Pine Bluff daily graphic., 1917-06-24
By EDWIN R. A. sELioMAN,

6s Appertioned.
 By EDWIN R. A. sELiGMAN,
 ncvickar Professor of Political Econ
 omy. Columbia University.
 On May 23. 1917, the House of Rep
 resentattves passed an act ito provide
 revenue to defray war expenses and
 for other purposes" In the original
 bill as presented by the Committee o1
 Ways and Means, the additional reve' nue to be derived was estimated at $1, S1O. .42O.OOO. The amendment to the in come tax, which was tackled on to the bill during the discussion in the House, l was expected to yield another $40, ,OOO,- GOO or $50,0oo,ooo.
 l In discussing the House bill, two problems arise:
 l l. How much should be raised by taxation?
 l II. In what manner should this sum be raised?
 ]. How Much Should B. Raised by l, Taxation7
 How was the figure of $1 ,SOO,O0O, 900 arrived at? The answer is simple. When the Secretary of the Treasury came to estimate the additional war expenses for the year 1917-16, he calculated that they would amount to some $6,GOO- 100000, of which $3,OOO, 100000 was to be allotted to the allies, and $3,6OO,. 1 100000 was to be utilized for the do- l 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 $1,8O0, ,OO0,- l 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 defrayed by loans, and the other Is that all war expendi- lures should be defrayed by taxes. Each theory is untenable.
 It is indeed true that the burdens of the war should be borne by the pres- ent rather than the future generati tion; 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 hay oc 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 im- practicable.
 Secretary McAdoo had the right in- stinct and highly commendable cour- age in deciding that substantial DOT tion, at least. of the revenues should be derived from taxation. But when he hit upon the plan of 50-5O per cent, that is, of raising one-half of all do- nestle war expenditures by taxes, the question arises whether he did not go too far.
 The relative proportion of loans to taxes Is after all a purely business proposition. Not to rely to large ex- tent on loans at the outset of war is . mistake
 Disadvantages of Excessive Taxes.
 The disadvantages of excessive taxes at the outset of the war are as follows: 1. Excessive taxes of consumption w}11 o0,iSo ,NOt,SY1or
 2. Excessive taxes on industry will disarrange business, damp enthusiasm and restrict the spirit of enterprise at the very time when the opposite is needed.
 5. 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- sary in any event. .I
 4. Excessive taxes on wealth will cause serious diminution of the in. comes which are at present largely drawn upon for the support of educa 1 tional and philanthropic enterprises. l Moreover, these sources of support l would be dried up precisely at the time when the need would be greatest.
 5. 6xe~stive taxation at the outset of tho war will reduce the elasticity avaiI- 1 able for the inorsasino dsmands that | are soon to come. '@ Great eritain's' Policy.
 Take Great Britain as an example. 1 During the first year of the war she l increased taxes only slightly, in order to keep industries going at top notch. During the second year she raised by 1 new taxes only 9 per cent. of her war expenditures. During the third year she levied by additional taxes lover and above the pre-war leveD only l slightly. more than IT per cent. of her i var expenses. N1lf we should attempt to do as much in the first year of the war as Great Britain did in the third year 1t would ! (Iace 10 raise by taxation .$1.250,0 0,0oQ,- Ap0 If, ip order to be. absolutely ou ihea safe. side, it deemed advisable to | AA R<AsA V. |