The Detroit times. [volume] (Detroit, Mich.) 1903-1920, 1911-09-04
VALIDITY OF
NEW MORTAGE
TAX LAW
Rep. George Lord Says Action Of
Legislature in Putting Mortgages
in Special Class Is Open To
Serious Question.
Bankers Are Investigating With
View To Testing Constitutional
ity Of the Measure.

While should not like to see II In
validated, It IS my opinion that the
mortgage tax law passed by the last
legislature is invalid" said Rep. George
Lord OF this city. who was chair
man Of the house committee on tax
ation In the last Legislature. when
1--WE prepared the law. we submitted II
20 the encouragement for an opinion.
and he stated that he found Il consti.
tutional. At the time, | was OF the
opinion that the law was not cons.i-
futional because II put special tax
|pn mortgages as distinguished from
other sorts of credits, such as promis-
. sorry notes, etc. The constitution pro-
rides that the taxation shall be uni
'orm throughout the state, and do
not believe that the legislature had
he power to put mortgages in a
special class"
When the law was under discus
5ion, ! was In favor OF exempting all
classes OF credits and evidences OF
iebt from taxation as has been done
| by the New York legislature. This
would have left no doubt OF the con-
|5titutionality Of the law, but, under
he opinion of the attorney-general.
he present law was reported out and
BASED"
Michigan bankers have been quiet
|y investigating the mortgage tax law,
which has Just gone into effect. with
4 view to testing the constitutionality.
rhe chief fault found with the act is
he provision that the mortgage can
bot compel the mortgagor to pay the
|ecording fee. which Is required to
Exempt mortgage from taxation.
This throws the burden of the tax
| lpon the banks. which, under the old
hw, were not taxed on the mortgages
hat they held. the tax on their capi-
nj covering all other forms OF taxa
1 Jon. This made II possible for the
anks to hold mortgages much more
|rofitably than they could be held by
| he private investor, but the new law
yill put them on the same footing
yith the pfiyate emoney-lender. One
X the results that II Is claimed will
| |se brought about by the new law Is
eduction OF the rate of interest on
|'avings deposits in the country banks.
|fany OF these have been paying four
er cent, and their chief assets have
[lways been mortgages.
This Of course, will not operate on
| he mortgages that are at present In
|he hands OF the banks In the state,
ecause, II these mortgages are not
ut on record there Will be no record
| hg fee exacted and they will retain
heir present exemption from taxa
lon. Mortgages In the hands OF pri-
ate holder will still be subject to the
| I'D rate OF taxation. IL they are not
PRESENTED for record and the record
| hg fee paid on them.
II the present mortgage tax law rs
eclared unconstitutional, there will
e two alternatives open. There can
|ither be a constitutional amendment,
living the legislature the power to
lassify evidences OF debt for pur-
oses of taxation. or the law can be
mended so that all evidences OF debt
re exempted from taxation on pay.
hent OF q fixed fee, In the same way
B the mortgage.
n This latter plan Is followed In New
FORK and II Is generally recognized
w students OF taxation to be the
huitable course. There seems to be
y logical reason why man should
hy taxes on a promissory note and
= exempted from taxation II he takes
mortgage to secure his debt. The
Ian who has the promissory note
Inns n much greater risk OF losing his
| loney. and when the tax is deducted
Eom the interest that he receives his
eturn Is less than 1t would be on the
bortgage.
4 The New York law. II is believed,
I'm result in a marked increase In the
ow OF capital into that state. The
rat steps taken in New York was
he abolition of the mortgage tax. put
ne. law was recently amended to ap-i
Sv To all evidences OF debt.