The Rathdrum tribune. (Rathdrum, Idaho) 1903-1963, 1917-06-22
BY EDWIN r. A. sELleMAN,

| by EDWIN r. A. SEIlGMAN,
McVickar 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.
S10,420,0O0 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 $50,OO0O00.
In discussing the House bill, two
problems arise:
|. How much should be raised by
taxation?
II. In what manner should this sum
be raised?
!. How Much Should Be Raised by
Taxation2
How was the figure of 81, 800 COO 600
arrived at? The answer is simple. When
the Secretary of the Treasury came to
estimate the additional war expenses
for the year 1017-1S, he calculated that
they would amount to some $G,6oC,
100000 of which $3,00O,O0OO0O was to
be allotted to the allies, and $1,000.
100000 was to be utilized for the do
nestle purposes. Thinking that 1t
would be fair proposition to divide
this latter sum between loans and
taxes. he concluded that the amount
to be raised by taxes was $1,S00.OOO.
900.
There are two extreme theories, each
of which may be dismissed with scant
courtesy. The one is that all war e2
penditures should be betrayed by loans.
and the other is that all war expendi-
lures should be betrayed by taxes
Each theory is untenable.
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
decade within the same generation.
In the second place, when expendi-
lures approach the gigantic sums of
present-day warfare, tile tax-only pol
icy would require more than the total
surplus of social income. Were this
absolutely necessary, the ensuing hav-
oc in the economic life of the communi-
h0 fn In d.
where the disasters are so great and
at 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 cour-
age in deciding that substantial Dor.
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 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 war is
R mistake.
Disadvantages of Excessive Taxes.
The disadvantages of excessive taxes
ut the outset of the war are as follows:
l. Excessive taxes on consumption
will cause popular resentment.
:. Excessive taxes on industry will
iisarrange business, damp enthusiasm
md restrict the spirit of enterprise at
he very time when the opposite is
needed.
3. Excessive taxes on incomes will de-
1lete the surplus available for invest
nents and interfere with the placing of
he enormous loans which will be neces-
AIRY in any event.
f. Excessive taxes on wealth will
'ause serious diminution of the in
'omes which are at present largely
irawn upon for the support of educa.
fonal and philanthropic enterprises.
moreover, these sources of support
would be dried up precisely at the time
when the need would be greatest.
.. Excessive taxation at the outset of
ne war will reduce the elasticity avail.
'ble for tho increasing demands that
ire soon to come.
Great 5ritain's Policy.
Take Great Britain as an example
During the first year of the war she
increased taxes only slightly, in order
o Keep Industries going at top notch.
)uring the second year she raised by
eW taxes only o per cent. of her war ,
expenditures. During the third year
he levied by additional taxes (over
nd above the pre-war leveD only
lightly more than II per cent. of her y
var expenses. ,
If we should attempt to do as muc, d
the first year of the war as Great
'ritain did in the third year 1t would I
ufiice to raise by taxation $1,250.OOO= s
Oo. II, In order to be absolutely ON q
he safe side, it seemed advisable TO q
icrease the sum to $1,500,O00. 600 this n
houil. in our opinion, be the maxi. n