Show fr HO HOW SHALL WE P A 7 FOR I 1 fit r A criticism on the house revenue bill bills LOANS BETTER THAN TAXES five reasons why excessive Cx taxes tax at the outset of war are ar disadvantage advantage Dr out ous greet great britain example worthy of emulation how the taxes should be 0 apportioned by EDWIN R A SELIGMAN professor of political acon omy columbia university on may 23 1017 the of hep rep passed nn an net act to provide revenue to defray war expenses and tor other our purposes poses in the original bill as presentad present td cd by lie committee ot of ways and means the additional revenue to be derived v was as estimated at 1 I 1 the amendment to tho the income tax which was tacked on to the bill during the discussion la in the house was expected to yield another or 50 in discussing the house bill two pro problems blemA arise 1 I how now much abouel be raided by taxation 0 11 II in what manner should thia this sum be raised 1 how much should do D raised by taxation how now was the figure of anad id at nta tho me answer in aa simple when the secretary of the tho treasury came to estimate the additional war for the year 1017 18 he calculated calci that they would amount ta t some M of which 1 was to be allotted to the allies and buoo 3 M was to bo be utilized for the domestic purposed acs sei thinking that it would be a fair proposition to divide this latter sum between loana loans and taxes be he concluded that tho amount to be raland by taxes tuxes was thero aro are two extreme theories each t of which may be dismissed with scant courtesy tle ono one la Is that all war ex should bo be defrayed by loans and tbt er Is that all war tures should be he defrayed by maxem jacb theory Is I 1 untenable it is 1 indeed true that the burdens of the war should he be borne home by the present rather than the future generation but this does not mean that they should bo be borne by this years taxation meeting all war expenses by taxation makes the taxpayers in one or two years bear beer the burden of benefits that ought to be distributed at least over a decade within the same generation in the leond place when ex expenditures approach tho the gigantic sums of present day warfare fure tle the tax only policy polley buld require more than the total surplus of social income wire this absolutely noc necessary essary the ensuing liu lia oc in the economic life of the coni community muni would have to bo be endured dut but where the dl disasters asters are so gie gicht it end and at th same time so unnecessary UK A tax only policy may bo be declared impracticable secretary mcadoo had the right instinct and highly comai commendable courage in deciding diding that a substantial portion at least of the reNe revenues should be derived from taxation but when ho he hit upon the plan of 50 per cent that Is of raising one half of all tn mcatic war expenditures by taxes the question arises whether bo he did not go 0 too far the relative gro proportion portion of loans tn to taxes Is after all a gumly business busine aa prot proposition tion not to rely to a large ex tnt tent on louns loans at the outset of a war Is 1 4 41 mistake 11 disadvantage disadvantages of excessive Exco taxes the disadvantages of escos lve tuxes at the of the war arc are ua collona follona fo llona 1 Enoe olve taxes on con pHou will etu rauie resentment 2 Excess he taxis on industry will disarrange business damp enthusiasm and restrict the spirit of enterprise at the vi vo ry time when the opposite Is 1 needed 3 excessive antes on oil income will tie ie pleto tho surplus available for amest menta ments and interfere with the placing of the enormous loans which will be sary n any elent 4 excessive lasea ase on bilth will causo a serla diminution of the in comes which are at pre present bent largely drawn di awn upon for the support of edina lional and aca moreover thebe sources of support would bo be dried up als LI nt sit the litno when the beird would bu be tr trait jit t 5 excessive taxation at the a outset tt of the war will reduce the elasticity avail able for the increasing demand demands that are re oon soon to come great britain policy take greit in it britain as an on example during the arst year of 0 the aar she increased Inc reared taxes only sll in order to keep irbing at top north during the second year slie she raised b in new taxes only U per cent of her war expenditures during purin the year ebe she levoid by additional taxis over and above the prewar pre war only slightly more wore than 17 per cent of her war expenses if we should attempt to do is muth much in tit the first benr of the war us great britain did in the thiril scar it would to raise by taxation if in fit order to be on the safe elde it seemed advisable to increase the sum to IWO lu thia this should in our opinion be the maxi roum 1 0 in ia cn the apportionment of the extraordinary burdan of taxes in wai war tims certain scientific principle principles are definitely established how taboa should bo be apportioned 1 the burden of caces be spread aa as far an a possible over the whole so aa as to dae each individual to bare share in the sacrifices according to hie his ability to pay and according to bid his share in tho the government 2 taxes on consumption which are necessarily borne home by tho the community at large should tw be imposed aa as far as pos behle on articles of quasi luxury rather than on those of 3 excises should be imposed an far as possible upon commodities in the bands hantis of tho final dual cc rather than upon articles which serve bartly as raw material for further I 1 ro reduction 4 taxes upon buit bustness ness should be imposed aa as far as upon net earnings rather than upon gross re or capital invested 5 taxes upun income which will necessarily bo be severe should be both differentiated and graduated that Is 19 there should be a distinction between earned and unearned income incomes and thero there should be a higher rate upon the larger incomes it Is essential however not to make the income rate so excessive aa an to lead to evasion er aslon administrative or to the more fundamental objections which have b pra urged it above bore 6 abo excess profits which are due to the war constitute the most obi obvious ious and reasonable source of 0 revenue during ing war umea times but the principle upon alich these war profit taxes are laid must by in equitable in theory and easily calculable in practice the proposed income tax the additional antome tax passed by b y the bouse runs up to a rate rato of GO 60 per cent this Is a naw unheard of in the history of civilized society ft U fanst bo be remembered that it was only alter after the drat year of the war that great britain increased her income tax to tho the minimum of 34 per cent and that even now in the fourth year of tho the war the income tax docs does not exceed per cent it could easily bo be shown that a tas tax with rates on mod moderate crate incomes BUD sub at stant anti lally ally leas than in great brinnin and anti on the larger incomes about as high would yield only slightly less than the originally estimated in the house bill IIII it Is to be hoped that the senate will reduce the total rate on the highest in coat 2 to 34 per cent or at most to 40 per cent and that nt at tho same time it will reduce the rute rate on the smaller in comes derived from personal or probes atonal earn hiRa if it the th war continue continues we hall shall have to depend more and more upon tho the in como corns tax by imposing excessive rate rates now we are rot rat only endangering tho the future abst arc are inviting all manner of difficulties chica even groat great britain ha has bon been able t to escape conclusion who tho house bill contains other fundamental defects which may be summed up as follows 1 2 it an erroneous principle in imposing retroactive taxes 2 it selects an unjust and unworkable criterion for the excess tax 3 it proceeds proceed 4 to an n of height in tit tho the income tax 4 it unwarranted bunions upon the eon of rif tho th coin bomnin niti alt al 61 5 it Is calculated calculate il to throw bustnes ant into con finlon b taxes on groa instead of upon commodities 0 6 it f fills to tit nuke ike n proper uso use of c taxes al 71 7 it follows an s stein in its flit flat fl it rate du imports 8 it it multiplicity of I 1 let et ty and anti etive taxed tuxes tho ve vexatious cantow nois noi nei s 4 of which is out of till 11 II proportion to the revenue they prot product luce 0 16 0 0 the fundamental lines on the house hill 1111 should be modified are sum surn med up bierei herewith ith 1 I 1 the amount of f new nev taxation tax atlon should be limited to 1250 or at th outset to 1 to do inore than this would be as us unwise as it Is 14 unnecessary to do even this would be to do inure more than has ever been done by any civilized govern ment in time of stress rai 2 the exco tax based upon H cound system ought to yield about WO 3 the ithome tax schedule ought to be revised with ith it lowering of the rates on earned incomes below belo and with an analogous 4 lo lowering cring of the rates on tho higher incomes so is ni n i net not tu to exceed 34 per cent A careful cal kul ul atlon shows that an all income tux tim of this kind would yield some XO additional 41 the tax iu on whisky and tobacco ought to remain approximately ns as it 1 Is with ith a yield of f nebout these ahme taxes to gither ther with the stamp stump tax nt tit eren even the low ion rite of the llou e bill 1111 and with an improved an to mobile will yield oser 1250 which Is tho lie amount of moner thought de desirable the above program ram would be in bar her mony with an approved scientific ava arm tim ti tin m it nill do away with almost all of we ue complaints that are being urged the present it will refrain from taxing the consumption of the poor it will throw n far heavier burden upon the rich but will not go to the extremes 4 of 0 confiscation it will ob alato loter interference ference with busina is a and will keep unimpaired the social productivity of the community it will establish a just balance be aveen loans and and will not succumb to the danger of approaching either the tax tat only policy or the loan 0 ly ily policy above all it will keep an in undisturbed disturbed elastic margin which must be bo more and more heavily drawn upon as the war Ms cafe fc |