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War Taxation


_Some Comments and Letters_


OTTO H. KAHN


1917




War Taxation

_Contents_


Some Comments                                     Pages 7 to 42

Letters

I
THE INCOME TAX                                   _Pages 43 to 60_

II
RETURN UPON TAXABLE AND TAX-EXEMPT SECURITIES    _Pages 61 to 70_




_War Taxation_


The recent publication of a little pamphlet entitled "Some Comments on
War Taxation" elicited numerous interesting comments by the readers.
The points to which these comments mainly related were the statements
contained in the pamphlet that:

_First._ If our neighbor Canada continues her present policy of not
taxing incomes, or if she imposes only a moderate tax while rates of
income taxation in America are fixed at oppressively and unnecessarily
high rates, there can be little question that the ultimate result will
be an outflow of capital to Canada, and that men of enterprise will
seek that country.

_Second._ Moneyed men not having their capital engaged in active
business, if they are so constituted that their consciences permit them
to evade their share of monetary sacrifice, can put their funds into
tax-exempt securities.

In reference to the foregoing points, I have written two letters in
answer to correspondents. These letters contain an elaboration of
certain arguments and viewpoints set forth in the original article on
War Taxation and also refer to some additional phases of the subject.
Those who have done me the honor of perusing that article may possibly
be interested in reading these letters.

In order that they may be presented as a part of the argument as a
whole, the original article with a few additions and slight revisions
is printed in the first part of this pamphlet, followed by the letters.

O. H. K.

52 William Street,
New York, July 5, 1917.




SOME COMMENTS ON WAR TAXATION


    _This is a reprint, somewhat amplified, of an article printed
    recently in the New York Times. The original article was written
    before the recommendations of the Ways and Means Committee of the
    House of Representatives were reported._


In a time of patriotic exaltation and of universal obligation and
readiness to make great sacrifices to bring a most just and righteous
war to a successful conclusion, the voice of sober argument and matter
of fact considerations is apt to grate upon the ears of the people.

That voice is all the less likely to be popular when the arguments it
puts forth may easily lend themselves to the interpretation of being
actuated by solicitous care for selfish interests.

I am fully aware that by publishing the following observations I am
exposing myself to that interpretation and to criticism of, and attack
upon, my motives.

Yet, seeing that certain measures now under consideration threaten to
take shape in a way which, from my practical business experience and
after mature deliberation, I am bound to regard as faulty and as indeed
harmful to the country, I believe it to be right and proper to
contribute my views to the public discussion of the subject, for
whatever they may be worth.

I can only hope, then, that in what I am going to say I shall be given
credit for endeavoring to speak conscientiously and to the best of my
knowledge and judgment from the point of view of the welfare of the
entire country and not of the welfare merely of the well-to-do.

I shall address myself to the practical aspect and to a few phases only
of the question and shall not attempt to enter into the economic
theories and the broader and deeper considerations involved.

I shall assume in my argument that what Congress is seeking to
accomplish is to impose taxes justly, effectively and scientifically
with the desire to disturb the country's trade and commerce as little
as possible and to avoid as much as may be the evils of financial
dislocation.

I shall take it for granted that at a time when more than ever the
unity of the country should be emphasized, sectional selfishness will
find no place in the taxation program, and that, should it be attempted
nevertheless, the congressional delegations of the States which would
be unjustly affected, would resist, regardless of party affiliations,
harmful discrimination against their constituents and their States.

I shall assume that it is not the purpose and intent of Congress, under
the guise of the necessities of the war situation, to embrace the
doctrines of Socialism.

Our present economic system, our present method of wealth distribution
may or may not stand in need of change; the fact remains that Congress
has no mandate to effect a fundamental change.

The consequence of such a change would be so immensely far-reaching
that no government has the right to sanction steps to bring it about
until the subject has been fully discussed before the people in all its
bearings and the people have pronounced judgment through a Presidential
or other election.

I will first state what in my opinion ought not to be done:




I


I take it that not many words need be used to expose the fallacy of the
argument, heard even in the Halls of Congress: "If men are to be
conscripted, wealth also must be conscripted."

_Men will be conscripted to the extent that it is wise and just and
needful. So, and no other, should wealth and the country's resources in
general be conscripted._

And, are not the children of the well-to-do conscripted equally with
the children of the poor?

Indeed, the proportion of the sons of the well-to-do on the actual
fighting line is bound to be a predominating one, because vast numbers
of wage workers in the industries and on the farms will necessarily
have to be retained at their accustomed vocations in order to maintain
the output of our factories and farms.

Have the children of the well-to-do been backward in volunteering? Were
they not, on the contrary, amongst the very first to offer to serve and
to fight?




II


_There appears to prevail amongst not a few people the strange delusion
that America's entrance into the war was fomented by moneyed men, in
part, at least, from the motive and for the purpose of gain._

_Were there any such men, no public condemnation of them could be too
severe, no punishment would be adequate. I am absolutely certain that
no such hideous and dastardly calculation found lodgment in the brain
of any American, rich or poor._

Moreover, is it not perfectly manifest that any rich man in his senses
must have known that his selfish interest was best promoted by the
continuance of the conditions of the last three years in which America
furnished funds and supplies to Europe at huge profits, whilst our
entering the war was bound to diminish those profits very largely
(indeed, to entirely eliminate some of them), to interfere with
business activity in many lines and to compel the imposition of heavy
taxes on wealth?

It is to the credit of our rich men that, though fully realizing the
extent of the monetary loss and sacrifices which war between this
country and Germany must necessarily bring to them, there were but very
few of them who supported the Peace-at-any-Price Party or favored the
avoidance of America entering into the war when it had become plain
that our participation in that war could not be avoided with honor and
with due regard for our duty to our own country, or to the cause of
right and liberty throughout the world.

Yet, somehow, the pacifists seem to have singled out the rich as mainly
responsible for the war.

It may be due, consciously or unconsciously, to a resulting feeling of
resentment that _the proposal to confiscate