The Washington herald., 1918-06-07
ONE-THIRD WAR
COST FROM TAX,
MADOO PLAN
CONTINUED FROM PAGE ONE.

and war savings certificates. We
shall thus have completed fifteen
months OF the war with a financial
record unequalled, 1 believe. by that
Of any other nation.
I'VE can not wisely contemplate
nearly doubling our cash disburse-
ments In the fiscal year 1919, without
providing additional revenue. We
can not afford to rely upon 1900, ,0O0-
900 only from taxation. because we
shall then have to rely on raising
81. .0OO, 10000 by loans. This would oe
a surrender to the policy Of high in
terest rates and initiation, with all the
evil consequences which would flow in
evitably therefrom. and which would,
1 firmly believe, bring ultimate disas-
ter to the country.
I'VE can not afford to base our fu-
ture financing upon the quicksands of
Initiation or unhealthy credit expan-
sion. II We are to preserve the finan-
cial strength of the nation. we must
do sound and safe things. no mat. n
whether they hurt our pockets or in
volve sacrifices-sacrifices of a -e:a-
lively Insignificant sort as compared
with the sacrifices our soldiers and
sailors are making to save the life OF
the nation.
The sound thing to do Is unquea-
tionably to increase taxation. and he
increases should be determined upon
promptly and made effective at The
earliest possible moment.
Il doubt seriously IL the government
can be financed with only A,vvV, ,OOO. 900
derived from taxation, because with a
tax bill no larger than this. sufficient
economies will not be enforced upon
the people Of America, and without
such economies, l see no way in
which the great financial operations
Of the government can be safely con-
Quoted.
Sound Financial Policy.
"On the basis of the present reve-
nue. laws, we should have to raise in
the fiscal year 1919 10000, 900 by
the sale of liberty bonds or by loans
OF one sort or another. l believe that
IL We are to preserve the soundness
and stability of our financial struc-
ture, We should raise by taxation not
less than one-third of the estimated
expenditures for the fiscal year 1919
or IS 900, 900 900.
There are also certain general con-
siderations bearing upon the problem
Of taxation which I hope l may be
permitted to bring to your attention.
The existing excess profits tax does
not always reach war profits. The
rates of excess profits taxation are
graduated and the maximum is sixty
per cent. In Great Britain there Is a
fiat rate of eighty per cent on all war
profits. The government departments,
under great pressure as they are to
get necessary war materials and sup
plies with the utmost expedition. can
not in the nature Of things fix their
prices nor guard their contracts in
such a way as to avoid the possibility
of pro1teering. The one sure way is
to tax away the excessive profits
when thep have been realized. 1 do
not say this in a spirit of criticism
Of the corporations or business men
of the country who have for the most
part loyalty supported the govern
ment. In entering into war contracts
they take grave risks. They are call
ed upon to make vast expenditures
OF capital for purposes which may
prove unproductive after the war.
They are not to be blamed in those
circumstances for asking for prices
and terms which cover those risks.
On the other hand, when the risk
has been HQuidated by proper allow
profitable, the government should take
back in taxes all profits above a rea-
sonable reward. Under existing law,
that does not happen because the tax
rates are not high enough and can
not safely be made high enough, since
the test now is not how much Of the
profits are due to the war, but what
relation the profits bear to the capi-
tai invested. A company with a swol-
len capital and huge profits escapes
Reasonable PROFITS Allowed.
"Of course. no one objects to rea-
sonable profits; on the contrary,
everyone should want. and I am
sure does want. business and en-
terprise to he rewarded with rea-
sonable. or even liberal profits. Pros
perity should be preserved and can
be preserved, believe, on the basis
Of reasonable profits. The problem
Of craftsmanship Is to establish a
just relation between necessary tax
alton and the earning power of the
nation.
This brings me to another con-
sideration of great moment in the
governments financial plans. I nope
that IL will not be necessary fur
ther to increase the interest rate
on government bonds. The num-
Der OF subscribers to the three lib
erty loans aggregated 10000, 900.
The people who subscribed are Inn
patient Of those who have not. Var
ious plans have been urged upon