The Lakeland evening telegram. (Lakeland, Fla.) 1911-1922, 1917-06-13
BY EDWIN r. A. SELIGMAN,


BY EDWIN r. A. SELlGMAN,
Mcvickar Professor of Political Econ
omy, Columbia University.
On May %, 1917, the House of Rep
resentativeS passed an act TO 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.,
0,420,000 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 S4O,O0o,-
GOO or $50O0O,0OO.
In discussing the House bill, two
problems arise:
1. How much should be raised by
taxation?
II. In what manner should this sum
be raised?
I. How Much Should Be Raised by
Taxation?
How was the figure Of 800, 600, 600
the Secretary Of the Treasury came to
estimate the additional war expenses
for the year 1917-1S, he calculated that
they would amount to some $4,000
100000, of which $3,OOOO0O,OO0 was to
be allotted to the allies, and $1,000,
OOO,G,W 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,SOOOO
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 untenabe
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 hay
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. ut least. Of the revenues should
be derived from taxation. But when
he hit upon the plan Of $3.50 per cent,
that is, of raising one-half of all do
mestic war expenditures by taxes. the
question arises whether he did not 70
too far.
The relative proportion of loans to
taxes is after all purely business
! proposition. Not to rely to a large ex-
tent on loans at the outset of war Is
mistake.
Disadvantages of Excessive Taxes.
The disadvantages of excessive taxes
at the outset of the war are as follows
l. Excessive taxes on consumption
will cause popular resentment
z Excessive taxes on industry will
disarrange business, damp enthusiasm
and restrict the spirit of enterprise al
the very time when the opposite is
needed.
q. Excessive taxes on incomes will de
plete the surplus available for invest
ments and interfere with the placing OF
| the 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
Drawn upon for the support of educa
tionai and philanthropic enterprises
Moreover, these sources of supper,
would be dried up precisely at the time
when the need would be greatest.
3. Excessive taxation at the outset o,
the war will reduce the elasticity avail.
sbie for the increasing demands tina,
are soon to come.
Great Britain's Policy.
Take Great Britain as an example
During the first year of the war sh,
increased taxes only slightly. in ordel
TO keep industries going at top notch
:. During the second year she raised b,
new taxes only per cent. of her wal
expenditures. During the third yea
she levied by additional taxes love-
and above the pre-war leveD onl,
slightly more than II per cent. of he
war expenses.
II we should attempt to do as mucl
In the first year of the war as Grea
Britain did in the third year it would
suffice to raise by taxation 81, 10000.