The Fargo forum and daily republican. [volume] (Fargo, N.D.) 1894-1957, 1914-01-14
7. A. Acker, legislative reference

by 7. A. Acker, legislative reference
librarian. [
b. Mr.. Acker said: Members Of the |
State Tax Association:
80 7 nave been requested to discuss the
taxation Of mortgages in North Da-
kota. California. Minnesota and Wis
consin.
That the system Of taxing moneys
and credits in this state Is far from !
satisfactory has been generally rec
ognized for many years. In 1910 this
association passed resolutions ex~ |
pressing its disapproval of the present
system Of taxing mortgages as gener-
al property and recommended an in
! vestigation to ascertain better meth |
DDS.
! Unfortunately, North Dakota is one |
Of the many states which are COM
! PEELED to tax all property at the same
rate ON account Of the provision in
their constitution that all property |
shall be taxed according to a uniform
j rule. 1t is devoutly to be hoped that
i the voters next November will approve
the proposed amendment to our con-
%stitution permitting the classification
Of property for taxation purposes.
And the members Of this association
should take ar active part in bringing
about the adoption Of this long-need-
ed amendment.
j Our law provides that moneys and
credits shall be taxed as general prop
erty. If the law were enforced, on a
farm worth $20,0 900 and mortgaged for
$40, 000, taxes would have to be paid
on a valuation Of $780, 900 providing the
property we're assessed at its full VAL
lie. Thus by a few strokes of the
pen $4,000 are created where nothing
existed before. This is our law, but
not in practice, because it is not en-
/ f~~1ohI ~--,k. b kN1 -
counties in every quarter Of the state
and without exception the reply was
that mortgages were rarely assessed.
The law is not obeyed. And when it
is obeyed, it usually results in the
assessment of a mortgage on property
belonging to a person who can least
afford to pay the tax.
No law can be enforced unless it
has public sentiment behind it. Law
is c~rystalized public sentiment. The
legislature may enact so-called laws
n have them printed in the code.
but unless they embody the wishes Of
the majority of the people, they can
not be enforced. An effort to enforce
them inevitably results in failure or
in their appeal.
The. taxation of mortgages under
our~archaic method results in a sys-
tenn Of double taxation that places an
intolerable burden on the debtor.
When a man is compelled to borrow
money 1t is ridiculous to suppose that
his ability to pay taxes is increased
by the debt he. has assumed.
OF course, the theory Of the law is
that the lender and not the borrower
shall pay the tax. That is the theory,
but it is not the practice. The tax
Is invariably shifted to the borrower,
either directly by his agreeing to pay
| If or I'm the form nf O hiphaYs yofn nf
interest, as will be shown hereafter.
Laws making it illegal for the borrow
er to pay the tax are of no avail An
memorable law of economics which
can not be repealed or a~brogated by
any legislative enactment, imposes up
on the m~ortgagor the burden Of pay
Ing the tax in the form Of a highe:
rate of interest.
AS stated, mortgages are practically
exempt from taxation in North Da
kota because the law is rarely enforc-
ed /. e., mortgages are rarely assessed,
and an attempt to enforce the law
would be worse than useless. In Ohio
and Iowa tax inquisitor laws We're re-
sorted to but they proved to be a
dismal failure. Their effort was to
drive capital from the state and caus-
es Wholesale perjury. The fact that
some mortgages are assessed works
an injury because it causes unequal
and discriminatory taxation. To tax
mortgages as general property Is uni
Versally condemned. To consider
credits as property as we'll as the
property by which they are secured
is k adding together the two sides
or an account, the assets and liabili-
ties. According to this idea, when a
mortgage Is paid taxable property is
DESTROYED. This is absurd.
But if the lender could be made to
pay the tax, not even the economist
would complain. 1t is true that credits
possess no intrinsic value over and
above the actual value of the property
which they represent, but the average
citizen is of the opinion that capital
invested in mortgages should con-
tribute toward governmental expen-
ses. But the experience of every state
has demonstrated beyond a doubt that
the holder of the property pays the
entire tax, not only upon the property
assessed to him, but upon the mort
gage as well, the latter in the form of
a higher rate of interest that he would
ordinarily pay.
This has been clearly demonstrated
by extensive Investigations in Califor-
MIA by Prof. Carl Plelm, n in Wis
consin by Professor Adams. Professor
Adams states in the report of the Wis
consin Tax commission for 1907 that |
the most vigorous efforts to- assess |
and tax mortgages on their full value
In addition to the taxation Of mort
gagged property has at best had but
partial success as a means of increas- |
IN revenue; and that such efforts |
usually result in an increase in rates
to borrowers, and even more
ly tend to transfer mortgaged invest
ments to residents in other states. |
To reach nonresident creditors, be- |
sides involving grave problems Of in j!
terstate comfy. presents the almost
in~surmountaible difficulty Of reaching !
credits in the hands Of non-residents.
The following considerations may be |
stated as the principles upon which
the universal condemnation of taxing |
credits as general property is based:
FIrst-Such laws can only be par |
TALLY enforced, and partial enforce
ment of the law is unjust to those who
are compelled to pay the tax.
Second-Deceptions and perjury are !
resorted to in order to evade the law |
and the result is a degrading moral |
effect on h community. |
Third-To tax credits as property |
without making a corresponding re-
duction in the assessment of the prop
erty Of the debtors in double taxation.
Fourth-The system tends to drive |
local capital seeking investments to
foreign fields. |
1t remains then to consider methods !
by which these objections can be ov-
ercome. One method suggested is to
permit the amount of the mortgage
assessed to be deducted from the
valuation of the property Of the debtor
SO a sto tax the lender on the mort