The Meridian times. (Meridian, Idaho) 1909-1938, 1917-06-22
HOW SHALL. WE
/ PAY FOR THE WAR?
A Constructive Criticism on tho
House ReV3nue Bill.
LOANS BETTER THAN TAXES
Five Reasons Why Excessive Taxes At
thu Outset Of War Are Disadvantage
ous--Grsat Britain Exampls Worthy
Of EmuIatlon--tiow the Taxes shouId
Be Apportionsd.
BY EDWIN p. A. sELIoMAN.
McVickar Professor ~ Political Econ
omy. Columbia University.

WAY NoihhltHtt NHStIHitNs
On May %, 1917, the House Of Rep
resentatives passed an act ITO provide
revenue to defras war expenses aid
for other purposes la tile original
bill as presented BY the Committee 81
Ways and Means, the additional rese-
nue. 60 be derived was estimated all 81,
$40, 10000. The amendment TO the IN
come tax, which was tackled on to the
bill during the discussion Iii the House,
was expected to yield another $4,000
600 or $50,O00O00.
In discussing the House bill two
problems arise:
|. How much should be raised by
taxation?
III. Ia what manner should this sum
be raisedf
l How Much Should Be Raised by
Taxation?
How was the figure or 81, 500. 0O0, 900
arrived ut The answer IL simple. When
the Secretary OF the Treasury came 10
estimate the additional war expenses
for the year l9l7is, he calculated that
they would amount to some $4,000.
100000. OF which $4,000, coo. 900 was TO
be allotted TO the allies. ana $1,000.
100000 was 10 he utilized for the do.
nestle purposes Thinking that Ii
would be a fair proposition to divide
this latter sum between loans and
taxes, he concluded that the amount
90 be raised by taxes was Sl, 800 1000
900.
There are two extreme theories. each
or which may he dismissed with scait
courtesy The one h thut all war ex-
penditures should be betrayed by loans.
and the other II that aIl war expendi-
lures should he betrayed by taxes.
Each theory IL untenable.
II IL indeed true that the burdens or
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 Ia one or two
wears bear the burden OF benefits that
ought 20 be distributed at least over ii
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 commune
~ would have to be endured. But
where the disasters are so great and
Ut 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 co,u-
age In deciding that substantial por-
tion, at least, OF the revenues should
be derived from taxation. But when
he hit upon the plan Of $3.50 per cent,
that IL, OF raising one.half of all do
nestle war expenditures by taxes, the
question arises whether he did not 20
too far 49,
The relative proportion Of loans to
taxes Is after all purely business
proposition. Not to rely 10 large ex-
tent on loans at the outset OF war is
II mistake.
Disadvantages of Excessive Taxes.
The disadvantages Of excessive taxes
az the outset OF the war are us follows:
J.. Excessive taxes on consumption
win cause popular resentment
=. Excessive taxes on Industry Will
dlsarrange business, damp enthusiasm
and restrict the spirit OF enterprise at
the very time when the opposite Is
needed.
3. Excessive taxes on incomes win de
plete the surplus available for invest
ments and Interfere With til pluy.ng d
the enormous loans Will h will lene Is
sary In any event.
4, Excessive taxes on wealth Mil
cause serious tlimmutlom III the hi
comes which are ut present largels
drawn upon for the support Of edGea.
tional and nhilsathropic entefpgiseS
Moreover, these sources Of suppor
would be dried UP precisely at the lin,
when the need would he greatest
S. Excessive tsxstion at the outset o.
the war will reduce the elasticity avail
able for the increasing demands that
are soon 60 come.
Great 6ritaia's Policy.
Take Great Britain as an example
During the first YEAR Of the war she
increased taxes only slightly, III ordel
to keep industries going ut top Notch
During the second year she raised hy
new taxes only o per cent of her wa
expenditures. During the third yea
she levied by additional taxes (ove
and above the pre.war leveD onl
slightly more than II per cent. OF lie
war expenses.
II we should attempt to do as mucir
in the first year OF the war as Grea,
Eritain did in Tie third year il w6ul.
suffice to Raise by taxation Sl,250.eGa
100. If. IN order 10 be absolutely :
the safe side. il seemed advisable
increase the sum to 81 500,00aO0O. til.
should, in our opinion. be the max
M I'M,