The citizen. [volume] (Berea, Ky.) 1899-1958, 1908-07-09
THE NEW WAY TO
TAX MORTGAGES
Growth in Favor of the R,gistrs-
ton Plan.
Several States Now Tax at Five Dol
lars a Thousand When Lodged
For Record-tiavlrg
Good Effect.

II will be interesting when a year
has rolled around TO estimate the
amount OF tax that has been collected
In Kentucky by the state and by coun-
ties on real estate lien notes AMI
mortgage notes. This subject Of mort
gage taxation is one that Kentucky
should very carefully consider ia
most states Il has been recognized
that TO tax mortgages Ia 20 impose
double taxation, since by the borrow
ing Of money upon real estate no new
property has been created. but ouly
the same property twice. il has been
considered. however. that the state IS
entitled TO some revenue from this
source, and other states have solved
the problem by leyying a registration
tax upon mortgages. Under this sys.
TEN. when a mortgage Is filed Cor rec
ord Il pays a tax OF five dollars ON
each thousand dollars OF the amount
secured by the mortgage. No subse-
quent tax Is imposed and the entire
amount OF the tax collected goes into
the state treasury.
where this system has been tried.
the result las beer a considerable Ia.
crease In the revenue from taxation
OF mortgages. The system which We
are trying In Kentucky. by which the
county clerk is required to make a
correct return 10 the Assessor Of all
mortgages. gives very little chance
for any mortgages 20 escape taxation.
so that % adopt In Kentucky the sys
tenn OF a registration tax on mort
cages would not be productive 81
more revenue. and might possibly be
productive OF less: bat Il Is question
able whether the slight additional rev.
enue derived from these mortgage
makes up for the injustice done 90 the
borrowers Of money II Is not cOuceiv.
able that a man viii lend money az
or per cent. and then pay from "a
to per cent in the way Of tax. and
yet Il would amount 20 this In veC
many Of our Kentucky ciths and
towns. Rather than do so. since be
can not now, under the law avoid dis
closing his possession OF the mort
gage. the lender will simply retire
from the money lending market
These restrictions curtail the amount
OF money that viii be loaned on mort
cages and result In a hardship 20 Dor
rowers II should be remembered.
also, that the borrowers affected In
this case are OF the very best class
farmers who need 20 raise money on
their farms men OF small means who
desire TO borrow money 10 build
homes. as well as men who pledge
real estate 20 aid them in extensive
building or Industrial operations. The
possibility OF borrowing the money
they need from private sources has
always been. OF great advantage -
people OF these classes. especially In
small towns and cltfes where there
are not so many trust companies max.
ing loans The lender might stand
the burden Of the tax II he were al.
lowed 10 add that amount 10 his rate
Of interest. but he is headed on In
that direction by the usury laws In
many cases he takes chances on this
point and by various devices will con
trive to collect from the borrower
some extra premium by way OF Offset
TO the tax he must pay on the mort.
gage. In this way the burden falls
direct on the borrower and must In.
evitably tend TO increase the interest
rate on mortgage loans.
That a tax on mortgages does 80
increase the interest rate on mort
gage loans has been clearly proved by
the experience OF New York.
II Is not TO be supposed that there
will be any opposition 10 the tax on
mortgages on the part OF corporations
which have money to lend. since, by
Law, banks and trust companies are
not specifically taxed on their mort
gage loans. But any banker dislikes 10
see anything done that restricts the
amount OF available capital In the
state. for such restriction OF available
capital means restriction OF bust.
ness, restriction OF all forms
OF progress that make the state
more prosperous. Experience has. up
TO this time, demonstrated that the
only beuehciaries OF the attempt 10
rigidly tax mortgages are the foreign
insurance companies, which come into
the state and lend their money and.
being resident In other states. do not
have 10 pay tax on their mortgages.
The same registration tax where v
has been adopted Is applied TO the
mortgages fled by railroad and other
corporations. This Is proving a more
effective way OF taxing bonds than to
take the chance OF individual holderr
being willing TO give them in for tax
alton, which they generally fail to do.
in view of the fact that the bonds
rarely pay more than 5 TO 10 per cent,
and three -iifths to threefourths ~
this would have to be given up TO the
tax gstherer II the bonds are listed
with the assessor. And men will not
willingly submit 10 confiscation.
The subject OF taxing credits is one
Of the most dificult in the rnalm NJ