The Bridgeport times and evening farmer., 1919-10-14
The High Cost Of Living
 
By OTTO II. KAHN

the excess profits tax amounted to, say. 40 per cent
 That means that it was impos- sible for such a business 70 make one dollar profit over and above the arbitrarily fixed and low re- turn above referred to without charging something over two dollars to the purchaser. The government takes the difference.
 In addition to that, the gov ernment, of course, takes the individual income tax.
 And it must be remembered that most articles before reach ing the ultimate consumer pass through four or five different handlings.
 The activities of the producer of the raw material, the manu- facturer, the jobber and the re- tailer-aI are more or less sub ject to this same condition.
 Each expects to be able to earn a somewhat larger profit to take care of the increased cost of present day living, whether it be for himself as in the case of the individual merchant or for the holders of the securities which he represents, as in the case of the corporate mana ager-and each must take into account the operation of the excess profits tax, not to mention the income tax.
 And that necessarily spells in creased cost to the public.
 The Excess Profits Tax has tended furthermore to increase the actual cost of production, in asmuch as costs naturally are de- ducted before taxable profits are arrived at, and. therefore, un- der the operation of the excess profits tax there is not the same inducement as under normal cir cumstances to keep cost down as much as possible, but in fact rather the reverse.
 Nor is there any longer any in ducement to employ accumuIat- ed profits in the business with out capitaEzing them, which, Of course, makes for lower cost of production.
 On the contrary, there is every inducement to capitalize every justifabIe item-and this makes for higher cost.
 The excess profits tax in peace time must not be confounded with the war profits tax in time of actual warfare.
 war profits tax, however heavy, is wholly sound. morally, socially and economically, and it's effect on prices is largely miti- gated through the circumstances and agencies which are operative when a country is at war.
 The objection to a very heavy excess profits tax iu peace time rests not so much on equitable grounds as on the ground that on the one hand it does not, and cannot, accomplish the social purpose aimed at and on the other hand it tends to hurt trade, discourage enterprise and burden the public.
 Our excess profits tax certain ly has not stopped, but rather intensified what is commonly termed "profiteering. If ever the American people should reach the conclusion, all most incalculably far-reaching in the ramifications of its effects i that profits are to be limited to a definite maximum that purpose
  by direct statutory enactment. It cannot be accomplished by excess profits taxes. | The Income Tax One of the most valuable by products of wise taxation is the promotion of thrift. But our personal income tax. by reason of the kind and manner of it's gra- dation, instead of promoting
 more frugal living, is a breeder of extravaganza, and thus of | higher prices.
 Proof of this is everywhere.
 America has probably never been as spendthrifty as she IS now l For this phenomenon, there are various psychological and economic explanations which it would take too long to set forth
 in this letter.
 | One of these explanations is | expressed in the sentiment which have heard expressed repeated ly: What is the use of trying to save a few hundred or a few | thousand dollars when the gov ernment takes it away from us in | chunks 9"
 In other words, the incentive to saving has become gravely di- minished.
 Moreover, the investor. in or der to recoup a portion, at least, of his income tax, demands secur- ities yielding much higher rates of interest than formerly, thus | enhancing the cost of capital which again makes for higher | prices.
 Or he buys tax exempt muni-
 cipal, state or government bonds,
 thus diminishing the quantity of 1 funds available for private en- | terprise.
 An incidental evil is disclosed
 in the fact that seeking, because r of the income tax, a higher re-
 turn than bond investments offer,
 not a few investors have come to
 tempted and induced to turn to | speculation.
 The promoter of "get rich
 quick" schemes is reaping a har- | vest.
 The investors reluctance to
 buy bonds subject to the income
 tax, or at least his insistence on
 an abnormally high yield of in
 terest, is bound in the long run to have a decidedly unfavorabIe I effect on our export trade, be-
 cause if the world under exist
 ing circumstances is to buy from | us, we must enable foreigners to
 borrow from us not only by
 means of opening commercial
 credits to them, but also by free
 ly purchasing their securities. | Also this attitude nf "a