leases, if taxed, however, like all evidences of indebtedness would, in effect, impose double taxation upon the property which they represent.*

To tax indebtedness, is to tax the borrower.—If any one doubts that a tax on indebtedness is a tax upon the borrower, or the property which the indebtedness covers, that question can be easily solved by an honest uniform tax on all State, county, town and city bonds hereafter issued, by making them all subject to an annual tax of one, two or more per cent, and by providing that the tax shall be deducted at the time of the payment of the interest. Is there any one who believes that these bonds will sell in the market at the same high rate that they would command, if by law, they were free from taxation?

We can also test the effect of an honest, uniform tax upon mortgages, by providing that mortgages hereafter made, shall operate to reduce for assessment, the valuation of the land mortgaged to the amount of the mortgage, and that the mortgagor shall pay the tax on the mortgage, and deduct the tax from the principal or interest, when paid to the mortgagee. But who believes, under such a law, with the legal rate of interest at seven per cent, that any money would be loaned on mortgages in this State?

A somewhat curious piece of practical evidence in support of the truth of the position taken by the commissioners in respect to the taxation of mortgages, has been afforded by the recent experience of New Jersey. This State, as before stated, exempted in 1869, all mortgages from taxation in certain of her counties and cities which lie contiguous to New York city; but this legislation, although operating to draw capital away from New York and into New Jersey, was not primarily effected for any such reason, but was brought about in this wise. New Jersey, in the first instance, enacted an honest uniform law of taxing mortgages, and one, moreover, which could

* The following curious instance of hardship in taxing mortgages actually occurred in one of the counties of central New York within the last six years. A worthy farmer and his wife, finding themselves becoming incapacitated through age from taking practical care of their little farm, sold it for $5,000, and allowed the purchase-money to remain in the form of a mortgage, with the expectation of living on the interest paid annually by the purchaser from the profits of the farm. The town being very small, the fact of the sale and the consideration paid became known to every one, and the assessors were compelled, in opposition to their usual practice, to tax the old man to the full amount of the mortgage, as personal property. But the year in which this was done, happened to be a year in which the town, anxious to avoid a draft of men for the army, to which the old man was not liable, put up the rate of taxation to more than the legal rate of interest, in order to provide sufficient money to purchase recruits. The result was, that the poor old man and his wife found that not only was all their income from the mortgage swept away by the tax collector, but they were even obliged to go out for days' work, in order to pay a balance of taxation and provide means of support; and this too, while the identical farm for which the mortgage, was given was taxed at onefifth its true value, and other investments of other citizens of an invisible and intangible character undoubtedly escaped taxation altogether. And this we call equality in taxation.

with the utmost certainty be executed, and similar in principle to that above suggested; namely, that the person giving the mortgage should pay the tax on it, and deduct the tax from the principal or interest, in settling with the creditor. The result was, that all mortgages falling due were immediately foreclosed, and as no new loans, moreover, could be made, the inhabitants of the growing counties near the city of New York, wishing to borrow money on land, or to sell land, found themselves in an uncomfortable position; so much so, that if the law taxing mortgages in this section of the State had not been promptly repealed by the legislature, the issue would soon have become a predominant one in the State elections; and hence the explanation of one of the most curious statutes in the history of American legislation, which makes one tax law for one part of a State, and another and a different one for the remainder.* But the point of chief interest to be noted is, that it did not take the citizens of New Jersey a great length of time to find out that a borrower of money on a mortgage paid the tax, and that the lender was the tax collector, and only paid his part of a diffused tax, as all other persons living, consuming, buying or selling in the State must pay; and that if the borrower could not legally pay the lender a rate equal to other net profits of investments, he could not borrow. A little experimental legislation in New York will, therefore, effectually explode the vague theory that taxes uniformly levied do not diffuse themselves; and although it is true that the persons or property primarily taxed do not charge the entire tax over to others, this very fact nevertheless shows that the tax is diffused with absolute equality upon the persons who originally may pay the tax, and upon those who finally bear their portion of it.

Loans on mortgages prohibited in Rome.-Mommsen, in his "History of Rome," states that at one period the lending of money in that country on mortgages was prohibited, and it is apparent that a uniform taxation of mortgages in New York would amount to a prohibition as effectual as the prohibition which existed under the Roman law. The Roman patricians, in their legislation, wished to prevent the common people from becoming an independent yeomanry, and owning and acquiring real estate through the facilities of borrowing upon mortgages. No chimerical attempt had then ever been made to

* And all mortgages upon estates, chattels or personal property, taxable by law, within said counties of Hudson, Union, Essex and the city of Brunswick, Middlesex county and the county of Passaic, except the townships of West Milford, Pompton and Wayne, for State, county, township and city purposes, shall be exempt from taxation, when in the hands of any inhabitant, corporation or association, residing or located in said counties or cities," Approved April 2, 1869; Laws of New Jersey, 1869, page 1225.

tax money at interest, and this purpose of having the soil cultivated on shares or by dependent tenants could best be obtained by a prohibition of all mortgages.

Now it needs no argument to show that a system of onerous taxa tion of mortgages must have a tendency to reënact the Roman policy, and in time we may thus see our State cultivated by a dependent tenantry and owned by a few capitalists; and it ought not to escape attention that this very transformation has already occurred to a great extent in New York city and other cities. Capitalists and institutions, except life insurance companies and savings banks, which are free from taxation, will not loan on mortgages, but will buy real estate and lease it for a term of years, because this investment pays a higher rate than money loaned on mortgage subject to the contingency or reality of taxation. The effect of the present law, even partially or loosely executed, has changed the form of investment, but has not prevented capitalists from obtaining the average rate of profit of investments.

It is undoubtedly the true interest of the State, on both political and economical grounds, to encourage occupiers to become owners, who always give better attention and protection to their own property than to the property of landlords.

Purchasers of United States Bonds not practically exempt from taxation. The purchasers of United States bonds, which are nominally exempt from taxation, are in effect taxed, and uniformly taxed

The experience of taxing mortgages in New York is exactly what might have been legitimately expected. Capital which formerly found its way into real estate mortgages is now directed into other channels, and to such an extent that were it not for the provisions of law which exempt the mortgage investments of savings banks and life insurance companies from taxation, and compel these institutions to invest a part of their capital in such securities, money could now hardly be obtained in New York for the improvement of real estate on pledge of the property. Again, it was formerly a very general custom to embody in wills a provision that property bequeathed or to be held in trust should be invested in mortgages; but this custom, the commissioners are informed, is now almost entirely done away with, while executors and trustees are continually importuned by legatees to change the character of such investments of the grouud that they no longer continue to afford a fair interest. In one instance the commissioners were frankly informed by a board of assessors that their feelings as men would not allow them to assess mortgages according to the strict provisions of the law, when they knew that by so doing they would deprive widows and orphans of almost their entire income. In another instance it was pleaded that the interests of a city would not allow its assessors to tax its local mortgages, inasmuch as so doing would inevitably restrict growth, and that a certain annual growth or land improvement was absolutely essential in order to prevent the rate of taxation, by reason of annually increasing expenditures, from becoming unbearable.

As an illustration of the manner in which such capital has been diverted, of late years, from employment in connection with real estate in New York, the commissioners would call attention to a report made to them, to the effect, that, while in 1859 the fire insurance companies of New York, with assets of $26,323,384, loaned on bond and mortgage $19,801,094; in 1869, with assets amounting to $53,722,655, they loaned on similar security, but $13,611,232. At the same time, the directors of the largest savings banks in the State, inform the commissioners that the applications made to them to loan on the security of real estate of unquestioned value, for the purpose of its improvement, are continually and largely in excess of the amount available for such investments.-Report by commissioners, 1870.

in the high price which they are obliged to pay for these securities by reason of their exemption from taxation. It is not only a sound principle of political economy, that a tax upon money at interest is simply a tax upon the borrowing price of the borrower,* causing an increased rate of interest, or a reduced price to be obtained for the obligation given; but this principle has been adjudicated by the highest court of the country, so far as a court of last resort can adju dicate a great principle in economic science. Thus, in the case of Weston v. The City of Charleston (2 Peters, 449), the Supreme Court of the United States, through Chief Justice Marshall, held that "a tax on government stock is a tax on the power to borrow money on the credit of the United Seates." If, therefore, we except the borrower from taxation in the form of a decreased rate of interest, we grant him no special exemption or advantage, for his property, which is covered by the debt, has already in other forms been taxed, and the exemption will diffuse itself in the form of lower rate of interest, which will be the means of producing a higher price of labor, land, and personal property, until the exemption is completely diffused. Who will then be injured by taking the tax from money at interest? It is probable, that he who now adds the tax to the rate of interest, and charges the borrower, and does not pay it to the State, may lose by the change. He will be obliged to enter the open money market and pay the market rate, as the purchasers of government bonds now do, for evidences of debt that will be free from taxation in the hands of all persons; and the laws of trade will regulate his investment as they daily regulate the price of government bonds, and will bring down his securities to a rate of interest not much above the rate paid by the national government. The exemption applied to United States bonds, which is of no practical benefit to the present purchasers, in consequence of the increased price of the bonds, would be of no benefit if applied to the holder of other securities in an established and permanent system, except in freedom from the uncertainties and irregularities attending the exercise of arbitrary and irregular power. If the exemption is an

* A striking practical illustration of the truth of this proposition is to be found in the system. adopted by Connecticut for taxing the savings' banks existing in that State. Thus, the State, in the first instance, imposes a tax of three-fourths of one per cent on the whole amount of deposits and stock in such institutions; and then, in consideration of this and all other taxes (¿. e., United States internal revenue tax of one-fourth of one per cent on dividends), the banks are permitted to add a compensatory amount to the legal rate of interest on all their loans, and to take the interest in advance; the effect of which is to throw the whole amount of taxation, with possibly some addition for profit. off from the bank on to the borrower, who in most, and perhaps a majority of cases, is a man of small means, who borrows for a purpose of local development; or, in other words, the whole system is an ingenious plan for imposing a little more taxation on a class which the State can least of all afford to tax, and that, too, not on their property, birt upon their debts.

exemption of everything of the same class, it is perfectly equal and fair, and its effect is diffused and equated; and the tax on another article, taxed in lieu of the exempted class of articles, is likewise equated and diffused, and if invisible and imponderable evidences of debt cannot be taxed equally no injustice will arise if they are all free from primary taxation, and if the taxes of a permanent system are imposed on other things subject to positive and fixed rules of assessment. The daily price of United States bonds, therefore, is a constant lesson, that an exemption of a security from taxation is an exemption of the borrower, and the same law of political economy will rule in respect to both private, and public debts. Each State has, therefore, the power to put its borrowers on an equal footing with the general government, and without injustice or inequality toward the borrower or the lender.

THE OLD AND NEW IDEAS IN TAXATION.

The first attempt made to tax money at interest was instigated against money lenders because they were Jews; but the Jew was sufficiently shrewd to charge the full tax over to the Christian borrower, including a per centage for annoyance and risk; and now most Christian countries, as the result of early experience, compel or permit the Jew to enter the money market, and subunit, without let or hindrance, his transactions to the "higher law " of trade and political economy. But a class yet exist who would persecute a Jew if he is a money lender, and they regret that the good old times of roasting him has passed away. They take delight in applying against him, in taxation, rules of evidence admissible in no court since witches have ceased to be tried and condemned. They sigh at the suggestion that all inquisitions shall be abolished; they consider oaths, the rack, the iron boot and the thumbscrew as the visible manifestations of equality. They would tax primarily everything to the lowest atom; first for national purposes, and then for State and local purposes, through separate boards of assessors. They would require every other man to be an assessor or collector, and it is not probable that the work could then be accomplished with accuracy. The average consumption of every inhabitant of this State, annually, is at least $200, or in the aggregate, $800,000,000; and this immense amount would fail to be taxed if the assessment was made at the end of the year, and not daily, as fast as consumption followed production. All this complicated machinery of infinitesimal taxation and mediæval inquisition is to be brought into requisition for the purpose of taxing "money property," which is nothing but a myth. The money lender parts with his property to