The Prescott daily news., 1918-12-13
THE NEW STATE CONSTITUTION

The provisions of the new State
constitution concerning exemptions
from taxation are among the strong
est features of the proposed new basic
law These exemptions are set forth
in Article Is. as follows:
The bonds of the State of Arkan-
sas, of any county, municipality,
school, levee, road, taxing or improve
ment district within said State, sold
after the adoption of this constitution;
public property actually used eXclus-
lively for public purposes; churches,
parsonages, manses, rectories, used as
such; cemeteries used actually as
such; school buildings, apparatus, in
come, materials, grounds and perma-
nent endowment funds not invested in
real estate, used exclusively for the
maintenance and use of libraries and
institutions of education and charity
and not for the private property of
any person or corporation"
First-The bonds of the State of
Arkansas, of any county, municipal
ity, school, levee, road, taxing or inn
provement district within the State,
sold after the adoption of the new
constitution. The reason for exempt
ing these bonds from taxation is be-
cause such exemption will enhance
their value as investments and will
therefore assure a ready market for
them at a lower rate of interest than
would be possible if the bonds were
not taX-exempt. 1t is often difficult
to secure a ready sale of bonds of a
State, municipality or improvement
district or of school bonds, and in
order to find a market it is necessary
to pay high rate of interest Even
this higher rate, however, is often not
sufficient to attract many investors
when the tax on the bonds is taken
into consideration. TaX-eXempt bonds,
however, attract buyers because, even
though the rate of interest is not so
very high, the fact that they are eX-
empt from taxation, makes the total
income larger than would otherwise
be the case. The market prices of the
various issues of Liberty Bonds illus
trate the argument. The non-taxable
1-2 per cent Liberty Bonds sell for
more on the open market than the
taxable 4 and IA per cent Liberty
Bonds. The exempting of the various
Arkansas bonds from taxation will
benefit the people of the State in
three ways; it will secure a quicker
and more permanent market for the
bonds, thus making possible more
rapid development of improvements
and hence a more progressive State;
it will offer good investment for the
people of Arkansas who wish to make
an investment in bonds, and it will
save money for the State because the
tax-eXempt bonds can find a ready
market at a lower rate of interest
than taxable bonds. The new consti.
tuition specifically states that the ta>
exemption will extend only to bonds
sold after the adoption of the consti
tuition. This is perfectly in line with
good law and good business. A bono
constitutes contract between the
purchaser and the State or the dis
trict issuing the bonds. Any provis
ion which accrues for the benefit OF
thee purchaser such as payment Of
interest or exemption from taxation
is a part of the contract with the pur.
chaser, who buys the bonds because OF
the provisions which give value to anG
safeguard the bonds. Hence these
provisions affect only bond contracts
made in the future and bought on the