Show Two Years of Faulty Taxation and the Results S BY OTTO H. H KAHN t EW YORK March 20 Taxation O.-Taxation N NEW while necessarily involving In political political political po po- po- po O and social considerations is essentially essentially es es- es- es a problem In national eco ceo It Is primarily a a. question of af public advantage ad wisely truly and broadly c conceived n el ed Its effects are subtle sub sub- tIe lie profound and manifold and unless carefully studied and measured In ad advance advance ad- ad I vance ance apt to crop up in unexpected ways was and places The vor very extreme extremo of Ot tho the burden laid upon business and Incomes by the method of ot taxation I adopted b by Cons in 1317 and since Ince continued has partially defeated the purposes which tho the framers of ot that le legislation had in view Ie and at the same sarno time has bas given Il rise to certain unforeseen and troublous development de as as Invariably In happens In the tho case ease of ot extremo extreme measures especially where economics arc are involved In Several Se factors are aro ro responsible for tar forthe tho the economic dl dislocation and resulting I Ills Including high prices which confront confront con can front frant us Amon Among these factors actors none nane I has hag been more malO Potent Patent for harm than our federal taxation The Thc results which did arise from it were bound to arise It did not need a prophet to foretell for far In instance that the thc existence existence exist exist- ence enco of ar many billions of ot federal state tate and farm loan bonds entirely free tree from tram all Taxes and 1011 more mare of at such bonds coming out almost dan dally daily on an tho the one hand and income taxa Ion on a scale unparalleled In an any other country In respect of ot a persons person's income from busIness business bus bus- iness mess and corporate securities on the theother theother theother other hand would drive a veT er very great portion of ot the country's liquid capital Into tax lax freo securities and thus largely largel prevent th thin access of ar private and corporate trade an and Industry to tho great s-reat reservoir of ot individual investment in vestment capital Elements The free flow lO lOat of at capital the thc normal working of ot the In investment market are aro absolutely basic elements for forer every er kind hind of ot trade an and industry The Tho ef effects ef- ef I feels of ar their disturbance o to nn any serious serious seri seri- serl ous au degree for tor any nn length of ot arc all Wo Yo cannot have o a return to a state i n g no normal rma I cc conditions rid i t I 0 n s 0 of at f trade prices etc until our In c Investment Invest invest- t- t ment mont market will have hare come within measurable distance at least of at normal normal normal nor nor- mal conditions And that is Impossible as lon long a an as I our aur present income tax remains In I force torce even if the thc other elements which have operated to bring about tho the present pres pres- enl eat abnormal situation were removed d. d It is an old axiom of at taxation that an excessive tax destroys Its oi own oin n p prod productivity ro ii U Ct iv Wrong ranS economics however well wail I Intentioned have ha been boen m more re fruitful of ar harm to tile the people than almost an any other single act of at government No o doubt thc the prevailing pre ment of monetary reward is not nat free from defects detects though less so 10 in this country th than rL an anywhere else but there has been a steady and pronounced ten tendency and movement especially within this generation toward mending mending mending mend mend- ing such defects detects and remodelling In Inequitable inequitable In- In equitable con conditions Evolution and tho the Irresistible powers which make mako for Cor progress oss enlightenment an and Justice Inn may be depended upon to continue and advance anco that process There can be tic beno no turning back hack But Improvement ment measures of ot economic violence will not nol I hasten that process on the thc contrary they will 11 impede It It I 10 UI ul ut I IA I I A A small committee of or I I men of different callings approaching S 1 their task tank free tree from fram political social an and sectional bias would not find It a formidable undertaking to evolve ool a measure which while full fully responsive to tho the dictates of at equity and social Justice would woul pro produce ucc no less revenue than th thc taxation now naw in force and yet would be bc far less burdensome upon pen the country less hampering to enterprise enter prise and less productive o of at economic disturbance and dislocation It might recommend a radical re revision revision revision re- re vision of or Income taxation on an the theory that thal the tho emphasis of or taxation be laid I rather rathor on 00 expenditures than on in iti In- In comes cames and that a sharply marked dis distinction t is Unction be made between such portion of or a person income as Is use used constructively constructively con Can in ln savings 8 investments or enterprise and such portion as Is la spent on his scale of at living A tax based on that theory would no doubt exempt cx- cx of ot a 3 certain minimum sum per annum sa say 2500 GOO for single and 1000 for tor married persons would ouId bo be applied rna moderately to moderate ex expenditures cx- cx and would be bo severely pro pro- on lar Urge large e expenditures Much uch can be ho said for such a tax from both the thc and mural points of or Among other othor desirable effects It Il would reach those who by holding tax exempt securities now escape tho the burden of at income taxation an and it would thus go 10 a n. lon long way to eliminate tho the undue advantage ad now attaching to ta tax tax- exempt securities and to correct the S I I r resulting evils which I have have pointed out before tore in discussing that thal phase of at our tax problem While a tax of ot this nature involves In certain complexities in its details and working the they would 1 by no DO m means s be Insuperable in fact the they would I think be bo less formidable than those of or orthe the present Income tax One l Per ler cr C Cen D Tax Tho committee might I should think reach tho the conclusion to recommend the Imposition of at a small percentage tax sa say 1 pot pOI cent on all sale of commodities ties tics an and products and presumably of ot r real al estate Such a measure would be productive of at an immense amount of ot revenue re and would not be harmful to any anyone one Tho The exact form orm which such Buch a tax should tal take e Is debatable It might be imposed d on an the seller according to the tho aggregate sale salo effected the thc tax to b be computed quarterly semiannually or annually Or It might ht on an OVer every overy transaction transaction trans trans- action bo be paid by br the tho purchaser In which case casc It should not bo ho included In tho the selling price but specifically added to it a as a separate Item probably best In the tho shape of at stamps Or might be made mado applicable to ct i sales only In the latter case It ml might ht be found foundWell foundwell foundwell well to exempt from fram th the tax single purchases purchases purchases pur pur- chases belo below 32 2 Also 4 in that case I. I e. e In d dealing alln with the ultimate purchaser pur pur- chaser It might possibly be deemed ap ap- ap ai- ai make tho the tax ar varying in its scale say flaY from tram 1 per cent to 10 per percent percent cent or even 20 0 O per cent progressing I according to the value o of the tho article I purchased so that for instance a person person per per- son on making a 5 purchase would woul pay 1 per cent ta tax I. I c. c 3 o cents while a a. person person person per per- per per-I son making a purchase would pa pay 10 per cent tax I i. i e c. c and I BO so on While tho the progressive scale calc suggested suggested sug sug- I flug-I s would be bo attractive from the tho points of ar view o of equity I realize of oC course ours tile the practical objection to which it is open apon and tho difficulty of ot its operation In Indeed cedIt it ma may bo be found upon investigation that tho the complications complications involved would bo be such as to be bo decisive against the a adoption of at that suo suggestion I Consumer C The simplest and most moat remunerative e way a naturally natural would bo be to impose a avery avery or very small tax on tho the turnover turna computed corn com quarterly or E monthly semi of ot I ho tho sales of ot comma commodities lUeft an and products all along tho the line lInc from the first to the last ast At it t any rate whatever ma may be bc tho the differences of opinion as to the thea va various various va- va arlous rious of sales s. waya wayn applying a taxI tax I feel eel confident that as far a. a as tho the principle principle prin prin- I ciple of or such a n. tax Is Is concerned a a. great majority of ar the thc men engaged in business businesS largo large or ar small would welcome welcome wel wet come It IL ILIf If It tho the ways waS and means committee of ot Congress were to consult on an the subject subject sub sub- with duly dub qualified re representatives of af business associations and agricultural agricultural tural and other ather organizations no great s-reat difficulty should be found to devise IS the thc best most mast productive and least troublesome troublesome trouble trouble- some same way and method b by which a tax of ot that general nature should bo be made operative e It ma may bo be objected that such uch a tax le is finally pa passed on to the tho consumer No 00 o doubt It Is So is the bulk of ar the tho ex excess ex- ex cess eess profit tax tar So Sa in tho the end Is practically practically ever every business tax and to a great extent even e individual taxes And thc the burden on tho consumer Is always cumulative Inasmuch as almost every o article before it com comes s to him pass passes s through several different han han- in tho the process of or being converted convert convert- ed from om raw m material to t the tho o finished n hed cd C rn t. t I on an rait raie caen one ono 01 or inose I concerned In itt that process seeks to add to tho the price a proportionate percentage percenta percent percent- I a age e to cover cr hl his taxes at least in i part Smaller Burden Durden The sales tax tat would a aggregate a far smaller burden b by tho the time lime It re reaches ches tho the consumer than our prevailing pre array arra array ar ar- ar- ar ra ray of or taxes taoS It would weigh far tar more maro lightly on tho the rank and file than do the results of ot our aur existing t taxation At Al present apart from tram various arlous minor taxes corporate business pays 10 io per percent percent percent cent income tax and In addition excess profit taxes up to 40 o per cent Individuals Individuals Indi Indi- pa pay up to 73 per cent In federal como Ir taxes aloneA alone alano A trifling sales eales tax on the tho huge huse vol vol- ume of ot commodities chan changing handa hands annually annual would yield so GO vast a revenue that It would 1 enable the excess s profit tax an and practically all rill other ather l business taxes except perhaps the tho corporate cor cor- Income incense tax tao to bo be eliminated surtaxes on an individual Incomes to be greatly reduced and federal taxation of ot Incomes up to say to bo be abolished abol abol- altogether The Tho result would be bo a great s-reat reduction II I In the cumulative percentages with which prices are now naw loaded to meet i taxation that Is to sa say there thero would be ue beI I I bound to ensue a lowering of af prices I all around Competition would see aee to toI I that If H contrary to all an expectation SS X S S S 1 and precedent it should should not do so j other agencies will wUl Another nather advantage o of oC the sales tax taxIs taxis Is tho the great reat simplicity of its working and the definiteness of ar Its Us application especially aa us compared to tho vexatious vexatious vexatious uneven and unfair working of or orthe the excess profit ta tax Furthermore to collect such ouch a tax requires little expense no complicated bookkeeping no intricate schedules no lawyers lawyers' and accountants accountants' services and no arm army of government o It Itcan Itcan Itcan can bo be increased or or- decreased decrease in short order and without an any resulting economic eco ceo nomie disturbance according to the financial needs need of or the tho government Sa Pr Present nl Plan Pion Evil It If a 1 per cent tax produces too It is a a. aery very ery simple process to decrease it b by an appropriate percentage If It it il produces too little a small additional percentage ge will yield the sum needed We IVe have ha had a a. two years years' test now naw of ot a scheme for raising raisinS revenue re which Is unscientific inconsistent and Ill de signed an arid and has as Its principal characteristic charac charae- tho the taxation of at business and constructively ch employed capital on a ascale ascale ascale scale without a parallel anywhere The result is writ large in the high cost of ot ln ll living industrial and economic dislocation dis dis- location and social discontent discontent for for all of oC which our taxation policy is Ie a a. strongly contributory though of ot course not tho sole Bole cause In common camman with all thinking right men I desire fer very earnestly and sincerely sin ain to see the burdens of at the thc poor and those thase of ot moderate means lightened to tho the utmost extent possible I realize but too tao well that the thc load weighing weighing- upon tho those o whose Income has haa not kept pace with the tho increased cost of at things has hag become almost intolerable able I welcome e cr every means compatible compatible com corn with sober reason and the thc test of experience and with national welfare wel vel fare tare to remedy that situation or at least to mitigate it to tho the limit of aC our aur ability But I am entirely convinced that thal crushing an and bungling taxation of or capital capItal capital cap cap- ital an and Industry Is not tho the wa way to o accomplish accomplish ac ac- ac- ac that result I am convinced con on an the tho contrary that such taxation is to redound to tho the detriment of or orall all tho the people peaple It If our aur extreme surtaxes on en Incomes an and our aur excess profit tax had thc the effect of breaking the tho vicious circle of aC price price- boosting and aDd wage wage- wage boosting if It these taxes had power to eliminate or curb profiteering much ml might ht be forgiven en I theta them But Dut experience has hag proved that not ani only have havo they no touch such effect and no I such power but Indeed the they have ha tended tendel tend tend- ed ell to greatly Intensify those thase evils lIs To Todeal Todeal deal with these noxious things measures measures meas meas- ures of quite a different nature are aro 1 re reS re- re S |