Another policy is to maintain the general principle, but to make exceptions here and there.  Usually the exceptions are made just at those points where the law would with earnest effort be most easily enforceable, and therefore where it has become most inconvenient.  As a result of these changes the state laws display a bewildering and illogical variety.  By constitutional interpretation, United States notes and federal bonds are exempt from state and local taxation; generally, by state law, building and loan association and savings-bank loans are exempt as, in a majority of states, are state and municipal bonds if held within the state.  In at least eight states, bonds of the state are exempt, but those of the municipalities are taxable, while in a few states the reverse is the case.  In several states both kinds of bonds when issued after specified dates, are exempt, but in Ohio state bonds are exempt only if issued prior to 1913.  All but seven of the forty-eight states, however, attempt to tax the resident holders of state and municipal bonds of other states; but the exceptional states are those in which most of the investors in this class of securities reside.  In many cases private debts receivable are allowed to be offset against debts payable.  In some states mortgages on real estate are exempted or (in Massachusetts) treated as an interest in the real estate.  Rarely mortgages are exempted up to a certain amount (in Indiana, to $700, the purpose being to tempt the borrower to reveal the name of the lender).  Sometimes a special mortgage registration tax, payable but once (in New York 1/2 of 1 per cent) is levied, and otherwise mortgages are free from taxation.  Small as this rate is, the fiscal yield of mortgage taxation under this plan exceeds that under the general property tax.

By the overlapping of these laws, so contradictory in principle, it may happen that securities held by taxpayers residing in other states than those of the issue are taxable two or three or more times; but few if any loans of this kind are made except by those evading all taxation.

Sec. 5. #A consistent policy of wealth taxation.# These exceptions still leave the law in its general principles as to the taxation of intangible property illogical and unjust.  A solution can be found only by abandoning the ambiguous legal concept of property, and making use of economic concepts.  A consistent tax law might take either wealth or capital as the basis of assessment, but not sometimes the one and sometimes the other.  Wealth is an impersonal basis of taxation; each piece of wealth might be taxed once as a unit no matter how the ownership were divided.  Or the other alternative might be chosen.  Capital would be a personal basis of taxation; each person’s capital might be taxed no matter from what sources the incomes were derived (the concrete wealth, of course, then being left untaxed).