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293
Finances of Oregon.

must be actual and not merely contingent due tO' a surety pledge and that deduction could be allowed only to the amount of the proportional liability in any joint debt.[1] The enactment of such legislation is evidence complete as tO' the practice rife.

In 1893, the whole policy of deduction for indebtedness was thrown overboard.[2] Under the law providing for the deduction of indebtedness the amount of indebtedness deducted had each year been greater than the whole amount of moneys and credits assessed. This disparity became larger and larger. By 1885, the amount deducted for indebtedness was more than twice as great as the sum of moneys and credits taxed.[3] Debts were largely created for the purpose of being used in avoiding taxation, and yet the law had been retained some three decades. A special committee of the state senate on assessment and taxation as late as 1891, was not able to secure a unanimous report recommending its repeal. The minority report of this committee contains a plausible argument for the retention of the law in a modified form.[4] Under the constitution of Oregon, as interpreted by the supreme court of the state and the United States circuit court, credits must be made taxable and any law exempting them from taxa- tion would be void. By virtue of such liability to taxation cred- itors secured higher rates of interest whether they paid the tax on credits or not. The return of assessable credits had been increased in cases cited through the law allowing deduction of indebtedness upon the debtors giving the name of the cred- itor. So the situation was that the creditors had to be taxed and the law allowing deduction for indebtedness could be made to serve in the detection of tax-dodging creditors. Therefore, the wise policy would allow the debtor to deduct his

debt to the amount of the assessable value of the credit within----

  1. Session Laws, 1880, p. 52.
  2. Session Laws, 1893, p. 6.
  3. Report of Board of Commissioners on Assessment and Taxation, 1886, p. 85.
  4. Report of Special Senate Committee, 1891, pp. 1-10.