The times-herald. [volume] (Burns, Harney County, Or.) 1896-1929, 1918-06-08
LOANS BETTER THAN TAXES
Five Reasons Why Excessive Taxes at
the Outset Of War Are Disadvantage
eus-Great Britain Example Worthy
Of Emulation---How the Taxes Should
Be Apportioned.
BY EDWIN r. A. sELleMAN,
McVickar Professor OF Political Econ
omy, Columbia University.


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 81,
S10,420,OOO. 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.
100 or S50,OO0000.
In discussing the House bill, two
problems arise.
|. How nuch should be raised by
taxation?
ii. In what manner should this SUN
be raised?
/ How Much Should Be Raised by
Taxation7
How was the figure OF 81 800. 900 900
arrived att The answer Is simple. When
tho Secretary OF the Treasury came to
estimate the additional war expenses
for the year t0l7-1S. he calculated that
they would amount to some $4,000.
100000. OF which $3,00O.OO0 900 was to
be allotted to the allies. and $4,000.
100000 was to he utilized for the do
nestle purposes. Thinking that II
would be a fair proposition TO divide
this latter sum between loans and
taxes, he concluded that the amour
To be raised by taxes was $l.S00,O00.
900.
There are two extreme theories, each
Of which may be dismissed with scant
courtesy. The one IL that all war ex.
Dendltures should be betrayed by loans,
and the other IN that all war expe1dL
lures should be betrayed by taxes
Each theory is untenable
1t Is indeed true that the burdens OF
the war should he borne by the pres.
snt rather than the future generations;
but this does not mean that they shoula
DC borne by this years taxation.
Meeting all war expenses by taxatior
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
aires approach the gigantic sums OF
1resent-day warfare. the tax -ouiy pol
fcy would require more than the total
surplus OF social income. We're this
absolutely necessary. the ensuing hav-
oc In the economic life of the communl.
nv would have to be endured. BuI
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
a0n, at 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
nestle war expenditures 10y taxes. the
question arises whether he did not 20
fJo far.
The relative proportion OF loans TO
taxes Is after all purely business
proposition. Not to rely to large ex-
tent on loans at the outset of war IL
. mistake.
Disadvantages of Excessive Taxes.
The disadvantages of excessive taxes |
at the outset OF the war are as follows. |
|. Excessive taxes on consumption |
Will cause popular resentment.
z. Excessive tnxes on industry will |
dlsarrange LH5iness, damp enthusiasm
and restrict the spirit Of enterprise at
tue very time when the opposite Is
heeded.
g. Excessive taxes on ln"Omes will dc
Ilete the surplus available for invest
nents and Interfere with the placing Of
the enormous loans which will lie neces
sary in any event.
4. Excessive taxes on wealth will
cause a serious dimlnutlon OF the In
comes which are at present largely
drawn upon for the support OF educa
tiOnal and philanthropic enterprises.
Moreover. .,:ese sources OF support
would be dried W precisely at the time
when the need would he greatest.
s. Excessive taxation at the outset Of
the war will reduce the elasticity avail
able for the increasing demands that
arc soon to come.
Great Britain's Policy.
Take Great Britain as an exampe
During the first year OF the war shes
Increased taxes only slightly, In order
b Keep Industries goiag ut top notch.
During the second year she raised by
new taxes only 0 per cent. OF her war
expenditures. During the third year
'he levied by additional taxes (over
and above the pre-war leveD only
slightly more than IT per cent. Of her
war expenses.
II we should attempt to do ns much
n tue first year of the war as Great
Britain did In the third year II would
Hiiilce to raise by taxation S1,2J0n0O,
100. II, III order to be absolutely on
he safe side, 1t seemed advisable to
ncIease the sum to 81 800, 100000, this
'hould, In our opinion. be tho maxi
nun.