New-York tribune., 1917-07-30
Equity in War Taxes

parently decided not TO take into account
Secretary McAdoo's new estimates OF gov
ernment expenditure in revising the pend
ing war revenue act. 1t will merely in
crease the tax total of the amended House
bill from S1,67O,OOO,OO to about $1,000
900 900. leaving the House of Representa-
tives free hand in providing the addi-
tional money - about S4,6OO,OOO,OOO- -
which the Administration thinks will be
needed before the present fiscal year runs
cut.
Since the Constitution gives the popular
branch the right to initiate tax bills, IN re-
sponss to detailed estimates submitted to
it by the Treasury Department, the Senate
Finance Committees attitude is technically
correct and politically prudent. The House
Should undoubtedly act first on Mr.. Nc
Adoo's recommendations. 1t has untortu-
nately shown little capacity to deal with
intricate tax problems. But, theoretically,
it holds the purse strings under our sys-
TEN of government. 1t must take the
initiative. It's work can be improved on
later by the Senate, which, to It's great
credit. has recently whipped the crude,
haphazard and inequitable tax bill which
the House passed last May into something
presentable and ineligible. That DILL
when enacted, will take care Of govern
mental expenditures up to December l
next, at least. There will therefore be
time enough to pass a second act, ellmi-
mating the deficit for the second half OF
. the fiscal year.
The Senate Finance Committee is said
10 have decided to revise the income tax
rates upward in order to bring the total
carried in the pending bill to about $2,OOO,-
100000. There is talk of increasing the
normal income tax rate to 5 or even per
cent. 1t is at present per cent. In the
pending measure the normal rate is fixed
at 4 per cent. An increase to or to
ner cent will undoubtedly come before the
war is over. But to make it now would
obviously throw burden on the man with
2 small income-between 81 600 and $4,000
-unreasonably severe compared with the
burden put upon other classes paying
taxes on income and profits.
It should be the primary aim of war
taxation to recover for the use of the ma
tion the excess profits created by war con-
ditions. Those who are receiving bonus
out of the war should be the first to bear
the burdens of new taxation. Until a fairly
complete adjustment is made in the field
of war profits, the man whose earnings
are not increased by the war, or are even
lowered by it, should be treated with rela-
tive consideration. His turn would come
later under any enlightened scheme of war
finance, and then would come the turn Of
the general consumer who is without taxa
bic income.
We have not yet made very great prog
ress in recovering war profits for the
benefit of the Treasury. The House of
Representatives voted for a ludcrously
j inadequate tax Of per cent on excess
I profits. The Senate Finance Committee
recognized the error of allowing excess
8 war gains to go practically untouched
4 while imposing general consumption duties,
as the House did when it authorized a
4 horizontal increase Of 10 per cent or all
tariff duties and the imposition of a fiat
Il 10 per cent duty on all imports now on
the free list. The Finance Committee
s. wisely enlarged and graduated the taxes
on excess profits. But its complicated
scheme of graduation has given wrong
impression Of the burden actually laid on
industries which have prohted abnormally
- from war conditions.
The highest rate Of excess profits tax in
the Senate committees bill is 80 per cent
But that does not mean that anything like
80 per cent is to be collected from any
= concern subject TO the excess profits tax
The so per cent applies only to the amount
by which concerns profits exceeded by
more than $50 per cent its profits in the
pre-war period. On the first ~ per cent
+ of excess the tax is only Is per cent; on
the excess between Is and 25 per cent it is
pnly 16 per cent; on the excess between
% and so per cent it is only 20 per cent
Between 30 and rs per cent the rate is
IS per cent; between IS and 100 per cent
per cent; between 100 and $50 per cent
Is per cent; between $50 and 200 pei
ent, 40 per cent; between 200 and 25C
er cent, 46 per cent; over $50 per cent
0 per cent.
- In an article recently published, Mr.
;odfrey N. Nelson, an expert on the in
orne tax law, figured out, under the pro.
isions Of the Finance Committees bill, the
~ xcess tax on a business which made
SO, 900 in the pre-war period and is now
hakjng sl00,O 900. The tax would net only
II ,075. This would be only % per cent
h tn excess profit. The Senate bill there.
Ipre allows a very generous share Of war
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