Rogue River courier. (Grants Pass, Or.) 19??-1918, 1917-06-24
HOW SHALL We
PAY FOR THE WAR?
A Constructive Criticism on tho
House Revenue Bill.
LOANS BETTER THAN TAXES
Five Reasons Why Excessive Tsxss q.
the Outset OF War Are Disadvantage.
eus--6reas Britain Example Worthy
Of EmuIation--Hew tho Taxes Should
Be Apportionsd.
By epWIN q. A. sslloMAN,
Mcvickar l'ro,cssor OF Political Eco

BY EDWIN r, A. SEllGMAN,
Mcvickar Professor OF Political Econ.
eny, columbia Cnlverslty
On May ~, 1911, the House ot Rep
reSentatiyeS passed an act TO provide
revenue Ia denHy\war expenses and
I 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.,
Sl0.42o.o0o, The amendment TO the In.
come tax, which Mas tackled on to the
bill during The discussion IN the House.
was expected 10 yield another SiotaAe
600 or $50,OO0Nl0,
In discussing the House bill. two
problems arise;
I. How much should be raised by
/ taxation;
II. In what manner should this sum
be ralsedy
l. How Much Should 5e Raised by
Taxasiong
How was the iisare uf 81. 500. .000. .000
arrived at? The answer Is simple. When
the Secretary OF the Treasury came to
estimate the additional war expenses
for the year iaiT.lS. he calculated thar
they would amount IL some $1,000.
0O0OO0. ~ which $3.OO0O0O,060 was to
be allotted to the allies, aud SStsn.
00o000 was to be utilised for the do
mestic purposes Thinking that It
would be II fair proposition To divide
this latter sum between loans and
taxes. lie concluded that the amount
to be raised hy taxes was $l.S10,OO0,
0OO.
There are two, ,eStrcine theories. each
OF which may be dismissed with soant
courtesy The oHc Is that glI war ex.
pendi,ureS should he betrayed by loans.
aud the other Is that ali war expcndi,
lures should be betrayed by taxes.
Each theory is untenable,
1t is indeed. true that the burdens OF
the war should hc bCrne 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 n
decide within the same generation.
In the second place. when cxpendi
lures approach tie gigantic sums o.
present-day warfare. the tay.only pol.
Icy would require more than the total
surplus Of social inccme. We're this
absolutely necessary. the ensuing hay
DC in the economic llfe Of the communi-
ty would have 10 be endured. But
where the disasters are 50 great and
at the same time 50 unnecessary. the
tax-only policy may he declared i'm
practicable.
Secretary NcAdoo had tue right IN
stlnct aud highly conmendablc cour-
age in deciding that II 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.
meStic war expenditures by taxes. the
question arises whether he did not 30
too far
The relative proportion OF loans to
taxes is after all II purely business
proposition Not to rely TO n large ev-
tent on loans at the outset of war ~
a mistake.
Disadvantages Of Excessive Taxes.
The disadvantages of excessive taxes
at the outset OF the war are as follows
/. Excessive taxes on consumption
Will cause popular resentment.
.. Excessive taxes on industry will
disarrange business, damp enthusiasn
and restrict the spirit OF enterprise az
the very time when the opposite "
needed.
=. Excessive taxes on incomes will dc
pletc the surplus available for invest.
ments and Interfere with the placing %
the enormous loans which will be neccs
sary In any event.
\. Excessive taxes on wealth will
cause serious dlminIion Of the IN.
comes which are ut present largely
drawn upon for the support of educa.
tional and phllanthropic enterprises
Moreover, these sources OF support
would be dried up precisely at the time
when the need would be greatest.
s. Excessive taxation at the outset Of
tho war will reduce tho elasticity avail.
able for tho increasing demands that
are soon to come.
Great Britain's Policy.
Take Great Britain az an example,
During the first year of the war she
increased taxes only slightly. IN order
10 keep industries going at top notch.
During the second year she raised BY |
new taxes only 8 per cent Of her war
expenditures During the third year
she levied by additional taxes tover
and above the pre.war levclD only |
slightly more than II per cent Of her
war expenses.
II we should attempt to do as much |
IN the first year OF the war AZ Grent |
Britain did In the third year II would |
suffice to raise by taxation si.250,0 ,00o..