Missouri Valley times. [volume] (Missouri Valley, Iowa) 1874-1931, 1917-06-14
HOW SHALL We
PAY FOR THE WAR?
AConstructlve Criticism on the
House Revenue Bill.
LOANS BETTER THAN TAXES
Five Reasons Why Excessive Taxes at
the Outset of War Are Disadvantage
ous-Great Britain Example Worthy
Of Emulation-How the Taxes Should
Be Apportioned.
BY EDWIN r. A. sELleMAN,

Be Apportioned.
BY EDWIN r. A. sELlGMAN,
Mcvickar Professor OF Political Econ
omy. Columbia University.
On May %, 1917, the House of Rep
resentatives passed an act ITO provide
revenue to defray war expenses and
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.
S1O,42OOOO. 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 100000
600 or $50,O00,00O.
In discussing the House bill. two
problems arise:
l. How much should be raised by
taxation?
II. In what manner should this sum
be raised?
!. How Much Should Be Raised by
Taxation7
How was the figure of S1.S0O.00O,0Oo
arrived at? The answer is simple. When
the Secretary Of the Treasury came to
estimate the additional war expenses
for the year 19l7-1S. he calculated that
they would amount to some $4,000
100000, of which S3,O0O,oo0o0O was to
be allotted to the allies and $780,.
100000 was to be utilized for the do
nestle purposes Thinking that it
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.SOO,OoO.-
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 untcnabla
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 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 he 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 commune
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 i'm
practicable.
Secretary McAdoo had the right in.
stinct and highly commendable cour,
age in deciding that substantial por.
ton, 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
nestle war expenditures by taxes the
question arises whether he did not &,
too far.
The relative proportion of loans tt
taxes is after all purely business
tent on loans at the outset of a war is
mistake.
Disadvantages Of Excessive Taxes.
The disadvantages of excessive taxes
at the outset o. the ga: are as follows
l. Excessive taxes on consumption
will cause popular resentment.
2, Excessive taxes on industry will
disarrange business, damp enthusiasm
and restrict the spirit of enterprise al
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 O
the enormous loans which will be neces
sary in any event.
4. Excessive taxes on wealth will
cause serious diminution of the in
comes which are at present largely
drawn upon for the support of cduca
tional and philanthropic enterprises
Moreover these sources of suppor
would be dried up precisely at the time
when the need would be greatest
S. Excessive taxation at the outset o.
tn6 war VIII FeQuCe the elasticity avail.
able for the increasing demands that
are soon to come
Great Britains 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 wal
expenditures. During the third yeal
she levied by additional txxes love,
and above the pre-war leveD only
slightly more than II per cent. of he,
war expenses.
If we should attempt to do as muci
in the first year OF the war as Grea
Britain did in the third year it woult
suffice to raise by taxation ST .25O, 600.
600. If. In order to be absolutely OF
the safe side. it seemed advisable t,
increase tie sum to S1,500.00O.00o thi.
should. in our opinion. be the maxi
mum