Forest City press. (Forest City, Potter County, D.T. [S.D.]) 1883-19??, 1917-06-22
A Constructive Criticism on tho
House Revenue Bill.
LOANS BETTER THAN TAXES
Five Reasons Why Excessive Taxes at
the Outset of War Are Disadvantage
ous-Great Britain Example Worthy
of EmuIation-How the Taxes Should
Be Apportioned.
BY EDWIN r. A. sELIeMAM.
Mcvickar Professor of Political Eco,

BY EDWIN r. A. sELIGMAN,
McVickar Professor of Political Econ
omy Columbia University.
On May %, 1917, the House Of Rep.
resentatlves passed an act Ito provide
revenue to defray war expenses and
for other purposes" In the original
bin as presented by the Committee Of
Ways and Means, the additional reve-
nue. to be derived was estimated at ST.
S~10,42O,O0O. The amendment to the in.
come tax, which was tackled OH to the
bill during the discussion in the House,
was expected to yield another $4,000.
600 or $5O,OOO,OO0.
In discussing the House bill, two
problems arise: :
l. How mucn should be raised by
taxation?
III. In what manner should this sum
be raised?
!. How Much Should Be Raised by
Taxation7
How was the figure of ST, ,O0O, 900
arrived at? The answer is simple. When
the Secretary of the Treasury came to
estimate the additional war expenses
for the year 1918, he calculated that
they would amount, to some $6,6OO,-
100000, of which $3,0OeQ00.OOO was to
be allotted to the allies. and $780,.
100000 was to be utilized for the do.
nestle purposes. Thinking that it
would be a fair proposition to divide
this latter sum between loans and
taxes, he concluded that the amount
to be raised by taxes was 81, 100000.
600.
There are two extreme theories, each
Of which may be dismissed with scant
courtesy. The one is that all wal ex.
p%enditures should be betrayed by loans,
and the other is that all war expendi-
lures should be betrayed by taxes
Each theory is untenable.
1t is indeed true that the burdens of
the war should be borne by the pres
ent rather than the future generation:
but this does not mean that they should
be borne by this years taxation.
Meeting all war expenses by taxation
makes the taxpayers in one or. two
years bear the burden of benefits that
ought to be distributed at least over a
decade within the same generation.
In the second place. when expendi-
lures approach the gigantic sums Of
~present-day warfare. the tax-only pol
Icy would require more than the total
surplus of social income. Were this
absolutely necessary, the ensuing hav.
DC in the economic life Of the commune
ty would have to be endured. But
where the disasters are so great and
at the same time SO unnecessary, the
tax-only policy may be declared I'm
practicable.
Secretary McAdoo had the right in.
stinct and highly commendable cour-
age in deciding that a substantial por-
ton. at least, Of the should
be derived from taxation. But when
he hit upon the plan of $3.50 per cent,
that is. OF raising one-half Of all do
nestle war expenditures by taxes, the
question arises whether, he did not go
too far.
The relative proportion of loans to
taxes is after all a purely business
proposition. Not to rely to q. large ex.
tent on loans at the outset Of a war is
a mistake.
Disadvantages Of Excessive Taxes.
The disadvantages Of excessive taxes
at the outset Of the war are as follows:
!. Excessive taxes on consumption
will u popular resentment.
2 Excessive taxes on industry will
disarrange business. damp enthusiasm
and restrict the spirit Of enterprise at
the very time when. the opposite is
needed.
:. Excessive taxes on incomes will de.
plete the surplus available Tor invest
ments. and interfere with the placing Of
the enormous loans which win be neces-
sary in any event.
4. Excessive taxes Of wealth will
cause Z serious dfminution Of the In:
CONFESS which are at present largely
drawn upon for the support OF educa.
ttonal and philanthropic enterprises.
Moreover, these sources oS support
would bezdried up precisely q the time
when the need would b greate1t.
kHexosssIve stSxGkiSn atsths outsst a.
the war WillarsdUeo 4hss elasticity avail.
able Ter che ineroeelnO degnandestsats
are ooont 20 coma.
orsat Dritelnss Policy.
Take Great Britain ~ an example.
During the 6rst ysaRso az thS war she
incEeasedstaxes only alightly. - ofder
Io keep Observation-Disclosures notch.
During IN secdndyeir shGfaleedsbyl
nay taxAasQnlxaRak esnt q ~ var