The Mena weekly star., 1918-06-13
ASKS 8 BILLIONS
 THRU TAXATION
eacretary McAdoo Makes RecOmmen- d.t;on for New Revenue Bill to Chairman Ways and Means Con-
 mittee-One-T Third Expenditures

Washington, June 6.-Secretary Me Adoo today recommended in letter 4a Chairman Kitehin of the House ',ovs and means committee that the .o,y revenue bill be drawn to obtain billion dollars by taxation, one-third of the estimated "A billion dollar ex- nenditures in the fiscal year, 1919.
 He also recommended that a war nrofts tax be established at high rate to he super-imposed upon existing ex- cess profits taxes; that the normal in- come tax on unearned incomes be in- crsased and that heavy taxation be ;mposed on luxuries.
 The suggestions were given in re- snonse to letter from MT. Kitchin, and constituted an outline of the treasurv's ideas not only of taxation to meet the Nations huge war expenses ;n the future, but of preparing way for floating of additional billions of T,;hrty bonds. Increasing the rate of .,a-r,al taxes on incomes from which Tibsrty bonds are exempt, said the sacretary., will tend to make these honds better investments and to per-
 nit them to compete with industrial and municipal securities bearing high
 CT rates of interest -
 After explaining that his. estimate
 ef 24 billion dollar expenditures in
 the fiscal year starting next July 1,
 is based on expenditures in the past,
 and a calculation of the rate of in- crease Mir. McAdoo said it would con stitute unsound financial policy to collect 20 billion dollars of that sum by Notation of Liberty loans, to make up the deficit that would follow, if there was no increase in the billion dollar revenue obtainable under the existing law.
 To Tax Actual Profits.
 Explaining his ideas for new tax to reach actual profits made out of the war, Mir. McAdoo wrote:
 "The existing excess profits tax does not always reach war profits. The rates of excess profits taxation are graduated and the maximum is 50 per cent. In Great Britain there is a fiat rate of 80 per cent on all profits. The government departments, under great pressure as they are to get nec- essary war materials and supplies with the utmost expedition, cannot in the nature of things fix their prices nor guard their contracts in such a way as to avoid the possibility of profteering. The one sure way is to tax away the excessive profits when they have been realized.
 q do not say this in a spirit of criticism of the corporations or busi- ness men of the country who have for the most part Loyalty supported the government. In entering into war contracts they take grave risks. They are called upon to make vast expendi- lures of capital for purposes which may prove unproductive after the war. They are not to be blamed in these circumstances for asking for prices and terms which cover those risks. On the other hand, when the risk has been liquidated by proper all lowances and the contract has proven profitable, the government should take back in taxes all profits above req sonable reward"
 Promote Sale of Liberty Bonds.
 The way in which a higher normal nate on incomes would promote the sale of Liberty bonds, particularly to persons of big means, was explained as follows:
 l hope it will not be necessary further to increase the interest rate on government bonds. The number of subscribers to the three Liberty loans aggregated 30 million. The people who subscribed are impatient of those who have not. Various plans have been urged upon me for forcing the people to buy Liberty bonds. The man of small means who buys $10O bonds wants his neighbor to do so too. There is a popular demand also for high taxes upon war profits. There is also a popular demand that all peo- pie should contribute to financing the war.
 There should, therefore, be sub stantlal increase in the normal tax rate and a higher tax rate should be levied upon so-called unearned than on earned incomes. Incomes derived from Liberty Scnds would be exempt from this taxation, and the relation between income from Liberty bonds and income from other securities would be readjusted without increas- Ing the rate of interest on Liberty ponds. It would not tax the patriotic purchasers of Liberty bonds on their holdings, but it would weigh heavily upon the shirkers who have not bought them. It would make the re- turn on Liberty bonds compare favor aDiy with the return on other securi- ties"
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