The restrictions imposed by constitutions have been particularly troublesome where attempts have been made to treat classes of property differently in order to equalize more nearly the tax burden. The results of property taxation have demonstrated that a general, uniform system of taxing property is no longer practical, and that, under modern conditions, it cannot be enforced equitably or effectively. The so-called uniform tax is based on the theory that every form of property, regardless of character or condition, shall be taxed in proportion to value and by a uniform method and rate. The theory presupposes that all property is able to bear the same burdens and that all forms of property are equally easy for the assessor to find and to estimate their values. Uniformity of valuation is an imperative requirement. All property must be assessed at the same percentage of actual values, so that each class, with a uniform tax rate, will bear its just proportion of the burden. No possibility exists, under modern conditions, even to approximate this result.

Court Interpretation. - It has been found possible, where permissible, to approach more nearly a uniformity in tax burdens on property by varying the method of assessment and taxation for the different classes. The Supreme Court of the United States has consistently held that this principle of classifying property for purposes of taxation does not violate any principle of the Federal Constitution. The line of reasoning has been somewhat as follows: diversity of taxation, both with respect to the amount imposed and the various species of property selected, whether for bearing tax burdens or being exempt from them, is not inconsistent with a perfect uniformity and equality of taxation in the proper sense of these terms. A system, moreover, which imposes the same tax upon every species of property, irrespective of its nature, or condition, or class, will be destructive of the principles of uniformity and equality in taxation out of a first adaptation of property to its burden. State courts, however, have generally been much narrower in their interpretation of the constitution or statute providing for uniform assessment.

Status of Classification. - Much interest has been shown in recent years in the classification of property for tax purposes. In not every state where the constitution permits this feature, however, is classification used. Colorado furnishes an example of this situation, which illustrates an exception, however, rather than the rule. A provision was placed in the constitution of 1876 which permitted the legislature to classify property for tax purposes. As yet there has appeared little disposition on the part of the legislature to provide for a classification of property. This is probably on account of the small amount of in-tangible property which appears in this state. On the other hand, in more than a dozen states, where classification of property is allowed, experiments looking to a greater equality of assessment are being carried on, while a number of states which are not allowed the privilege of classification are seeking to obtain it.

Principle of Classification. - The outstanding idea in the principle of classification is to place a distinctly lower rate of tax on intangible property than upon other forms. This is because it has been clearly demonstrated that an imposition of the general tax rate upon this class of property drives a large majority of it into hiding, and it is not reached at all. Tangible property, moreover, is so frequently assessed at only a fraction of its true value, that a lower rate is needed on the intangible property to secure equality, since much of this must be assessed at full value when it is found.

Results of Classification. - The general experience of the states which have tried to reach intangibles through lower rates has been satisfactory. The results are not that perfection has been reached, but that a decided improvement has resulted. The number of property owners assessed has increased materially, as well as the amount of property, and in some cases the actual revenue obtained has been greater than before the tax rate was lowered. The results would indicate that the conscience of taxpayers varies inversely with the tax rate.

Taxation of Mortgages. - One class of personal property that has generally escaped taxation under the property tax is mortgages on real estate. A number of plans have been used to attempt to remedy this evil. Some states have taxed the land at full value and levied only a low rate on mortgages, with the hope that more mortgages would be given in to the assessor. Others have allowed the land owner to deduct the amount of the mortgage from the assessed value of the land, but because of the general underassessment of land, the amount of the mortgage has frequently exceeded the entire assessed value of the land. Still others have given up the attempt to collect any tax from mortgages except a nominal tax at the time of recording. In spite of the apparent injustices, however, most states attempt to tax both the mortgagor and the mortgagee.

New York Mortgage Recording and Secured Debts Tax. - The state of New York, in 1906, through the enactment of the mortgage recording tax, gave legal recognition to the fact that mortgages generally escape taxation. This law removes mortgages from the general property tax and substitutes a tax to be paid, once for all, at the time the mortgage is recorded. The rate is five dollars on the thousand dollars, irrespective of the term of the mortgage. The next extraction from the application of the general property tax was the secured debts, which came in 1911. The holders of these instruments could secure immunity from all future taxes, no matter what the length of life of the security, by presenting it to the comptroller of the state, paying a tax of five dollars on the thousand dollars, and having stamps affixed to indicate that the tax had been paid. This was unsatisfactory because of the unequal rate which resulted on securities of different dates of maturity, and the low return which really came to the state when the time element was considered. Several amendments were tried, and the final result was the investment tax law of 1917. Under this secured debts are taxed annually by the state at the rate of two dollars per thousand dollars. The tax may be paid for one, two, three, four, or five years, but for no longer period.

Other Examples of Classification. - Pennsylvania and Connecticut have both used the principles of classification with interesting results. A few years ago Pennsylvania reduced the rate of taxation on intangible property to a small fraction of what it had been, and for the next year received more revenue from this source than for the preceding year with the higher rate. It appears that the new rate was not high enough to sear the consciences of the owners of intangible property.

Connecticut has a voluntary registration of bonds, notes, and, in fact, practically every form of taxable in-tangible property, with the state treasurer. A tax is paid upon this registered property at the rate of four mills a year. The attached treasurer's receipt exempts from all other taxes. If the document is not registered it is subject to taxation, if found, at the local rates, which are much higher than the state rate of four mills.

The use of the system of classification is but another attempt to make a success of the property tax. At present it is but in its experimental stage, but a strong agitation and extensive program of education is being carried on to secure a wider adoption. It is likely that the future will bring a much more extensive use of the principle, but whether it will satisfactorily solve the problem of taxation of property remains to be seen.