The subject is commonly considered with reference to those credits which are secured by mortgage or other express lien upon specific property. When superficially considered the duplication of values seems more apparent in such case than in the case of credits not so secured. It is not difficult to perceive, however, that every obligation due from a solvent debtor is potentially secured upon his property, or upon the property of some one else if such debtor's financial means consists of credits or other representative interests in actual property, and therefore, it is just as much a duplication of values to treat so called unsecured credits as property as it is in the case of credits expressly secured by mortgage or other lien upon specific property.

For the purposes of this discussion, it is not denied, that in this state at least, it is within the constitutional power of the legislature to permit and direct such duplication of values as is contemplated by our present tax laws; and it is not contended that such duplication results in double taxation in technical legal contemplation, according to the general current of judicial decisions. But it is beyond controversy that such duplication results in double taxation in economic consideration and from the standpoint of substantial justice and equity.

It would hardly seem that argument is necessary to establish the remainder of the proposition under consideration, that assessment laws resulting in double taxation "cannot fail to produce inequality and injustice, so far as such laws may be enforced." It is almost self-evident that such injustice must follow even if the law be fully and effectually enforced,—and where such laws are only partially enforced, the inequality, as to those who are forced to pay is greatly intensified. Let it be assumed, for illustration, that in the state the total value of actual property subject to the general property tax is twelve hundred millions of dollars; that one half of this property is

1 Cooley on Taxation (2nd ed.), p. 219; Second Ward Savings Bank vs. Milwaukee, 94 Wis., 587. But a contra legal view is taken in People vs. Hibernia Bank, 51 Cal., 243; Savings & Loan Society vs. Austin, 46 Cal., 415; Stroh vs. Detroit (Mich.), 90 N. W. Rep., 1029; Commonwealth vs. Fall Creek Coal Co., 156 Pa. St., 488.

owned by persons who are not indebted and the other half is held by persons owing sums aggregating four hundred millions. If these credits are assessed and the actual property is also assessed at its true value the total assessment will be sixteen hundred million dollars. The result will be that the debtors and their creditors, having between them only one-half of the actual property and together possessing no greater means or actual ability to pay taxes than the non-debtors, would be required to pay ten-sixteenths of all the taxes while the non-indebted class, possessing one-half the actual property and one-half of the actual means and ability to pay, would bear only six-sixteenths of the burden. It is thus evident that debtors and their creditors together considered as one class are injured, while those who are not debtors are benefited, by the assessment of credits without corresponding reduction in the assessment of debtors. Where only a portion of all credits are assessed, the creditors who are assessed, with their debtors, are placed on an inequality with other debtors and creditors as well as with non-debtors, and their actual burden is greater than if all credits were assessed. In brief, the assessment of credits is the creation of fictitious valuations having precisely the same effect as an overvaluation of property, producing injustice to those whose assessments and tax burdens are thereby increased and a corresponding advantage to all other tax payers. If only a few are thus injuriously affected their wrongs are greater both relatively and absolutely than if many were so treated.

In closing this branch of the discussion it may be remarked that it is not at all surprising that laws requiring the assessment of credits without corresponding reduction in the assessment of the property of debtors, have usually been resisted and evaded or that assessing officers have generally made little effort to enforce them. Laws which are fundamentally wrong are incapable of substantial enforcement among free and enlightened people; and the fact that the assessment laws under discussion have never been effectually enforced is evidence that there is some radical defect in the principle upon which such laws are founded. It would not be wholly correct to assert that in their practical rejection of such laws the people and

their assessors have shown themselves wiser than their lawmakers, but is it not true that by instinct or intuition they have arrived at correct conclusions which as yet have not been consciously perceived by the majority of legislators? It is not doubted, however, that the majority of legislators when called upon to take action in the matter will perceive, as the majority of persons who study the subject believe, that the present laws requiring the taxation of credits are wrong in principle and so far as enforced produce injustice, and should be no longer tolerated.

There are, however, many persons who are convinced that the present system of taxing credits without corresponding reduction in the property assessment of the debtor is unjust and indefensible, but are firmly of opinion that the remedy for the admitted evil is not the release of credits from taxation, but that the state should continue to tax them as property and grant relief to the debtor against the effect of double taxation by reduction in the assessment of the actual property in his possession. Inasmuch as this view is sincerely entertained and strenuously urged by some of those who adhere to it, it requires careful and impartial consideration. It is after all the question upon which the greatest division of opinion will be finally made and upon which the most earnest contest may be expected. If the conclusions already reached as to the justice and expediency of the existing law are correct, it follows of course that a law permitting reductions in the assessment of the debtor equal to the amount of debts for which his creditor is taxed is infinitely preferable to the present system. The only question remaining for consideration is the question, indicated above, whether the state shall cease to consider credits as property for purposes of taxation or shall continue to tax them and provide for deductions in the assessment of the property of debtors equal to the amount of credits assessed so as to avoid the injustice of double taxation.

In considering this question it should be borne in mind that if double taxation is to be completely avoided the suggested deductions in favor of debtors will be exactly equal to the amount of credits assessed, and therefore no greater aggregate of "prop

erty" would be assessed for taxation under such proposed system than would be assessed if credits were wholly omitted from taxation and the property of debtors assessed without deductions. As precisely the same aggregate of "property" would be assessed under either plan, it follows of course that those who are neither debtors nor creditors would have no greater burden under the one plan than under the other. The proposition, then, is one affecting debtors and creditors only, and therefore the real question is whether the legislature shall interfere between debtor and creditor and attempt by law to determine the portion of taxes which each shall pay on account of property in which both are interested, or whether the state shall look only to the possessor of the actual property for the required revenue, leaving the adjustment of the burden between debtor and creditor to be worked out by natural economic laws. In other words the proposition to tax the creditor directly is not to secure additional revenue, nor to increase the total amount of property to be assessed so as to lessen the burden of the non-indebted property owner, but solely to benefit the debtor-to secure as between him and his creditor, if possible, a more equitable adjustment of the tax burden to be imposed on account of property in which both are interested than would be accomplished by the natural laws of trade and commerce without arbitrary legislative interference. Such plan necessarily contemplates that the tax to be imposed upon the creditor shall not become a burden upon the debtor. This brings us to the consideration of the sixth and seventh propositions stated on page 115 which for convenience are here re-stated:

(6) The tax imposed upon the creditor is ordinarily shifted to the debtor in the form of higher interest or otherwise, with something added to cover the creditor's risk.

(7) Laws designed to prevent such shifting are impracticable and serve to injure rather than to benefit the debtor, the only person for whose protection they are intended.

Argument is hardly required to show that credits which are taxed cost the borrower more than credits which are free from taxation, assuming that conditions are not exceptional. This is hardly different from the proposition that, under ordinary

conditions, goods which are taxed will cost the consumer mole than if the same goods were free from taxation, which, it would seem, none will deny. Taxes paid by the merchant or the manufacturer must be reckoned as a part of the cost and included in the price of articles sold just as much as any other item of expense incurred in conducting his business. If these cannot be included so as to yield him a reasonable margin of profit he will employ his time and capital in some other occupation and others will do the same until those remaining in his line of business, by reduced competition, will be able to secure prices which will yield a reasonable profit after paying all expenses including taxes. These results are worked out by the natural laws of trade which are patent to all thinking persons. By the same laws, the lender of money must include his taxes in the rate of interest if not recompensed in some other way. If the rate secured will not leave a reasonable income after payment of taxes, loanable capital will be invested in other enterprises until there is a sufficient scarcity to command a rate of interest which will yield, as compared with other investments, a fair return plus taxes. Ordinarily the increase in the interest rate to cover taxes is something more than the actual tax rate, especially in case of credits having a year or more to run; for in such case the future tax rate is unknown at the time the interest rate is stipulated and the latter rate is usually fixed high enough to cover the contingency of an increase in the tax rate, which ordinarily does not occur. Thus the debtor pays the "cost of shifting" in addition to the tax.

As already stated, these results are accomplished by operation of natural economic laws those principles and forces which underlie and, if untrammelled, regulate and control industry and commerce and affect and in large measure determine production, cost, prices, values-which are of infinitely greater potency and force and more unerring in operation than any mere act of the legislature. It is believed that every candid, thinking person will recognize and admit that the foregoing statement of the operation of such laws as applied to the case of merchants and manufacturers is substantially true. Can it be seriously doubted that the same immutable laws will operate