The Madison daily leader. [volume] (Madison, S.D.) 1890-current, 1917-06-19

the Outset OF War Are Disadvantage
ous-Great Britain Example Wor,hI
of Emulation-How the Taxes Should
Be Apportioned.
BY EDWIN n. A. SELIGMAN,
McVlckar Professor Of Political Econ
omy. Columbia University
On May %, 1917, the EIuuse ~ l.ep
r~esentatives passed an not ITO provid,
revenue to defray war expenses a..
for other purposes" In the o%iiginai
bin as presented by the Committee OF
Ways and Means. the additional reye
nue. to be derived was estimated at 81.
S~10,420,OO0. The amendment TO the I'm
come tax, which was tackled on to the
bill during the discussion In the House.
was expected TO yield another $4,000.
600 or $50,O0O,000.
In discussing the House bill, two
problems arise:
L. How much should be raised by
taxationl
III. In what manner should this sum
be raised2
/. How Much Should Be Raised by
Tasation7
How was the figure Of 81, SOO,O0O,oO
arrived at? The answer il simple. When
the Secretary Of the Treasury came 10
estimate the additional war expenses
for the year 1917-1S, he calculated that
they would amount TO some $4,000.
100000, of which $3,0OO.OOO.0O 900 was to
be allotted TO the allies. and $1,000.
100000 was to be utilized for the do
nestle purposes. Thinking that 1t
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 81, 100000.
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 hat 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 q
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-
ty would have TO be endured. But
where the disasters are so great and
tax-only policy may be declared i'm
practicable.
Secretary McAdoo had the right in
stinct and highly commendable cour-
age in deciding that a substantial por-
tion, at least, of the 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
nestle war expenditures by taxes, the
question arises whether he did not 20
too far.
The relative proportion OF loans to
taxes is after all a purely business
proposition. Not to rely to a large ex-
tent on loans at the outset of a war is
a mistake.
Disadvantages Of Excessive Taxes.
The disadvantages of excessive taxes
ut the outset of the war are as follows
l. Excessive taxes on consumption
viii cause popular resentment.
:. Excessive taxes ON industry will
d~isarrange business. damp enthusiasm
and restrict the spirit Of enterprise al
the very time when the opposite d
needed.
3. Excessive taxes on incomes will de
plete the surplus available for invest
ments and interfere with the placing O
The enormous loans which will be neces
sary In any event.
4. Excessive taxes on wealth will
cause q serious diminution OF the In
comes which are at present largely
drawn upon for the support Of educa
tional and ph~ilanthropic enterprises
Moreover, these sources OF support
would be dried up precisely at the time
when the need would be greatest.
5. Excessive taxation at the outset o.
the war will reduce the elasticity avail.
sble for the increasing demands tina
IRE soon to come.
Great Britain's Policy.
Take Great Britain as an example
During the first year of the war she
increased taxes only slightly, In order
to keep industries going at top notch
During the second year she raised by
new taxes only 8 per cent. Of her wa
expenditures. During the third yea
she levied by additional taxes love-
and above the pre-war level only
slightly more than II per cent. Of he
war expenses.
Ii we should attempt to do as mucl
in the first year of the war as Grear
Britain did i'm tha third rear II woulf