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BW SHAH WE htyFOATHEWAII? istructiye Criticism on ttm House Revenue Bill. RHS BETTER THAN TAXES

Ammu Why EKcawiv. Outsat of War Aro OioadvomasoBritain Cxamplo Worthy |f Emulation—How tho Toaoo Should Apportioned. r EDWIN R. A. SELIQMAN, Profoaeor of PoUtlcal Koooocny. Columbia Ualrandty. a May 23, 1017, the Homo of B*ptiveo p-Msrd an act “to provide t to defray war expeueee and | other purpooea" In the original 9 prroeuted by the Committee of a and Means, thr additional reveo be derived was estimated at 11.20^00. The amendment to the Intax. which was lacked on to the otlng the discussion In the House, expected to yield another $40,000.irKftOOOjOOO. i discussing the House bill, two

a arise:

L How much should be raised by

(atlou?

. In what manner should this sum

praised?

How Much Should Bo Raised by

r was the figure of J1,800,000.000 d at? Tbe answer Is simple. When

| Secretary of the Treasury came to iste tbe additional war expenses be year 1917-18. he calculated that ’ would amount to some $6.000,.

i. of which $3,000,000,000 was ti

| allotted to the aUles. and S3.0UO.

9 was to be utilised for the dopurpo*ei. Thinking that 1 be a’falr propositi on to divide

In cnaslderlng the ai4*,rtlaomrat of tbe extraordinary l urdeo of taxes In war times certain e-tent I Be principles re dedniteiy cstsblisii*!: How Tases bhsuM ts Apportieneo. (II Tbe liunlen of uts must be spread as fsr a> powit.le over the whole community «o as to cause each Indlvidusl to shan- In tho sacriBcss sccoctllns to bis anility to i»y and acconlltir to hb> shun- In tbe i.ovemmenL (2) Taxes on consumption, which are necessarily borne by tbe community at Urge, should t* Imposed as far sa possible on artlclea of '.us si-luxury rather than on those of necessity. (8) Excises should be Imposed at far

hands of tbe I

consumer rather

than upon the articles which aseve primarily as raw material tor further production. (4) Taxes upon business should be Imposed as far as possible upon net earnings rather than upon gross receipts or capital Invested. (3) Taxes upon Income which will necessarily be severe should be both differentiated and graduatad. That la, there should be a distinction between earned and unearned Incomes and there should be a higher rate upon the larger Incomes. It Is essential however, not to make the Income rate so excessive as to lead to evasion, administrative difficulties, or to the more fundamental objections which have been urged

above.

(O Tbe excess profits which ere due to the war constitute the most obvious and reasonable source of revenue during war times. But the principle upon which these wsr-proflt taxes are laid must be equitable In theory and easily calculable In practice. The Proposed Income Tax. The additional Income tax as passed by the House runs up to a rate of per cent. This Is a sum unheard of In the history of civfllxed society It must be remembered that It was only after the first year of the war that Great Briulu 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 42H

per cent

It could easily be ahown that a with rates on moderate Incomes substantially leas than In Great Britain,

latter sum between loans and >n( , M (he tanfer incomes about as he concluded that the amount hl£b wou id j^id only slightly less than raised by fates was $1,800,000. (1|r g-x;<»si,(x)u originally estimated In

the House Mil.

e two extreme theories, each lt u (u t*- hoped that the Berats will ftrblcb may be dismissed with scant lbr tI>uI n te on the highest luVtesy. The one is that all war ex c%)ton to 34 rent, or at most to 40 Jllturcs should be defrayed by loans. ^ |ha , , t u* same Urns It | tbe other Is tbsl all war expend! wU , Ib , r,*, on tbe smaller Ini should be defrayed by taxes derived from personal or profrs-

h theory Is un.enable. .i.-.i ^rnings

I la Indeed tree that tbe burdens of , f tK . war tom , nuM ws khall hsvs to

I war should tie borne by the pres dspsnd

B rather than the future ge. Is ooes not mean that they should e by this year's taxation Lrtlng all war rxi-euara by taxation Am tbe taxiavera In our or two a bear tbe burden of beorfita that lo lie distributed at leest over a e within tbe aa|ne feneration. :be aecond place, when expendll approai h the gigantic r ue or ■nt-dsy warfare, the ux-only Pol Would rcjulre more than the total kina of ao-ial *ucome. Were this Lutrly m-ces-uuy. the ensuing havl tbe economic lire of tbecommuui- | have to be endured. But > the disasters are so great and ao unneresaary. the Ably i Kit Icy ms) be declared Ira

cable

tary McAdoo bad the right In I highly commeodable cour idlug that a eubsUo'lal porI leest. of the revenues should Ived from uxatton. But when It upoo the plan of BU-60 per cesh, . of raising one-half of sB doc war expenditures by taxi ‘ n arises whether be dW not go I relative proportion of loom U> i after all a purely business (tltlou. Not to rely to a large ex is at the outset of a war la tdvantagaa »t Exesaaive Tax as. k dIsadvantages of sxctsalvs taxes ^ outset of the war are as follows: salve taxes on consumption e popular resentmeuttxevasive taxes on Industry will ^angv huxlnens. damp enthusiasm ►strict the spirit of enterprise at ^ery time wliec the opposite U

■ the

salve taxea on Incomes will dean rpl us available for Inveotluterfere with the placing of whl-h will Iwnecrs

went

ve taxes on wealth will a serious diminution of the !nwhlcb are at present largely i uikiu for the support of educsaud philanthropic enterprises these sources of support lie dri.-d up precisely at the time ' v need would b* greatest estiva taxation at the outsat ef will reduce th. •.asticity availthe mcrossing demands that i to cumo. Groat Britain’s Policy, ifeat Britain as an example he firat year of the w ar nhe l taxes only slight!/. In order Industrie, going at top notch, thr six-uud year ah* raised by only P per emt of her war vs Haring the third year by addithmal tains (over ove toe prewar level) only more than 17 per cent, of her

I first

should attriuirt to do as much year of the war as Great lu tbe third year It would raise by taxstho $1.250.000 In order to be abaoluitij on shiv, it seemed advisable to the sum to fl.hUO.UOO.OUO, this

.a ts>. By impesing axcaaslvs rat new we are net only endangering t future, but are inviting all manner of I dWcultiee which even Greet Britain ||

has been able to oocapo.

Conclusion

The House bill contains other funds- I menUl defects which may be wimmed r

np as follows:

(1) It pursues an erroneous principle |

In Imposing retroactive taxes.

(2) It select* an unjust and unwork- | able criterion for the excess-profits tax. (3) It 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 throw Into confusion by levying taxea on grom receipts Instead of upo?. commodities. (hi It falls to make a (iroper n * ■tamp taxes. (7) It follows an unscientific system In Its flat rate on Impel (8) ft Includes a multiplicity of petty and unlocratlve taxes,The vexatious nets of which U out of aU proportion to tbs revenue they produce. Tbe fundamental lines on which the House bill should be modified are med pp herewith: (1) The amount of new taxation should be limited to $1.250.000.00U-or at the outset to lU'flO.OOO.OOO. To do more than this would lie It Is unneivumry. To do even this would be to do more than has ever been done by eny clvlllxed Government tn time of atress. C*) Tbe excens-proflls tax Used upon a sound system ought to yield about $500.010.W >. (3) Tbe Income-tax schedule ought be revised with s'lowering of tie rate* on earned Ino -mrs below $10,000. and with an analogous lowering of the es on Hie higher Incomes, ao as not exceed 34 1st cent. A careful cal relation shows that an Income tax of this kind would yield aoipe $400,000.(riO 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 ux at even tic low rate of the House bill and with an Improved automobile tax. will yield over flifiO.- ■ xvwxxi which is tbe amount of money thought desirable. Tho above program would be In bar mou with au approved scientific eyetex. It wll! do away with almost all of tbe complalntB lUt are being urged against the present It will refrain from taxing the caoeumptloo of thr

poor

It will throw a far heavier burden u|«un tbs rich, but will nut go ,0 f * extreme* of euollseatbm. ft will vtate Interferes*- with bus-ness and will k«*-p uulmiwlred the social pro ductlvity of the community ft will establish a lust UMncs between loans and la succumb to the danger of approaching eltls-r Ibe tax-only pulley or the loan

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