The Grenada sentinel. [volume] (Grenada, Miss.) 1868-1955, 1917-06-15
BY EDWIN r. A. sELiGMAN,

OF muIotion-Ho the axes Sncuid
Be Apportioned.
BY EDWIN r. A. sELiGMAN,
Mcvickar Professor of Political Econ
omy, Columbia University.
On May %. 1917, the House Of Rep
Tesentatives 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-
nut to be derived was estimated at ST.
S10,420,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 $4,000. 900.
In discussing the House bill, two
problems arise:
l. How much should be raised by
taxation?
II. In what should this sun
be raised?
!. How Much Should b Raised by
Taxation?
How was the figure Of 81, 300. 900, 900
arrived at? The answer is simple. When
the Secretary Of the Treasury came to
estimate the additional war expenses
! for the year 1917-1S, he calculated that
they would amount to some $6,6O0,-
100000, Of which $4,000, 900, 900 was to
be allotted to the allies. and $780,.
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 s 1,600.000,-
600.
There are two extreme theories, each
of which may be dismissed with scant
courtesy. The one is hat all war e.
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 he borne by the pres
ent rather than the future generation:
but this does not meal that they should
be borne by this years taxation.
Meeting all war expenses by taxation
makes the taxpayers in nj 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
p~resent-day warfare, the tax-only pol
icy would require more than the total
| crrn1rtc nf cncia1 inanvnn yEora th;e
absolutely necessary, the ensuing hav'
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 s. 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 a substantial por
tion, at least. of the revenues SHOULD
be derived from taxation. But wheI
he hit upon the plan of $3.50 per cent.
that is, Of raising one-half of all do
nestle war expenditures by taxes, tn,
too far.
The relative proportion Of loans I,
taxes is after all a purely bushes.
proposition. Not to rely to a large ex
tent on loans at the outset of a war il
q mistake.
Disadvantages Of Excessive Taxes.
The disadvantages of excessive take.
at the outset Of the war are as follows
1. Excessive taxes on consumption
will cause popular resentment.
2. Excessive taxes on industry viii
disarrange business, damp enthusiasm
and restrict the spirit of enterprise a
the very time when the opposite il
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 vii
u a serious diminution of the in
m which are at present largely
drawn upon for the support of educa
tional and philanthropic enterprises
Moreover. these sources of support
would be dried up precisely at the tim,
when the need would be greatest.
5. Excessive taxation at the outset O
the war will reduce the elasticity avail.
able for the Increasing demands tina
are soon to come.
Great 1ritain's Policy.
Take Great Britain as an example
During the first year of the war sh,
increased taxes only slightly, in ordel
to keep industries going at top notch
During the second year she raised b,
new taxes only 8 per cent. of her wa
expenditures. During the third yea
she levied by additional taxes (oveI
and above the pre-war leveD only
slightly more than II per cent. of hel
war expenses.
II we should attempt to do as much
in the first year of the war as GreaI
Britain did in the third year it would
suffice to raise by taxation $l.250,OO0,
hhh