The labor world. [volume] (Duluth, Minn.) 1896-current, 1917-06-23
HOW SHALL We
PAY FOR THE WAR?
A Constructive Cr|ticism on tho
House Revenue Bill.
LOANS DETER THAN TAXES

LOANS DETER THAN TAXES
Five Reasons Why Excessive Taxes at
tho Outset Of War Arc Disadvantage
ous-Great Britain Example Worthy
Of Emulation-Row tho Taxes Should
30 Appertioned.
BY EDWIN r. A. sELIGMAN,
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 original
bill as presented by the Committee O.;
Ways and Means, the additional revc
nue. to be derived was estimated at 81,
S1O,420,OCO. The amendment to the IN
come tax, which Was tackled on to the
pill during the discussion in the House.
was expected to yield another $4,000,
900 or S50,C00,000.
In discussing the House bill, two
problems arise:
l, How much should he raised by
taxation?
II. In what manner should this sum
be raised?
!. How Much Should So Raised by
Taxation?
How was the figure OF 81, SOC, 900. 900
Of nn s,o
the Secretary of the Treasury came to
estimate the additional war EXPENSES
for the year 1918. he calculated that
they would amount to some $C,6Oa.-
100000, Of which $780, 100000 was to
be allotted to the allies. and $4,000,
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 amour,
t" be raised by taxes was $l,Y00,OOO..
600.
TSere are two extreme theories, each
ct which may be dismissed with scant
courtesy. Tho one is tlrat all war ex-
expenditures should be. betrayed by loans
and the other is that all war expendi
lures should be betrayed by taxes
Each theory IS untenable.
1t Is indeed true that the burdens O.
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 ct benefits that
ought to he distributed at least over
decade within the same genera ton,
In the second place. when expendi-
lures approach the aaIantic sums of
present-day warfare. the tax-oply 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 IL.
practicable.
Secre44fy McAdoo had the right in.
stinet and highly commendable cour.
age In deciding that substantial nor.
ton, at least, OF the revenues should
be derived from taxation. But wheu
he hit upon the plan of $3.50 per cent
that IS, of raising one-ba1f Of all do
nestle war expenditures hy taxes, the
question arises whether he did not 20
too far.
. Tho relative proportion of loans to
taxes is after all purely business
proposition. Not to rely to a large OK
tent on loans at the outset Of a war j.
a mistake.
Disadvantages Of Excessive Taxes.
The disadvantages of excessive taxes
at the outset Of the war are as follows:
!. Excessive taxes on consumption
Will cause popular resentment.
2. Excessive taxes on industry vii,
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 .,ent.
4. Excessive taxes on wealth will
cause serious diminution of the in-
comes which are at present largely
drawn upon for the support of educa-
'ional and philanthropic enterprises.
Moreover. these sources Of support
:ould be dried up precisely at the time
When the need would he greatest.
5. Excessive taxation at tho outset Of
no war will reduce tho elasticity avail.
able for ths increasing demands that
are soon to come.
Great eri*ain'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 goiu; at top notch.
During the second year she raised BY
new taxes only ? per cent. OF her war
expenditures. During the third year
she levied by additional taxes lover
I