The Adair County news., 1917-06-27
BY EDWIN r. A. sELIoMAN,

Be APPOrtIonsd.
BY EDWIN r. A. sELIoMAN,
Mcvickar Professor Of Political Econ
omy, Columbia University.
On May %, 1917, the House Of Rep
resentatives passed an act "to provide
revenue to defray war expenses and
for other purposes" In the original
bill as presented by the Committee OF
Ways and Means, the additional reYe-
nue. to be derived was estimated at ST.
S10,420OOO. 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 $4,000
600 or $5O,OO0OOo.
In discussing the House bill, two
problems arise:
l. How much should be raised by
taxationl
II. In what manner should this sum
be raised2
!. How Much Should Be Raised by
Taxation7
How was the figure Of 81, 100000 900
arrived att The answer is simple. When
the Secretary of the Treasury came tC
estimate the additional war expenses
for the year 1917-1S, he calculated thai
they would amount to some $4,000,
100000, Of which $3,000,OO0,OOO was t.
be allotted to the allies, and $1,000,
100000 was to be utilized for the dc
nestle purposes. Thinking that i
would be a fair proposition to divide
this latter sum between loans ant
taxes, he concluded that the amount
to be raised by taxes was 81 800 600
900.
There are two extreme theories, eacl
Of which may be dismissed with scant
courtesy. The one is that all war eX-
penditures should be betrayed by loans
and the other is that all war eXpendi
lures should be betrayed by taxes
Each theory is untenabie.
1t is indeed true that the burdens
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 twr
years bear the burden Of benefits tha
ought to be distributed at least over /;
decade within the same generation.
In the second place, when expendi
lures approach the gigantic sums @
present-day warfare, the tax-only pOl
icy would require more than the tota,
surplus of social income. Were this
absolutely necessary, the ensuing hay
oc In the economic life Of the commun
ty would have to be endured. Bu
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 i
sttnct and highly commendable cou.
age in deciding that q substantial pC
tion, at least, of the revenues shou,
be derived from taxation. But who
he hit upon the plan Of $3.50 per cen.
that is, Of raising one-half Of all 4
mestic war expenditures by taxes, I'll
question arises whether he did not 30
too far
The relative proportion of loans e.
taxes is after all a purely businesa
proposition. Not TO rely to a large ez-
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
1. Excessive taxes on consumptiCn
will cause popular resentment,
2. Excess:rn tS::cs on industry W..
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 {
plete the surplus available for inVe
ments and interfere with the placing o.
the enormous loans which will be necc.
sary In any event.
4. Excessive taxes on wealth ".
cause a serious diminution Of the Il.
comes which are at present larg
drawn upon for the support Of edu .
donal and philanthropic enterprie. D..
Moreover, these sources Of suppc: {
would be dried up precisely at the tin,
when the need would be greatest.
5. Excessive taxation at the outset {
the war will reduce the elasticity avail.
able for the increasing demands ths
are soon to come.
Great Britain's Policy.
Take Great Britain as an examp'.
During the first year of the war sil
Increased taxes only slightly, In or lc.
to keep industries going at top no: j
During the second year she raised t.
new taxes only per cent. of her u:
expenditures. During the third va!
she levied by additional taxes (caeT
and above the pre-war level only
slightly more than II per cent. of har
war expenses.
II we should attempt to do as nT'l,
III the first year of the war as G,.ei.
Britain did In the third year it ~,
suffice to raise by taxation $1,250CT
900. If, in order to be absolutel. %.
the safe side, it seemed advisabl f.
increase the sum to $1,500,OO0,G9O, hi.
should. In our opinion, be the ma y
MIN.