New-York tribune., 1921-06-03
Two Bad Taxes

to the excess profits tax and the high
surtaxes on incomes ended with the
war. But their evils remain and
multiply. Their incidence has be-
come not only grossly unfair---as
it always was - but highly dam
gerous. They are blights on busi-
ness, causes of unemployment and
preventers Of prosperity. Moreover,
they are no longer productive enough
to make them worth while.
The excess profits tax is perhaps
the more evil Of the two. 1t greatly
contributed to the preposterous and
unhealthy initiation OF 1919, and con-
sequently it was largely responsible
for the inevitable depression which
followed and from which the coun-
try now is suffering. In a period Of
wildly rising prices and wages it
was easy to pass the burden along
with substantial addition, but now,
with market distinctly favoring
the buyer, the depressing effects of
the tax are greater than ever.
AT time when industrial eff
cheney and price stabilization are es-
sential to the return Of prosperity
the excess profits tax operates to
penalize the efficient enterprise, puts
a premium on ineficiency in produc-
ton and distribution and postpones
in many cases the adjustment that is
needed to bring about a change in
the public temper toward prices.
And such change must come before
we can have prosperity in full
measure.
But these are not the only objec-
tions to the tax. It is so grossly un-
equal as to penalize conservative
financing and to offer a premium on
stock watering. One authority cites
the results in the cases Of four well
known corporations engaged in the
same line Of business, which paid
respectively, S, H., Is and 80 per cent
Of their net incomes, the differences
being largely due to differences in
organization and capitalization. The
turn Of hair in definition of what
constitutes invested capital - the
basis Of the tax-rnakes difference
Of million dollars or more in the
levy on the earnings Of particular
corporation. The prosperity of the
stockholders and the workers of a
given enterprise is often dependent
on the mere form of its organization.
The repeal of the excess profits tax
is an essential to the restoration Of
normal business conditions and the
Unemployment of jobless workers.
And the reduction of surtaxes ON
incomes is essential. 1t is not merely
that surtax rates running up to 73
per cent are intrinsically unfair; not
merely because the rates are so high
that the tax becomes increasingly
less productive; but also---and main
iy-because the exorbitant rates di-
vert capital from productive employ
naent to reproductive or waste
full use.
Even If tax to penalize the rich
could be applied without penaIizing
the rest of US, this tax would be
faulty because escape from it is
too easy. The rich man puts his
funds in tax-exempt securities, of
which the supply is unlimited. The
rest Of US pay s or 8 per cent be-
cause the rich man is not allowed
to lend to us and we thus lose the
benefit of his weight in the money
market. And, of course, high capital
costs mean high manufacturing costs
and high pric, :. The capital which
industry sorely needs goes to mu-
inequalities and county and state
governments, where much of it is ex-
pended, to put it moderately, in a
way that adds little to our general
store of goods.
The failacy Of the assumption that
the rich can be penalized through
taxation--that their capital can be
confiscated-without injuring every
wage and salary Garner, every small
investor and every consumer has
BEEN demonstrated countless times.
1t is time for our tax makers to real
lze that, no matter who has title to
it, capital works for everybody.
When the agencies of production are
heavily taxed all Of us are affected.
The recent suggestion Of the Sec
retary of the Treasury that the max
imunl surtax be reduced to 40 per
cent this year and SO per cent next
seems moderate one--puts the