The Watertown news. [volume] (Watertown, Wis.) 1917-1919, 1917-06-11

surplus Of social income. Were this
absolutely necessary, the ensuing hav-
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 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 60
too far.
The relative proportion of loans to
taxes is after all a purely business
proposition. Not to rely to large eX-
tent on loans at the outset Of war is
mistake.
Disadvantages of Excessive Taxes.
The disadvantages Of excessive taxes
ut the outset of the war are as follows:
L. Excessive taxes on consumption
will cause popular resentment
z. Excessive taxes on industry will
d1sarrange 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 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 philinthropic enterprises
Moreover, these sources of support
would be dried up precisely at the time
when the need would be greatest.
5. Excessive taxation at the outset of
the war will reduce tho elasticity avail
able for the Increasing demands that
qre soon to come.
Great Eritan'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 going 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
| 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 $3.50, OOO.-
0OO If. in order to be absolutely on
the safe side, it seemed advisable to
increase the sum to $1,000. 100000. this
should. in our opinion. be the maxi
mum
| LII considering the apportfonMent OF
the extra ordinary burden of taxes il
war times certain scientific principles
are definitely established:
How Taxes Should Be Apportioned.
% The burden Of taxes must be
| spread as far as possible over the
whole community so as to cause each
4
cording to his ability to pay and &C
cording to his share in the Government
GU Taxes on consumption, which are
necessarily borne by the community al
large, should be imposed as far as pos
sible on articles of quasi-luXury rather
than on those of necessity.
90 Excuses should be imposed as fal
as possible upon commodities in thu
hands Of the final consumer rather
than upon the articles which serve pri
marily as raw material for further
! production.
| az Taxes upon business should bt
imposed as far as possible upon ne
earnings rather than upon gross re
ceipts or capital invested.
~ Taxes upon income which viii
necessarily be severe should be botl
differentiated and graduated. That is
| there should be a distinction between
earned and unearned incomes and there
should be higher rate upon the larger
incomes. 1t is essential, however, no
to make the income rate so excessive
as to lead to evasion, administra tive
difficulties. or to the more Fundamental
objections which have been urge(
| above.
Co. The excess profits which are due
to the war constitute the most obviou:
and reasonable source Of revenue dur
ing war times. But the principle upol
which these war-proft taxes are lai(
must be equitable in theory and easily
ralculable in practice.
The Proposed Income Tax.
The additional income tax as passet
by the House runs up to rate of q
per cent This is a sum unheard of il
the history Of civilized society. 1t mus
be remembered that 1t was only afte
the first year of the war that Grea
Britain increased her income tax to tn
maximum of "a per cent, and tina
even now in the fourth year Of the wa
the income tax does not exceed 421
per cent.
It could easily be shown that ia,
with rates on moderate incomes sub
stantially less than In Great Britain
and on the larger incomes about a.
high, would yield only slightly less thar
the $500 100000 originally estimated il
the House bill.
1t is to be hoped that the Senate viii
reduce the total rate on the highest in
comes to "a per cent, or at most to n
per cent, and that at the same time |
will reduce the rate on the smaller In