The Bridgeport evening farmer., 1917-06-13
HOW SHALL WE
 PAY FOR THE WAR?
A Constructive Criticism on the
 House Revenue Bill.
LOANS BETTER THAN TAXES

Five Reasons Why Excessive Taxes al
 the Outset of War Are Disadvantage.
 ous-Great Britain Example Worth,
 of EmuIation-Howt the Taxes shouIe
 Be Apportioned.
 By EDWIN R. A. .sELlGMAN, McVickar Professor of Political Econ-
 omy, Columbia University. @ On May g, 1917, the House of Rep resentatives passed an act ito provide revenue to defray war expenses and for other purposes" In the original bill as presented by the Committee ot Ways and Means, the additional reve. nue to be derived was estimated at $1,- 810,420O00. The amendment to the in- bill during the discussion in the House, was expectedkto yield another $40, ,OOO.- 900 or $5o. .oo6,OOo.
 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 $1,SOO, ,OOO, GOO arrived at? The answer is simple. When the Secretary of the Treasury came to estimate the additional war. expenses for the year 1917-1s, he calculated that they would amount to some SC, ,6OO,- 100000, Of which $3,OOO, 100000 was to be allotted to the allies, and $8;cOO,- 100000 was to be utilized for the do- nestle purposes. Thinking that 1t 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 1,SOO, ,OOO,- 900.
 There are two extreme theories, each of which may be dismissed with scant courtesy. The one Is that all war ex- penditures should be defrayed by loans, and the other is that all war expendi- lures should be defrayed by taxes. Each theory is untenable.
 It 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 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 hay oc in the economic life of the communi- 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 fn- stinct and highly commendable cour- age in deciding that substantial DOT tion, at least, of the revenues should be derived from taxation But when he hit upon the plan of 50-5O per cent, that is, of raising one half of all do- mestic war expenditures by taxes, the question arises whether he did not go 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 war is a mistake.
 Disadvantages of Excessive Taxea.
 The disadvantages of excessive taxes at the outset of the war are as follows:
 l. Excessive taxes on consumption will 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 is needed.
 3. 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.
 4. Excessive taxes on wealth will cause a serious diminution of the in- comes which are at present largely drawn upon for the support of educa- tional and philanthropic enterprises Moreover. these sources of support would be dried up precisely at the time when the need would be greatest.
 5. Excessive taxation at the outset of the war will reduce the elasticity avail able for the increasing demands that are soon to come.
 Great Rritain's Policy.
 Take Great Britain as an example. During the first year of the war she increased taxes only slightly. in order to keep industries going at top notch. During the second year she raised by new taxes only 9 per cent of her war expenditures. During the third year Ehe levied by additional taxes lover and above the pre-war leveD only slightly more than IT per cent. of her war expenses.
 If we should attempt to do as much in the first year of the war as Great Britain did in the third year it would suffice to raise by taxation $1.25o, ,0O0.- O00 If, in order to be absolutely on the safe side, 1t seemed advisable to increase the sum to S1.5OO. 100000. this should, in our opinion. be the maxi hum. ~
 In considering the appori.onment of