Iron County news. [volume] (Hurley, Wis.) 1913-1950, 1917-07-07
By EDWIN r. \. sELleAAN.

Be Appertiense.
BY EDWIN r. \. sELiGhAN,
McVickar Professor Of Political Econ
ofny. CoIum bia University
On May %, 1917, the House Of Rep
resentatiyes passed an act TO provide
revenue to defray war expenses and
for other purposes" Ia the original
bill as presented by the Committee of
WAYS and Means. the additional reve-
nue. 10 be derived was estimated al 81,
SIV420OyO The amendment 70 the in
come tax. which was tackled eli 10 the
bill during the discussion in the House
was expected To yield another $4,000.
90 or 100000
In discussing the House bill. two
problems arise.
l. How much Should be raised by
taxation?
IL In what manner should this SUM
be raised!
l. How Much Should Be- Raised BY
Tsxation7
How was the figure OF 81 sO0O000O0
arrived at The answer is simple when
the Secretary Of the Treasury came TO
estimate the additional war expenses
for the year 19I7-1S, he calculated that
they would amount to some $G.GDD.-
oDD00;. OF which 5000 90 90 was to
be allotted to the allies. and s. GOu.-
10000 was 10 he utilized for the do
nestle purposes. Thinking that ii
would De a fair proposition 70 divide
this latter sum between loans and
taxes. be concluded that the amount
to Re raised by taxes was 81 10000
90
There are two extreme theories. each
OF which may be dismissed with scant
courtesy The one IL that all war ex-
pendltures should be betrayed by loans
and the other is that ali war expeudi-
lures should be betrayed by taxes
Each theory Is uutenable
II IS indeed true that the burdens or
the war should lac 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
A~~NANtH t'@ ttA lfA tt8 HI O&aE VI 1 W -
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 expeudi-
lures approach the gigantic sums Of
present-day warfare the tax only pol
Icy would require more than the total
surplus 81 social income Were this
absolutely necessary. the ensuing hay-
oc In the economic life OF the commuui-
ty would have TO be endured But
where the disasters are SO great and
az the same time so unnecessary. the
tax-only policy may be declared i'm
practicable
Secretary McAdoo had the right in
stinct and highly commendahle cour-
age ia deciding that a substantial por-
tion. at least, % 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 a purely business
proposition Not to rely to large er-
tent on loans at the outset Of war Is
a mistake
Disadvantages Of Excessive Taxes
The disadvantages u excessive taxes
at the outset OF the war are as follows.
! Excessive taxes on consumption
will cause popular resentment
: Excessive taxes on industry viii
disarrange 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.
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 diminutlon OF the in
comes which are at present largely
drawn upon Tor the support of ednca-
tional and philanthropic enterprises
Moreover. these sources OF support
would be dried up precisely at the time
when the need would be greatest
>. Excessive taxation az the outset Of
the war will reduce are elasticity avail.
able tor the increasing demands that
are soon 20 come
Great 5rltaios Policy.
Take Great Britain as an example
During the drSt year OF the war she
increased taxes only slightly. In order
10 Keep industries going At top notch
During the second year she raised bv
new taxes only Q per cent OF her war
expenditures During the third year
she levied by additional taxes lover
AMI above the pre-war leven ouly
slightly mo than l. per cent. OF her
war expenses
II We should attempt to do as much
N the first year o. the war as Great
Britain did In the third year 1t would
sunice to raise by taxation St.2coo1o..
90 X. In order 10 De absolutely ON
the safe side il seemed advisable -
increase the sum to Si.50OUOOoo0 this