Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-04-30
TAX SHIFT PLAN
SEEN AS MENACE
National Grange Proposal
Has Increased LevieS in
f Germany in Ten Years.
This Is the fourth Of series OF
articles on the trend toDdTd pdter-
ndHSnt in the Federal Government.
BY AsHMUN BROWN.

III hShGMCN AbASONNN'
In yesterdays article in this series
the new development in the system of
Federal subsidies to States was ex-
planned This development is one fos-
tered largely by some OF the elements
which oppose an extension OF the Fed
eral authority into the States, but de-
sire nevertheless to get Federal money
for State purposes.
Their idea is to convert the Federal
machinery into strengthening agency.
the resulting revenue to be distributed
among the States to be expended by
those States without direction, con-
troll or cooperative management from
Washington. Thus. they argue. the
evils of Federal paternalism would be
avoided.
To those who have opposed subsidies
to the State, always heretofore accom-
panied by an extension OF the Federal
authority, this new suggestion is dis
concerting The only comfort they
find in the situation IT, first, that the
National Grange, Senator Black of
Georgia and others advocating the plan
are very much in minority, and, sec
ond, that the States, in their eager
ness to get Federal money, will con-
tinue. for a time at least. to accept a
measure of Federal control.
This leaves the opponents OF Federal
bureaucracy in possession OF their main
argument that the rights Of the States
are being invaded Still, the new sug-
gestion. as indicating an ultimate pos
sible shift in the application OF taxes,
is of profound significance.
The fact remains that whether the
Federal authority continues to pursue
the Federal dollar into the States or
is divorced from that dollar AS soon
as the appropriation is made, demands
on the Treasury at Washington for
funds to help the States are growing
and will continue to grow rapidly.
Coming at time when demands for
literally billions of dollars Of Federal
money for pensions and doles are
pressing forward, they spell inevitable
and huge advances in Federal taxation.
Force Of Appeal.
The argument advanced by the Ma
tional Grange in behalf of a redis-
tribution Of national revenue among
the States for State purposes Is bound
to have an appeal to the Senator'S and
Representatives from the thirty-odd
states that pay in the aggregate less
than half Of the Federal revenues.
Resolutions adopted by the National
Grange indicate the force OF that ap-
peal which is applicable to both prop
ositions: The one to have the Federal
authority 20 with the Federal grant
and the one to have the Federal au-
thority extinguished. The Grange said
in its resolutions:
whereas the fast-increasing concen-
tration of business Is resulting IN
concentration Of wealth in a few ia
vored centerS and is frequently increas-
ing the tax burden in the outlying dis
tricts Of the Nation from which this
wealth Is drawn, and
Whereas this wealth can be eQuitably
reached only through FEDERAL taxation,
Resolved, That we favor distribution
Of a portion Of the proceeds Of the
Federal income and estate taxes among
the States on the basis Of school re-
quirements or some other similarly
equitable basis.
New and revolutionary though this
proposal may appear in the United
States, 1t Is by no means new In the
world. On page 661 OF the 1881 EDITION
Of the World Almanac one reads:
I'm 1920 the German states surren-
dered to the Berlin central government
the right to control direct taxes. hitherto
held jealousy by the several states. In
creases of the direct tax rates followed,
income taxes rising so per cent"
When the Dawes committee Of experts
got to work trying to bring order out
OF chaos in the German financial stu
alton, 1t reported that this method of
having the central government act as
. collecting agency for the several
states and communes was "a constant
drain upon federal RESOURCES hole
in the budget'-that must be plugged"
1t held that Gin flush times the states
receive more than they need and are
tempted into new expenditures; in bad
times they are under pressure to press
the Reich for further aid"
Gilbert Condemned System.
In each of his semi-annual reports,
s. Parker Gilbert, the American who
acted as agent general for reparations,
condemned the whole system as waste
full and harmful. He has spoken Of it
as the most bothersome problem af-
fecting the structure of the German
budget"
For the taxpayer" he remarked in
his report of November 30, 1925, the
results must be entirely disagreeable,
and it would seem that, from his point
of view at least 1t would be far better
to have q system which would clearly
define the responsibility for levying the
taxes and place 1t squarely on the gov
erning body responsible in the first in
stance for the expenditure"
In his report Of June 10, 1927. Mr..
Gilbert in an extended condemnation
Of the system, said:
1T Is on the whole sound principle
of taxation that taxes should be levied
by the same governmental authority
that makes the expenditures. Under
the system in force in Germany, how
ever. the states and communes have the
function of spending q large share of
the taxes that the Reich has the re-
sponsibility of collecting. This in itself
tends to relieve the states and COM
munes from the pressure for economy
in expenditures that would certainly
exist II theirs was the responsibility to
levy the taxes necessary to meet their
own responsibility
In his report Of May 81, 1880, Mr..
Gilbert referred to the plan Of central
lied collection and decentralized dis
hursement as the underlying fault" of
German finances.
The government Of the Reich" he
sain collects the taxes, but does not
fee. the full responsibility for them.
slice 1t must pass on large share Of
the proceeds TO the states and COM
nfunes. and 1t now proposes for the
most part to exclude the transfers to
the states and communes from It's
bndget-as II to emphasize its own
lack OF responsibility for them.
States and communes on their side
spend the money without having any
of the responsibility of odium of COL
lecting it, and they have fallen into
the habit of expecting the Reich to
provide more and more money for
them TO meet the recurring budgetary
deficits
Results Of System.
The sum OF it all is that excessive
taxation. resulting from this method
against which Mr.. Gilbert rails, Is far
more responsible for unemployment in
Germany and for difficulties in meeting
reparation payments than any other
one cause
That method is not peculiar TO Ger
many Albert W. Atwood. economist,