FARM TAXES IN MASSACHUSETTS 117 



vidual farmer is shown by an analysis of 69,601 income tax returns for indi- 

 vidual farms in 1923, recently published by the Federal Bureau of Internal 

 Revenue.^ According to these figures, state and local taxes took an average 

 of 38.4 per cent of net profits before taxes were paid. Only 457 returns were 

 tabulated from Massachusetts out of which 213 reported a net loss. The aver- 

 age net loss per farm for the 457 farms was about $550 before paying taxes, 

 and nearly $900 after state and local taxes were paid. The average for the 

 United States based on 69,601 returns was a net profit of more than $1000 per 

 farm before paying taxes, and of over $600 per farm after taxes were paid. 

 The 244 Massachusetts farmers reporting a net profit paid 13.73 per cent of net 

 profits for state and local taxes. 



Taxation of Savings Banks. 



Savings banks are more fortunate than other types of corporations in that 

 taxes usually take a smaller percentage of tiieir income. Savings banks are 

 taxed one-half of one per cent on their average savings deposits, less certain 

 exemptions. The effect of the exemptions has been to reduce the actual taxes 

 collected even with increasing deposits. Since 1921 deposits have increased 

 29.95 per cent while taxes on deposits have dropped 2.66 per cent. In 1921, 69.9 

 per cent of the deposits were exempt; in 1925 exemptions had increased to 

 77.49 per cent. Apparently savings banks are investing their deposits in 

 exempt property as rapidly as possible. In 1925 a tax of one-half of one per 

 cent on total deposits would have returned over $8,000,000 in taxes, whereas 

 the actual tax amounted to only $1,843,000. If this is computed on an income 

 basis, savings banks paid 2% per cent of their income as state taxes, provided 

 the banks earned 5 per cent on their deposits. Exemptions have reduced 

 taxes from $5.00 per $1000 deposits to $1.12 per $1000. 



Savings banks are subject to local taxation on their real estate. In 1925 the 

 value of real estate used for banking purposes amounted to $19,792,000. Assess- 

 ing this amount at the average rate of $28.53, giving property taxes amounting 

 to $564,665, or 34.48 cents per $1000 of deposits. Adding this amount to the 

 previous tax gives a total tax of $1.47 per $1000 of deposits. With earnings 

 at $50 per $1000 all taxes take 2.94 per cent of the income. Massachusetts 

 savings banks pay no Federal income tax, because they are mutual associa- 

 tions. Consequently the above taxes represent total tax payments and must 

 be compared with the payment of 26 per cent of the income of business cor- 

 porations. There is one difference in that patrons of savings banks must pay 

 the Federal Income tax on their interest received provided their income is 

 above the legal minimum, while personal income from business corporations 

 is not subject to the normal Federal income tax. 



At the present time over 57 per cent of the total savings bank deposits are 

 loaned on real estate taxable in Massachusetts, and according to law such 

 loans are exempt from all taxes. In buying real estate for $10,000 on which 

 the savings bank advances 60 per cent or $6,000, the buyer pays local taxes 

 at the rate of nearly 3 per cent on the entire assessed valus. The legal basis 

 for exempting bank deposits is that in such cases the property is taxed locally, 

 and if the bank deposits were taxed it would be double taxation. This ex- 

 emption is a wide departure from our underlying principle that taxes should 

 be levied according to ability to pay as measured either by value of property 



* Statistics of Income, 1924. 



