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Show ' HOW SHALL WE PAY J FOR PRESENT i! WAR? H ' ' CONKTIlL'trrtVi: cuithihm on BBI houhi: iu:vi:nci; uu.it. BBYJ JFlvw traoiis Why IiccaIvo Taxes BBB I At the. Outset or llio Wnr Am 1)1. BBVl I advantageous Orcnt IlriuUn Ex. BR nmplo Worthy of Kmiilntlon How Bft ' Tin en Hhoulil IWi Apportioned. HH Py EDWIN R. A. 8ELIGMAN, BBaWJ MeVlcksr Professor of Politics! Keen- BBBfl omy, Columbia University Hj On May 23, 1017, llio Ilouto of Hen- BpJ reeentstlves passed nn net "to provide BBYj revrnuo (0 defray war cipctisc nml BBQ 1 tor otticr purposes." In the original BBVJ I bill an presented by (lie Committee of BBVI Wnya and Sienna, ttio nililltlonnt rovo- BFBjl nuo to Ihi derived wns estimated nt f 1, BBIH I 810,120,000. Ttio nmcmlmcut to ttio In- BBJ r , ' come tax, which wns lacked on to the BBH till during ttio discussion in the House BBV was expected to yield another f 10,000,- J 000 or $50,000,000. BBW In discussing the House bill, two BBhJ problems arise: BBpJ I. How much should lo raised by pf taxation) BBBJ , II, In what manner ilionld tbU aunt BBS be raised) BBVJ I. Haw Much Should 8. Railed by BBpJ f Tsxatlonf BBhJ j How wns ttio flffiiro of $100,000.000 BBM : - arrived at) Tlio nnswer Is kltnple. When BBpJ D the Secretary of ttio Treaaury came to BBhJ otllmato the additional war expenses BBpL for the yenr 1017-18, he calculated that BBV ' , I i tltey would amount to noma OC00,- BBpJ 1 ' 000,000, of whtcb $3,000,000,000 waa to BHB ' be allotted to (ho allien, and $,1000,. MB i OOO.OOO wna to be utilised for ttio do. BBh mrsilc purjiflsc. Thinking that It BBml would bo n fair proportion to dlrlde BBpj thli latter sum between loan and BBhJ J Intra, ho concluded that (ho nmount BBB ' to bo rained by tnxca waa II.HO),000,- 00(1 BJ; Thera nro two extreme theories, each j of which may bo dismissed with cant BBpJt comtcsy. Tlio 0110 la that all war ex- BBM' , ' I pendltiirea ahould ho defrayed by loans. BY f and tho other Is that all war cxpcndl J K turea ahould lie defrayed by taxes I licit theory la untenable. BBV ,f It la Indeed true that tho burdena of BBWli ' tho war ahould be borno by tho prea- BBpjj l cnt rather than tho ruturo ccuerallon: I but this does not menu that they should BBpJij , be bonio by thla year's taxation. r S M Meeting nil warcxpensc by tnxatlou 'j 2 1 8 makes tho taxpayers In one or two ll. ? 'w yesrs bear the burden of benefits that j-fl mebt to bo dlatrlbutcd at leait orer n J1 J tfecado within tho aamo ceneratlon. Hr t In the aecond place, when expcndl- B.7 m turea approach tho elffsntlc sums of j f present-day warfare, tho tax-only pol j, J I Icy would require mora than tho total f I F aurplus of sodnl Inromo. Wcro this B ' if Absolutely ncceaasry, tho ensuing bar J A 00 In tho economic llfo of tho communb J ' -' I y W0UlJ ,:nvu to bo endured. Hut HB ' m wbero the dlsaitera aro so great and HB fl t tho aamo time so unnecessary, tho H, B tax-only iollcy may Ih declared lm- PB ' H practicable. HMv( ;- B Recretnry JtcAdoo had the right In- ' stlnct and hlnlily commendable cotir- B' ' ffl A(o In decldlmt that a subitantlat or iL tlon, At least, of tho rereiiurs should 1 'h M (,crlrrd Tnim tnxatloiu Hut when PH ' H JK bo hit upon tho plan of fiO-M) per cent, PB m that l, of ratline ouo-half or nil do- HHi 1 ' hi I ' tnestlo war oxiHiidlturca by taxes, tho 1 i (lj i question nrltes whether ho did not LH , 'ih t00fftr' J 1 Tlio relative proiortlun or loans to J , , i J (axes U After all a purely busliieas B , 1 1 proposition, Not to rely to a lartro ex. Bi Li ' I tent ou loans nt tho outset or a war Is BBj V ,J I a roUtake. B- ll V Dlisdvsntsgts of Eaettslvs Taxi. HBJ , f It'o tllsadrantnces or oxcesslro taxes BBt 1 9 At tho outset or tho war nro ms follows; BBJ. '' Jfc I. Kxccimlvo taxes on consumption asssBi'' 1 li will cnuso ponulsr resentment. BBvb ' ;U Uxcesslro taxea on Industry will BBJ 1 1 i M. dlsarrnnKo business, damp futhuslasm 1 m nnd restrict the spirit of enterprise at ' j HIS ,u0 Terjr ,lmo w,le" tho OPM"ltO Is pH' t 'IwcmIvo taxes on Incomes will do- Bflt I') 1 Plcto tho surpliu nvnllablo for Invest BBl )L menu uml Interfere with tho placing of BJH 1 ' tho enormous loans which will bo neces H W in any event. I, , Excesslvo taxes on wealth will BB , I caumi n serious diminution of tho In- Bsv' ' I comes which aro at present largely 1 ' ' I drawn upon for tho support or cducn- BK , E tlonnl and phllsnthroplc enterprises. BBa ' 1 M Jforeover. these sources of support Bfll I j ft W0IJ bo dried up precisely nt the time Bfll 1 when tlio uqq would Ihi nrentest. H 1 ' ) 8- Exesidve tsxstlon st ths outitt ol BB1 ' ' O 1 war vvl" rdut hs stsitlelty avail. BBaf 1 I i abl for thl borsaslng damands that m . I ' J ar soon to com. BB 1 . f Grsst Dritaln's Policy. BBa r 1 ' J Take Glwt llrltnln as an example BH ' j Durlns the tint yenr or the war she BB' j ' ' Increased tnon only sllelitly. In order BB)1.' (, ' to keep Industries koIhb nt top notch BBJ '' ll j Dtirlnt llio second jenr hIio mtfed hy BBJ p I new taxes only I) per (cut of her wnr BH.it' ' ; i cxpcndlturoa. nurtnu the thlnl )oar BB', , ; B bo lerletl liy nddltloual taxes (orer BBT: j 1 j nnd nbovo tho pro-war level) only BBTli J .1 n slightly moro than 17 per cent of her BPJr ' W 1Tar 'tl)c"EOS' BbV '1 ' rl' Jt ,vo SU0U,(I "t'cuipt to do nn murh BBJ1 f!l '" ,je n,vt 'cnr of 'I10 "r os Grtut BBl'f I .'! Hritaln did III tho tUnl year It would BBjt f H V culilco to ralao by taxation $1.0,000, BHl? m OOa If, In order to bo alsejuicly on BBp'i i ttle safo !',, ll cerocd nrtvlsablo to feH P. Xr H Increase the sum to 11,600.000.000, this LasS Si m. should, In our opinion, be tb usxl- HR' II ?r um. BBBtJ. In considering tho npixjrtlwnnciit of the extraordinary burden or taxes In war times certain elcntllle principles aro definitely established: How Taxes 8hoUld Do Apportioned. (1) Tbo burden or tnxes must bo spread as fur as povsllilo over tho wholo community to ns to couc each Individual to share In tho oacrblces according ac-cording to his ability to pay and according ac-cording to his slmro In tho Government (2) Taxes on consumption, which are ncewirlly borne by tho community ot large, should bo Imposed as far as possible pos-sible on articles of quasl-laxury rather than on thoso or necessity. (0) Kxclsc should bo Imposed as far as posslblo upon commodities In the bands or tbo final consumer rather than upon tho articles which servo primarily pri-marily as raw material for further production. (-1) Taxes upon business should be Imposed as fsr as posslbto upon net earnings rather than upon gross receipts re-ceipts or capital Invested, (S) Taxes upon Income which will necessarily bo severe shonld 00 both differentiated nnd graduated. That Is, there should bo a distinction between earned and unearned Incomes and thero should bn n higher rata upon tbo larger Incomes. It Is essential, however, not to mako tho Incomo rale so excessive aa to lead to evasion, administratis difficulties, or to tho more fundamental objections which have been urged above. (0) Tlio excess profits whMi nre duo (o tho wnr constitute the moit obvious nnd reasonable source or rerrnue dur lug war times. Hut the principle upon which thrso war-profit taxes aro laid mutt bo canltablo In theory nml easily calculable In practice. Ths Propoasd Incoms Tax. The additional Incomo tax ns passed by tho House runs up to n rato or OU per cent. Tills Is n sum unheard or In the history or clrlllied society. It must bo remembered that It was only nfter tho first year or tho wnr that Great Britain Incrrnsed her Income tnx to the maximum of 31 per cent, nnd that eren now In tbo fourth year or (he war tho Incomo tax does not exceed 4.4 percent It could easily bo shown that n tax with rates 011 moderate Incomes substantially sub-stantially less than In Orcnt Hritaln and on tho larger Incomes about ns high, would yield only slightly less than tho fo32.000.000 originally estimated In tho Homo bill. It Is to bo hoped that tho Penate will reduce tho total rata on the highest Incomes In-comes to 31 per cent, or nt most to 40 per cent, mid tbnt at tbo samo tlmo It wilt reduce tho rate on the smaller Incomes In-comes derlred rrom personal or professional profes-sional earnings. If ths war continues we shall have to depend mors and mors upon ths ln corns tax. By Imposing axeetilve rstse now wo aro not only endangering ths future, but sre Inviting all manner of difficulties which even Qrest Britain hss been able to eecspe, Concluelen. Tbo Houso bill contains other fundaments funda-ments 1 defects which msy bo summed upas follows! (1) It pursues an erroneous principle In Imposing retroactive taxes. (2) It selects nn uujmt nnd unwork. sblo criterion for tho excess profits tnx. (3) It proceeds to an unheard-of height In tho Incomo tax. (i) It Imposes unwarranted burdens upon tho consumption or tho community. commu-nity. (3) It Is calculated to throw business Into confusion by levying taxes on gross receipts Instead of upon commodities. (01 It falls to mako n proper use of stamp taxes. (71 It follows an unscientific system hi lis flat rato 011 Imports. (8) It Includes n multiplicity or pet tyand unlucratiro taxes, tho vexatious. ness or which Is out or all proportion to tho revenue they produce. Tho fundamental lines en which the Houso bill should bo modified aro sum. med up herewith: (1) Tho amount of new taxation should bo limited to JI.2o0.000.000-or at thu outset to $ 1.500,000,000. To do more than this would bo ns unwlsa as It Is unnecessary. To do even this would to do mora than has ever Imh!1 dnnn lir ntiv rlvlllvA.1 (Iav.. mcut lu time or stress. (3) The excess-probta tax based upon a sound system ought to yield about ,00,000,000. (3) The Income-tax schedule ought to to wised with a lowering of tho rates on earned Incomes Mow $10,000, and with an analogous lowerlug or llio rates on tho higher Incomes, so as not to exceed ,11 per cent A careful cal. dilation shown that an Incomo tax of Ibis kind would' yield soma Sino.OOQ,. 000 nddll' muL (1) Tlio nx on whisky nnd tobacco ought to remain npproxlmately as It U, with n yield or ubout $230,000,000, Theso three taxes, together with tho stamp lax at even tho low rato of tho House hill, and with on Improved au tomnhlla tax, will yield over $1,230,. 000,000, which Is the Amount of money thought desirable. Tho hhovo vro'ram wo-iM to In harmony har-mony with nu approved .ntliit- .y tern. It will do nwny with uhuiwt nil or tho complaints that nro being urgi-d agalust the present. It will lefrulu from taxing tho consumption of the wor It will throw n far heavier burden upon the rich, but wdl not go to the extroMn ot confiscation. It will obviate ob-viate Interferineo with bnsluesa und will keep unimpaired tho social productivity pro-ductivity or tho community. It will establish n Just tialuuco be-twesu be-twesu loans nnd taxes and will not succumb to tho danger or approaching cither Hie tax-only policy or the loan-only loan-only policy. Abovo all. It will keep an undisturbed (.Mastic margin, which tmmt be more nnd moro heavily draws upon as tho war proceeds. Legal blanks at The Sun Office. |