Smyrna times., 1917-06-13

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.
S10,420O00. 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 S5O,OOO,OOO.
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
Taxation?
How was the figure of S1,S00,O0O,000
arrived at? The answer is simple. When
the Secretary Of the Treasury caIe to
estimate the additional war expenses
for the year 1917-1S, he calculated that
they would amount to some $6,6OO,-
100000, Of which $3OOOOOO,OOO was to
be allotted to the allies, and $780,
100000 was to be utilized for the do
nestle purposes. Thinking that it
would be fair proposition to divide
this latter sum between loans and
taxes, he concluded that the amount
to be raised by taxes was $1,S00,O00,-
600.
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 a
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 communi-
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 a substantial pOr
ton, at least, Of the revenues should
be derived from taxation. But wher
he hit upon the plan of $3.50 per cent.
that is, of raising One-half of all do
nestle war expenditures by taxes, tn,
question arises whether he did not g
too far.
The relative proportion Of loans t
taxes Is after all a purely bushes
proposition Not to rely to a large ex
tent on loans at the outset OF a war i
mistake.
Disadvantages Of Excessive Taxes-
The disadvantages of excessive take
at the outset Of the war are as follows
/. Excessive taxes on consumptio
will cause popular resentment.
2. Excessive taxes ON industry wi
disarrange business, damp enthusiast
and restrict the spirit Of enterprise 9
the very time when the opposite
needed.
3. Excessive taxes on incomes will d
plete the surplus available for inves
ments and interfere with the placing
the enormous loans which will be nece
sary in any event.
4 Excessive taxes on wealth wi
cause a serious diminution of the II
comes which are at present largel
drawn upon for the support of educ
tional and philanthropic enterprise
Moreover, these sources Of suppO
would be dried up precisely at the tin
when the need would be greatest.
8. Excessive taxation at the outsst
the war will reduce the elasticity aVai
able for the increasing demands tn
are soon 60 come.
Great BrItatne Foitcy.
Take Great Britain as an exampl
During the first year Of the war 81
increased taxes only slightly, In ord
to keep industries going at top note
During the second year she raised
n new taxes only per cent. of her W
q expenditures. During the third ye
I'll she levied by additional taxes (ov
I'll apd above the pre-war leveD on
@l slightly more than IL per cent. of b
81 war expenses.
Oil II we should attempt to do as mu
I'll in the first year of the war as Gre
9 Britain did in the third year it wou
Il suffice to raise by taxation $1,250,OO
II 900. If, in order TO be absolutely
Il the safe side, it seemed advisable
S increase the sum to $1.5O0,O00,0O0, Il
81 ahould In oIlr onfnfon ha tho ma