The Nonpartisan Leader Newspaper, January 10, 1921, Page 6

3 . won’t have to pay the cost. T A A B T S T R R P SR N N P S A e D o S YA S R L DAy WHO WILL PAY OUR TAXES? Proflteers Seek to Throw Burden of War Debt on the Common People—“ Tax Dodgers Busy at Washlngton Now BY E. B. FUSSELL HREE years ago A. C. Townley was telling the people of North Dakota, Minnesota and other states: “Unless we take steps now to conscript the war profits being made by our profiteers, the boys who are fighting, what are left of them, will have to come home and spend the rest of their lives paying the cost of the war.” For saying this Mr. Townley was-called a pacifist, a pro-German and a liar. He was charged with dis- + loyalty " and arrested not once, but many times. Antj-farmer papers and pohtlclans of the Norfh- west said, agam and again: “Townley is trying to mislead you. We will pay the cost of the war by excess profits taxes and taxes on large incomes. "The men who fought the war Nothing will be too good for them when they come home.” That was three _years ago. Today every word that Townley said in 1917 and 1918 is coming true. Congress is preparing to abolish the excess profits tax and to reduce the income tax on large incomes. The loss of revenues from these sources is to be made up by sales-taxes that will fall on every con- sumer, or by taxes of 10 cents a pound on tea, 2 cents a pound on coffee and sugar, increased taxes on tobacco and the like. The ex-service men who were told during the war that after it was over “Nothing will be too good for you,” are told, when they apply for a bonus that would make up for their meager pay of $30 a month, that the United States can not afford to pay it, because the millionaires and war profiteers are going to have their taxes reduced. Every word that Mr. Townley said about the shifting of taxes from the war profiteers to the service men and the common people is coming true, ‘except that he ‘didn’t make it strong enough. Mr. Townley said that the soldiers would have to spend the rest of their lives paying off the war debt. Now, ., according to the latest plans announced by Repub- lican leaders, the cost of the war will be spread over the next 60 years. Tt will be a charge not only for the soldiers during their lifetimes, but for their children and their grandchildren. - FEDERAL TAXES GO TO MEET WAR COSTS, PAST AND FUTURE - The subject of taxation i is often considered a com- plex and umnterestmg one, generally because it is presented .in connection with column after column of dull and dry figures. In this article, therefovre, we will cite just as few figures as possible. We will consider briefly three proposmons. ‘What are federal taxes for? ‘Who pays them now? Who will pay them under plans for “tax re- vision” ? The first questlon is easy to’ answer. The plain fact of the matter is that the great bulk of federal ° The proportion’ taxes go for paying war expenses. of the federal taxes that goes for wars, past, pres- ent and future, has been estimated at 75 per cent- by the treasury department, but this estithate elimi- - nates such expenditures as the war-time shlpbmld— - Congress is now considering bills to re- peal the income profits tax and to lower the income tax on large incomes. To make up for these losses congress plans " either to levy new taxes on consumers, such as a general sales tax, special taxes on tea, coffee, sugar and the like, or to spread payment of the war debt over a period of 60 years. The Leader . is doing all it can to call attention to the steal that may be put over.on the " common people.. The only way to make sure that it is stopped is for every farmer to write his congressman- direct, protesting against any action" that will shift national taxes any further from the rich to the poor. WRITE YOUR CONGRESSMAN TO- DAY. Then let’s all get together to elect congressmen two years from now |} who can be depended upon to establish a taxation system that will bring justice to all. ing from the “war” list. Including such items as war-time shipbuilding and increased departmental expense caused by the war, Doctor E. B. Rosa of the United States bureau of standards estimates that 93 per cent of our present expenses are due to the war. Whether war expenses take exactly 75 per cent or exactly 93 per cent of our national tax income is * unimportant. - The point is that the great bulk of our national taxes are due to war.” The easy way to reduce national taxes, therefore, would be to do away with wars. During the recent campaign the - Democrats said we could prevent wars by going into the league of nations and the Republicans said we could prevent wars by keeping out of the league of nations. But now that the war is over we find both Secretary of the Navy Daniels, Democrat, and President-elect Hardmg, Republican, ‘advocating the largest navy in the world for the United States, all hands urging the increase of our army and many influential ‘leaders of both sxdes .for compulsory military training. _ . 'The next point is who pays natmnal taxes now? At present they are raised by a variety of means of which the principal are excise taxes, tariff duties, income taxes and excess profits taxes. Excise taxes are such taxes as the tobacco tax of 18 cents a pound. Though this is paid in the first instance by the manufacturer he passes it on im- mediately to the consumer. . When tariff duties were first originated they were hailed with joy by, the polltlclans The average per- son who buys an article like ‘an ice cream soda, and finds a 2-cent tax added to the price, kicks like a . steer, either out loud or to himself. - But when the - " same person buys a pair of gloves from ‘abroad with a 25-cent duty attached onto them, he does not kick, because the duty is included in the price. For years Republican politicians advocated tariff duties, higher and still higher, with the war cry, “Make the foreigner pay the taxes.” = The average voter didn’t stop to think that the foreigner imme- "diately added the tax to the selling price and that, therefore, the consumer paid the tax, as usual. As a matter of fact the consumer usually pays tariff duties twice over. Suppose, for instance, that half of our national supply of gloves comes from abroad and half is produced in the United States. A 2b-cent duty, let us say, is levied on imported _ passed directly on to'the consumer, are to be retain-. : gloves. The importer of these foreign gloves im- mediately adds 25 cents to the selling price so that the consumer pays the entire tax. But it does not stop there; for the American manufacturer also adds 25 cents to his selhng price and the consumér pays this, too. In an effort to get a form of tax that could not be passed on immediately to the consumer the income and excess profits taxes were devised. It is the be- lief of economists and tax experts that a compar- atively small portion of such taxes can be pass- ed on because the rapidly-increasing rate of taxa- tion eats up the larger share of profits when they grow beyond a certain figure. Just how the income and excess profits taxes work is expla.med elsewhere on this page. But now, under the plea of tax revision, congress proposes to change the. present plan. Various pro- posals are now bhefore congress, but nearly all of them have these essential features: The excise taxes and tariff duties, which can be ed or increased. The excess profits and income taxes, which can not be passed on to the consumer, or can be- passed on less easily, are to be redoced. GENERAL SALES TAX AND SPECIAL COMMODITY TAXES ARE PROPOSED How to make up the loss in national revenues that will be caused by repealmg the excess profits taxes and reducing the income taxes is the problem that is now before congress. ' One element wants a flat tax on all sales, to raise $1,000,000,000 a year, which would be borne dixectly by the consumer. _Another element wants a tax of 10 cents a pound on tea, 2 cents a pound on coffee and sugar, increased tobacco taxes and so forth, which also would raise $1,000,000,000 and also would be paid directly by the consumer. Such violent opposmon is likely to develop from the eommon people of the country, when they real- ize the full import of these pla.ns, that Representa- tive Mondell, Republican leader in the lower house, has proposed still another scheme. This is that congress abolish the excess profits taxes and the higher income taxes and levy no new taxes on con- sumers. This will make it impossible to carry on the scheme of paying the cost of the war in 25 years. “Then let’s put off the war debt for 60 years,” says Mondell. The argument seems to be that with the excess profits taxes repealed and the income taxes reduced, . the consumers will be paying the entire cost of. the war, anyhow, and they might as well be a.llowed 60 years for the job as 25, How the Present Income and Excess Proflts Taxes Work {] VERY plan for “tax, rev1s1on" that has tains two main provisions. No. 1 is that the excess profits tax be abol- ished. No. 2 is that the income tax on large incomes be reduced. It will be interesting to farmers and others to refresh their minds as to just what these two forms of taxation now provide. The excess profits tax was levied on the theory that corporations making profits far above the nor- mal should return a percentage of these profits to. the support of the government which made them possible. - Its provisions are as follows: The first $3,000 net profits of any corporation are : entu-ely exempt from this tax. : Eight per cent of the total capitalization of the corporatlon is exempt in addmon to the first $3,000. .been put before congress to date con-: Above this exemption ($3,000 plus the first 8 per cent) corporations are required to pay 20 per cent of -their net profits to the government. If thre corporation earns more than 20 per cent it is required to pay 40 per cent on the portion above 20 per cent of its net capital. S : $100,000 CORPORATION HAS 11 PER CENT PROFITS EXEMPT To see how this works out, take a corporation - with a capital of $100,000.. The first $3,000 of its - profits are exempt, also the next $8,000 (8 per cent of $100,000). - Therefore: the corporation can make profits of $11,000, or 11 per cent of its capital, in 8 year without being required to pay any.excess profits tax whatever, ‘Above thls figure it must pay. excess profits taxes, . If 1t makes $12,000 profits 5\12 per cent) it pays fis . PAGE six Gu e Y # go per cent on the $1,000 above the first $11 000, or 200. If it makes $15,000 profits (15 per cent) it pays 20 per cent\on the $4,000 above the first $11,000, or $800. - If it makes $20,000 profits (20 per cent) it pays gg ger cent on the $9,000 above the first $11,000, or business to make. It is doubtful if 1 per cent of the farmers of the United States made this much prof- it, even during the war years. It would be rea- sonable, therefore, to expect that corporations mak- ing 20 per cent profit should give a good—sxzed por- tion of it to keep up the government. But' the actual excess profits payments, when i analyzed, ' are ridiculously small..’ The $100,000 corporatlon that ma.kes 11 per cent profits - pays SEE e Twenty per cent is a big profit for any line of 8 o : o] Sy & | K% o o Q"- < <M & i R TR - < v ; v o N i & ! b/ ! Y t S ¥ g bt apE .o' e (o A LEN