PRINCIPLES OF TAXATION. 651 



not in itself property, but, like a deed or lease, is a species of con- 

 veyance or acknowledgment of a conditional interest or right in 

 the property, is not equal and uniform taxation, but an unequal and 

 double tax on the property mortgaged. 



The importance of this decision, considered as an act reforma- 

 tory of the popular theory of local taxation, does not require to be 

 proved and illustrated; but as it was unquestionably a step in 

 advance of any heretofore taken by either our Federal or State 

 courts, and as, by reason of it, not only were mortgages exempted 

 from taxation in California, but also all promissory notes and other 

 evidences of indebtedness, it is desirable briefly to ask attention to 

 the reasoning by which the court was led to its conclusions. 



The opinion was given by the Chief Justice — Crockett — who, 

 after reviewing the history of the case, is reported to have used the 

 following language: 



"I come now to the point, whether a tax on land at its full 

 value, and a tax on a debt for money loaned, secured by a mort- 

 gage on the land, is in substance and legal effect a tax on the same 

 property. We all know, as a matter of general notoriety, that 

 almost universally, by a stipulation between parties, the mortgagor 

 is obliged to pay the tax both on the land and on the mortgage. 

 Practically he is twice taxed on the same value, if he has still in 

 his possession the borrowed money to secure which the mortgage 

 was made. The law taxes in his hand both money and land; and 

 by his stipulation he is required to pay tax on the mortgage debt, 

 and also, if the money has pased out of his hands into the posses- 

 sion of some other taxpayer, it is taxed in the hands of the latter, 

 so that the money bears its share of taxation, and the land its share, 

 in the hands of whomsoever they may happen to be. 



" It is very true that a voluntary agreement on the part of the 

 mortgagor to pay the tax on the mortgage debt can not improve its 

 situs. The State was no party to the contract, and is not bound by 

 stipulation inter alias. The burdens of taxation can not be shifted 

 from those on whom the law imposes them by stipulations between 

 private persons; but in the absence of such a stipulation, an inex- 

 orable law of political economy would impose upon the mortgagor 

 the burden, in a different form, of paying the tax on the mortgage 

 debt. Interest on money loaned is paid as a compensation for the 

 use of the money, and a rate of interest as agreed on is the amount 

 which the parties stipulate will be the just equivalent to the lender. 

 If, however, by the imposition of a tax on the debt, the Govern- 

 ment diminishes the profit which the lender would otherwise re- 

 ceive, the rate of interest will be sufficiently increased to cover the 

 tax, which in this way will be ultimately paid by the borrower. 



