New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1921-04-19
An Experimental Sales Tax

confronts Congress and insists
upon an early solution. The
country unquestionably has voted
for the repeal of the excess profits
tax and for a reduction in the
higher surtaxes. The practical
viciousness Of any income taxes that
seek to extract too high a percent
age has been demonstrated to every
ones satisfaction. AS President
Harding noted, they defeat their
own immediate end by driving in
vestments into non-taxable securi-
ties. Also, they cripple the capital
resources of the country by limit
ing the amounts available for free
investment in extensions and new
industry and by creating industrial
depression visit their evil conse-
quences upon those least able to bear
the burden of hard times.
BY this practical test of a too
heavy income tax we have all
learned more economics than in
score of years before. There are
doubtless few radicals who still
uphold the doctrine of Soaking
the rich" The broader view now
takes into consideration the fact
that soaking" any one class may
mean loss, want, disaster to every
other class. The new test of taxa
ton looks not to the venting of
grudge, but to the ultimate welfare
of the whole community.
1t is always difficult to prophcsy
at just what point income tax rates
will discourage saving and cut
seriously into the working capital
of the nation. All that we know is
that this point whcreat an income
tax defeats it's own ends has been
greatly exceeded in our war taxa
ton. Therefore, these rates must
be reduced. Therefore, also, we
submit, they should be cut suf-
ficiently to give industry every
chance to face the future with con-
fidence. Hard times, the loss of
months or six months pay, part
time, inevitably cost workman
far more than any shift in the in
cidence Of tax. The error. if any.
should be on the side of reducing
the income tax rates we'll within a
safe, peace-time basis.
All this is condition, not theory
and so is the alternative before the
country. 1t will be necessary to
supplement this reduced income tax
with new tax. For this substitute
but one levy has been seriously
proposed, a sales tax, of the gen
cral character of that contained in
the Smoot bill. This bill provides
for a tax of per cent on all
sales of commodities, and would
raise an estimated revenue of a
billion and half. We think there
are strong reasons for preferring q
much smaller rate-possibly. a
rate of one-third Of per cent. a.
suggested by Mr.. Otto Kahn. This
Il would raise half a billion dollars
and probably would meet the fiscal
needs OF the country even after all
necessary reductions in the income
tax rates had been made.
All taxation is quite as much q
matter OF experience as theory, as
we learned from the income tax
demonstration, the habit and mind
OF country having much to do
with determining the success Of
= tax. There are strong d pr;ors
grounds for viewing sales tax a.
peculiarly sound and simple levy.
1t has succeeded in other countries
1t almost certainly will succeed
here. But only actual trial can
decide the point, and it would GER
tainly seem the part Of wisdom to
experiment with the tax upon as
small a scale as the financial needs
Of the country permit.
The problem as to the form Of
the tax also gives cause for a slow
beginning. The ideal tax would be
one upon retail sales, concededly;
but no one has as yet been able to
devise a satisfactory definition Of
such sales. Some advocates have
gone to the other extreme and
urged sales tax upon all turn
overs, whether capital or commodi-
ties. The objections to this plan
are grave. Opinion is now leaning
toward the middle ground of the
Smoot bill, which is in the nature
Of a merchants sales tax" a tax
on the turnover of commodities
only.
The Tribune thus considers that
~ first duty of Congress is to re-
n the income tax levies to safe
~ rates which will permit the
- .AkA~-