The Washington herald., 1917-06-01
The House Revenue Bill

On May %. 1917, the House Of Repre-
sentatives passed an act TO provide
revenue to defray war expenses and for
sS 059er RTER2GSss RaR2fSs writes nts.6 Edwin R Ssig
Economy, Columbia University, in the
New York Times In the original bill
as presented by the Committee OF Ways
derived was estimated at HH6 40, 900
The amendment TO the income tax, which
was tackled on to the bill during the dis
cusston in the House, was expected to
yield another s4O,OO0OOo or 100000,
In discussing the House bill two prob
alton?
II. In what manner should this sum
be raised?
How Much Should Be Raised by
TaxatiOnf
The question At once presents itself:
How was the figure of 81, 800 OOO, 600 ar
the. Secretary OF the Treasury came to
estimate the additional war expenses for
the year l9l7-lS he calculated they would
amount to some $500, 900. Of which
allies, and s., 400 600, 900 was to be utilized
for the domestic purposes Thinking that
Il 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. .SOo OO0,OOO
In this calculation there are two In
Z H.,
total expenditures would amount to So
!9O,ovo,CoS and, second. that a proper
ttqn Of half and half is desirable
Both of these assumptions NAV he cbsI-
lenged. In the first place. II Is clear
that the advances to the allies will great
~ exceed the sums originally estimated
most month ago, I estimated that the
tota! war expenditures for the wear
would amount to some SO, ,OO0O OOO The
accuracy of this estimate now seems 10
hos
probable that the 50 90, 900 900 allotted 10
IHe aIhes VIII not suffice. and that we
must advance additional sums before the
year Is over. In considering this fact,
however it must be remembered that
money advanced to the allies constitutes
only an advance and that the principal
rears Of interest, will ultimately be re-
PAID. The real problem, therefore, still
temains: What proportion OF the in
b1i sernal or domestic debt is to be betrayed
There are two extreme theorfes
each OF which may be dismissed with
Scant courtesy. The one is that all
war expenditures should be betrayed
war expenditures should be defraved
oy taxes. Each theory is untenable.
me Ioan-only policy Is impractic-
1noie Tor two reasons. If Government
OF taxation at least adequate to pav
the interest on the new loans. the
credit of the Government will suf-
Ler. II VIII have to borrow at pro-
sIeSSlVely higher rates of interest un-
III hually 1t will not be able to Dor
row at all. The only guarantee of
being able to continue to borrow dur
ing protracted war Is to main tain
taxation.
The second argument against COM
pIete reliance upon loans Is that you
are are only putting off the evil day. For
dividual must ultimately pay its
debts, and can do so only through
taxation; The danger. however, Of
contracting debt entirely or made
debt will remain as an incubus on the
community. A nation which must be
prepared for the recurrence of wars
would pc toolhardy to attempt to
loans. "
But If the loan-only policy is err
roneous. the tax.only policy is equal
policy. even in peace time2the polscy,
namely, of defrsying capital expen-
ditures out of current social income
! through taXatiOn--is Legitimate only
to the extent that the capital expen-
new schools and new pavements But
where the capital expenditures are extra
ordinary and not expected to recur, as,
for instance, in the case of the new
courthouse or the subways, in New York,
the .'pay-as-you-go" policy is open to
criticism. For it puts a crushing burden
upon the taxpayers in the particular
year when the improvement is made. al
though the benefits of the expenditure
accrue largely to future taxpayers And
in the second place, the fear of this bur-
den upon the present taxpayers will in
duce them to employ every device to
prevent the outlays that are really need
ed. Even in peace times therefore, loans
expenditures
In war time, however, the argument is
still stronger II is indeed true that the
burdens OF the war should be borne hy
GRAFTON; but this does not mean that they
should be borne by this years taxation.
Meeting all var expenses by taxation
makes the taxpayers In one Of two years