The Washington herald., 1921-09-11
The Tax Question.
To the Editor. The washingtOn Herald:

To the Editor. The Washington herald'
In an editorial of August rs you
stated that the excess profits tax
and the income surtaxes are passed
on to the consumer. One hears this
theory from many sources, includ-
ing the business and financial inter-
ats. This, in face of the fact that
~ch interests have been accused OF
lack of regard for the welfare OF
the ultimate consumer. There Is
danger that this statement may be
acceped blindly and unthinkingly
merely because of its constant
reiteration. Economists are not
agreed upon the subject. Consider
able doubt can be brought to bear
upon the well-nigh universal die
tum that these taxes are passed on
How can a merchant or manufac-
turer. for example. shift this tax?
BY raising the price Of his product
and thereby increasing his total re-
turns by sthe amount OF the tax, or
more. II will do him no good to
raise his prices unless his volume
OF sales remains such that his total
returns are greater than before.
He. collectively speaking. can raise
his prices by curtailing his output.
SuT will raising his prices enable
=
greEste return. and thus provide
the wherewithal to pay this tax7
1t will not His prices are already
set at a figure which will. volume
of sales considered. give him q
higher total return than will higher
prices Cor lower prices), volume Of
sales considered. This Is true so
far as trial and experience indicate
TO him the most profitable" prices:
there is no other means of deter
mining them except by trial. and
this method is, of course. subject
to error. Ford undoubtedly thinks
that the present prices of Fords will
net him a greater total return than
either higher or lower prices. In
crease his income surtax and he
will not raise his prices, for his
present prices give him more money.
But even though the manufar-
turer cannot raise his total net re-
turn any higher-everybody knows
he raises IL as high as he can, tar
or no tax-may not these high taxes
on income or profits discourage pro-
duction and take money out of in
dustry. thus causing our manufac-
turer to earn less income or profits
in order to avoid paying them7
II they did have this effect it
would be no longer a question OF
shifting; for in this case the taxes
are not paid But did you ever hear
of anyone's refusing to accept a
higher salary or income because Of
the greater income tax required?
Half-or n quarter, even-of an
extra dollar or an extra million is
somewhat better than none of it.
even to a merchant or manufac-
turer.
1t is. OF course, true that these
taxes drive much money from other
Industries into tax-free securities.
While this may and probably does
retard business" here again it is
not a question of shifting but
avoidance
The excess profits tax should be
repealed because OF difficulties OF
administration. inequalities in ap-
plication and possibilities of eva
sion by the hiding of profits but
not because it Is passed on. 1T
can't be did"
The proposed sales tax, unlike
the taxes on total profits or in
come. would be passed on to the
consumer in higher prices. II is an
expense Of production and mar
rows the margin Of profit by that
much. II thereby forces the mar
sinal men out of the business. thus
restricting the supply. The re-
Stricted supply causes higher prices
F. II SHELLEDY.
HyattsyiIIe Md