The commonwealth. (Scotland Neck, N.C.) 1896-1929, 1917-06-12
HOW SHALL WE
PAY FOR The WAR?
4 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
IS Emulation-How the Taxes Should
Be Apportioned.
By EDWIN r. A. SELIGMAN,
,scvickar Professor OF Political Econ
omy, Columbia University.
On May %, 1917, the House of Rep
rosentatives passed an act Ito provide
revenue to defray war expenses and
for other purposes" In the original
hill as presented by the Committee of
Vows and Means, the additional reve-
mo TO be derived was estimated at ST.
e1O42OOOO. The amendment to the in
come tax. which was tackled on to the
hin during the discussion in the House,
was expected to yield another SAC, OOO,-
600 or S5o,OOe,O00.
In discussing the House bill. two
rroblems arise:
l. How much should be raised by
taxation?
II. In what manner should this sum
be raised?
l. How Much Should Be Raised by
Taxation?
NV was the figure Of $1.8OO,O00, 900
led at? The answer is simple. When
Secretary Of the Treasury came to
mate the additional war expenses
the year 1918, he calculated that
.nev would amount to some $6,6OO,-
100000. of which $3,OOO,O00,QOO was to
he allotted to the allies, and $780,
100000 was to be utilized for the do
nestle purposes. Thinking that il
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,
600.
There are two extreme theories, each
of which may be dismissed with scan1
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 shoul6
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 tha
ought to be distributed at least over !;
decade within the same generation.
In the second place, when eXpendi
lures approach the gigantic sums o
present-day warfare, the taX-only pol
icy would require more than the tota
surplus of social income. Were thi
absolutely necessary, the ensuing hav
oc in the economic life Of the communi
ty would have to be endured. Blu
where the disasters are so great ant
at the same time SO unnecessary, tn,
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 POI
ton. at least. Of the revenues shoul
be derived from taxation. But whe
he hit upon the plan of $3.50 per cent
that is, Of raising one-half of all dc
nestle war expenditures by taxes, tn
question arises whether he did. not e
too far.
The relative proportion of loans t
yes is after all a purely bushes
Vposition. Not to rely to large e,
q on loans at the outset of a war |
listake
Disadvantages of Excessive Taxes.
The disadvantages of excessive take
at the outset of the war are as follows
L. Excessive taxes on cOnsumptio
VIII cause popular resentment
Z. Excessive taxes on industry wi
uisarrange business, damp enthusiasts
anu restrict the spirit Of enterprise
Tue very time when the opposite
needed.
.. Excessive taxes on incomes will
piete the surplus available for inves
ments and interfere with the placing
Tue enormous loans which will be nece
sary III any event.
T. Excessive taxes On wealth w
cause a serious diminution of the i
so"es which are at present large
uia"n upon for the support of educ
uonal and phianthropic enterprise
moreover, these sources of suppo
"oaia be dried up precisely at the tin
wen the need would be greatest.
o. Excessive taxation at the outset
.us war will reduce the elasticity ava
ao'e TOR the increasing demands tn
are soon to come.
Great Britain's Policy.
rake Great Britain as an examp
turing the first year of the war s
Nreased taxes only slightly. in ord
keep Industries going at top note
I'll