The Bennington evening banner. (Bennington, Vt.) 19??-1961, 1908-09-02
STATE TAX COMMISSION
Continuation of Report Submitted &c
Gov. Proctor

could in no case affect more than
very small proportion OF the mort
gage debts Of Vermont. Under these
IL is impossible for us TO
predict its exact effect on interest
rates, but we believe II would be en-
tirely different from what its adYo-
Gates expect. The most probable re-
suit, we believe, would be numerous
evasions of the law, however strict /
ly it might be safeguarded, by pay l
ment of commissions, bonuses, etc,
by which the state would lose its
revenue and the mortgagors at best {
receive only portion of the relief in.
tended, in many cases none Of IT, I
AS to the second Proposed remedy, |
the ,appOrtiOnment of the tax be- !
tween the mortgager and mortgages: |
IL the mortgages interest In the |
mortgaged property is to be taxable |
to him in the town where the proper |
ty is situated at the local rate, and no
other rate could be adopted, a very
striking reason for not adopting this
plan suggests itself. The tax rate
varies in the different towns in the
state from sixty cents to $3.50, so II
the capitalist is TO be taxed on his
loan in the town where the security
is situated, it will be seen at a glance
that the man living in town bur
dened with while he is quite as much
in need of it as those living in q tax
rate of $3.50 will be wholly unable TO
borrow money, towns with a lower
rate of taxation. There are many
towns in the state where the tax rate
lis 81 or more. This would leave the
capitalist only four per cent or less
on his loan, and his money would go
into the savings bank or out of the
state rather than be loaned in towns
with high tax rate.
1t must be perfectly apparent that
under such a system of taxation It
would be practically impossible for
person residing in town where the
tax rate equals 81 or more to borrow
money, unless 1t were done clandes-
timely and the loan never. returned for
taxation. There would be an immedi
ate demand for call money now loaned
in such towns, resulting in the fl
nancial ruin of many borrowers. OF
course the borrower might and prob
ably would assume the tax but this
would defeat the object of the law.
Experience shows that such laws,
even where the conditions suggested
do not exist, are of doubtful benefit to
the mortgagor. Assuming that the
Information which we have obtained
relative to their results is correct.
such laws generally fail to relieve the
borrowing Glass; In common prac.
tice the borrower contracts to pay the
taxes which the law contemplates
shall be borne by the lender, and the
interest rate is not reduced. While
some laws attempt to prevent this ar
arrangement, they have generally
failed.
We do not believe the remedies
suggested will give the borrower any
Improbable relief
AS bearing somewhat upon the bur
den of taxation actually borne by
mortgaged real estate, certain other
facts should be considered. The ten
dency is to appraise real estate at less
than its true value which will always
to some extent minimize the evil I'M
lder discussion.
Again. competent authorities upon
the subject of taxation assert, and we
think with much reason, that where
a tax on real estate is reasonably uni
form and universally believed to be
permanent, the purchaser takes the
property in sense free from the tax.
because by the operation of economic
laws, the tax becomes capitalized and
is In effect deducted from the pur.
chase price of the real estate when.
ever II is sold, or 10 put IL In another
way, in determining the values of real
estate, the fixed tax rate against the
same has the effect of an incumbrance
upon the land, similar to an annuity
charged thereon, thereby relatively de
creasing its value.
The difference in the selling price
OF real estate in some of our towns
! with a heavy debt and high tax rate
as compared with the price of rea
, estate in more favorably situated
towns, illustrates this principle.
!. IL follows, therefore, that reduced
rate of taxation upon real estat,
would increase the selling price Their,
lof, would benefit the present owner!
y rather than future purchasers, anC
/ would not enable a poor man to bul
i and pay for farm in Vermont NOR,
. easily than he can at the presen
. time, because, although the tax rat
u might be less the purchase price an,
u the subsequent assessed value thereo
y for taxation would be more.
II II may be claimed that in what w
+ have said on this subject, we are al
tempting to show that the propose
e remedies are inadequate without suf
+ costing a cure ourselves. SO far a
q the taxation of property and the taxi
ton of debt against 1t, whether S,
u cured by mortgage or not is doubl
Ie taxation, we concede the CORRECTNESS
'e of the claim.
1t To entirely cure this trouble W
s. know of but two remedies:
20 l. Tax only tangible property.
" 2. Allow Offsets to apply to real q
well as personal estate
10 We cannot recommend either, b.
81 lieving the conditions resulting Their
3, from would be worse than those no
ID existing.
pc There are good reasons for imposin
er tax upon intangible property and
U. seems to us that such property
.. equally bound to pay its just propo
re ton OF the expenses of government
~ It has long been the policy of tn
~ state to tax this class Of property al
'o- we see no sufficient reason to depa
therefrom. The important questiC
10 Is, what is its just proportion, and tn
70 will be discussed later. We do, ho
81 ever, believe that with offsets abolis
~ ed, with some plan adopted that W
nj ne result in intangibles paying their IA
eI' proportion of taxes, and probably
es, more Importance than either with
On honest vigorous enforcement of d
',r tax laws, this evil will be minimize