The Arvada enterprise., 1918-01-17

Of Emuiation-Howt the Taxes Should
Be Apportionsd.
BY EDWIN r. A. sELioMAN.
McVickar Professor OF Political Econ
omy. Columbia University.
On May %. 1917, the House of Rep
:esentatives passed an act ITO provide
sevenue to defray war expenses and
for other purposes" In the original
bill as presented by the Committee Of
Ways and Means. the additional reve,
uue to be derived was estimated at ST.
S1O.i2O.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.
600 or $5O.OOO,OOO.
In discussing the House bill. two
problems arise:
I. How much should be raised BY
taxation? ....
II. In what manner should this sum
be raised?
!. How Much Should 30 Raised by
Taxation2
How was the figure OF 81, 800. .OOO, ,OOO
arrived at? The answer Is simple. When
tAe Secretary Of the Treasury came to
estimate tho additional war expenses
for the yenr l0l1-1s. he calculated that
they would amount to some $4,000
10000. Of which $3OOO.OOO.OOO was to
be allotted to the allies. and $1,000.
OOOOO0 was to be utilized for the do.
nestle purposes. Thinking that II
would be fair proposition to divide
this latter sum between loans and
taxes, he concluded that the amount
to be raised by taxes was $l.sOO.OOO..
900.
There are two extreme theories. each
Of which may be dismissed with scant
courtesy. The one IL that all war ex.
penditures should be betrayed by loans.
and the other is that all war expcndl.
lures should be betrayed by taxes
Each theory is untcnable.
1t Is indeed true that the burdens OF
the war should be borne by the pres.
ent rather than the future generation
but this does not mean thut they should
lc borne BY this years taxation.
Meeting all war expenses by taxation
makes the taxpayers In one or two
years bear- the burden Of benefits thai
ought to he distributed at least over a
decade within. the same generation.
In the second place. when expcndi.
lures approach the gigantic sums Of
present-lay warfare. the tnx-only pol
lw, ,S-n,,IH rnnulrn mora than enr, H<,&,,
surplus Of social income. Were this
absolutely necessary. the ensuing hav.
Oc In tho economic life Of the communal
~ would have TO 10 endured. But
where tho disasters are 10 great and
at tho same time 70 unnecessary. the
tax-Only policy may lie declared i'm
practicable.
Secretary NcAdOo had tho right in
stlnct and highly Ammendable cour
age In deciding that q substantial por
'lon. 1t least. Of the revenues should
bc derived from taxation. sut when
he hit upon the plan Of 60-5O pcr cent
that II, Of raising One-half Of all do
nestle war expenditures by taxes. the
question arises whether ho did not e.
too far.
The relative proportion Of loans "a
taxes IL after oil . purely business
prolOsitiQ. Not to rely to large cx
tent OH loans at tho outset Of war h
. mistake.
oisa dvantaees sf Excessive Taxes.
Tho disadvantages Of excessive take,
ut the outset Of the war are IN follows
!. Excessive taxes on consumption
will cause popular resentment.
=. Excessive taxes on industry will
| dissrrange business. damp enthusiasm
nnd restrict the spirit Of enterprise al
tho very time when the opposite h
needed.
2. Excessive taxes on incomes will d.
plete tho surplus available for invest
mcnts and interfere with Tue placing o
the enormous lOans which will bs ncccS
sary In any event.
Z. Excessive taxes Oh wealth vii
cnusc q serious dimInution Of tho In
comes which arc at present largely
drawn upon for tho support Of cducn
tlonai and philanthropic enterprises
Moreover. these sources Of support
would Ike dried up precisely ut the dmf
when the need would bc greatest.
s. Excessive taxation q the evtset si
the war will reduce ths elasticity avail.
abis for the increasing demands thst
are seen TO como.
oeest 0sitsiWs Policy.
| Take Grcnt Britain M an example
During tho first year Of the wnr sh'
Increased taxes only slightly. In ordc,
10 keep Industries going ut top notch
During the second year she raised b.,
new taxes only o pcr cent. Of her wnI
expenditures. During the third ycal
sho levied by additional taxes (ovsl
and above tho pre.waf lcvcD Onl,
slightly more than II per cent. Of hs'
war expenses.
II We should attempt 10 do M muci
In tho frst year Of the war sx Grcs'
Britain did In the third yrsr II woult
sufiicc to rniss by tsIation fi.250.O0o.
90. II. In ORDER 10 bc absolutely or
the safe side. II seemed advisable u
Increase the sum 10 ei.6o0y0oo 400. thi'