The Adair County news. [volume] (Columbia, Ky.) 1897-1987, 1917-06-20
BY EDWIN r. A. sELIeMAN,


Be Apportioned.
BY EDWIN r. A. SELIoMAN,
McVickar Professor of Political Econ
omy, Columbia University.
On May q, 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.
S1O,420,OOO. 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
900 or $5O,OO0,OOO.
In discussing the House bill, two
problems arise:
/. How much should be raised by
taxation?
II. In what manner should this sum
be raised1
!. How Much Should Be Raised by
Taxation7
How was the figure Of 81, 800, 100000
arrived at7 The answer is simple. When
the Secretary Of the Treasury came to
estimate the additional war expenses
for the year 1917-1S he calculated that
they would amount to some $780,
100000, of which $3,OOO,OO0,OOO was to
be allotted to the allies, and $780,,
100000 was. to be utilized for the do
nestle purposes. Thinking that it
would be a fair proposition to divide
this latter sum between loans and
taxes, he concluded that the amount
to be raised by taxes was $1,SOO,0O0,-
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 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 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
-
absolutely necessary, the ensuing hay
&C 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
practicable.
Secretary McAdOo had the right IL
stinct and highly cornmendable cour
age in deciding that a substantial pol
ton, at least, Of the revenues should
be derived from taxation. But whCi
he hit upon the plan of $3.50 per cent
that is, of raising One-half Of all do
nestle war expenditures by taxes, thu
question arises whether he did not Z,
too far.
The relative proportion of loans t.
taxes is after all a purely business
proposition. Not TO rely to a large ex-
tent on loans at the outset of war l.
q mistake
Disadvantages of Excessive Taxes.
The disadvantages. of excessive taxes
at the outset of the war are as follows
1. Excessive taxes on consumptio,
will cause popular resentment.
2. Excessive taxes on industry Wi.
disarrange business, damp enthusiast
and restrict the spirit of enterprise at
the very time when the opposite is
needed.
8. Excessive taxes on incomes will d,
plete the surplus available for inVes
ments and interfere with the placing {.
the enormous loans which will be necC
aary in any event.
4. Excessive taxes on wealth w
cause a serious diminution Of the f.
comes which are at present large
drawn upon for the support of educ
tional and philanthropic enterprise
Moreover, these sources Of suppo. .
WOu1u Dt uIlcu w pLSCScig at Juc Iliu
when the need would be greatest.
s. Excessive taxation at the outset OF
the war will reduce the elasticity avail.
able for the increasing demands that
are soon 60 come.
Great Britain's Policy.
Take Great Britain as an exampi
During the first year of the war s..
Increased taxes only slightly, in orc p.
to keep industries going at top mote,
During the second year she raised
new taxes only per cent. of her W.
Expenditures. During the third yea.
she levied by additional taxes TO- 81
and above the pre-war level OF:
slightly more than IL per cent of i.1l
war expenses.
If we should attempt to do as NJ
IN the first year Of the war as Or.
Britain did In the third year it wo
suffice to raise by taxation $1,25OCY
600. II, IN order to be absolutely e.
the safe side, it seemed advisable =
Increase the sum to 81, O.O000OO. 4 Is
should. in our opinion, he thu MAJ.
mum.