The sun., 1919-09-07
FAVORS REMOVING
MORTGAGE TAKES
Merchants Association Says
1t Should Be Eliminated
From All Construction.

In an exhaustive report on the hous-
ing situation in Greater New York the
Merchants Association through its own
housing committee recommends elimi-
nation of taxes on all mortgages. The
committee, composed Of some OF the
most notable realty agents. operators,
architects and financiers in the city,
declares that this is the only way in
which to stimulata new housing con-
struction.
In the same report the committee
predicts a heavy demand on industry
in the next ten years or so. accom-
panied by labor shortage and the en-
forced adoption OF new methods which
will give wage earners larger share
of the sale price of the products of
manufacture,
Regarding the proposed exemption Of
building mortgages from Federal taxa
ton the committee says
AT first consideration 1t may be
thought that such legislation would de-
prive the Government of a substantial
revenue. but further consideration
shows that such would not be the case.
"a single illustration will demon
strate the effect on the Governments
revenue OF exempting new loans.
IAN operator intends to build 100
houses at cost of $4,000 each, a total
building cost OF 100000. They are to
be erected on land owned by him worth
$3.50 900. He will furnish the land and
800, 900 capital and must borrow $780,
900 divided into 100 mortgages of $4.-
900 each.
This m oney will be furnished by from
ten to 100 individuals. For the purpose
of the illustration, let us assume that
Il will be furnished by twenty individ-
uals, taking $4,000 each, upon which
the income would be s per cent. or
81 900. The Government would thus col
lect tax upon twenty incomes of $1,000
each. All this is of course based on the
assumption that the mortgages could
be placed, which to-day is not the case
Money Would Come Easily.
"On the other hand If the tax on
these mortgages were removed the money
would be readily secured and the opera
ton would proceed. On completion. the
operator would sell the houses at a
profit of $500 each, a total Of $4,000,
which would accrue TO one Individual
and be subject to both the normal tax
and surtaxes. Thus the Government
would collect in one year taxes equal
In amount to at least five years. in
come from mortgages
ut Is plain that income tax exemption
should not be allowed without limitation
to the mortgage holdings OF any indi-
vIdual Otherwise this exemption would
assist the wealthy in avoiding taxation
by transfer OF investments into real es-
tate mortgages. The committee believes
Furthermore that a great demand for
- he tad
by appealing to the small investor For
this reason the committee advocates
that the exemption apply to real estate
mortgage holdings of any individual up
to $4,000 only. While the committee
does not advocate the $4,000 limit as
being necessarily the proper one II does
believe that by setting the limit at ap-
proximately this figure the amount Of
taxes the wealthy would avoid would
be immaterial. while an appeal would
be made TO a sufficient number OF small
investors to create the mortgage de-
mand required.
Should Not Limit Exemption.
"The question has also been raised I:
Why should not this exemption from
to xation be limited to new construc
! tinn ina snuch as funds are needed for
new construction rather than for in
vestment in buildings already erected
The committee discussed this point very
thoroughly and is OF the conviction that
| the real estate mortgage market is in
dvisible and must be treated as a
unit II money is brought into the real
! estate mortgage market the demand for
new mortgages will automati ally in
crease but II the market for new mort
&c ges ohly Is stimulated. the advantage
received will be largely. II not entirely
offset by the stsgnating effect on the
market for old mortgages.
ITO be more specific, II the elimina-
ltion Of taxes is confined To nsW mort