New-York tribune., 1917-06-13
The Incubus

Why has the DDeEty Loan Hdu quill
hard sledding? Primarily. because Of lack
Of forethought and vision at Washington.
When IL was assumed that the bonds would
sell thernselves-that all that was neces-
sary was to open window in the Treasury
Building and the bonds "would fly OUT
an uphill eleventh-hour fight to float the
loan was invited. Equally foolish was the
announcement from Washington that the
first bids assured an oversubscription.
Delay and friction in passing the war
tax bill have been due to exactly the same
mismanagement. 1t was essential at the
very outset to decide exactly what sum Of
money should be raised by an initial enrer-
gency tax measure. 1t was of the utmost
Importance to determine what proportion
new taxation should bear to war expendi-
ture and to what extent taxation, for the
present, ought to be supplemented by bond
issues. But that vital preliminary task
was neglected.
Congress went to work in the dark. The
WAYS and Means Committee of the House
Of Representatives set out to raise by tax
alton about S1,5OO,OOOOOO. After the bill
was practically written Secretary McAdoo
sent word to the Capitol that $3.50 ,OOO,-
600 ought to be raised. Still later-too late
to produce any results-he urged the COM
mittee to increase the tax levy to 49,
2Oo,OOOOOO.
The House accepted bill drawn blindy.
It's trainers themselves announced that
they were going to vote for it with their
eyes shut 1t went to the Senate, where
tax bills have always been taken more
seriously than in the House. The kitchin
blind mans buff method did not appeal to
the Senate Finance Committee. 1t sought
TO rationalize the House bill, and as first
step toward rationalizing it the amount
sought to be raised was reduced to some
thing in the neghborhood of $780,
100000.
1t is hard to say exactly what the gov
ernment's additional expenditure will be
for the first year Of the war. 1t is dis
ingenious to include as war expenditure
the loans we are making to our allies.
They have given US their bonds in ex-
change, bearing the same rate Of interest,
and for all these advances the Treasury
will be eventually repaid. The $780,
100000 to be raised by new taxation will
certainly represent liberal percentage of
cur first years real war expenditure.
In our opinion $1,2OO,OOO,OOO would be a
more satisfactory percentage. For we can
make no greater mistake than TO impose
an excessive first year tax levy, highly dis
turbing to capital and business. Capital
and business can adjust themselves TO
heavier burdens as time goes on and the
discipline of war seeps in. But ability to
pay heavier taxes next year and the year
after viii be greatly lessened by Grip
pling initial assessment.
That is one grave objection to an exces-
sve income super-tax. If man pays a
40 or 80 per cent tax on his income, he is
entitled the year following TO deduct that
income tax payment from current income.
His return will therefore be from 40 to 80
per cent lower than it was the year before,
if his income remains the same. Conse-
quently, income tax receipts will rapidly
fall away. The same thing is true of ex-
cessive taxes on business. 1t is best TO
start in with moderate taxation all along
the line and to allow business and capital
% prepare against the harder days that
arc 70 come.
The government should have put limit
20 its taxation for the coming year before
it issued the Liberty Loan. Mr.. McAdoos S
widely varying estimates and the go-it-
blind philosophy Of Mr.. Kitchin and his
associates have naturally created concern
in the business world. People want TO
know where they stand. and hesitate TO buy
bonds freely 50 long as the tax question
remains unsettled.
There is no lack ot patriotism in the
country. Our people can absorb without
strain this Liberty Lean and the others 10
follow IT, But they are not 70 be blamed
for waiting for a clear statemen. Of the
governments fiscal policy. The House tax
bill was in many respects a rnonstrosity.
The retroactive incoN,e tax, the 10 per cent
horizontal increase in tariff duties, the fiat
10 per cent tax imposed on all articles now
on the free list, including great many
food imports, and the bunglng excess
profits tax are Instances Of grossly unin-
+eiiigent LEGISLATION. Mr.. Kitchin's recent