HOW SHALL WE
PAY FOR THE WAR?
A Constructive Criticism on the
House Revenue Bill.
LOANS BETTER THAN TAXES
X
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,
MkVickar Professor of Political Econ
omy, Columbia University.
On May 23. 1017, the House of Rep
resentatives passed uu act “to provide
revenue to defray war expenses and
for other purposes.” In the original
bill as presented by the Committee of
Ways and Means, the additional reve
nue to be derived was estimated at $1,*
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 $;>o.ooo.ooo.
In discussing the House bill, two
problems arise:
I. How much should be raised by
taxation?
II. In what manner should this sum
be raised?
I. Hew Much Should B« Raised by
Ta nation ?
How was the tigure of $1,800,000,000
arrived at? The answer is simple. When
the Secretary of the Treasury came to
estimate the additional war expenses
for the year 1017-18. he calculated that
they would ameunt to some $»».♦*■»>0.
000,000. of which $.3,000,000,000 was to
be allotted to the allies, and $3,000,
000.000 w’as to be utilized for the do
mestic purposes. Thinking that it
would be a fair proposition to divide
this latter sum betweeu loans and
taxes, he concluded that the amount
to l>e raised by taxes was $l.S»>0.000.
000.
There are two extreme theories, each
of which may he dismissed with scant
courtesy. The one is that all war ex
penditures should bo defrayed by loans,
and the other is that all war expendi
tures should Ik* 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 bv taxation
makes the taxpayers in one or two
years t*»ar the burden of benefits that
ought to be distributed at least over n
decade within the same generation.
In the second place, when expendi
tures approach the gigantic sums of
present-day warfare, the tax-only pol
icy would require more than the total
surplus of social income. Were this
absolutely necessary, the ensuing hav
oc iu the economic life of the communi
ty would have to be endured. But
where the disasters are so great and
at the same time so unnecessary, the
tax-only policy may i»e declared im
practicable.
Secretary McAdoo had the right in
struct and highly commendable cour
age in deciding that a substantial por
tion. at least, of the revenues should
be derived from taxation. when
he hit upon the plan of 50*50 |**r cent.,
that is, of raising one-half of all do
mestic war ex[K»nditures 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. Not to rely to a large ex
tent on loans at the 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 <*onsumption
will cause popular resentment.
2. Excessive tax«*s «>n 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 for invest
ments and Interfere with the placing of
the enormous loans which will l>e 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 aod philanthropic enterprises.
Moreover, these sources of support
would be dried up precisely at the time
when the ueed would be greatest.
5. Excessive taxation at the outset of
the war will reduce the elasticity avail*
able for the increasing demands that
are soon to come.
Graat 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 secoud year she raised by
new taxes only 9 per cent, of her war
expenditures. During the third year j
she levied by additional taxes (over ;
and above the pre-war level! only
slightly more than 17 i>er cent, of her
war expeuses.
If we should attempt to do as much
in the first year of the war as Great
Britain did in the thin! year It would
suffice to raise by taxation $1,2.10,000.
000. If, in order to bo absolutely on
the safe aide, it seemed advisable to
1&V.Tgjye the gum tP $1.500,000,00d, tbf •
should, in our opinion, be tlip nrixl
mum.
In considering the apportionment of
the extraordinary burden of taxes in
war times certain scientific principles
are definitely established:
How Taxas Should Ba Apportioned.
(1) The burden of taxes must be
spread as far as j>ossilde 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 he imposed as fax as i>os*
slide on articles of quasi-luxury rather
than ou those of necessity.
(3) Excises should be imposed as fue
as i>ossible upon commodities iu the
hands of the final consumer rather
than upon the articles which serve pri
marily as raw material for further
production.
(4) Taxes upon business should he
impost'll as far us possible ui>on net
earn lugs rather than upon gross re
ceipts or capital invested.
Taxes upon income which will
necessarily be severe should he both
differentiated and graduated. That is,
then' 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.
ph The excess profits which are due
to the war constiMb * tVe mo t obvious
and reasonable sour* e of revenue dur
ing war times. Rut the principle upon
which these war-profit 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 IJO
per cent. This is a sum unheard of in
the history of civilized society. It must
be remembered that it was only after
the tirst year of the war that Great
Britain increased her income tax to-the
maximum of 114 per cent., and that
even now in the fourth year of the war
the income ta.%does not exc eed 42’j
per cent.
It could easily be shown that a tax
with rates on moderate incomes sub
stantially less than in Great Britain,
and on the larger incomes about ns
high, would yield only slightly less than
the $ol»2.flfH>.tH)0 originally estimated iu
the House bill. /
It is to be hoped that the Senate will
reduce the total rate on the highest in
comes to 1H» per cent. <»r at most to 40
per c ent, and that at the same time it
will reduce the rate on the smaller
c omes derived from personal or profes
sional earnings.
If Ine 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
haa been able to escape.
Conclusion.
The House Hill contains other funda
mental defects which may lie summed
up as follows:
(H It pursues an erroneous principle
in imposing retroactive taxes.
0!> It selects an unjust ami unwork
able criterion for the excess-profits tax.
(3i It proceeds to an unheard-of
height in the income tax.
(4» It impost's unwarranted burdens
upon the consumption of the commu
nity.
(5) It is calculated to throw business
into confusion by levying taxes on gross
receipts Instead of upon commodities.
(6) It fails to make a 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 unlucrative taxes, the vexatious*
ness of which is out of all proportion to
the revenue they produce.
* * * * ft ft ft
Tlie fundamental lines on which the
House bill should be modified are sum
med up herewith:
(1) The amount of new taxation
should be limited to $1.250,000.000—or
at the outset to $1,500,000,000. To do
more than this would be 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-protits tax based upon
a sound system ought to yield about
$500,000,000.
(3i The income-tax schedule ought to
be revised with a lowering of the rates
on earned incomes below $10,000. and
with an analogous lowering of the
rates on the higher incomes, so as not
! to exceed 34 per cent. A direful cal
culation shows that an income tax of
this kind would yield some $150,000.
000 additional.
<4> The tax on whisky and tobacco
ought to remain approximately as it is,
with n yield of aliout $230,000,000.
These three taxi's, 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 umount of money
thought desitalde.
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 the 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 keep 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 J^eep
an undisturbed elastic margin, which
must be more and more heavily dm?/*,
upon as the war proceeds.
RIVALARMiES
MAY FIGHT
Accuse Gen. Chang Hsun of Being
Dictator Under Guise of
Young Emperor.
TIEN TSIN, July 5.—Civil war be
wteen rival military forces is immi
nent. Troops at Peking are showing
opposition to Gen. Chang Hsun’s
dictatorship under the guise of a
monarchy.
Tsao Kun, governor of the province
of Chi Li, is mobilizing for an at
tack cn Peking. His action follows the
serving of an ultimatum on Chang
Vs' r, asking that he withdraw his
army from Peking, which Hsun has
ignored.
_... _ " *
Legal blanks at the Gateway.
CITATION TO HE^RS AND ALL
INTERESTED PARTIES
In the Probate Court for the Kenai
Precinct, Third Division, Territory
of Alaska.
In the matter of the Estate of Anna
Ninuno, Deceased.
It appearing to this Court by the
petition for Order of Sale of real
property, filed herein on the 17th day
of May, 1917, by Leon C. Looker, ad
ministrator of the Estate of Anna
Nimmo, deceased, that it is necessary
to sell all of the real estate of said
decedant in order to pay her debts and
the expenses and charges of adminis
tration; therefore,
IT IS ORDERED that all persons
interested in the said estate appear
before this Court on Wednesday, the
25th day of July, 1917, at the hour of
two o’clock, P. M., on the aforesaid
day in the court room of this court,
in the town of Seward, Alaska, and
show’ cause, if any cause there be, why
an order should not be granted said
administrator, authorizing him to sell
said real estate for the purposes afore
said; and it is further
ORDERED that a copy of this Or
der be published once a week for a
period of four successive weeks in the
Seward Gateway, a newspaper of gen
eral circulation, published at Sew’ard,
Alaska, and the one most likely to give
notice to all parties interested in this
cause; and it is further
ORDERED, that a copy of this Ci
tation shall be posted at three public
places within Kenai Precinct, one of
w’hich three places shall be the U. S..
postoffice in the tow’n of Seward,
Alaska.
WITNESS MY HAND and official
seal this 19th day of June, 1917.
(SEAL) FRANK G. ENNIS,
U. S. Commissioner and Ex-officio
Judge of Probate.
Jun-19-26—Ju.-3-10-17124.
Serial 01686, Sur. 184
In the United States Land Office, Ju
neau, Alaska, May 24,1917.
NOTICE OF APPLICATION FOR
PATENT
NOTICE is hereby given that An
drew Grosvold, as assignee of Deborah
A. Luthy, being entitled to the bene
fits of Section 2306 of the Revised
Statutes of the United States and the
amendments thereto, has applied to
make entry of the lands embraced in
United States Non-mineral survey No.
184 situate on Northerly shore of Bird
Island, Shumigan Island Group, Dis
trict of Alaska, more particularly de
scribed as follows, to-wit:
Beg. Cor. No. 1 on beach at ordi
nary high tide Pacific Ocean, cor. not
set, wit. cor. bears South 1.59 chs.,
from which wit. cor. top of Twin Rocks
bears North 22 deg. 05 min. W.; U.
S. L. M. Sur. 184 bears N. 69 deg. 17
min W. 3.61 chs.; thence from true cor.
No. 1 South 9.17 chs. to cor. No. 2,
thence West 12.91 chs. to cor. No. 3;
thence North 14.44 chs. to cor. No. 4,
cor. not set, wit cor. bears South
1.62 chs.; thence from true cor. No.
4 meandering beach Pacific Ocean at
ordinary high tide (1) S. 51 deg. 38
min. E. 3.28 chs.; (2) S. 68 deg. 46
min. E. 4.16^ chs. (3) S. 74 deg. 49
min. E. 6.72" chs. to cor. No. 1 place
of beginning. Area 14.46 acres. Var
iation at all corners 20 deg. 00 min.
East. Latitude 54 deg. 49 min. 56 sec.
N. Longitude 159 deg. 44 min. 00 sec.
w.
As additional to original homestead
entry of Deborah A. Luthy, widow of
Godfrey Luthy, No. 5199 and 5973 en
tered at Boonville, Mo„ which said
scrip is filed in Juneau Serial 01654.
Any and all persons claiming ad
versely any portion of the above de
scribed tract of land are required to.
file with the Register and Receiver]
of the United States Land Office at
Juneau, Alaska, their adverse claim
thereto under oath, during the period
of publication, or withing thirty days
thereafter, or they will be barred by
till* provisions of tin* Statute.
ANDREW GROSVOLD,
By NEWARK L. BURTON,
Attorney in Fact.
First publication June 25, 1917.
Last publication Sept. 5, 1917.
IT IS HEREBY ORDERED that the
foregoing Notice be published for the
stautory period in the Gateway, a
newspaper of general circulation,
printed at Seward, Alaska, the near
est newspaper to said above described
claim or survey.
C. B. WALKER, Register.
Serial 01654, Sur. 1109
In the United States Land Office, Ju
neau, Alaska, May 24, 1917.
NOTICE OF APPLICATION FOR
PATENT
NOTICE IS HEREBY GIVEN that
Andrew Grosvold, as assignee of De
borah A. Luthy, being entitled to the
benefits of Section 2300 of the Revised
Statutes of the United States and the
amendments thereto, has applied to
make entry of the lands embraced in
United States Non-mineral survey No.
1101) situate on Sand Spit at Sand
Point, Humboldt Harbor, Popof Island,
Shumigan Group, District of Alaska,
more particularly described as fol
lows:
Beg. cor. No. 1 at ordinary high
tide beach Popof Straits, cor. not set,
wit. cor. bears North 1.35 chs. dist.;
from which wit. cor. Sand Point Post
Office bears N. 35 deg. 31 min. E.;
thence from true cor. No. 1 North
19.37 chs. to cor. No. 2, cor. not set,
wit. cor. bears South 0.87 chs.; from
which wit. cor. U. S. l>. M. Sur. 1146
bears S. 78 deg. 01 min. W. 13.03 chs.;
Astronomical Station bears S. 75 deg.
29 min. W. 13.01 chs.; thence from
true cor. No. 2 meandering beach at
ordinary high tide, Humboldt Harbor
and Popof Straits (1) S. 85 deg. 58
min. W. 5.19 chs. (2) S. 84 deg. 29
min. W. 0.04 chs. (3) S. 77 deg. 41
min. W. 1.70 chs. (4) S. 59 deg. 13
min. W. 1.08 chs. (5) S. 31 deg. 48 min.
W. 1.02 chs. (0) S. 1 deg. 12 min. W.
0.92 chs. (7) S. 31 deg. 11 min. E. 0.70,
chs. (8) S. 30 deg. 01 min. E. 4.06 chs.
(9) S. 45 deg. 27 min. E. 3.32 chs. (10)
S. 54 deg. 45 min. E. 7.55 chs. to cor.
No. 1, place of beginning. Area 17.82
acres. Variation at all corners 19 deg.
10 min. East. Lat. 55 deg. 18 min.
44 sec. N. Long. 150 deg. 31 min. 00
sec. W.
As additional to original homestead
entry of Deborah A. Luthy, widow of
Godfrey Luthy, No. 5199 and 5973 en
tered at Boonville, Mo., which said
scrip is filed in Juneau Serial 01654.
Any and all persons claiming ad
versely any portion of the above de
scribed tract of land are required to
file with the Register and Receiver
of the United States Land Office at
Juneau, Alaska, their adverse claim
thereto, under oath, during the period
of publication, or within thirty days
thereafter, or they will be barred by
the provisions of the Statute.
ANDREW GROSVOLD,
By NEWARK L. BURTON,
Attorney in Fact.
First publication June 25, 1917.
Last publication Sept. 5, 1917.
IT IS HEREBY ORDERED THAT
the foregoing Notice be published for
the statutory period in The Gateway,
a newspaper of general circulation
printed at Seward, Alaska, the near
est newspaper to said above described
claim or survey.
C. B. WALKER, Register.
FORFEITURE—NOTICE
To M. IMHOFF, C. J. IMHOFF, A.
M. IMHOFF, HARRY V. MILLER, H.
D. THIELE, ESTATE OF H. D.
THIELE, Deceased, and AUGUST
MELHORN, your respective heirs and
assigns:
•
You are hereby notified and will
take notice that we, the subscribers,
H. P. Salisbury and A. A. Hein, have
expended, during the year 1914, the
sum of Three thousand, forty-six dol
lars and twenty ($3,040.20) cents,
during the year 1915, the sum of
Six hundred ($000.00) dollars, during
the year 1910, the sum of Two thou
sand, fiye hundred and sixteen dollars
and seventy (2,510.70) cents in labor
and improvements upon each of the
following described mining claims, to
wit: OPHIR QUARTZ MINING
CLAIM, COLUMBIA QUARTZ MIN
ING CLAIM, BESSY PLACER MIN
ING CLAIM, MILL SITE and WA
TER SITE OR LOCATION, all of
which said claims are situated and lie
in the Moose Pass Mining District,
Kenai Recording District, Third Ju
dicial Division, Territory of Alaska,
The notices of location thereof are of
record in the office of the United
States Commissioner and District Re
corder for Kenai Recording Precinct
and District, at the Town of Seward,
Territtory of Alaska, to which office
reference is hereby made for a more
particular description of said mining
properties. Said expenditures were
maae for the purpose of holding pos
sessory rights and title to said min
ing claims under the provisions of
! section twenty- three hundred and
twenty-four of the Revised Statutes,
of the United States and the amend-1
ments thereto, section one hundred
and thiry-six of the Compiled Laws of
Alaska, 1913, and the Session Laws of |
the Territory of Alaska, providing for
the annual labor upon mining claims.
If you fail and refuse or fail or re- j
fuse within ninety (90) days from the
personal service of this notice, if per
sonal service be had, or within ninety
(90) days after the publication of this
notice, to contribute your proportion
of such expenditure as a co-owner,
your respectice interest in and to said
mining claims, and each and every
one of them, will become the property
of the subscribers, who are your co- j
owners, and who have made the ex-!
penditures and improvements as
above-mentioned on said mining
claims, and each and every one of
them, pursuant to the provisions of
the said statute, Compiled Laws and
Sessions Laws.
>■ A. A. HEIN
H. P. SALISBURY.
First publication, March 21, 1917.
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