The Springdale news., 1917-06-22
BY EDWIN r. A. sEllGMAN,


McViekar 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 of
Ways and Means, the additional reve.
nue. to be derived was estimated at ST.
810,420,000. 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
coo or S50,o00,0O0.
In discussing the House bill, two
problems arise:
|. How much should be raised by
taxation?
H. In what manner should this sum
be raisedf
!. How Much Should Ee Raised by
Taxaton7
How was the figure of 81 SOC, o00, 000
arrived at? The answer is simple When
the Secretary of the Treasury came to
estimate the additional war expenses
for the year 1917-1S, be calculated that
they would amount to some $1,000,
100000, of which S3,O00,000,000 was TO
be allotted to the allies and So COO.
100000 was TO be utilized for the do
nestle purposes. Thinking that 1t
would be a fair proposition to divide
this latter sum between loans and
taxes, he concluded that the amount
b. 10 g. = ?
600.
There are two extreme theories, each
of which may he dismissed with seant
courtesy. The one is tAat all war ex
penditures should be betrayed by loans,
aud the other is that all war expendi
lures should be betrayed by taxes
Each theory Is untenable
It 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 Icy taxation
makes the taxpayers in one or tive
years bear tie 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 hay
oc in the economic life Of the communi-
ty would have to be endured, But
where the disasters are so great ana
at the same time so unnecessary, the
practicable.
Secretary McAdoo had the right III
stiHet and highly commendahle eour
age in deciding that a 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 half of all do
nestle war expenditures by taxes the
question arises whether he did not sc
too far
The relative proportion of loans to
taxes is after oil a purely business
proposition Not to rely to a large eX-
tent on loans at the outset of a war IS
mistake.
Disadvantages of Excessive Taxes.
The disadvantages of excessive taxes
at the outset of the war are as follows:
l. Excessive taxes on consumption
Will cause popular resentment.
4 Excessive taxes on industry will
dlsarrange business, damp enthusiasm
and restrict the spirit of enterprise al
Ha &c
needed
.. Excessive taxes on incomes Will de
piete 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 serious diminution of the in
comes which are at present largely
Drawn upon for the support of educa.
uonal and philanthropic enterprises.
Moreover, these sources of support
would be dried up precisely at the time
when the need would be greatest.
D. Excessive taxation at the outset of
the war will reduce the elasticity avail
aoie tor the increasing demands that
are soon to come
Great Britains Policy.
rake 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 wat
Expenditures During the third year
she levied by additional taxes lover
ana above the pre-war leye). only
slightly more than II per cent. of her
war expenses.
II we should attempt to do as much
IN the first year of the war az Great
britain did In the third year it would
Suihce to raise by taxation S1,250,ooo,-
oeb If in order to be absolutely on
tne safe side, it seemed advisable to
increase the sum to 81 00,000,000, this
should, III our opinion. be the maxi
mum