The Ontario Argus. (Ontario, Or.) 1???-1947, 1917-06-21
By EoWIN r. A. seLIeMAN,

Be Apportioned.
By EDWIN r. A. sELicMAN,
Mcvlckar Professor OF Political Econ
omy. Columbia University.
4 On May %. 1917, the House OF Rep.
resentatives passed an act 'to provide
revenue TO defray war expenses aud
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..
Sl0,42D,O00. 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 sJ0,0o0.OoO.
In discussing the House bill. two
problems arise:
]. How much should be raised by
taxationl
II. In what manner should this sum
be raisedf
I. How Much Should Ne Raised BY
TsSstionf
How was the figure OF 81, 800 600. 600
arrived att The answer IL simple. When
the Secretary OF the Treasury came 10
estimate the additional war expenses
for the year l9iT-is, he calculated that
they would amount IL some $1,000.
100000. OF which 5000, 100000 was 10
be allotted 10 the allies. and $1,000.
100000 was 10 be utilized for the do.
nestle purposes Thinking that Il
would be n fair proposition TO divide
this latter sum between loans and
taxes. he concluded that the amount
10 be raised by taxes was 81 i.S0O,OOO,,
900. .s...--.ssxsfNt6s E2'g
There are two extreme theories, each
OF which may be dismissed with scant
courtesy. The one II that all war er.
pendltures should be betrayed by loans.
and the other In that all war expendl-
lures should be betrayed by taxes.
Each theory In untenable.
IL IN indeed true that the burdens of
the war should he 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-
oc In the economic life OF the communi'
~ would have 10 be endured. But
where the disasters are 80 great aud
At the same time 80 unnecessary, the
tax-only policy may be declared Inn
practicable.
Secretary McAdoo had the right tn-
stinct aud highly commendable cour-
age IN deciding that n substantial por.
ton, at least. OF the revenues should
be derived from taxation. But when
he hit upon the plan OF $3.50 per eest.,
that IA. OF raising one-half OF all do
mestic war expenditures by taxes. the
question arises whether he did not go
too fur,
The relative proportion OF loans 10
taxes Is after all a purely business
proposition. Not 10 rely 10 a large ex-
tent on loans at the outset ~ war is
a mistake.
Disadvantages Of Excessive Taxes
The disadvantages Of excessive taxes
at the outset of the war are Ms follows
1. Excessive taxes ON consumption
will cause popular resentment
2. Excessive taxes ON Industry viii
disarranse business. damp enthusiasm
and restrict the spirit OF enterprise al
the very time when the opposite Is
needed
8. 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.
A. Excessive taxes on wealth VIII
cause a serious dlminutiOn OF the In
comes which are at present largely
drawn upon for the support OF educa'
tional and philanthr0pic enterprises
Moreover. these sources OF support
would he dried up precisely at the time
when the need would be greatest
8. Excessive taxation at the outset OF
the war will reduce the elasticity avail
able for the increasing demands that
are soon 10 come.
Great sritain's Policy.
Take Great Britain AS AN example
During the irst 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 per cent. Of her war
expenditures. During the third year
she levied by additional taxes (over
and above the pre-war leyeD only
slightly more than II per cent. of her
war expenses.
II we should attempt 10 do as much
Ia the first year OF the war as Greal
Britain did IN the third year II "9uia
-. - a.. eafton EI pr.n * Il