Morris tribune., 1912-05-10
A COMPROMISE TAX.
Tax Commission Thus Justifies
Mortgage Tax.
XV.-THE MORTGAGE REGISTRY
TAX


Prior to 1907 mortgages were as
sessed and taxed in the same manner
as other classes of personal property.
The register of deeds was required to
furnish list of all mortgages or other
real estate securities held. owned or
controlled by residents of each district.
Such list was appended to the per-
sonal property assessment book and
was assessed in accordance with the
amount due on each instrument.
The tax could rarely be enforced
against non-residents of the state, and
as result, nonresident could loan
money at slightly lower rate of in
terest and still derive greater net re-
venue from his loan than citizen of
the state. To overcome this disad-
vantage the practice became common
of having the mortgage recorded in
the name of a nonresident, even
when actually owned by citizen,
thus evading the tax. AS result of
this practice very small amount of
public revenue was derived from this
source of taxation.
In 1907 the legislature passed a
tax of fifty cents, in lieu of all other
taxes. on each hundred dollars of the
principal debt or obligation secured by
the mortgage. This law applies to
all mortgages whether owned by re-
sidents or non-residents of the state,
except mortgages taken By persons
or corporations whose personal pro-
perry is expressly exempted by law.
The revenue derived under the law for
the year ending September 80, 1909
mounted to 1886, 91O.91, and for the
year ending 1September 80. 1910,
$500, 542. 20 the total collected since
the enactment of the law to the last
named date being 81, 32o,972. SO.
The mortgage registry tax is in
measure compromise between those
who believe that mortgages should not
be taxed at all and those who be-
lieve they should be taxed. 1t is con.
tended by some that to tax both the
mortgage and the property upon which
the mortgage is secured is double
taxation. If this be true, then the
mortgage registry tax law practically
removes the double burden, for the tax
is now so light on the former as to
be scarcely noticeable. The average
life of mortgage is said to be about
five years. This would make an an
nual rate of only one-tenth of one per
ceRt instead of from two to three per
cent as under the old law. Such a
tax can scarcely be called burdensome.
1t may be interesting to note that the
supreme court has construed the law
as tax on the security AID not on
the debt. In other words. the tax is
imposed on the right to record the
mortgage and not on the debt secured
by the mortgage.
One objection to the law is that the
mortgagor pays the tax. The an
swer to this objection is that the
mortgagor practically always paid the
tax either directly, or indirectly. in in
creased interest rates. "Under the
forces of supply and demand the rate
of interest is controlled by economic
law. The lender under this principle
gets compensation for his capital
that is based on its value to the COM
munity. Every attempt by usury law
to take any part of this from the lend
er results in the removal of the cap
ital elsewhere. - Men are not obliged
to loan their capital and will only do
so upon conditions that appear to
them satisfactory. Unless the bor-
Foyer complies with these conditions
he canaot secure the loan. Under
such circumstances it is doubtful if
any law could be enacted that would
compel the lender to pay the registry
tax.
The mortgage registry tax. like
the three mills tax on money and
credits is distinct departure from
the principle of the general property
tax.