The Dermott news. (Dermott, Ark.) 1910-1977, 1917-06-14
4 Constructive Criticism on the
House Revenue Bin.
LOANS BETTER THAN TAXES
Five Reasons Why Excessive Taxes a.
ous-Great Britain Example Worthy
Of Standardization the Taxes Should
30 Apportioned.
BY EDWIN r. A. SELiGMAN,
McVickar Professor of Political Ecoi

ofny, ColumDia university.
On May %. 1917, the House of Rep
resentatives passed an act ito provide
revenue to defray war expenses nnd
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 81,
S10,420OOO. 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 $50,o00.000.
In discussing the House bill, tive
problems arise:
l. How much should be raised by
taxation?
H. In what manner should this sun
be raised?
I. How Much Should Be Raised by
Taxation2
How was the figure of $500. 100000
arrived at The answer is simple When
the Secretary OF the Treasury came &c
estimate the additional war expenses
for the year I9l7-1S. he calculated that
they would amount To some $1,000
100000, of which S3.0OO,000.00O was tc
be allotted to the allies. and $500
100000 was TO he utilized for the do
nestle purposes. Thinking that II
would be fair proposition to divide
this latter sum between loans and
taxes, he concluded that the amount
to be raised 10y taxes was 81 100000.
600.
There are two extreme theories, each
of which may be dismissed with scant
courtesy The one Is olat all war OK
penditures should he betrayed by loans
and the other is that all war expendi
lures should be betrayed by taxes
Each theory Is untenable.
II 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 mean that they should
be borne by this years taxation.
Meeting all war expenses by taxatiou
makes the taxpayers IN one or tive
years bear the burden OF benefits that
ought To be distributed at least over n
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 communi
" would have to be endured But
where the disasters are SO great aud
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 a 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 to
taxes is after all purely business
proposition. Not to rely to large ex.
tent on loans ut the outset of a war is
mistake.
Disadvantages Of Excessive Taxes.
The disadvantages of excessive taxes
at the outset of the war 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 nj
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 will be neces
sary in any event.
L. Excessive taxes on wealth will
cause serious diminution Of the in
comes which are at present largely
drawn upon for the support Of educa
tional and phllanthropic 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 OF
tho war will reduce tho elasticity avail
able for the increasing demands that
are soon TO come.
Great 6ritain'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 o per cent. Sof her war
expenditures. During the fhird year
she levied by additional taxes (over
and above the pre-war level only
slightly more than II per cerig OF her
war expenses.
IL we should attempt to do II much
in the first year of the war al Great
Britain did In the third year ID would
suffice TO raise by taxation $l,2go, Ooo,-
600 II. In order to be absolutely ON
the safe side. II seemed advisable to
increase the sum to 81. 500. 000, o00A this
chn,lA In. ,,sr .,r,fufnu Ia tha re -