The Democratic advocate. [volume] (Westminster, Md.) 1865-1972, 1917-06-29

ths Outset Of War Are Disadvantage
ous-Creat Britain Example Worthy
~ EmuIation-How the Taxes Should
5s APpor+ioned.
8y EDWIN r. A. SELlGMAN,
N,vlrllr Professor Of Political Econ
orH:. Columbia University
DD Nav -. 1917. the House of Rep.
-ege1tatiyr4 passed an act ''tO provide
revenue to drfray war expenses and
FOR other purposes" In the Original
bill a. presented by the Committee OF
U'av4 and Means, the additional reve,
me TO be derived was estimated at ST.,
9rn42OrW. The amendment to the In.
come TAX. which was tackled on to the
bill dur:a.. the discussion in the House
vas rA ,prI"d to yield another $4,000.
ED or >5o."DuDO.
Ia discussing the House bill, two
Problems arise:
How much should be raised by
taxation:
II. I'm what manner should this sum
D. raised:
How Much Should De Raised by
Taxation?
How was the figure Of 81, 800, 0OO, 600
arrived M: THE answer il simple. When
the Secretary Of the Treasury came tC
estimate IN" additional war expenses
FIR rhr year 1917-1S, he calculated that
:a,.v uu1li amount to some $1,000
.a.5'syp. of which $1,000, 100000 was tc
',, allotted to the allies, and $500
srlHn v.;4 10 be utilized for the do
mn~air purposes Thinking that II
would b" fair proposition to divide
his latter sum between loans and
taxes he concluded that the amount
ID Re raised by taxes was 81 100000.
uN
TA"r" are two extreme theories each
az which may be dismissed with scant
nourr">y The one j. that all war ex
r"udlfurH.> should be betrayed by loans
ami tn" other il that all war expendt
cures >HnM!L be betrayed by taxes
El'h theory Is untrnablp.
II il indeed trur that the burdens OF
.l' war should hr borne by the pres
ont rather than the future generations
hur this does not mean that they should
"a borne l,y this years taxation.
Meeting ali war expenses by taxation
makes til" taxpayers in one or two
Years hra" the burden OF benefits that
ought 10 J." distributed at least over &
decade within the same generation.
III The second place. when expendi-
tires approach the gigantic sums of
rrp7cnt-dUy warfare, the tax only pol
I"y would require more than the total
surplus Of social income. Were this
absolutely necessary. the ensuing hay
o. in thr economic life Of the cOmmuni,
~ would have 10 be endured But
whore TIE disasters are so great and
4t the me time so unnecessary. the
taz-unlr policy may ne declared i'm
rra '.icai.ir.
Secretary Nrtduu had the right i'll
srinct and highly commenlable Cour
age in deciding tina; y substantial por,
don al least, Of the revenues should
- derived from taxation. But when
~ hit Il Oh the plan nf $3.50 per cent.
THAT is If RI ;Sing on"-half of all do
Lestic war expenditures by taxes, the
question ari "'S whether he did not e
TOO far
The r"I"tiv'' Nr".,r'iuu Of lpnns t.
taxes j. after all purely business
lrurp>itiDu. Not 20 rely 90 large ex.
tent ON loans Ht the outset of war l.
VA mistake.
Disadvantages OF Excessive Taxes.
The disaL"uutH%"S of excessive taxes
al the outset Of III" war are as follows
]. Excessive taxes on consumption
viii cause popular resentment.
;. Excessive taxes Oh industry will
ii~arrungr business. damp enthusiasm
aDd restrict the spirit of enterprise nj
the very time when the opposite l.
needed.
3. Excessive taxes on incomes will de
ricte the surplus available for invest,
meats and int"rfe:r with the placing OF
The enormous leans which will he npceS
s"rr In any event.
4. EXrp<<iv" taxes ON wealth will
cause a serious dilninutiOn OF the in
comes which ar" 1T present largely
drawn UI."A for lac support of cduM.
-l0nRl H.I nMil&NthrOpir enterprises.
Moreover, th".;.' sources of support
would be dried III precisely at the time
when the need would be greatest.
y. Excessive taxation at the outset OF
the war will reduce the e!acticity avail
able for the increasing demands that
are soon to come.
Great 5ritain's Policy.
Take Great Britain as an example
During the first year of the war she
Increased taxes only slightly, in order
80 keep Industries going Mt top notch
During the second year she raised by
new taxes only 8 per cent. of her war
expenditures During the third year
she levied BY additional taxes lover
and above the preWar leveD OmIE
slightly more than II per cent. Of her
war expenses.
IL we should attempt to do as mucn
In the first year Of the war az GreAl
Britain dc In the third year il would
suffice TO raise by taxation $1.25O,O00,
900. III, I'm order to be absolutely on
the safe side, it seemed advisable to
Increase the sum to $1,5OO,OOO,O 900, this
should, In our opinion, be the maxi
mum.