The sun., 1918-10-18
THE TREATMENT OF OIL AS
A WAR PRODUCT.
Confscation Masked as the Taxing
Of Excess Profits.

oil taxation is nonsensical. TIE SuN
honest dealers in fake oil stocks should
secure the gains without paying tax"
THE SUN or any one else never claimed
to have discovered "a possible techni-
cality by means OF which" oil owners
could escape taxation.
do not know who Mr.. Seitz is, but
II he has any uncomfortable super
Hesitation Of patriotism let him turn over
to the Government all the property he
owns SO as to leave himself and his
family 2cnniless. He will then be much
In the position Of the oil owners referred
to In THE SUNS editorial article.
Another correspondent Of THE Sun
makes n suggestion that is interesting.
He suggests that where Federal taxa
ton Is conflscatory In certain lines of
business the Government. II 1t must
have the money" issue therefor obliga-
tons payable after the war. the same
as in the case OF other property COM
Wandered.
In letter TO THE Sun of September 81 I
gave the history OF small oil company.
showing that after three years of expen-
sive exploration and development the
company found oil and opened a new
source of supply in wildcat territory. l
showed that the Government under the
guise of war taxes was confiscating the
property. In this instance the Govern
ment levied a tax OF $4s3.000 on S4S5,-
900 profits" On protest a rebate OF
$4,000 was allowed. but II Is under
stood that the new law will reach back
into last year so as to absorb or largely
absorb what was not taken before.
AS half the entire product of an
oil well Is taken out the first year, IL
Is obvious that two years of such taxa
ton will virtually take the property.
The Government has not reached any
! such stress of necessity. II IT reaches
this stage, then let property be taken,
but let 1t all be taken alike. This Is
not only common justice, but 1t is a
constitutional requirement.
In the case instauced IL is obvious that
the company simply has n quantity Of
oil. Its business consists In extract
ing and marketing this stock. In the
case in question the oil Is run directly
from the wells to a refinery. II might
be run into tanks and stored The re-
suit would be the same either way, but
suppose, for illustration, that the oil
were all taken out Of the ground and
stored In tanks. The Government wants
Oil; so It comes along and takes all the
oil In the tanks. Ordinarily when the
Government takes property 1t pays for
II. II 1t takes oil without paying. 1t
may take cattle or goods or anything
else.
An oil company OF the kind men
toned has no business in the ordi-
nary sense. II simply has some oil
Whether the oil is in the ground or In
tanks is immaterial. Whether II he run
to refineries and cashed in or held in
storage Is immaterial. If the oil is
turned into money and the Government
takes the money II is the same in effect
as II It took the oil. 1t Is a constitu-
| tional principle that private property
shall not be taken for public use with
out Just compensation.
Large companies whose enterprises
and lines Of business overlap may be
assimilated in 4 measure to ordinary
business and taxed accordingly. But
small companies whose enterprise con-
Justice be SO treated. When successful
ell they have is some oil. II you take
this you take all they have--it is SIM
ply confiscation. This is SO obvious that
! 1t only needs to be stated to be ap-
| parent.
IL Is evident that some plan should be
devised by which such enterprises can
be taxed In a rational way. either by
some sort of flexible scale that would
meet individual cases or by adopting
some fiat rate that would be reason
| atle, and for all above this require the
/ issuing Of an obligation payable as In
| case OF other property taken by the
Government.
No fault can reasonably be found
with the taxing of war profits What
the war produces may very we'll be
| taxed to support the war. But the war
produces no oil. The finding of oil Is
! fortuitous. The quantity found Is the
same. war or no war. To tax an oil
company In war time on the same prin-
ciple that you tax n munitions plant
Is absurd. There Is no analogy what
\ ever. Such crudities of taxation are as
| dirgraceful to legislative intelligence as
| they are hurtful in their economic
| effects. In so far as the price of oil
| may be attributed to war conditions this
| may in theory be regarded as an ele-
! ment in the equation, but It Is a doubt
| full element a: best and no certainty
| can be predicated upon IT,
Staples are subject to fluctuations in
depe ryiently Of war, and so many things
| enter into the rise and fall of oil prices
| that II Is not easy to determine In a
given case the particular part played by
| war. Cushing oil is only 10 per cent
less in content-that is. in value-han
Pennsylvania oil, yet it sold for forty
cents a barrel four years ago when
| Pennsylvania oil was selling for sl.35.
The reason was simply overproduction
end lack OF handling facilities In the
| Gushing field.
Supply. distribution and transporta-
tion are controlling factors in the price
OF oil, and 1t Is difficult. II not impos-
sible. In estimating prices In war time
to say just how much is due to war
and how much to other causes. To this
Is to be added the great hazard OF the
business and the rapid depletion of
| wells. In short, n very little reflection
| will show that oil Is a business sui
/ generis and not asslmIlable to ordinary
| business ventures. This being true It
should be taxed in accordance with its
exceptional nature. To make for It a
| Procrustean bed. as In Federal legisla-
| ton to date. Is to make for II a bed