Evening star., 1920-02-29

s1HO tne Results is lnc tit1e OF
pamphlet issued yesterday by Otto
II. Kahn. the essential portions of
which follow:
Taxation. while necessarily involv-
ing political and social considers
tions. is essentially problem in ma :
tlOnal economies. 1t is primarily a
question of public advantage. wisely.
truly and broadly conceived Its ef-
fecfs are subtle. profound and mani
fold and. unless carefully studied
and measured in advance, apt to
crop up in unexpected ways and places.
The very extreme of the burden laid
upon business and incomes by the
method of taxation adopted by Con-
gress in 1917 and since continued. has
Partially defeated the purposes which
the trainers of that legislation had
in view. and at the same time has
given rise to certain unforeseen and
troublous dcvelopmcnts-as invaria- :
bly, happens i'll the case of eXtgeme
measures. especially where econom cS
are involved.
FacfOrs in Economic DisIocntion.
Several factors are responsible for
the economic dislocatiou and resulting
Ills Gncluding high prices) which
confront us. Among these factors
none has been more potent for harm
/. than our federal taxation. The re-
suits which did arise from it were
bound TO arise. 1t did not need q
prophet to foretelI for instance that
the existence OF many billions of
federal. state and farm loan bonds.
entirely free from all taxes tand
more of such bonds coming out almost
daily. on the one hand. and income
taxation on scale unparalleled in
any other country in respect of a
persons income from business and
corporate securities. on the other
hand. would drive very great por-
tion of the country's liquid capital
into tax-free securities and thus
and corporate trade and industry to
the great reservoir of individual in
vestment capital
'hTe free flow of capital. the normal
working of the investment market
are absolutely basic elements for
every kind of trade and industry. The
effects of their disturbance to any
serious degree for any length of time
are all-pervading.
We cannot have return to state
approaching normal conditions of
trade. prices. etc. until our invest
measurable distance, at least. of nor
NAL conditions
Income Tax Blamed.
sAnd that is impossible as long as
our present income tax remains in
force. even if the other elements
which have operated to bring about
the present abnormal situation were
removed.
1T is an old axiom of taxation that
an excessive tax destroys it's own pro-
ductivity.
Wrong economics. however we'll
mentioned. have been more fruitful of
harm to the people than almost any
other single act of government.
NO doubt the prevailing apportion-
ment of monetary reward is not free
from defects Cthough less so in this
country than anywhere else). but
there has been steady and pro-
nounced tendency and movement, es-
pecially within this generation. to-
ward mending such defects and re-
modelling inequitable conditions. Evo-
luton and the irresistible powers
. which make for progress. enlighten-
upon to continue and advance that
progress. There can be no turning
back. But improvident measures OF
economic violence will not hasten
that process; on the contrary, they
will impede it.
men of different callings. approaching
their task free from political. social
and sectional bias. would not hnd 1t
formidable undertaking to evolve
measure which. while fully responsive
to the dictates of equity and social
justice. would produce no less revenue
than the taxation now in force, and
vet would be far less burdensome upon
the country, less hampering to enter
prise and less productive Of economic
disturbance and dislocation.
Would Tax "Expenditures.".
TT might recommend a radical revi-
sion of income taxation on the theory
Shat the emphasis of taxation be laid
father on expenditure than on in
oomes and that a sharply marked dis
tinction be made between such portion
of a persons income as is used con-
,structivefy in savings. investments or
enterprise and such portion as is spent
on his scale of living A tax based on
that theory would no doubt exempt
expenditures of a certain minimum
sum per annum, say. $4,000 for single
and $4,000 for married persons. would
penditUres. and would be severely pro-
gressive on large expenditures.
Much can be said for such tax
from both the economic and moral
points of view. Among other desir-
able effects, it would reach those who
by holding tax-exempt securities, now
escape the burden of income taxation,
and it would thus go a long way to
eliminate the undue advantage now
attacking to tax-exempt securities
and to correct the resulting evils
which l have pointed out before in
discussing that phase of our tax prob
lem. 6
"While tax of this nature involves
certain complexities in its details and
working: they would by no means be
insuperable; in fact. >aey would.
think, be less formidable than those
OF the present income tax.
The committee might, l should
think, reach the conclusion to recon-
mend the imposition of a small per-
centage tax. say ] per cent. on all
sale Of commodities and products and
presumably Of real estate. Such a
measure would be productive of an
immense amount Of revenue and
would not be harmful to any one.
Exact Form DebatabIc.
THE exact form which such a tax
should take it debatable. 1t might be
imposed on the seller according to the
aggregate sales effected, the tax to be
computed quarterly, semi-annually or
annually Or. it might, on every
transaction. be paid by the purchaser.
in which case it should not be includ-
ed in the selling price, but specifically
ADDED to IT as a separate item prob
ably best in the shape of stamps Or
it might be made applicable to retail
sales only.
in the latter case it might be found
well to exempt from the tax single
purchases below 81. Also in that case.
!. e.. in dealing with the ultimate DUR
kAser. 1T might possibly be deem ed
appropriate to make the tax VARYING
In IT'S scale, say from per cent to
10 per cent, or even 20 per cent pro-
crossing according to the value of
the article purchased. so that for in
stance. person making s. pur-
chase would pay per cent tax. i. e.
. cents. while person making a $5.-
600 purchase would pay 10 per cent
tax. j. G.. $500, and so on
w hlle the progressive scale SuD.
gested would be attractive from the
point of view of equity, / realize, of