Shoshone journal. [volume] (Shoshone, Idaho) 1884-1931, 1917-06-22
By EDWIN R. A. sgLleMAN,

By EDWIN r. A. sELiemAN,
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 and
for other purposes" In the origina
bill as presented by the Committee Of
7 Ways and Means. the additional reve
nue. 10 be derived was estimated at 81,
s10,420O00. TIE amendment to the in
come tax, which was tackled on TO the
bill during the discussion in the House
was expected to yield another $4,000.
600 or SJOOe0.OOO.
In discussing the House bill, two
problems arise:
L How much should be raised by
taxation?
H. In what manner should this sum
be raised?
!. How Much Should &c Raised by
Taxation?
How was the figure OF 81 500. 900. 600
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 $1,000
100000, of which S3O00.OO0.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 10 divide
this latter sum between loans and
taxes, he concluded that the amount
to be raised by taxes was 81. 10000
coo.
There are two extreme theories, each
of which may be dismissed with scant
courtesy. The one is that all war eI-
penditures should be betrayed by loans.
and the other is that all war expendi-
lures should be betrayed by taxes
Each theory is untenable.
Ii is indeed true thst 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 hay-
oc in the economic life of the communi-
~ would have to be endured But
where the disasters are so great and
tax-only policy may be declared i'm
practicabl
Secretary McAdoo had the right in
stinct and highly commendable cour-
age in deciding that substantial por
ton. ar least, Of the e7enues 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 purely business
Not TO rely TO large ex-
tent on loans at the outset OF war is
q mistake.
Disadvantages of Excessive Taxes
The disadvantages Of excessive taxes
at the outset OF the war are as follows:
/. Excessive taxes on consumption
VIII cause popular resentment
. Excessive taxes on industry viii
business, damp enthusiasm
and restrict the spirit OF enterprise at
the very time when the opposite Is
needed
s. Excessive taxes on incomes Will de-
plete the surplus available for invest
ments and interfere with the placing OF
The enormous loans which viii be neces-
sary In any event
f. Excessive taxes on wealth will
cause q serious dimiEution Of the in
comes which are at present largely
drawn upon for the support OF educa-
donal and philanthropic enterprises.
Moreover, these sources of support
would be dried up precisely at the time
when the need would be greatest
s. Excessive taxation at the outset Of
he war will reduce this elasticity avail
lhis for the increasing demands that /
IRE seen to come.
Great B~itain's Policy.
Take Great Britain as an example. /
During the first year OF the war she
taxes only slightly. in order I
o keep Industries going at top notch. .
During the second year she raised by !
lew taxes only o per cent Of Der war
During the third year l
he levied by additional taxes lover
md above the pre-war leveD only >
lightly more than II per cent Of her
var expenses
II We should attempt to do as much
q the first year OF the war as Great
Britain did IN the third year II would
ufiice TO raise by taxation 1928. Co.,
90 If, In order to be absolutely en-
be safe side. 1t seemed advisable to
ncrease the sum TO S1.5oo.ooo,0oo, this
hould, In our opinion, be the maxi
,um