5 i8 POPULAR SCIENCE MONTHLY. 



bonds hereafter issued, by making them all subject to an annual tax 

 of one, two, or more per cent, and by providing that the tax shall be 

 deducted at the time of the payment of the interest. Is there any 

 one who believes that these bonds will sell in the market at the same 

 high rate that they would command if by law they were free from 

 taxation? 



We can also test the effect of an honest, uniform tax upon mort- 

 gages by providing that mortgages hereafter made shall operate to 

 reduce for assessment the valuation of the land mortgaged to : the 

 amount of the mortgage, and that the mortgagor shall pay the tax 

 on the mortgage, and deduct the tax from the principal or interest, 

 when paid to the mortgagee. But who believes, under such a law, 

 that any money would be loaned at the legal rate of interest? 



A somewhat curious piece of practical evidence, in support of the 

 truth of the above position, in respect to the taxation of mortgages, 

 has been afforded by an experience of New Jersey. This State ex- 

 empted, in 1869, all mortgages from taxation in certain of her coun- 

 ties and cities which lie contiguous to New York city; but this legis- 

 lation, although operating to draw capital away from New York 

 and into New Jersey, was not primarily effected for any such reason, 

 but was brought about in this wise: New Jersey, in the first in- 

 stance, enacted an honest, uniform law of taxing mortgages, and 

 one, moreover, which could with the utmost certainty be executed, 

 and similar in principle to that above suggested; namely, that the 

 person giving the mortgage should pay the tax on it, and deduct 

 the tax from the principal or interest in settling with the creditor. 

 The result was that all mortgages falling due were immediately fore- 

 closed, and as no new loans, moreover, could be made, the inhabitants 

 of the growing counties near the city of New York, wishing to bor- 

 row money on land, or to selHand, found themselves in an uncom- 

 fortable position; so much so, that if the law taxing mortgages in 

 this section of New Jersey had not been promptly repealed by the 

 Legislature, the issue would soon have become a predominant one in 

 the State elections; and hence the explanation of one of the most 

 curious statutes in the history of American legislation which made 

 one tax law for one part of the State and another and a different one 

 for the remainder.* But the point of chief interest in respect to this 

 whole tax experience to which attention should be especially direct- 



* " And all mortgages upon estates, chattels, or personal property, taxable by law 

 within said counties of Hudson, Union, Essex, and the city of Brunswick, Middlesex County, 

 and the county of Passaic, except the townships of West Milford, Pompton, and Wayne, 

 for State, county, township, and city purposes, shall be exempt from taxation when in the 

 hands of any inhabitant, corporation, or association residing or located in said counties or 

 cities." (Approved April 2, 1869.) Laws of New Jersey, 1869, p. 1225. 



