Evening star., 1943-01-17
Public Becoming
Tax Conscious
BIZ Frederic J. HdSktn.

In a democracy wflere people can exc
press their opinions freely WITHOUT leah
of suppression or punishment mass
thinking leads to reforms. 1t Is thiS
process of public interest that SWINGS
the pendulum from a danger point lnO
a zone of safety. When any great num-
Der of people in a democracy become IN
terested in a subject, formal action 70
their way of thinking is usually the
result
One noticeable cycle of current public
opinion is the subject of taxes, the more
apparent because of its interest TO men
and women representing varying degrees
of income and wealth. Servants of the
people on Capitol Hill are evidently be-
coming aware that large numbers are
seeking some restraint upon mounting
Federal tax burdens. They are not OBJ
iecting to increases resulting from the
war, but to the spending OF huge sums
for what appears to be non-esSential. In
sistence is being made that expenditures
which call for tax collections be more
carefully scrutinized and the new Con-
gress has given expression to this de-
mand on the part of the public. This is
a very practical demonstration of gov
ernment by the people, and it also fully
demonstrates one outstanding difference
between a democracy and dictatorship.
Debt is a contributing Iactor to the
cause of taxation, although there would
have to be taxes to support public enter
prise to meet current expenses The in
terest an individual pays on personal
debt is form of taxation which the
individual personally imposes. Interest
on a public debt must be covered by
taxes imposed through constitutional
channels. Thus it follows that the in
dividual who is borrower and tax
payer pays a double tax-one private
and the other public. The individual
who borrows of his own volition rarely
thinks of the fact that officials whom he
has helped to elect can and do borrow in
his name as a taxpayer, obligating the
taxpayers future and in many instances
the future of his children. 1t is, how
ever, because of a fuller realization Of
these facts that the American people are
becoming tax-conscious. 1t is one OF the
healthful signs of the times.
One of the paradoxes of public life Is
that credit is popular and taxes unpopu-
lar. To keep taxes from becoming more
unpopular, the process of hiding them is
employed. In these instances taxes are
Jumped with the sales price of an article,
and the consumer takes his medicine
without tasting the unpleaSantness. II
merchants marked their taxed merchan-
al nd ther
added to the price the tax that is hidden.
consumers would become rebellious.
Merchants are not responsible for the
| system, and consumers apparently like it
| for they are willing to support 1t.
| When the credit of an individual is
| good and his income normal, there Is a
tendency to pay little or no heed to taxes
and less heed to interest charges person.
| ally contracted. When credit Is weak
and income uncertain, the individual Is
| faced with the stern reality that interest
| charges and tax payments remain the
same, or go higher. 1t was this situa-
| ton that struck such a terrific blow to
many people between 1929 and 1882.
Wages and salaries during this period
dropped more than $4,000, 100000, divi-
dends decreased approximately $3,00o,-
900 and rents and royalties declined
by more than $4,000, 000, 900. Yet in the
face of such disastrous shrinkages in in
comes of all classes, interest on private
and public debts remained substantially
the same. Money-lenders, however, could
not be blamed, because they were legally
entitled to their rights under contrac-
tual agreements. Individuals and gov
ernments began to realize the danger in
the general practice of borrowing, and
taxpayers also realized that their for
tunes were jeopardized by permitting
extensive and long-term contracts for
credit.
This situation not only brought home
to the American people the dangers and
difficulties of extensive borrowings based
on future taxes. but helped to fix in
the minds of taxpayers that the length
of debt becomes a rigid factor in any
economic situation. Taking cognizance
Of what had happened, and what could
happen to more serious degree, statis-
ticians began to reveal to the public how
far ahead business and governments had
obligated investors assets and public in
terest, either directly or indirectly.
AS an example of these revelations.
many Glass I railways had issued bonds
maturing at intervals between January
/, 1860, and January /, 1862. Actually
1t was found that one railroad as early
as 1886 had issued bonds for redemp-
ton on January l, 1861. On all these
borrowings the average rate of interest
was 4.58 per cent, and under long-term
contracts this rate could not be changed.
Public carriers are not singled out
except for illustration Of the possible
dangers of public borrowing where prof.
its or taxes must be relied upon to pay
interest and principal. 1t is obvious that
the redemption of these obligations can
have no conceivable relation to the con-
ditions under which they were con-
tracted. The same principle applies to
individuals and governments, local and
national, and is indicative of the eco
nomic difficulties involved in longtime
borrowing. Continuous borrowing per-
petuates tax burdens, for interest mounts
with principal.
1t is evidently because of a public con-
sciousneSs of the whole ramification OF
debts, private and public, that concern
is being manifested over non-essential
spending by the Federal Government.
According to the Presidents recent bud
get message to Congress, the public debt
at the beginning of the 1912 fiscal wear