Real  Estate   Record





AND BUILDERS' GUIDE.





YoL. XXI.





NEW YOEK, SATURDAY, APRIL 6, 1878.





No.  62.5.





Pidilished Weekly by

'€\n %m{ Estate %mxti Issotmiion.

TERMS.
ONE YEAU. in advance....SIO.OO.
Communications should be addressed to

C.  \V.  SWEET.

Nos. 345 AND 34T BnoADW.w.





Next week will appear the fifth of our aeries of
articles on the lIj-gienicB of Building.





THE NEW TAX LAW.
There has been introduced into tho State Senate
bj' Senator .Sessions, and passed bj- that bodj' with
the celeritj-of a lightning tlasli, a law profcssedlj-
iuteuded to rehevc the holders of heavilj- mort-
giiged real estate. Before this bill is railroaded
through the .^sserablj-, it will be worth while to
stop and consider its provisions and their probable
elfects. Anj' legislation relating to taxation must
be interesting to citizens at large in the present
exigenc}' of affairs, and of exccptioimble moment to
those whose interests aro specitillj- uft'ectcd therobj-.
It, is diflicult and perhaps unfair to criticise a legis¬
lative enactment upon the meagre abstract fur¬
nished as news by the press. We shall procure an
ollicial copj- of the bill as soon as practicable, and
will then give the framers and promoters of it the
benelit of an\- now readings which the bill itself
luiij- disclose. This bill has a verj' plausible exter¬
ior, but it appears to be ingeniously- framed, to
cover sinister and special objects. If our con¬
struction of it, based upon iircsent data, is war¬
rantable and just, its obvious effects will be highlj-
detrimental and prejudicial to .sound and merito¬
rious real estate interests. If it seeks to establish
a more certain and compreliciisivo taxation of
mortgages, this object could be far more effectu¬
ally accomplished in a simple and easj- waj-,
naniclj', to cause an iuventorj- lo be made at the
Register's office of all ontstauding mortgages
arranged according to the alpliabetical order of
the mortgagees; then with the aid of a city
directorj', or by special inquiry of the mortgagors,
or present owners of the properties mortgaged, it
could be quickly determined whether •the mort¬
gages are taxable. If the object is to relieve
real estate of the double taxation now- imposed
upon it—to wit: tho tax upon tlie fee aim-
pie, and the ttix upon the mortgages cov¬
ering the fee, then the true and eflective
way to accomplish this end is to exempt all
mortgages from taxation. Upon the enactment of
such a law the interest rate on mortgage loans
would drop to four per cent, for prime loans, and
would prob-ibly never exceed five or six per cent,
per annum in normal states of the money market.
Neiihcr of these objects, wc believe, is honestly
or sincerely contemplated by the present law, or
if they are, its direct efl'ect will be to defeat such
ends, and its indirect eflects will be to heap up
additional and unwarrantable taxation upon free
and clear, or lightly mortgaged properties, and
to seriously embarrass the negotiation of mortgage
loans. The motives concealed in this bill, and the
interests favored by its enactment, may be bound
up in three categories. It maybe the desperate
efi'ort of the owners of h»avily-mortgaged vacant





lots to relieve themselves entirely from taxation at
the expense of more fortunate owners of prop¬
erty free and clear, or lightly encumbered. It
may be an eflbrt on the part of monicd corpora¬
tions to secure the monopoly of lending money ou
mortgage, which will include the fixing of the rate
of interest and the costs or bonuses. It may be
an honest but ignorant efi'ort on the part of city
politicians, to eulargo the area of taxable values.
Under the operation of this law, the owner of a
Boulevard lot mortgaged, .say to an Institution for
S10,000, and tax valued at $10,00(1 will escape free of
tax, and as the Institution (Life Insurance Com¬
pany or Savings Bank) is exempt by law from tax¬
ation on mortgages, the amount of tax thus waived
will be reassessed upon free and dear, or lightlj--
encumbcred property.

AVe have no time now to trace out the full efl'octs
of this law, but can see at a glance enough evil
consequences that are likely to follow in its trail,
to warriint ns in sounding a nolo of alarm to all
conserviitive and bona fide owners of retd estate
aii^l personal investors on mortgages, as wc believe
their interests are being placed iu jeopartly.

We will summarize our criticisms upon this law
as succinctly as possible, leaving our readers to
discover at their leisure the links of cause and
effect in the positions we shall assume with relii-
tioii to it.

It offers a large premium to ow-ncrs of property
that is heavily mortgaged.

It imposes a correspondingly hciivy penalty on
the owners of free and dear or lightly encuniliercd
property.

It will give to monicd corporations in this State
and to individual capitalists residing out of the
State acom])lote monopoly of Mortgage Loans, as
the former arc exempt by law from taxation and
the latter cannot be taxed by this State, nor can in¬
terest be withheld for them when due.

It discriminates severely against the capitalist or
lender on mortgage in this State, by compelling
him to pay out of his present income of six per
cent, a tax of two and a half per cent., leaving him
a net income of three and a half per cent., or in
heu of this compels him to take up with such bor¬
rowers (the poorest of all) w-ho will agree to pay
the tax out of their own pockets. This moans poor
bondsman and poor security.

It appears to limit its operation to purchase
money mortgages, a very small percentage of ex¬
isting mortgages. The principle and heaviest
mortgages of this description arc now covering
vacant lots. This feature aecma to indicate that
tlic bill has been prepared expressly and espe¬
cially for the relief of holders of some uptown
lots, that are now mortgaged for more than the
assessed tax valuation.

It will have the effect to Avithdraw- from the Tax
lists all mortgages that are now taxed and lo im¬
pose upou free and clear or lightly encumbered real
estate an additional biudcn, which in the case of
lightly encumbered properly will more than neu
tralize the apparent benefit which it may derive
from the operatiou of the law. It will precipitate
the calling in, or immediate foreclosure, of all past
due mortgages held by individual residents of this
State, and throw serious and insurmountable ob¬
stacles iu the way of negotiatiug fresh loans from
similar sources.

It will impair existing contracts and hopelessly
confuse the basis of fresh negotiations.





It represents class or special legislation of the
most objectionable kind. Its operation would bo
liurah, unequal, oppressive. It would add just the
additional ounce to a lotul of misfortune which real
estate is not able at present to bear.

It encourages rascality and recklcs.sness, and
discourages thrift, prudence and honest dealing.

It w-ill open possibilities f'or widespread evasion
of taxation on real estate. Owners will have
merely to over their properties with fictitious
mortgages to tho amount of the asse.s.-ii-d tax valu¬
ation, and thus escape taxation entirely. The city
will be seriously and hopelessly defeated of its
r.-venue.

Its apparent relief of mortgage debt(jr3 is really
deceptivo and illusory. It will depreciate the value
of their property through the hardships lliiis im¬
posed on real estate, ami render extensive fore¬
closures inevitable. If owners could borrow at
four per cent, by agreeing to pay the tax the rate
would amount to more than the ruling one to-day,
while owners are sure to be met under the opera¬
tion of this law- by increased tax valuations, and
largely increased taxes. It will have the tendency
to ultimately establish the highest legal rate as the
ruling one for loans, and introduce the vicious sys¬
tem of discounts, bonuses and slmve.sjfor procuring
loans, when mortgages on city property should be,
and would otherwise be, eagerly sought after as the
choicest and most reliable securities, available aud
negotiable at the lowest rates of interesL

THEORIES OF  TAXATION.

When, iu loss than thirtj- j'ear.s, the total taxa¬
tion of this State, including State, county- and
school tax, has increased from four millions to
sixty- million.s, having declined only in recent
years, after five j-ears of signal disaster, to its
present standard of fifty millions, it behooves the
tax-paj-er most certainly, and relatively- the press
and the entire peiiple of this State, to give heed
to questions of taxation. After the settlement,
or unsettlemcut rather, of the currency question
by the general government, there is no issue
more certaiu to loom up in portentous and over¬
shadowing proportions, both iu the Federal and
in the State governments, than this very question
of taxation.

It is computed that the total governmental tax¬
ation, Federal and Sttite, impo.sed upon this State
iu a J-ear amounts to fully ono hundred millions
of dollars. It is needless to saj-, that this is an
intolerable and imprecedented burden upon the
business interests and industries of the Common¬
wealth, and, in view of the prolonged revulsion
through which our whole business community
is ixissing, it becomes an interesting study- to note
the issue of the struggle between honest business
effort and the cormorants of government.

It maj- be esteemed a prime misfortune that
the science of political economj-, if it can be call¬
ed a science, has made so little progress since its
birth. Although among the earliest generaliza¬
tions of instructed and enlightened human genius,
we are compelled to look for its highest authori¬
ties in works which were produced between two
and three centuries ago, and it measures the pro-
gre.ss in this department of thought and knowl¬
edge to say that the standards then set up are the
authoritative and controlling ones to-day. Po¬
litical economy must take its place in the category