Evening star., 1922-01-14
ABANDON WAR DEBT
SOURCE FOR BONUS
10!
Government Leaders to Put
Through Direct Tax for
-. Soldier Payments.
ny DAVID LAWRENCE.

BY DAVID LAWRENCE.
All idea that the American soldiers
will be paid bonus out of the pro-
ceeds of the allied war debt may be
abandoned.
80; There will be q bonus paid. how
ever. 1t will be raised by direct tax
alton. President Harding announces
that he favors the enactment of
bonus law and that he will not oppose
a sales tax as the method of raising
the money.
Whether public sentiment will ap-
prove another tax imposition is quite
another matter, but republican lead
ers believe it is essential to success
in the fall elections that they put the
measure through. and they plan to do
30 within the next few weeks.
Obstacles to War-Debt Plans.
Practical obstacles have arisen to
prevent the linking up of the bonus
with the proceeds of the allied war
debt. One is the fact that the origi-
nal liberty loan acts provided that
any payments made on the principal
J of the money lent to foreign govern
ments shall be Immediately applied
to the payment Of liberty loan bonds
and interest thereon.
If the plans. which have been dis
scussed for the last week. to collect
Interest on the foreign debt and pay
1t to the soldiers were to go through
it would mean the repeal of that pro-
vision of the liberty loan acts of Sep
!tember, 1917. and would compel the
federal government to keep on tax
ing the American people, not merely
to collect the interest on the liberty
bonds, but also on the principal as
svell.
As matters stand now. the govern
sment here must annually provide
:about s975, 100000 to pay liberty bond
sholders the interest that is due them.
:where is that money secured? BY
1.-THE income tax. corporation tax and
1axtl the other levies of the new reve-
nue. act.
Relief from this immense burden
.Cne-fourth of the annual budget
has been expected to come eventually
from the payments by foreign gov
ernmentS of the interest and princi-
pal of their war debt. If. instead, the
soldiers get it, this means that the
federal government would have to
keep on borrowing from the Amer
lean people by regular bond issues
and would not be able to reduce the
tax burden for a generation at least
Bonds Back to Normal.
Liberty bonds and victory bonds
nowadays are around par and the
government is gratified that they
have returned to normal value. but
fears are entertained that if the pro-
ceeds of the allied war debt are
fsomehow made payable to the soldiers
as a bonus, the liberty bonds held by
so many millions of small investors
will be adversely affected and the re-
sultant impression on the electorate.
so far as the fall elections are con-
N cerned. will have to be taken into
consideration by the administration
as a possible boomerang.
There are something like sixteen
million bondholders. There are ap-
proximately 4,SO0,000 soldiers and
sailors, and many of them hold bonds.
\ too.
The tendency. therefore. will be to
steer clear of the allied war debt and
find some other means of raising the
bonus. The sales tax has executive
sympathy. though not full approval
as yet. because it means the inaugu-
ration of new system of taxation,
which its advocates insist will even
tually make it possible to do away
with the present levies of the revenue
act, especially on corporations, and
give the government practically all
the revenue desired for the annual
budget.
Some of the champions of the sales
tax are so ardently in favor of it
that they actually welcome the SOL
dier bonus as a way to demonstrate
the practicability of this new method
of taxation.
Real Danger Suggested.
Some officials, however. who have
nothing to do with the reelection
troubles of members of Congress
point out that whatever name it may
be called-sales tax or anything else
1T means an added tax burden to
American business and that the real
danger in the soldier bonus is that
what appears to be a single expentn-
sture of one billion dollars now ny
teaSlly become triennial or quadry H.
snial affair. dependent upon American
political contests. and that the grant
sof bonus now will establish an i'm
sportant precedent for the future.
The American government has been
paying an average of S275. .000.O dur
Z. ing the last four years to civil war
veterans. and the fact that the United
Estates has paid pensions to the SOL
sdferS of other wars will be seized
supon, 1T is predicted, as justification
.for making the soldier bonus per-
manent source of income. especially
IF the sales tax is once imposed and
sthe money appears to be easy Of col
sIection from that source.
Treasury officials say that no mat
ster what the title or form of taxation,
sthe new sums must come out of the
pockets of the American taxpayers as
"a whole. 1t is beginning to look as
.1f the issue of the next congressional
.trry, Ix.
sstruction. with bonus to those who
lnade sacrifices during the war; or an
cearly reconstruction, with promises
1of increased prosperity to soldiers as
Nro civ