The Washington herald., 1920-10-23
ARTICLE VII.

AINI1Ol1E VII
The principle of a progressive in
diyidual income tax and, corre-
spondingIy. of a tax on corporate
profits, I feel sure, is right. espe-
cially from the social point of view,
and its REIMBURSEMENT will not be
permitted by public opinion. But it
must not be applied ignOrantly, in
temperately or vindiCtiYely. Sur
taxes must not be so extreme that
I they impede production. discourage
or prevent normal enterprise, induce
a tendency for loading prices with
excessive margins of profit, dimin
ish the incentive to thrift, and pre-
clude that accumulation of business
and investments funds which is an
indispensable prerequisite for ma
terial progress and prosperity. And
in fixing the scale of surtaXes aC-
count must be taken Of the fact that
billions of taX-free securities are
available. which, under the COnsti-
tutiOnal limitations of our govern
mCnt system, cannot be eliminated,
and that the scale of supertaXatiOn
must be kept at a level which will
not drive capital to the refuge of
taX-eXempt securities. The point
out creating that wholly Undeslr-
able and harmful sequence is fairly
we'll established by a comparison of
existing values.
Careful investigation should be
made of the question whether
means should not and could not be
found to prevent further issues of
tax-exempt securities. or at least
to limit such exemption. say. for
instance. to the normal Federal tax
and State taxes. (Of course the
right should remain in the Federal
government to issue, upon Congress
sional authority, bonds free from all
taxes in case Of war;
Small Tax on Sales.
Much can be said for a small tax
On sales, or turnover, say 81 for
each S1Oe. A tax of this nature has
recently been enacted in France and
to a limited extent in Canada. 1t
has been advocated from certain
quarters in England. but has not
met with the appreciation of the
British treasury and its very COM
petent advisers. My first impress
sion was distinctly in favor of such
a tax, but further reflection and in
vestigatiOn have caused me to hold
my judgment on this subject in
allegiance pending further study.
Even leaving aside the social and
political aspect. there appear to be
certain weighty objections against
a broad sales or turnover tax, both
from the technical and adminfstra-
tive point of view and from that of
even-handed justice between differ
emily situated industries. merchants
and manufacturers. l have not yet
been able to reach a final conviction
in my own mind as to the argu-
ments pro and con.
believe that. failing the enact
ment of a broad sales tax, various
minor taxes can be devised-Or ex-
isting taxes of that nature
strengthened - and divers stamp
taxes can be impOsed-all of which
would be highly productive and not
accompanied by harmful conse-
quenCes.
Passed to Consumer.
1t may be objected that taxes of
, this nature are finally passed on
to the consumer. No doubt, to a
large extent, they are. So, in the
end, are almost all taxes, even TO
considerable degree individual
surtaXes.
And the burden on the consumer
tends always to be cumulative. in
asmUch as almost every article be-
fore ii comes to him passes through
several different landings in the
process of being converted from
the raw material to the finished
article on sale, and each one of
those concerned in that process
seeks to add to the price a proper
tiOnate percentage to cover his
taxes, at least in part. Nor, in the
great majority of cases. is he justly
subject to reproach for doing SO.
He is. as a rule, simply acting
from necessity because, as l have
indicated before, what the excess
profit tax as Well as the surtaxes
absorb is that essential necessity
for the conduct of business-cash.
Altogether I feel certain that the
enactment of reasonable instead of
obnoxious and oppressive taxes
would lead to the lowering of prices
all round, through a great reduc-
ton in the cumulative percentages
with which prices are now loaded
to meet taxation. Competition
would see to that. II, contrary to
DexpectatiOn and precedent, compe-
titioR should not do so, other agen-
Cies are, or can be made, available
which will see to it,
Tax by Any Other Name.
To those who would recoil from
tax to which the facile opprobri-
um Of the name consumption tax
may be attached, 1 would point out
that as "a rose by any other name
would smell as sweet" SO a tax
which. while being productive of
large revenue dues, in effect, tend
to diminish the existing burden on
the people, is a good tax by what
ever name 1t Is called.
Inheritance taxation on a progress
sive scale has rightly become a def
iritely established feature of our
fiscal program. But such taxation
should, it setms to me, as soon as
conditions permit, be left princi-
pally or wholly for the use of the
States, which are now hard pressed
to find sources of revenue.
1t is greatly to be desired that
the States develop a salutary and
stimulating rivalry along various
lines Of usefulness for the people
I'm those functions which properly
6Selong to the States and which can
a.