Saturday news. (Watertown, S.D.) 19??-19??, 1917-06-14
BY EDWIN r. A. SELlGMAM,

BY EDWIN r. A. SELiGMAN,
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.
S10,420,000. 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
900 or $%50y000,000.
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
Taxation2
How "a the figure of $500, 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 $4,000.
100000, of which $4,000, 900, 900 was to
be allotted to the allies. and $780,,
100000 vas to be utilized for the do
nestle purposes. Thinking that it
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 w extreme theories, each
of which may be dismissed with scant
courtesy. The Il is that all war ex
penaitures should be 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 be borne by the pres
emf rather than the future generation;
but this does nor mean that they should
lie borne BY this YEARS. taxation,
Meet IN war expenses by taxation
makes gs taxpayers in one or two
years ste@e tie burden Of benefits that
ought ~ distributed at least over a
aee lain ne same generation
In the saota place. when expendi
lures apggp2eh 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-
DC III the economic life of the communi,
ty would have to be endured. But
where the disasters are so great and
at the same time so unnecessary. the
taS-oniy policy may be declared i'm
practicable.
Secretary McAdoo had the right in.
stinct and highly c~6nmendable 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
mestic war expenditures by taxes, the
question arises whether he did NOT 20
TOO far
The relative proportion of loan MS 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 ii
a mistake.
Disadvantages of Excessive Taxes.
The disadvantages OF excessive taxes
ut the outset Of the wal are as follows-
4 Excessive taxes on consumption
will cause popular resentment.
!. Excessive taxes on industry VIII
disarralge business, damp enthusiasm
and restrict the spirit or enterprise III
the very time when the opposite Ii
needed.
). Excessive taxes on incomes via de.
plete the surplus available for iagest.
ments and Interfere with the ptactng of
the enormous loans which viii Ike aeces
sary in my event,
Al Excessive taxes on wealth viii
cause q serious difninuti0n OF lie Id,
comes which are DIT present largely
drawn uIeofl for the supper ef eanea.
tional and plilanthropir enterprises.
u Moreover. these sources Of Support
would be dried III precisely III sbe fapas
when the naed would be greasess
5 Excessive taxation ii he outses n
the war viii reduce tho elasticity assiis
able Tor the incrsasing dsn1sHSs Ahs.
srs soon ~ come.
Great avttaInis Poiisy.
Take Great britain DIV Ill, -xrau,.,le
During the FIRST year of Tie M5aT slie
sncreasad taxes Only slightly, iii ordas
a 20 Keep Industries going III top uotsstl
m DNrSnp flYa rA.snsad pna h ~Es 1870 l5