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HOW SHALL WE
PAY FOR THE WAR?
* /
A Constructive Criticism on th?
House iiovonue BiiL
LOANS BETTER THAN TAXES
Five Reasons Why Excessive Taxes at
the Outset of War Are Disadvantage
ous —Great Britain Example Worthy
of Emulation —How the Taxes Should
Be Apportioned.
By EDWIN R. A. SELIGMAN,
McVlckar Professor of Political Econ
omy, Columbia University.
On May 23, 1917, the House of Rep
resentatives passed an act “to provide
revenue to defray war expenses and
to r other purposes.” In the original
bill as presented by the Committee of
Ways and Means, the reve
nue to be derived was estimated at sl,-
810,420,000. The amendment to the In
come tax, which was tacked on to the
bill during the discussion In the House,
was expected to yield another $40,000,
000 or $50,000,000.
In discussing the House hill, two
problems arise:
L How much should be raised by
taxation?
11. In what manner should this sum
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but does not should be
conflict W made at once
with other fi for the new
Waites
be raised?
I. How Much Should Be Raised by
Taxation?
How was the figure of $1,800,000,000
arrived at? The answer is simple. When
the Secretary of tlie Treasury came to
estimate the additional war expenses
for the year 1917-18, he calculated that
they would amount to some $6,600.
000,000, of which $3,000,000,000 was to
be allotted to the allies, and $3,600.
000,000 was to be utilized, for the do
mestic purposes. Thinking that il
would be a fair proposition to divide
this latter sum between loans and
taxes, he concluded that the amount
to be raised by taxes was $1,800,000.-
000.
There are two extreme theories, each
of which may l>e dismissed with scant
courtesy. The one is that all war ex
penditures should be defrayed by loans,
and the other is that all war expendi
tures should be defrayed by taxes
Each theory is untenable.
It Is indeed true that the burdens of
the war should be borne by the pres
ent rather than the future generation;
but this does not mean that they should
be borne by this year’s taxation.
Meeting all war expenses by taxation
makes the taxpayers in one or two
years bear the burden of benefits that
ought to be distributed at least over a
decade within the same generation.
In the Second place, when expendi
tures approach the gigantic sums of
present-day warfare, the tax-only pol
ley would require more than the total
surplus of social income. Were this
absolutely necessary, the ensuing hav
oc in the economic life of the communi
ty would have to be endured. Rut
where the disasters are so great and
at the same time so unnecessary, the
THE BAfiTC'.V r RIEU\E-THE CAR TERSVILLE NEWS, JUNE 14, 1917.
tax-only policy may be declared im
practicable.
Secretary McAdoo had the right in
stinct and highly commendable cour
age in deciding that a substantial por
tion, at least, of the revenues should
be derived from taxation. But when
he hit upon the plan of 50-50 per cent.,
that is*, of raising one-half of nil
mestic war exr>enditurefe by taxes the
question arises whether he did not go
too far.
The relative proportion of loans to
taxes is after all a purely business
proposition. Xot to reiv to a large ex
tent on loans at tlie outset of a war Is
a mistake.
Disadvantages of Excessive Taxes.
The disadvantages of excessive taxes
at the outset of the war are as follows:
1. Excessive taxes on consumption
will cause popular resentment.
2. Excessive taxes on industry will
disarrange business, damp enthusiasm
and restrict the spirit of enterprise at
the very time when the opposite is
needed.
3. Excessive taxes on incomes will de
plete the surplus available fot invest
ments and interfere with the placing of
the enormous loans which will be neces
sary in any event.
4. Excessive taxes on wealth will
cause a serious diminution of the in
comes which are at present largely
drawn upon for the support of educa
tional and philanthropic enterprises.
Moreover, these sources of support
would be dried up precisely at the time
when the need would be greatest.
5. Excatsivs taxation at the outset of
the war will reduce the elesticity avail
able for the increasing demands that
are soon to corns.
Grsat Britain's Policy.
Take Great Britain as an example.
During the first year of the war she
increased taxes only slightly, in order
to keep industries going at top notch.
During the second year she raised by
new taxes only 9 per cent, of her war
expenditures. During the third year
she levied by additional taxes (over
and above the pre-war level) only
slightly more than 17 per cent, of her
war expenses.
If we should attempt to do as much
in the first year of the war as Great
Britain did in the third year it would
suffice to raise by taxation $1,250,000,.
000. If, in order to be absolutely on
the safe side, it seemed advisable to
increase the sum to $1,500,000,000, this
should, in our opinion, be the maxi
mum.
In considering tne apportionment ol
the extraordinary burden of taxes in
war times certain scientific principles
are definitely established:
How Taxes Should Be Apportioned.
(1) The burden of taxes must be
spread as far as possible over the
whole community so as to cause each
individual to share in the sacrifices ac
cording to his ability to pay and ac
cording to his share in the Government.
(2) Taxes on consumption, which are
necessarily borne by the community at
large, should be imposed as far as pos
sible on articles of quasi-luxury rather
than on those of necessity.
(3) Excises should be as far
as possible upon commodities iu the
hands of the fiual consumer rather
than upon the articles which serve pri
marily $8 raw material for further
production. • v
(4) Taxes upon business should be
imposed as far as possible upon net
earnings rather than upon gross re
ceipt*! Cl capital invested.
(5) upoii iBCO&ie which will
necessarily be severe should be both
differentiated ami graduated. That is,
there should he a distinction between
earned and unearned incomes and there
should he a higher rate upon the larger
Incomes. It is essential, however, not
to make tile income rate so excessive
as to lead to evasion, administrative
difficulties, or to the more fundamental
objections which have been urged
above.
(0) The excess profits which are due
to the war constitute the most offvious
and reasonable source of revenue dur
ing war times. But the principle upon
which these war-profit taxes are laid
must be equitable in theory and easiiy
calculable In practice.
The Proposed Income Tax.
The additional income tax as passed
by the House runs up to a rate of 60
per cent. This is a sum unheard of in
the history of civilized society. It must
be remembered that it was only after
the first year of the war that Great
Britain increased her income tax to the
maximum of 34 per cent., and that
| even now in the fourth year of the war
! the income tax does not exceed 421^
! feT Sent. ; mw■
Tt could easily be shown that a ta*
with rates on moderate incomes sub
stantially less than iu Great Britain,
and on the larger incomes about as
high, would yield only slightly less than
the $532,000,000 originally estimated in
the House bill.
It is to be hoped that the Senate will
reduce the total rate on the highest in
comes to 34 per cent, or at most to 40
' per cent, and that at the same time it
will reduce the rate on the smaller in
! comes derived from personal or profes
j slonal earnings.
If the war continues we shall have to
depend more and more upon the in
come tax. By imposing excessive rates
now we are not only endangering the
future, but are inviting all manner of
difficulties which even Great Britain
has been able to escape.
Conclusion.
The House bill eoutaius other funda
mental defects which may be summed
op ns follows:
il) It pursues an erroneous principle
in imposing retroactive taxes.
(2) It selects an unjust and unwork
able criterion for the excess-profits tax.
(3> 'lt proceeds to an unheard-of
height in the income tax.
(4) It imposes unwarranted burdens
upon the consumption of the commu
nity.
(5) It is calculated to threttv business
into confusion by levying taxes on gross
receipts instead of upon commodities.
(6) It fails to make n proper use of
stamp taxes.
(7) It follows an unscientific system
in Its fiat rate on imports.
(8) It includes a multiplicity of pet
ty and unluerative taxes, the vexatious
ness of which is out of all proportion to
the revenue they produce.
*******
The fundamental lines on which the
House bill should he modified are sum
med up herewith:
(1) The amount of new taxation
should be limited to $1,250,000,000—0r
at the outset to $1,500,000,000. To do
more than this would he as unwise as
it is unnecessary. To do even this
would be to do more than has ever
been done by any civilized Govern
ment in time of stress.
(2) The excess-profits tax based upon
a sound system ought to yield about
$500,000,000.
(3) The income-tax schedule ought to
be revised with a lowering of the rates
on earned below SIO,OOO, and
with an analogous lowering of the
rates on the higher incomes, so as not
to exceed 34 per cent. A. careful cal
culation shows that an income tax of
this kind would yield some $450,000,-
000 additional
(4) The tax on whisky and tobacco
ought to remain approximately as It Is,
with a yield of about $230,000,000.
These three taxes, together with the
stamp tax at even the low rate of the
House bill, and with an improved au
tomobile tax, will yield over $1,250,-
000,000, which Is the amount of money
thought desirable.
The above program would be in har
mony with an approved scientific sys
tem. It will do away with almost all
of the complaints that are being urged
against the present. It will refrain
from taxing tb" consumption of the
poor.
It will throw a far heavier burden
upon the rich, but will not go to the
extremes of confiscation. It will ob
viate interference with business and
will k p unimpaired the social pro
ductivity of the community.
It will establish a just balance be
tween loans and taxes and will not
succumb to the danger of approaching
either the tax-only policy or the loan
only policy. Above all, It will keep
an undisturbed elastic margin, which
must be more and more heavily drawn
upon as the war proceeds.
MISS LACKEY SAVES
DROWNING CHILD.
.Miss Annie Lackey, a popular young
lady, of near Acworth, formerly of
Cartersville, came near losing her life
last Monday while trying to save a
child from drowning. The child was
standing on a log over the creek when
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Miss Lackey told her to Come away.
The child did not obey but started to
go on further out over the water ami
fell in.
Miss Lackey could swim well so she
vent after her. The child caught her
by the head utter she succeeded in
reaching her and pinned it beneath
the .water. There were three other
ladies oil the bank and their screams
brought a man from a nearby field.
In the struggle Miss Lackey had
freed her head from the child and was
making for the shore. She gavq.. the
child to the man and fell unonscious
upon the bank.
Miss Lackey was carried to a house
near by where she still remains very
ill.
Soy Beans For Grain and Hay
By John R. Fain, Professor of Agrono
my, State College of Agriculture.
Especially in North Georgia the Soy
Bean should receive more atttention
than has been given it in the past.
For a grain producer on good soils
this crop can scarcely be surpassed.
It yields more bushels of grain per
acre than do Cowpeas and the grain
is rich in protein. For hog grazing
it stands as North Georgia's most
promising crop.
Soy Beans will not produce well on
poor worn lands however and should
never be planted there. The Cowpea
will remain the best legume for this
kind of land. It seems to stand ad
verse conditions here better than the
soy bean but on good land the soy
bean is hardier.
For grain soy beans should be
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spring will be ready to graze from
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variety. The Ito San and Hamber.
landt are examples of early kind."
and the Mammoth Yellow and Black
of late kindS. An average yield
should graze from eight to fifteen,
100 pound hogs for thirty days. Graz
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turn yellow.
For hay the soy bean will be used
largely on rich land where Cowpeas
are inclined to fall down and tangle’
The soy bean plants grow erect so
are easy handled. The yield is Usu .
ally a little greater than the yield
of cowpeas, but there is some more
waste in feeding it. The same rate of
seeding employed with cowpeas
should be used. For grain only a
half bushel per acre will be necei
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Soy beans are susceptible to wilt
and nematodes hence should not b
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makes a good yield of hay.
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