118 MASS. EXPERIMENT STATION BULLETIN 235 



or by income. On either basis the savings bank deposits are undertaxed. The 

 savings bank pays no taxes either on local real estate loans or on the income 

 from property loans. Consequently, savings bank deposits practically escai)e 

 all taxation in direct violation of a fundamental principle of tax justice. 



It is not believed that savings bank deposits should be taxed at local rates, 

 especially where most of the deposits are loaned on local real estate, but such 

 deposits should not escape taxation entirely. Since interest rates are limited 

 by law, it is only fair to tax savmgs deposits in real estate loans at a low 

 rate, and the legal rate of one-half of one per cent is fair. It taxes property 

 not otherwise reached and does not place an unfair tax burden on savings 

 deposits. Tlie real estate exemption should be removed. 



Taxation of National Banks. 



National banks in Massachusetts were formerly taxed upon the value of 

 their shares at the local rate in the city or town where located. This method 

 w'as declared illegal by the LTnited States Supreme Court, and since 1923 

 national banks have been taxed either upon share value or upon net income, 

 according to choice. The effect of tliis change has been to reduce national 

 bank taxes paid to tlie state by more than 60 per cent. In 1925 only 38 banks 

 were taxed upon share value, while 125 elected to be taxed upon income. 



The ratio of total taxes paid by Massachusetts national banks to net 

 additions to profits before deducting taxes has declined each year for the past 

 five years. The comparison of Massachusetts banks with the average for tlie 

 coimtry follows. 



Ratio of Total Taxes to Net Additions to Profits 



({Adapted from annual reperts of the Comptroller of the Currency. 



The ratio of taxes to profits before deducting taxes has declined much more 

 rapidly in Massachusetts than for the country as a whole, due to the change 

 in the law mentioned above. 



Available figures indicate that in proportion to income national hanks in 

 Massachusetts pay lower state and local taxes than other business corporations 

 except savings banks. 



Summary. 



It has been shown tht.t property of all kinds is generally undervalued for 

 assessment purposes. There are wide differences in the ratio of actual to 

 assessed values between farms in the same town, between farm and city 

 property, and between towns. Farm real estate appears to be assessed at a 

 lower percentage of value than other kinds of property. If value of prop- 



