The Bennington evening banner. (Bennington, Vt.) 19??-1961, 1908-08-14
TAX COMMISSION REPORT
Continuation Of Report Submitted to
Gov. Proctor.

Continuation OF Report submitted 70
Gov. Proctor.
Following Is q continuation OF the
report OF the commission on double
taxation:
Whether or not this condition con-
estitutes double taxation is of no par
ticular consequence to the person az
grieved. It is a condition which ex-
lists, and so far as 1t is unjust, ought
II possible, to be remedied.
The remedies most generally sug-
gested in this state to relieve the bur
den OF taxation in the case OF mort
gagged real estate are:
(a) The exemption OF real estate
mortgages from taxation where the
rate of interest agreed upon is below
a certain arbitrarily fixed per cent.
(b) The apportionment OF the
taxes ON mortgaged real estate be-
tween the mortgagor and mortgagee
In proportion to their respective in
terests; the debt to be otherwise ex-
empt from taxation.
We cannot recommend either of
these plans, even II satisfied, and we
are not, that they would produce the
desired results, because, as already
Indicated, we can see no logical diff
ference, for the purposes Of taxation,
between an Indebtedness secured by
real estate or chattel mortgage and
any other indebtedness whether Sc
cured or unsecured
Aq tho fret prOnnond rau1ndX
1t would be difficult, If not impos-
sible, to determine correct arbi-
trary rate at which money should be
loaned in order that 1t should be ex-
empted from taxation. The rate OF
interest which capital can command
Is always governed by the law of sup
ply and demand. 1t Is a matter Of
common knowledge that when money
/, Is scarce the rate of interest Is neces-
! sarily higher than when there is no
particular demand for It,
Our investigation shows that the
rate of interest varies in different
parts of the state, so that what might
be just and fair rate today in one
locality might be more or less than
, asked or received In another locality;
and the rate might be more or less to-
: day than six months hence. Yet, un-
der this proposed method of taxation
the rate fixed by the legislature would
necessarily remain the same for two
y years regardless of conditions arising
4 lin the meantime.
Another quite as serious objection
4 would be the inducement arising from
i changed conditions to legislate upon
4 this interest rate. There would eX-
list constant feeling OF uncertainty
I Neither the borrower nor the lender
would know what the next Legislature
would regard as proper rate.
Beyond this, we do not believe that
1t is a proper function of government
y to use its taxing powers to induce
capitalists to loan money to one
class of borrowers at a lower rate
than to another class. Such legisla
ton would necessarily tend to raise
the rate ON loans to borrowers not
belonging to the favored class. We
see no better reason why a person
should be allowed an exemption from
1. taxation on money loaned at four OF
n four and one half per cent with chat
y tel or real estate mortgage security
n than on money loaned without such sc
& curity.
y; 1t must be apparent that such a
> law would operate to discriminate
r against the borrower who has made
q quate security or no security at all
. Assuming the rate to be fixed at four
n per cent the borrower. with adequate
e security, would doubtless be able
y to borrow money at that rate. The
= borrower whose security would only
e command a loan at the rate Of -four
= and a half per cent, would have to
o pay the additional one-half per cent
Il OF interest, and IL he were compelled
by the creditor to include in the in
v terest the tax on the loan, which on
i. the average Is not less than one and
IF one-half per cent? he would suffer q
n discrimination of at least two pei
II cent.
g case of this sort where the Law
il discriminates In the taxation of loans
of different classes is an instance
~ where the tax is almost inevitably
shifted to the borrower. We believe
this Is an unwarranted discrimination
against the poorer Of the borrowing
classes.
Another reason why we do no
\. favor this proposed remedy is that i
could by no possibility affect NOR,
II than a small proportion of debts sc
OF cured by mortgages on Vermont rea
a estate.
\, In this state, the total Indebtedness
al of this character approximates fift.
al millions OF dollars. OF this, abou
eleven and onehalf millions, ar,
10 held by Vermont savings banks ant
i'd kindred Institutions; nine and one
w. half millions by individuals residen
in the state; nine millions by nonres
: dents; and the balance consists o
large mortgages against corporations
mostly held by non-residents.
Obviously the last two classe
would be unaffected by the proposes
law. The first class might be affecte,
or not according as the law NIGH
provide. In any case, 1t could onl
n cause a saving of seven-tenths of on
per cent. to the mortgage Tor less
the law is amended as elsewhere pre-
posed which would in no case lea
the banks to make reduction of on
and one-half per cent. in interes
! rates.
OF the amount loaned by individual
resident in Vermont, much is loane
by residents of towns whose tax rat
is considerably less than the redu,
ton they would be required to max
in the interest rate in order to secur
the exemption of the loan, and cons,
quently they would have no induce
ment to accept the provisions of tn
;. proposed law. Thus, assuming tn
present interest rate to be six pe