Valdez daily prospector., 1917-10-03
BY EDWIN r. A. SEllGMAN,

revenue to defray war expenses and
for other purposes" In the original
bill as presented by the Committee Of
Ways and Means. the additional reve
nue. to be derived was estimated at ST..
S1O.42O.OOO 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 S5ONO,OOU.
In discussing the House bill, two
problems arise:
|. How much should be raised by
taxation?
ii. In what manner should this sum
be raised?
!. How Much Should Be Raised by
Taxation7
How was the figure Of 81 800 OOO. COZ
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.GOO.-
COCOON. OF which $1,000, 100000 was to
he allotted to the allies. and $500.
0OOOO was to be utilized for the do
nestle purposes. Thinking that IL
would be a fair proposition to divide
taxes, he concluded that the amount
to he raised by taxes was $1.SOO.OOO.-
600.
There are two extreme theories, each
Of which may be dismissed with scant
courtesy The one is that all war ex.
penditures should he 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 of
the war should he borne by the pres
ent rather than the future generations
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 hav-
&C In the economic life of the cOmmuni
ty would have to be endured. Bui
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 IN
stinct and highly commendable cour
age in deciding that substantial pOr-
ton, at least, Of the revenues 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 20
too far.
The relative proportion of loans to
taxes is after all q purely business
proposition. Not to rely to large ex-
tent on loans at the outset Of war is
a mistake.
Disadvantass Of Excessive Taxes.
The disadvantages Of excessive taxes
at the outset Of the war are d. Follows:
1. Excessive taxes on consumption
will cause popular resentment
3. Excessive taxes on industry will
disarrange business, damp enthusiasm
and restrict the spirit Of enterprise at
the very time when the opposite is
needed.
8. Excessive taxes on incomes will Dr.
plete the surplus available for invest,
hents and interfere with the placing Of
the enormous loans which will be neces,
safy tn any event.
4. Excessive taxes on wealth will
cause a serious diminutiOn Of the in
comes WHICH are at present largely
drawn upon for. the support of educa-
tional and philanthr0pic enterprises.
Moreover. these sources Of support
would be dried up precisely at the time
when the need would De greatest.
8 Excessive taxation at the outset Of
the war will reduce the elasticity avail
able for the increasing dsmands that
are soon to come.
Great 6ritain's Policy.
Take Great Britain as an example
During the first year of the war abe
increased taxes only slightly, In order
to keep industries going at 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 pre-war leveD only
slightly more than II per cent. Of her
war expenses.
If we should attempt to do as much
in the first year Of the war as Great
Britain did In the third year it would
suffice to raise by taxation $1.25O, O00.-
600. II, In order to be absolutely on
the safe side, it seemed advisable to
Increase the sum to 81 500 O00, 900, this
should, in our opinion. be the maxi
Gum.
CONTINUED on Page Four)