The daily Gate City. [volume] (Keokuk, Iowa) 1855-1916, 1911-01-20
HOW CALIFORNIA ATTRACTS
CAPITAL.
HOW

Alfred Grnndy, formerly an attorney
al Cedar Falls. now located in Cali
fornia, writes to the Cedar Falls Rec,
ord concerning taxation methods in
that state He shows how the system
attracts capital. and asserts that it is
one of the reasons why wealthy Iowans
leave this state 10 settle in California.
Mr.. Grundy says at the beginning OF
his letter:
One thing that has always been a
source of surprise to me. and cause
for attempts 10 evade, in part at least.
taxation OF moneys and credits, is the
unequal rate OF taxation. Thus: A
farmers owns a farm OF 100 acres
that will sell in the open market for
SIC, 0gS0. 1t is assessed for taxation
on valuation of-from $50 10 $50 an
acre. He borrows on ii $1,000 from a
noney lender who lives in town.
where tax rates are 20 mills. The
farmer IS taxed on his land at val
uasion OF s65 per acre. and the lend
er is taxed at valuation of $4,000 or
al IS per cent higher rate on actual
market values. The farmer paws so
mills and the lender pays &c mills.
Then, too, both pay on the same prop
ersy"
This is the systein in operation In
Iowa, and Mr Grundy declares that
there is something manifestly wrong
with 1t In California. on the same
authority, the statute expressly pro.
hibits double taxation The mortga.
gor pays OF the valuation OF his prop
eTty, less The face of the loan, IN
paid. and the lender pays that. By
statute 1t Is possible for the lender to
so contract with the borrower that the
latter pays the full tax on his land as
II It were unmortgaged and on pro-
ducing his receipt therefor there is
usually three per cent deducted from
The interest rates. Both OF these CON
tracts are enforcible The result is
that all property is taxed once, and no
more. The money lender is anxious
10 have his funds out of course. and
when out under this sort OF agreement.
his money Is to him untaxed, or, il
taxed, he IS entitled TO higher in
ieress on that account.
AT the last election an amendment
10 the constitution OF California was
carried. covering the question of tax
eiion. one clause OF which was as fol-
lows:
All property -. shall he taxed
IN proportion 70 its value pro
Fiaed that a mortgage. deed of trust.
contract or other obligation by which
& debt IL secured when land is pledg-
ed as security for the payment there
Of. together with the money represent
ed by such debt shall not be consider
ed property subject TO taxation
This provision, it will be noted,
wipes out all taxes on mortgages and
moneys and credits at one swoop,
where The latter are secured by lands
and the requirement OF the borrower
10 par tax on the mortgaged property
or the mortgage are both eliminated.
There Is another provision Of the law
adopted At the last session Of the
California legislature which provides
that all moneys deposited in savings
banks on interest are exempt from
taxation. The effect Of this latter pro
vision, Mr, Grundy says, has been as
founding. as he thus explains:
There are many. many millions OF
dollars deposited in the savings banks
here because of this law. On regular
time deposits the banks pay per
cent interest. on checking accounts
they pay 3 per cent, provided the low
est balance is not under $500. Nat
prally there are thousands Of people
here With money who DO not know
the method Of loaning to advantage.
or sfraid to trust their judgment or
that OF people who would know. and
these all deposit in the savings banks.
This places millions Of dollars in the
hands Of the most astute financial
men of the state at q very nominal rate
of interest. and they IN turn. possess-
ing the knowledge and business judg-
ment, loan it on real estate al Z per