The Washington herald., 1920-10-13

how the increased cost of certain
articles in the past two years, COM
pared with the two years preceding
the war had been divided.
The Investigator found, taking
such increase as 100 per cent, that
labor received 81 per cent thereof.
the state, through taxation, 40 per
cent, and capital, : per cent.
This is not the place to argue the
question of whether in the pre-war
era industrially invested capital rs-
ceived too large a part of the ma
tional income. In some respects I
believe il did.
But since 1914 the wages OF labor
have been vastly increased. The
! farmer also rightly receives a
greater return than formerly.
There has taken place in fact a
considerable readjustment in the
distribution of the national income.
To a large extent. this is also true
of the distribution of capital This
capital value of farms and the cap
ital value of manual labor have
greatly increased, while the capital
value of all fixed interest bearing
investments has been very largely
diminished.
Leads to Pronteering.
! One of the most unsettling con-
sequences of our tax system is the
excessive and ill-regulated cash
drain which it creates, away from
! its normal channels into the cof-
I fers of the government You can.
not pay your taxes by turning over
i book assets, or bills receivable os
materials or Inventories: you must
pay them in cash. But while the
outgo in taxes payable to the gov.
| ernment lis all cash. the income oil
most businesses is cash only to &
| limited extent. Consequently. many
business man. however free from
the Objectionable tendencies of the
profiteer. must seek to increase hi
margin of profit in order to in
crease his margin of availa BILE cash
because otherwise, through the eX.
factions of clumsy taxation, the casf
resources indispensably essential tc
the conduct of every business woulC
be infringed upon to a perilous de
gree, If not to the point OF eXtinc
tion. This consideration is accen
tuated by the fact that. merely t,
do the same volume of business a.
before the war, a great deal NOR,
ga liNdl - ltlulltu hoN dud - ON III.
to the largely increased cost of la
Dor and materials.
Excess Profit Tax Criticised.
The excess profit tax has tended
furthermore to increase actual cos
of production, inasmuCh as cost
naturally are deducted before tax
able profits are arrived at. and
therefore, under the operation o
the excess profit tax there is no
the same inducement as under nor
NAL circumstances to keep cos
down as much as possible, but 4
fact rather the reverse. 1t is
tact well known to those familia
with business practices that ther
has been gross wastefulness in Ger
tain lines of expenditures since tn
excess profit tax went into effec
and as a direct consequence of it.
Objection to the excess profit ia
in peace time rests, in my mind. no
on the ground of denying the the
oretical equity of such tax. but o
the ground that. in actual practic,
it does not and cannot accomplis
the social purpose aimed at, an
that it tends to hurt trade, discour
age enterprise and butden the pub
lie. and that ii presents immens
difficulties of administration. Ou
excess profit tax certainly has ne
stopped but rather has intensifie
what is commonly termed prof
iteering."
: The. faultiness, the intolerab
compieNity of the technical prov
sions of that tax. its uneven appl
cation and its baneful effects /
various directions have become s
widely recognized that we may.
hope, BOX forward with reasonab
assurance to its repeal or thoroug
modification in the not very distar
future.
But to remove the excess prof
tax on corporations without at II
> same time reducing the extren
! rates of individual surtaxes wouI