Manchester Democrat. [volume] (Manchester, Iowa) 1875-1930, 1917-06-20
LA
HOW SHALL We
PAY FOR THE WAR?
A Constructive 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,

ouS-Great Britain Example Worthy
Of Emulation-How the Taxes Shouls
Be Apportioned.
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 ant
for other purposes" In the origina
bill as presented by the Committee o.
Ways and Means, the additional reve
nue. to be derived was estimated at 81,
S10,42O,O00. The amendment to the in
come tax, which was tackled on to tn,
bill during the discussion in the House
was expected to yield another $4,000.
900 or $5O,OOO,OOO.
In discussing the House bill, twt
problems arise:
!. How much should be raised BY
taxation?
II. In what manner should this sun
be raised?
l. How Much Should Be Raised b,
Taxation?
How was the figure Of S1.SOO,OO0, OOC
arrived at? The answer is simple. When
the Secretary of the Treasury came Il
estimate the additional war expenses
for the year 1917-1S, he calculated thai
they would amount to some S6,600..
100000, Of which $3,O0O,OOO.OOO was tt
be allotted to the allies, and $4,000.
100000 was to be 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 by taxes was 81 100000.
900.
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 untenable.
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 be distributed at least over
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 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 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 wher
he hit upon the plan OF 5000 per cent.
that is, Of raising onc-half OF all do
nestle war expenditures by taxes, the
question arises whether he did not go
too far.
The relative proportion of loans 20
taxes is after all purely business
Not to rely to a large eX-
tent on loans ct the outset of war is
a mistake.
Disadvantages Of Excessive Taxes.
The disadvantages Of excessive taxes
at the outset of the war are US 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 at
the very time when the opposite is
needed.
3. Excessive taxes Oh incomes will de-
plete the surplus available for invest
ments and interfere with the placing of
he enormous loans which will be neces.
sary in any event.
4. Excessive taxes on wealth will
cause a serious diminution of the in
comes which are at present largely
lrawn upon for the support of educa-
.ional and philanthropic 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 .
he war will reduce the elasticity avail.
able for the increasing demands that
are soon to come.
Great Britain's Policy.
Take Great Britain as an example
During the first year of the war she
taxes only slightly, in order
% keep industries going at top notch
During the second year she raised by
new taxes only 0 per cent. of her war
During the third year
she levied by additional taxes lover
md above the pre-war leveD only
slightly more than II per cent of her
var expenses.
If we should attempt to do as much
Il the first year of the war as Great
Britain did in the third year it would
suffice to raise by taxation $1,250,OOO,-
100. If, in order to be absolutely on
he safe side, it seemed advisable to
Increase the sum to $l,5OO,O00O0O, this
should. in our opinion, be the maxi
mum.
rem. Blood poison was said to be