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B U I LD E R S

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Vol. CII.





NEW YORK, JULY 6, 1918





No. .1,





Five MiU Tax Rate When Personalty is Taxed

Analysis of Gonditions and Laws in This State by John J. Merrill
Shows How Real Estate Can Be Reheved

BY JOHN J. MERRILL,
Member New York State Tax Commission.





THERE can no longer be any question in the minds
of those who are acquainted with the present tax
laws that primarily they are so arranged as to be
adverse to the best interest not only of home builders and
reaUy owners, but also to all who occupy homes, factories,
stores and otlier rented realty.

Necessarily anything that can be presented upon this im-
portant subject in the brief space allotted to this paper must
be somewhat desultory and at best can only furnish food
for reflection.

Let us examine the sources of the present unsatisfactory
situations; how they came into e.xistence; why they have
persisted; what their efĩect, and finally what if any remedy
may be applied.

"All weahh has its origin in the soil." This ancient
axiom has been used for many decades as the basis of an
argument for the total or partial exemption of personal
property from taxation. These interests, assuming the
axiom for a premise, have argued that because wealth is
the property basis of all taxation and all wealth if from the
soil, hence the real burden should be carried by real prop-
erty, and they have sought and have succeeded largely in
securing exemption for their personalty.

Neither time nor tribulation has served to show the
burden-bearing owners of realty how specious has been
this reasoning. In fact there is no actual relation between
the axiom and the so-called premise. They might as well
have started with the premise "Allah is good" and con-
cluded that as Allah wished to be particularly good to per-
sonal property, therefore personal property should not be
taxed. Nor have the realty owners and others afifected by
the scheme recognized how great the burden borne, nor
how far reaching the efĩfect not only upon their own in-
terests, but also upon the major portion of our population
generally. If some among the nuniber have seen through
the scheme they have not thus far succeeded in impressing
upon the masses of those similarly situated the seriousness
of the real situation.

It is a wise saw that "What is everybody's business is no
one's concern." Apparently this state of afîairs is "every-
body's business." It will never be alleviated until some
concerted action is taken with enough force behind it to
impress legislators not only with the justice of their cause,
but also with the fact, which is most important, that there
is a real potentiality behind the protest. In the presence of
these two provisions action may safely be anticipated and
if proper plans have been providcd, the desired result will
be attained.

It was of little moment in the earlier days of our govern-
inent whether taxes were levied against real or personal
property since the great body of wealth  resided in real





cstate and personal property generally was held as incident
diereto. Under such circumstances it is not strange that
the theory of the taxation of wealth or propery (evinced
generally by land and buildings) grew and gathered ground
for itself in which it has thrived without regard to conse-
quences.

Note, however, that even in the earlier days deductions
íor debts against real estate were not permitted. On the
other hand there have been allowances made not only for
the debts existing against personalty itself, but also deduc-
tions for the indebtedness of real property are legally al-
lowable against personalty.

Finally another step was taken and the mortgage against
real property could be ofifset against personal property
which was not directly impressed by any debt whatever,
and for a small consideration exemption was purchased for
the mortgage. The whole arrangement reminds me of
what the poet said of the Chinaman's que:

"He turned him around, he turned him around,
And still it hung behind him."

A former President of the United States was once
charged with the statement that "The soil remains in its
place." Laws have been changed but, to paraphrase, the
tax remains in its place, and always in the same old place.

The many schemes for the reduction or elimination of
taxes against personal property are too numerous and too
well known generally to require repetition here, and to so
repeat them will serve no useful purpose.

It is plain to those who have closely followed the course
of events relating to taxation that these exemptions and
exceptions in favor of personalty have been granted be-
cause of the somewhat plausible plea that personal prop-
erty subject to debt was not wealth belonging to the holder
and that, in fact, the only interest of the holder in the prop-
erty was the equity whicli he had at the time. Wliy the
rights of personal are superior to Ihose of real property
does not yet appear.

E.xceptions and exemptions and offsets for debts have
grown with the growth of the country and the accumula-
tion of wealth. The inconsiderable offsets of the earlier
days have grown to gigantic stature in these later times.
Today the shadow cast by this Colossus, grown fat and
formidable by feeding upon the fruits of others' labors,
falls across the fair fĩelds formerly occupied by the less
liquid, more visible, and consequently always contributing
real estate to the detriment of all who own or occupy
realty.

Money generally does not seek investment in lands and
buildings because they neither offer the remuneration nor
the ease of disposition offered by stocks, bonds and other
forms of securitíes.   This all results in reducing tíie in-