Arizona republican., 1922-04-27
BY Frederick ]. Haskin


A period of business depression does
not confine it's effects to individuals
and private business corporations
Hard times for the people also mean
hard times for the government. This
has become increasingly evident since
the treasury has come to place de-
pendence for SO large a proportion
of its revenue upon income taxes.
In earlier days the governments
revenue sprang chiefly from excise
taxes and customs duties. While de-
preston in the United States affected
these revenues they were not affected
so directly as the income tax Even
in hard times people bought tobacco.
wines, liquors and such taxed COM
modlties. Imports continued and the
customs duties went into the federal
Golfers.
With so large dependence for
revenue placed on income and profit
taxes. a year of depression is quick
ly reflected in returns to the govern
ment. Such a development is felt
with especial keenness when the large
volume of taxes from beer. wine and
whiskey has disappeared as the re-
suit of national prohibition. When
peoples incomes sink, income taxes
fall off; when business enterprises
y
none at all, profits taxes dwindle.
Income taxes are paid in one year
on the income and profits of the pre-
ceding year. Thus the March is in
stallment of taxes in 1922 reflects the
condition of business in 1921. That
was bad year for business Farm
prices sank to lower levels than
had been reached in years. Wages and
salaries were cut all over the country
and many people laid off Thousands
of people who the previous year drew
salaries high enough to make them
subject to the income tax, in 1921
found themselves among the army OF
unemployed. When men have dimin-
ished incomes their purchases fall off.
This means that business houses all
down the scale suffer diminution of
business and therefore profits are
non existent. For that reason busi-
ness profits taxes sink to small fig
ures.
Treasury is Embarrassed
Under the budget system on which
the United States government now
operates, careful estimates are made
for the fiscal year Estimates are
made of probable revenues and of
expenses. If these estimates prove
wrong the treasury is embarrassed.
The estimates for the fiscal year end
ed June 80, 1922. called for an in
stalIment of ircome and profits taxes
on March ID, amounting to $460,0 600, ;
600. For the calendar year 1922 the
estimates were made on the expecta-
tion of taxes from these sources
amounting to $1,T00, 100000. The tab
ulations of the taxes paid of March
Is last are just being completed and
show receipts of less than $400. 600. :
600. This has necessitated an entire
revision of the estimates for the call
endar year. 1t is felt now that more
than 81, 500 O00, 900 will be collected.
This means deficit of $500, 900, 900
in expected tax money.
Appropriations for government ex-
penses are made in advance by con-
gress. based on the amount of money
which will be available, as estimated
by the bureau of the budget. This
means that congress has made ap-
pectation of ST, 700, 600. 900 in 1922 from
these taxes. In other words. the
money already is spent. 1t is not
now possible for congress to levy
more taxes which can be collected
this year to make up for this hiatus
between the estimated revenues and
the money appropriated. There is
a definite gap.
The only recourse of the govern
ment, therefore, is to borrow money
from the public With which to carry
on government business and meet the
bills contracted by congress through
appropriations. The treasury will
not issue any long term bonds such
as the Liberty bonds put out during
the war, but will effect it's borrow
ings to meet this emergency by SELL
ing to the public short term obliga-
tions known as treasury certificates
of Indebtedness.
A Simple Parallel
To put this in simple terms within
the experience OF the man in the
street, assume a man has started the
year in the full expectation of having
an income at the rate of $4,000 a year
through the ensuing II months. He
has contracted expenses on that
basis which will use up the full
$4,000 Later he discovers that his
income will be only $4,000. He has
signed contracts to pay the full
$4,000 He cannot get out of them.
He must borrow. He expects to do
better the next year and therefore
does not desire to obligate himself to
pay interest on his borrowings for
long period. Therefore he signs a
promissory note for a year
In the larger national sense, a
treasury certificate of Indebtedness
merely is the nations promissory
note to tide the government over
until 1t can balance it's budget--that
is, have expenses and income equal.
These certificates OF Indebtedness
will be sold by the treasury to banks,