The Hartford herald. [volume] (Hartford, Ky.) 1875-1926, 1917-06-20


the Outset Of War Are Disadvantages.
ous-orsst Critain Example Worthy
Of Emuiation-!iow tho Taxes Should
Be Apportioned.
BY EDWIN r. A. sELIoKiAN,
Mcvickar Professor of Political Econ
omy, Columbia University.
: On May %, 1917, the House of Rep
resentatives passed an act ito provide
revenue to defray war expenses AMI
for other purposes" In the original
bill as presented by the Committee Of
Ways and Means. the additional reve-
nue. to be derived was estimated at ST..
810,420,O0O. The amendment to the In.
come tax, which was tackled ON to the
bill du...rc the discussion In the House,
was expected to yield another $4,000
600 or $5O,O00,O0O.
In discussing the House bill, two
problems arise:
l. How much should be raised by
taxation?
II. In what manner should this sum
, be raised?
]. How Much Should Be Raised by
Taxation?
How was the figure Of 81, 800, COO, 900
arrived at? The answer IL simple. When
the Secretary Of the Treasury came to
yestimate the additional war expenses
: for the year 1017-1S, he calculated that
they would amount to some $4,000
100000. of which $1,000. 100000 was to
be allotted to the allies. and $1,000
100000 was to be utilized for the do
nestle purposes. Thinking that It
would be fair proposition to divide
this latter sum between loans and
taxes, he concluded that the amount
to be raised by taxes was $1.S0OOOO.-
600.
There are two extreme theories, each
OF which may he dismissed with scant
courtesy: The one is that all war ex-
penditures should be betrayed by loans.
and the other is that all war expendl-
lures should be betrayed by taxes.
Each theory is untenable
IL 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 lie distributed at least over
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. We're this
absolutely necessary, the ensuing hav-
oc in the economic life of the communi-
ty would have to be endured. But
where the disasters are so great and
mt the same time SO unnecessary, the
M1-only policy may be declared i'm
practicable.
Secretary McA6oO had the right in
stinct and highly commendable cOur-
age in deciding that a substantial por-
ton, at least, of the revenues should
be derived from taxation. But when
he nit 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 60
too far.
The relative proportion Of loans to
taxes is after all purely business
proposition. Not to rely to 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 or the war are a. follows:
I. Excessive taxes on consumption
viii cause 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 h
needed.
8. Excessive taxes on incomes will de-
plete the surplus available for invest
ments and interfere with the placing of
the enormous loans which will be neces-
sary In any event.
l.. Excessive taxes on -wcslth will
cause q serious diminution Of che In
comes which are at present largely
drawn upon for tbs support of edrca-
tional and philanthropic enterprises
Moreover, these sources OF support
would be dried up precisely ut the time
when the need would be greatest.
q Excessive taxation at the outset Of
the war will reduce the elasticity avail.
able for the increasing demands that
are soon to come.
Great 6ritair's Pei.sy.
Take Great Britain as an exc,ap.a
During the first year of the war sas
increased taxes only slightly. IN order
to keep industries going at top notch.
During the second year she raised by
new taxes only o per cent. OF her war
expenditures. During the third year
De levied by additional taxes lover
and above the pre-war leveD only
slightly more than II per cent. OF her
war expenses. i
II we should attempt to do as much
m the first year of the war as Great
Btitain did In the third year It would
suffice to raise by taxation $3.50 O00-
aoa ~ In orIor m Ia olcolr,talx. m,