The record. (Greenville, Ky.) 1899-1???, 1917-10-04
HOW SHALL We
PAYFOR THE WAR?
A Constructive Criticism on the
House Revenue Bill.
LOANS BETTER THAN TAXES

LUHWC I'LL ILL IifHN ihAkO
Five Reasons Why Excessive Taxoa at
the Outset Of War Are Disadvantage.
sus-Great Britain Example Worthy
Of Emuiation-Howt the Taxes Should
Be Apportionsd.
BY EDWIN r. A. SELIeMAN,
McS Ekar Professor Of Political Econ.
omy, Columbia University.
On May %, 1917, the House of Rep
resentatives passed an act "to provide
revenue to defrny war expenses and
for other purpoees." In the original
bill as presented by the Committee of
Ways and Means, the additional reve
nue. to be derived was estimated at ST.
SIC, 100000. The amendment to the in
come tax, which was tackled ON to the
bill during the discussion In the House,
was expected to yield another $40, ,000,-
600 or $50,O0O.000.
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 se Raised by
Taxatienf
How was the figure of 81, 800, ,0O0, 900
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 $6,GO0,-
100000, Of which $4,000, 100000 was to
bs allotted to the aliies, and $780,
100000 was TO be utilized for the do
mestic purposes. Thinking that 1t
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 S1,SO0,OOO,-
600.
There are two extreme theories, each
Of which may be dismissed with scant
courtesy. The one is that all war e--
penditures should be betrayed by loans
ana the other Is that al: war expenGi-
trfeS should be betrayed by taxea
F-7saez
It is indeed true that The burdens of
the war should be borne by the pres
cnt rather than the future generation;
hut 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 n
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
at the same time SO unnecessary, the
| tax-only policy may be declared i'm
practicable.
Secretary McAdoo had tho right in
stinct and highly commendable cour-
age in deciding that a substantial por-
tion, at least, Of the revenues should
Be derived from taxation. But when
he lift upon the plan Of $3.50 per cent,
that is, of raising one-hah of all do
mestfc 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 large ex-
| FONT an 1aa Of TIM ~ a.
mistake.
Disadvantages of Excssaivs Taxes.
The disadvantages Of excessive taxes
at the outset Of the war are rs follows
| /. 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
nesded.
8. Excessive taxes ON incomes will de-
p1ete 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 vii,
cause a serious diminution Of the In
comes which are at present largely
drawn upon for the support of educn.
donal and philanthropic enterprises
Moreover, these sources of support
would be dried up precisely at the timt
when the need would be greatest.
8. Excessive taxation at the outset et
the war will rsdues the elasticity avail.
able for the increasing demands that
are soon to come.
Great Britain's Po!isy.
Take Great Britain as an eXample
DugiAS ~ asss ysex - the war sht
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
she levied by additional taxes (over
and above the prs-war level only
slightly mere than II per cent. Of her
war expenses.
II we should attempt 10 do as muci
in the first Jear OF the war as Great
Britain did Ia the third year it would
suffice to raise by taxation $1,25o, 900.
900. If, In order to be absolutely ca
the safe side, it seemed advisable to
increase the sum to $500, 900, ,ooo thii
should, IN our opinion, be the maxi