The Nonpartisan Leader Newspaper, June 24, 1918, Page 11

’ P 4 T L4 % J ‘Why War Profits Should Be Eliminated Welfare of Our Country Demands Taxation Insure Industries Don’t Make Greater Gains Than in Peace Tlmes—The Error of Tariff Duties BY W. G. ROYLANCE = THE beginning of the war there was a nation-wide demand that the cost of the war be paid out of the proceeds of taxation, in- stead of by the sale of bonds, and that those who were mak- ing enormous profits because of the war should bear a large share of the tax burden. The more radical held for conscription of wealth as drastic as the conscription of men, while the more moderate proposed merely hlgher tax rates on ex- cess profits than on ordinary incomes. During the greater part of last year most financiers and big business interests opposed drastic taxation and strongly favored bonds. At first they held for the issue of such bonds as would be attrac- tive to the investor, such as were issued earlier by the allied governments to enable them to make purchase of war supplies in this and other neutral countries. And such were the means by which all modern wars heretofore have saddled upon the people a debt that kept them bound to the moneyed interests for years or even centuries after. Strong- ly supported by the country at large President Wil- son and Secretary McAdoo were able to defeat this proposition, and to inaugurate in its stead the popu- lar loan policy that has been so successful. Now the financial interests have shifted their ground and hold for the increase of the popular’ bond issue, rather than the extension of taxes. The secretary of the treasury has promised that reve- nues shall be raised half by bonds and half by tax- ation. As the president is wholly in agreement with this policy it is altogether likely that additional war taxes will be voted before congress adjourns. THE LEAGUE LED THE WAY How should the additional taxes be distributed? If a popular vote should be taken on the question the people would undoubtedly decide in favor, first of all, of additional taxes on war profits; next for an ad;ustment and general increase of the income taxes; then for a national inheritance tax, or some other form of tax that would draw heavxly upon large unearned fortunes: Big business interests in general favor import duties and excise, or internal revenue, taxes; that is, taxes that will fall directly upon the consumer. “Tax the honey, not the bee,” says one very plausible writer. But this argument would have greater force if it were not so plain that he regards great accumulations of wealth as the source of production—that is the “bee” that should not be taxed—and disregards the fact that taxes falling on consumption often disastrously cut down the support and therefore the efficiency of labor. Though there is much special pleading in the tax ' proposals of the supporters of big business inter- ests, it is plain that there has been a wonderful Besides charginz too much for their war services, Lhe great corporations are menacing the financial stability of the country by absorbing so tremen- dous a share of its liquid assets. Money paid out in dividends may or may not find its way back into the channels of trade soon enough to aid in financing the war. That depends almost entirely upon the patriotism of the coupon- clippers, unless the government tax it away from them. Can the patriotism of a man who will take an enormously unfair profit be depended upon to re- turn a substantial part of it to the gov- ernment in the shape of a'loan? The president is right when he says that if patriotism will not deter men from taking a profit out of fheir country’s distress they should be prevented by price-fixing or some other means. If all methods fail and excess profits still accumulate, they should be taken as taxes—not merely a part, but the whole of the excess. broadening of thought on the question of how to pay for the war since a year ago last April. When Nonpartisan league lecturers and other progres- sives urged a year ago that we should pay for the war as we go along, and lay the burden of its financial support largely on wealth, they aroused a storm -of ridicule and professed indignation. They were scoffed at as visionaries and denounced as economic anarchists. But within six months reputable economists, after mature deliberation, announced that not only is it sound policy to pay as we go, but that it is absolutely impossible to do anything else. It was pointed out that once we have all our resources and labor engaged in war industries, any increase in money would mean only inflation and higher prices, not increased production. It was shown that there is a vast difference between our situation and-that of the allies before we entered the war. Before that time they could borrow from us; they could sell bonds to us and with the proceeds buy materials from us. After we entered there remained no in- dustrially strong nation from which we and our allies could buy on credit. If we borrowed it would be from ourselves. What then would have been the effect, if the gov- ernment had issued bonds of the same kind sold in this country by England and France? It would have been simply to agree to pay bondholders high rates of interest to induce them to release credit enough to enable the government to make its pur- chases in a market where production would have reached an absolute limit. Prices would have soar- ed beyond belief. Price-fixing would only have further curtailed production. More and more bonds would have been necessary before the war would have been won—if indeed it could have been won under such conditions—there would have been piled up a mountain of debt that would have well nigh buried our industries beyond hope of resurrection. It was this certainty of disaster from adopting big business finance for war purposes that made the advocates of those methods pause. And well it might; for their adoption would have whelmed them and their profits in the common ruin. SALVATION FROM A MOUNTAIN OF DEBT Now the opponents of higher taxes seem to as- sume that all war revenues can be raised from popular bond issues. Are they justified? The Lib- erty bonds have been a great success, chiefly be- cause they have stimulated saving. Also the Lib- erty bonds operate in part as a tax. When a purchaser of bonds borrows the money to pay for them and pays a higher rate of interest than that carried by the bonds, he is assuming a part of the interest burden that otherwise would fall wholly on the government. In effect Uncle Sam says to Mr. Business Man, Mr. Workingman, Mr. Manufacturer or Mr. Farmer: “I need money to pay soldiers and sailors, to build ships and to make guns and munitions, will you lend it to me at 4% per cent?” The answer is: “Yes, if I can borrow it from Mr. Moneybags, who is not engaged in production and is living off the in- terest on his investments.” On being approached, directly or through his bank, Mr. Moneybags consents to make the loan— at 6, 7, 8 or 10 per cent. It is plain that in all such cases the loan subscriber contributes the dif- ference between the interest he receives from the ‘government and the interest he pays to the money lender. The result is the same where the bond buyer uses money needed for carrying on his busi- ness, and either cuts down or borrows again; except that in these cases there is a direct loss in produec- tion that may more than offset the benefit to the government of his bond purchase, MUST NOT SACRIFICE EFFICIENCY Liberty loans accomplish two things: First, they enable the government to meet its immediate money obligations—to pay its bills, to remain solvent. Second, they necessitate saving on the part of all buyers who have not income enough above usual expenditures to pay for the bonds, thus liberating materials and labor for war purposes. But there is an absolute limit beyond w!uch it Here ls the packing plant of Smft & Co., at the Sonth St. Paul stockyzrds. the meat monopolies. The profit of the five big packers last year was 33 per cent. What farmer or small business man did so well? Many thmkmg people belleve that the government should control and operate - President Wilson has approved the recommendations of a special committee appointed by him to investigate the packing industry that there should be no gov- - 'ernment ‘operation unless it is found impossible to enforce regulation. = The packers are thus to be taken on good: behavior for a time. But the probabilities are, 'indginx by the facts brought out by the federal trade commission, that the delay in taking over the plants will be as unfortunate as was the delay in taking over Adeqmte atching of these'proflteermg interests will teqnire a large eorps of ‘men, and at the best the packers mll hold the cards.