The New York herald., 1920-01-25

| II anything further was necessary to
demonstrate the uneconomic working OF
the income tax laws, federal and state, II
is supplied by some calculations which
have been prepared for the ADVISORY
Council Of Real Estate Interests, accord
ing TO John L. Parish. It's secretary.
There are no insuperablc obstacles to
new construction OF housings, industrial
and office buildings in the large cities OF
the country where lack OF them has
boosted rents to twice and threefold their
normal levels, except the lack OF mort
gage money for building loans" said Mr..
Parish yesterday.
plans have been prepared and ap-
proved and builders arc ready to proceed
with construction as soon as the basic
capital necessary can be obtained 1t has
been declared by all who have to do with
the financing of building operations that
this capital is being withheld because OF
the operations OF the income tax laws
federal and state, and this statement has
never been disputed.
Loans stiu Being Called.
individual lenders are still calling ma
turing mortgages ana the savings banks
and other institutions which are exempted
from income taxation are having their
hands full with refunding these maturing
mortgages. SO that even those which are
by law authorized to make building loans
have no money for new loans.
THE chief sources Of supply for building
capital are dry, the money having been
and still being diverted to other chan
nels not affected by the income tax laws.
There would be some excuse for TINS pollcy
in taxation il the governments were gain
ing by the operation. rather than LOSING
and defeating their own purpose, as tnese
analyses show.
For the purpose OF illustration. the
analyst has taken two typical building op-
erations of the classes most needeo In tne
big cities, one OF typical five story iiat
of eighty-four to eighty-nine rooms, In
volving n total investment Of approxi-
mately s9O. 600; the other an office building
costing in these times, with the iand' ABOUT
II. 10000. There are many such pro)ects on
the boards which will go forward as soon
as the heavy hands of the governments
shall be raised.
"The first of these operations would re-
quire basic capital to the amount OF *o,oo
the builder contributing TO the active part s
of the capital the remaining $N,oU. Inc
income on this basic capital at six per
cent would be $500. and on this income
the federal income tax 0f this represented
ali the taxable income of the lender) "ouio
he Nn the state income tax $So
"But this would be the minimum pos
sihle tax In the hands OF large lehoer
whose income was larger the rate "ouio
be higher and the tax greater. III the TAX
were removed to the extent OF the income
from $4,000. as provided in the Calder
Mclaughlin bills at Washington and the
7 ockw ood- NcWhinney bills at Albany. the
federal tax would be only SIS and the State
tax Sl2. .,,
.But then the building operation would
be financed, the basic capital supplied. ana
the operation would figure out about as
follows
Mortgage (basic capital. D.............. seoo 600
Builders invcstment.............. D.Uo
Total cost. st.,...................... Nc'WO
Asd hu,lder's profit. 1900
7o,., vsius sos 900
-
croe, rental income ..,..,............ $500
Interest .................'....... NoUo
iNAV' a''1 y1o,soo
Net rental income equals Is per cent
.Tbe direct tax in this case would be ap-
nroxirnately $500. but (although this is
double taxation and therefore ought not TO
he, the owner under tho law would be re-
ouired 10 pay income taxes or his net
rental income OF 81. .ao-to the federal gov
ernment of $40 and to tho State govern
ment of s72 In addition 10 this the income
tax on the 10000 of the loan in excess of
tho $4,000 part exempted would, as shown,
be SIS to the nation and si2 to tho state.
whereby II appears that by levying the
income tax as at present the governments
arc not only gradually destroying taxabics