The Topeka state journal., 1920-04-05
FAULTY TAXATION.

Two Years OF Faulty Taxation and
the Results" is the title of a booklet
sent out by Otto H. Kahn, a man
prominent in the business and finan-
cial affairs of this country. Mr.. Kahn
holds that the four factors which,
more than any others, have brought
of economic disturbance and high
prices are:
The urgency of the worlds demand
for our raw materials and manufac-
tured articles during and since the
war.
Initiation of credit and currency.
Governmental and private extrava-
gance.
Faulty taxation.
All other contributory factors, he
asserts. are either of lesser effect than
is frequently attributed to them, or
spring more or less directly from the
causes above mentioned.
Mr.. Kahn continues as follows:
The system and method of taxation
/ inaugurated in 1917 and continued
since have played a very considerable
part in boosting prices far beyond the
cumstances inherent in the situation.
In saying this am not giving express
sion to an opinion based upon general
observation, but to what I have ac--
tually ascertained by taking pains to
follow in concrete instances, from pro-
ducer to retailer, the process of the
cumulative effect exercised on prices
by our existing taxation.
Increased cost Of manufacture and
distribution naturally means increased
n n 10
the necessities of life, increased wages,
in short, increased cost of living all
around.
The fact that in other countries less
heavily taxed than ours, prices have
increased as much as here, or even
more, has no bearing upon this state
ment, inasmuch as, in the case of those
countries, the course of prices is af-
fected by elements which do not come
into action here or only to a minor ex-
tent.
Taking UP the excess profits tax he
has this to say:
The social and moral arguments for
an unsparing war profits tax are to
my mind unanswerable. To permit
individuals and corporations to enrich
themselves out of the dreadful calam-
ity of war is repugnant to ones sense
of right and justice and gravely detri--
mental to the war morale of the peo-
pie. Moreover, the war profit tax in
making for higher prices is consider
ably mitigated thru circumstances and
agencies which are operative when a
country is at war.
Quite different in spirit and effect
is the excess profits tax, misleadingly
so called, which congress has deemed
we'll to impose and to continue after
the war had come to an end. That
measure establishes as normal earn
ings" an arbitrary and, in the case of
many industrial activities, Inadequate
percentage of return on invested cap
ital, and by a complex, confusing and
generally ill-deyised system, taxes at a
high rate all earnings above that per-
centage.
1t lays a heavy and clumsy hand on
successful business activity. 1t is
grossly ineQuitable in its effects, and,
to large extent, the greater or lesser
degree of its burdensomeness is deter
mined by purely fortuitous circum-
terprise and efficiency. It leaves un-
touched the man of wealth who neith-
er works nor takes the risks and re-
sponsibilities of business. but merely
collects his. coupons. 1t is bound to
operate unfairly, freakishly, and un-'
evenly, and greatly enhance the cost
OF things.
There is no need to discuss that tax
at length and to describe its workings
in detail, because its fauItiness and the
COInpleAlLy VI llS lSSIiAAASoA VI AONASAO!lS
and it's baneful effects in various di-
rections have become SO widely recog-
nized that we may, hope, look for
ward with reasonable assurance to its
repeal or thoro modification in the not
very distant future.
But to remove the excess profits tax
on corporations without at the same
time greatly reducing surtaxes on in
dividuals would manifestly be a dis
crimination against private business in
favor of corporate business, inasmuch
as it would greatly impair the capabil-
ity of private firms to compete with
corporations.