Maryland independent. [volume] (Port Tobacco, Md.) 1874-current, 1917-06-15

OF emulatton--HoW the Taxes Should
Be Apportioned.
BY EDWIN r. A. sELlGMAN,
McViclSar Professor Of Political Econ
omy. Columbia University.
On May %, 1917, the House OF Rep.
resentatiyes 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 ond Means. the additional reve-
nue to be derived was estimated at ST.
Si0,420O00 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
600 or S50,O00OOO
In discussing the House bill. two
problems arise:
|. How much should be raised by
taxation?
II. In what manner should this sum
be raisedi
l. How Much Should Be Raised BY
Taxation7
How was the figure Of 81, 800, 900. 900
arrived at? The answer is simple. When
the Secretary of the Treasury came to
estimate the additional war expenses
for the year 191T-1S he calculated that
they would amount to some $o,60O,-
100000, Of which $3,OO0O00,OOO was to
be allotted to the allies. and $500
100000 was to be utilized for the do
nestle purposes. Thinking that It
would be fair proposition to divide
this latter sum between loans and
taxes, he concluded that the amount
to be raised by taxes was 81 800 OOO,-
600.
There are two extreme theories, each
Of which may be dismissed with scant
courtesy. The one Is that all war ex.
penditures should be betrayed by loans,
and the other is that all war expendi.
lures should be betrayed by taxes.
Each theory Is untenabie.
1t is indeed true that the burdens of
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 in one or two
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 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-
oe 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
Secretary McAdoo had the right In
stinct and highly commendable cour-
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 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 purely business
proposition. Not to rely to large ex.
tent on loans at the outset OF a war Is
a mistake
Disadvantages of Excessive Taxsa
The disadvantages of excessive taxes
1t the outset of the war are as follows:
3. Excessive taxes on consumption
disarrange business, damp enthusiasm
and restrict the spirit of enterprise AZ
the very time when the opposite is
needed.
q. 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-
saTy in any event.
4. Excessive taxes On wealth VIII
cause a serious diminution Of the IN
comes which are at present lnrgely
drawn upon for the support OF eouca-
tional and philanthropic 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 o.
the war will reduce the elasticity avail.
able for the increasing demands tnat
are soon to come.
Great 6ritain'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 os
new taxes only per cent. OF her wal
expenditures. During tho third yea
she levied by additional taxes Cove
and above the pre-war level oni!
slightly more than II per cent Of ne
war expenses.
" we should attempt to do as muc
IN tho first year Of the war as Grea
Britain did in the third year Il woul
suffice to raise by taxation Sl,2oo'ooo
o0O If, in order to be absolutely Q
tbe safe side, II seemed advisable
increase the sum to 81, 800, 100000. tn
should. in cur opinion, be the MAJ
mum.