The sun. [volume] (New York [N.Y.]) 1916-1920, 1918-12-03
THE SOUTH. THE WORTH
AND THE TAXES.
A Correspondent who Misunderstands
What Il Was the Kltchlns Did.

| To THE EDITOR OF THE SuN-Sir: In
your editorial article "Kitchin's Sectional
Taxes an attempt is made to show
that, taking the wealth of the various
sections Of the country as basis for
the distribution of the national tax bur-
den. the Northern section paid a larger
amount Of taxes into the national Treas
ury In proportion TO 10 wealth than did
the Southern section
I will grant that upon this basis the
South did get an advantage over the
| North. but Is II fair to take wealth as
the proper basis for the distribution of
the tax burden? I do not think so. The
| amount Of wealth in a given section Ia
only one factor which produces income,
| and maybe very small factor liz its
production. Wealth Is a factor In pro-
ducing income only when II IL used in
production and when the productive
process brings about an increase in the
! form Of profits ProAt Is income And
II generally arises from tho combined
| use Of these factors:
Land. labor, capital. business organ
ization.
Land yields rent.
Labor yields wages.
Capital yields interest
Business organization Yields profits
The excess receipts OF rent wages.
interest and profits over the disburse-
ments of each of these are net income.
which the Government under the law
taxes
The mere possession OF wealth may
or may not produce income II would
produce income II efficiently and proflta-
bly, employed In a production where IL
brings about an Increase. II may be
so employed as actually to bring about
decrease, ms where II is inefficientiy
used. resulting I'm its loss and failures.
For example:
Two corporations organise IN the
United states 10 engage in the manufac-
ture of cotton cloth for sale in the
markets Of the world Both begin with
paid up capital OF 100000. This cap
ital. OF course. Is wealth. as It Is going
to be used in production. One of these
corporations locates In the State OF
Rhode Island. Northern section. while
the other locates in the State Of Mis-
sissippi. n Southern section. They both
begin at the same time, and at the end
Of the year the Rhode Island corporation
shows net income from operation OF
100000, while the Mississippi corpora
ton shows n net income from It's opera
ton OF $4,000. and as n result of these
showings the Rhode Island company will
pay more taxes into the national Treas
ury than the Mississippi corporation.
The Rhode Island corporation will be
enabled TO declare n larger dividend than
the Mississippi corporation. What do
these showings prove? They prove that
perhaps one organization was better or
snnized or better managed and It's drec-
tors used more Yankee brains than the
corporation In the Southern section of
the country.
This argument holds good in case OF
individuals. II is not n question OF how
much wealth n given section possesses,
but It is question Of how much income
that wealth produces. and Il Is income
which the Government taxes
The facts are the Northern people
have made more. and consequently are
able to pay more. and II you apply the
theory OF taxing the person who Is most
able 10 bear the burden. then you must
conclude that the amount of income ac-
tually received. irrespective Of wealth,
L. the fair basis OF taxation.
F. G. KLEIN.