The Washington herald., 1917-06-01

more than the total surplus of social In
come. Were this absolutely necessary,
the ensuing havoc in the economic life OF
the community would have 10 be endured
But where the d.tIsters are 80 great and
at the same time so unnecessary, the lax
! only policy may be declared impracti-
If, then, war expenditures cannot be de-
frayed entirely from loans or entirely
from taxes, the problem remains, what
should be the proportion between loans
and taxes?
IL is easily to be seen why Secretary
McAdoo shrank from placing an undue
reliance upon loans. He had before him
the warning example OF Secretary Chase
ance on loans soon compelled the gov.
eminent to resort to the fatal expedient
Of greenbacks from which 1t took US
retary McAdoo had the right instinct
and highly commendable courage in de-
Gliding that a substantial portion, at least,
of the revenues should be derived from
taxation. But when he hit upon the
Ens Esn o6eSSif ne % q % all dom Domestic % war expend-
tSesS 55 fIeS So the S0 question fsS arises
The relative proportion of loans to
taxes is after all a purely business pro-
POSITION. Not to rely to a large extent
take. Modern business is based upon
credit To abandon the use of credit
is to revert to primitive economic condi-
When railway desires TO make an ex-
traordinary expenditure for equipment IL
does not pay for all of this al once-for
that would bankrupt the railway. 1t
issues short equipment notes payable an
nually, thus spreading the payment over
perhaps a decade. So the merchant who
desires a great extension in his business
resorts TO borrowed money. OF course
the railway, like the merchant can bor-
row on easy terms only In case some of
the current surplus earnings are also
available. In the same way the govern
ment. which is nothing but a great busi-
ness enterprise, cannot afford 20 refrain
from utilizing credit in an emergency. To
attempt to go on without substantial re-
lance on loans would be to abandon
all the advantages of modern business
economy. But, as in the case OF the
merchant and the railway, the loans in
CURED by the government must be pro
portioned to its earning capacity, that is:
its taxes. II too low taxes are levied
its credit will suffer: II too high taxes
are levied the social productivity will
suffer. High taxes should, indeed, be
levied; that is the part OF prudence. But
taxes ought to be imposed only up 10
this margin or danger line which marks
the impairment of social productivity. In
the first wear of a great war. where the
maintenance Of stable business eondi-
tions is OF the utmost Importance. a large
part Of the war expenditures should come
from loans. To do otherwise would De
to fly IN the face OF business practice
The disadvantages Of excessive taxes
l-Excessive taxes on consumption VIII
cause popular resentment
2-ExCessive taxes on industry will dis
arrange business. damp enthusiasm, and
restrict the spirit of enterprise az the
very time when the opposite is needed
3-EXcessive taxes on incomes will de-
plete the surplus available for invest.
ments and interfere with the placing OF
the enormous loans which viii be neces-
Sary in any event.
4Excessive taxes on wealth will cause
Il NH@W. hA
which are at present largely drawn upon
for the support of educational and phil
anthropic enterprises. Moreover, these
sources Of support would be dried up
precisely at the time when the need
would be greatest. A government al
ready strained by the necessity OF i'm
mediately adopting many new functions
to assume a number of additional func-
tons now performed through private In
dividuals The difficult and hasty tran
would in all proba bility entail consider
able loss and would seriously cripple the
efficiency of our war activities.
Excessive taxation at the outset Of
the war will reduce the elasticity avail
able for the increasing demands that are
soon to come.
The 50. per cent-50 per cent policy is
one which has never even been remotely
approached by any country in the world.
II Is dlhicult to see what reasons exist
in the United States to warrant the
Britain as an example During the first
year OF the war she increased taxes
only slightly, in order to keep indus
tries going at top notch. During the sec
Ond year she raised by new taxes only
9 per cent OF her war expenditures. Dur
ing the third year she levied by addl-
tional taxes (over and above the pre-war
leveD only slightly more than II per cent
of her war expenses.
Is there not a wide discrepancy be-
tween the II per cent imposed by Great
Britain in the third year of war and the
50 per cent sought to be imposed In the
fret year of our war?
Even II we assume that our total war
expenses the first y6 ~ will be $4,000 900, 900
and if we disregard entirely the fact that
the major part of this is nothing but
advances TO the allies, IT still remains
true that the 81, ,SO,OC0OO0 sought TO be
imposed by taxation is is per cent of the
figure that has been reached by Great
Britain only after three years of war.
The comparison may be nut in another
way. The revenue from existing tax
laws in the United States will this year
he 81. 300, ,OOO, 900. This added to the 81, 800
900 900 of the House bill makes a tax
revenue of $500, 600 900 to cover an ex-
penditure for all purposes of some $ll, 800
OOOOO0 In Great Britain. on the other
hand, during the last year the total ex-
penditurA was about S11, 900 0o0, 900. and the
total raised bg all taxes, new and old,
amounted to only s., so, ,O000 900 (e5l4 900 OO0).
That is TO say. in order to cover about the
same governmental OuudNs as SIedI
Britain we propose to raise by taxation
over $40, 10000 more than she does, and
We attempt to do this in the hrst year
OF the war. whereas she did it only in the
third year.
II is not clear from the above recital
that the House bill endeavors to secure
an undue proportion Of the total ex-
penditure from taxation? And when the
endeavor to secure this excessive sum
carries with IL the need of imposing so
many petty and restrictive taxes, the con-
clusion becomes irresistible.
II We should attempt to do as much in
the first year of the war as Great Brit
ain did in the third year II would suf-
fee to raise by taxation q, ,25o, ,o0o. 900. If,
in order to he absolutely on the safe side,
It seemed advisable to increase the sum
to 81 800 ooO,0oo this should, in our opinion,
be the maximum. To insist upon the
81, 500, 100000 of the House bill would be
as unwise as It is UNNECESSARY. It is
sincerely to be hoped that the Senate
Finance Committee will hold out firmly
against the proposition which has been
accepted. with so little critical analysis,
by the House.
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