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BILLIONS AVAILABLE BY PAINLESS TAXATION
Le vy on Luxuries
Will Not Onlyj
But Help Mobil
By O. M. W. Sprague
Converge Professor of Banking and i
Finance, Hari-ard University
A YEAR AGO, when the first
war revenue measure was
before Congress, there was
widespread doubt pf the ability and ;
willingness of the people to pay j
very heavy taxes. To impose addi?
tional taxation to an amount very
much in excess of $1,500.000,000, it
was asserted, would be likely to
prove disturbing to business, damp-!
en the spirit of enterprise and se?
riously diminish subscriptions to
Liberty bonds. All these fears have
proved groundless. Additional taxa?
tion to the amount of about $3,000,
000,000 was levied, and no untoward
consequences have manifested them?
selves. Business is most active, lim?
ited only by available supplies of
materials and labor; the spirit of
enterprise has not departed; in?
deed, it has been found necessary to
keep it in check by controlling new
issues of securities; and, finally,
subscriptions to Liberty bonds have
been large enough, together with
tax receipt?, to cover the huge war j
expenditures. It is doubtful wheth
er there is now any one in the
United States who would seriously
contend that our war preparations
would be further advanced at the
present time if lower taxes had been
imposed by Congress last autumn.
Law Are Needed
The statement that under exist- j
iiig laws the limits to which taxa-]
tion may be safely carried have not
been approached does not imply
that there are no defects in
those laws. Experience with the
working of the income tax and of
the excess profits tax shows clearly
that modifications of the laws are
needed, to simplify methods of as?
sessment and remove inequalities
in the burdens to which taxpayers
having similar earnings are subject.
The necessity for amendment of the
present law becomes more urgent
with the sharp increases in rates
which are in prospect. Happily, the
work has been taken in hand in
good season. Congress will have
ample time to weigh carefully each
proposal for changes in existing
rates as well as for new taxes, and
to frame suitable administrative ar?
rangements for the particular taxes
which are finally adopted. It is also
an advantage that the new revenue
law will presumably be completed
k-ng in advance of the date of pay?
ment of income and excess profits
taxes, so that taxpayers may have
ample opportunity to adjust their
affairs to the burden for which they
must make provision.
The yield of the present taxes is
somewhat greater than was origin?
ally anticipated. Congress did bet?
ter than it knew in the matter ol
adequate taxation. It is proper tc
add that it probably went quite af
far and perhaps a little beyond pub
of opinion, as it had declared il
would during the first months of oui
participation in the war. Since thai
time a number of influences hav?
ken at work which warant the con- |
fident expectation that Congress I
*ttl find widespread support |
throughout the country for a policy
P greatly increased taxation and a
more general, and therefore more
equitable, distribution of this par?
ticular war burden.
Polly Must Die
Each month finds us engaged
"?ore deeply in war activities, both
W'intary and industrial. The busi
fces8-a8-uRual folly is decidedly and
8;gnincantly less vociferous. More
*?<i more generally it is being rcc
cWi??ed that, since the war requires
th? use of supplies of materials
t *ow, it is only through the curtail
LUXURIES TO THE COLORS!
ment of consumption now, i. e., by!
saving, that the war can be
financed. Each of the three possible
methods of financing the war brings
about this contraction in consump?
tion, but with important differences
in the burden on different individ?
uals and classes in the community.
The issue of government paper
money and bank credit, whether in
the form of bank notes or of de?
posits, enforces enconomy through
advancing prices, but in a hap-haz-1
ard fashion, and mainly from those
in receipt of stationery money in?
comes. We would certainly regard
a tax as most unjust which took
S300 or $400 a year from a woman
having a fixed Income from bonds
of $1,000. And yet that is precisely
what we are doing in financing the
war in part by means of credit in?
Subscriptions to Liberty bonds,
from whatever source derived, pro?
vide the government with funds, but
those of them which are made by
banks and by means of loans by
commercial banks to subscribers are
an effective means of securing a
larger portion of the total output of
industry for war uses only because
the money incomes of a large pro?
portion of the people do not ad?
vance at an even pace with rising
prices. The war can only be financed
with savings from current income,
Credit inflation is a potent means o?
enforcing involuntary economy, but
in a most uneven and grievously un?
just fashion. Some escape entirelj
and even profit from the situation;
higher salaries and wages in th?
case of many more, at least in part
offset the advance in prices; then
remains a very large number wh(
1 secure no relief whatever. Thej
contribute a huge quota of enforcec
? savings in support of the war ant
have nothing to show for it, eithe
? in Liberty bonds or even in the in
I ward satisfaction of definite ta:
! payments to the government.
! The Danger of
j Further Inflation
Enlightened self - interest, then,
should prompt every one with a sta?
tionary or near stationary income
to advocate vigorously all measures
designed to induce or compel a suf?
ficient amount of direct saving to
cover the entire cost of the war.
Frequently the high cost of living
is urged as a reason against taxes
which would fall upon people hav?
ing very moderate or low incomes.
Such a policy would be positively
harmful to those whom it is de?
signed to benefit. Moderate taxa?
tion of the well to do and light tax?
ation of the rest of the community,
together with voluntary saving in
order to subscribe to Liberty bonds
have not provided the government
with funds sufficient to meet our
war expenditures during the past
Credit expansion to something
like $2,000,000,000 was required to
. balance the account. There is, in
! deed, evidence of increasingly rigor?
ous saving on the part of many peo?
ple, but at the same time the ex?
penditures of the government are
: mounting with extraordinary rapid
? icy. There is, therefore, grave dan?
ger of further and more rapid in
? flation than we have as yet expe
? rienced. It can be escaped only by
the adoption of measures which will
induce drastic economy in consurnp
tion on the part of every member of !
Inflation enhances the money cost
of the war, and consequently the
burden of taxation after the war,
when prices will presumably fall to
a lower level. But there is a far more
immediate and vitally serious con?
sequence of inadequate saving.
The continuance of the civilian de?
mand for commodities seriously re?
tards mobilization of the labor and
capital of the country for war uses.
If drastic economy were universally
practised both labor and the owners
of factories would be far more eager
to transfer their services to war
work. The insistent civilian de?
mand for goods is a cause of friction
and delay which the offer of fancy
prices and wages by the government
dees not entirely overcome.
In shaping the war taxation and
also the war loan policy of the gov?
ernment two objects should and can
be attained. In the first place funds
in sufficient amount to carry on the
war must be raised. This is abso?
lutely esential. In the second place,
in raising the necessary funds,
every effort should be made not in
| consistent with the major object to
! secure the funds by methods which
! will induce and even compel saving
j and economy by every member of
I the community, rich and poor alike.
These two objects cannot possibly
be attained through piecemeal
patchwork legislation. A compre?
hensive financial policy is required
To work out such a programme ir
detail would far exceed the limits oi
a newspaper article, but the genera
scope and character of the policj
which is needed can be indicatec
briefly with some approach to com
i Landlords Have an
Under the present law the income !
tax and the excess profits tax are
the chief sources of revenue. They !
should continue to be our main re-1
liance All super-tax rates except
those on portions of income above
$500,000 should be sharply ad?
vanced. In Great Britain all in?
come in excess of $50,000 now pays ,
52 Vj per cent, and 25 per cent of the I
entire income is paid on earned in- |
comes of $12,500 and on unearned !
incomes of $10,000. In addition to
the upward revision of rates, a
number of equitable changes in the
law would materially increase its
yield. The rental value of houses
occupied by owners should be in?
cluded in the determination of in?
come. At present they enjoy an
unfair advantage over those who
pay rent for their homes. Again,
the incomo from future issues of
municipal securities should in some
way be reached. This should be
done, among other reasons, to pre?
vent the unhealthy stimulation of
municipal undertakings which an
artificially low price for municipal
bonds will induce.
It would be fruitless to attempt
to suggest changes in the detailed
provisions of the excess profits tax
law until the officials who are ad?
ministering the law shall have made
a report of its workings. The base
for the computation of the tax?the
return on invested capital?is not
easily determined, thus inviting eva?
sion and involving an inequitable
diversity of assessment on taxpay?
ers who are in virtually the same
situation. Defective methods in levy?
ing a tax become more and more
serious as the rates are advanced.
Whether the present excess profits
tax can be so amended that a drastic
advance in rates can be equitably
made should be given, most careful
consideration in Congress. It may be
found the wiser plan to retain or
even reduce the rates in the present
law and supplement it with a war
profits tax modelled after that in
i successful operation in Great Britain
! and most of the other warring coun
i tries. Based on the comparison of
profits before and during the war, a
war profits tax is a comparatively
simple tax to administer. Moreover,
; experience demonstrates that a very
PROFESSOR O. M. W. SPRAGUE
high percentage indeed (80 per cent
is taken in England) of profits en?
hanced during war can be taxed
away without untoward conse?
quences. Far from retarding, such a
tax seems positively to enhance war
industrial activities by removing
from the minds of the mass of the
people suspicions of huge profits to ?
Be Heavily Taxed
High rates of income and excess
profits taxation are primarily, and
almost solely, to be favored because
of the revenue which they will yield,
since much of the money thus se?
cured would have been saved and in
vested in Liberty bonds. But, ob?
viously, a billion secured by taxation
is more satisfactory from the point
cf view of the country as a whole
than a billion secured by the sale of
bonds. Heavy taxes on articles of
luxury and on a few articles of gen?
eral consumption would also yield a
large revenue and at the same time
enforce economy in consumption, !
tlius setting free materials and labor
for war uses.
Tobacco is the only commodity in
widespread use which is heavily
taxed. Even so, it is taxed far less
? heavily than in most if not all other
| countries. Raise the tax on tobacco
i by all means, but at the same time
tax, and tax heavily, a few other arti?
cles of even more general consump?
tion. The importance of taxing a few
articles in this class heavily rather
than placing light taxes on many ar?
ticles can hardly be over-emphasized.
A tax of a cent a pound on coffee,
for example, would yield little reve
I nue, and might or might not reduce
consumption appreciably. This would
depend largely upon whether the tax
I were absorbed by producers and mid?
dlemen, or used as the occasion for
I advancing the price from 3 to 5 cents
a pound. A tax of 10 cents a pound
! on coffee, on the other hand, would
I certainly reduce consumption, would
j produce much revenue, and, since it
would certainly reduce consumption,
no advance in price beyond the
amount of the tax could be made by
Among other commodities which
j would serve admirably as subjects
i for general consumption taxes may
be mentioned tea, at, say, 20 cents a
pound (it is taxed a shilling a pound
in England) and other temperance
beverages. Sugar might well be taxed
2 or 3 cents a pound ; it is a commod?
ity the consumption of which must be
kept down in any event. For the j
same reason a tax of, say, $1 a bar- j
re! on wheat flour might properly be
imposed. These taxes would not sub- j
ject any considerable number of peo?
ple to an Intolerable burden. Thanks
to the intense war demand for labor
of every description the poorest tenth
of our population, if able and willing
tc work, is better off than before the
war. For those incapable of work
some other and more adequate mode
of relief should be adopted. A policy
which is desirable for the community
as a whole should not be put aside on
account of incidental disadvanta?
geous effects upon an exceedingly
Vicarious Service an
Object for Taxes
Against taxes and luxuries the su?
perficial objections which are raisec
against taxes on articles of genera
consumption do not apply. Sucl
obviously do not impose a grievou;
burden during a great war, evei
though they are made sufficient!;
heavy to bring about an extensivi
diminution in consumption. Service
as well as articles of luxury shouli
be taxed. A few illustrations wi!
serve to show what can be done ii
this branch of taxation. Consider th
case of the automobile, both its man
ufacture and use. The men employe
in making the cars have the ski:
needed in all sorts of war industries
the factories could be converted t
war uses. Gasolene, it is said, can t
produced in quantities sufficient fc
all requirements, but its productio
takes a part of the scanty supply (
labor and its transportation contril
utes to the traffic congestion on ?
railroads. The huge pleasure c?
mileage also is in part responsib
for the large amount of labor ar
material employed in keeping hig
ways in repair. In these cireur
stances a tax en automobile sale
though a proper souce of revenue,
! rp1ativp.lv unimnortant.
A heavy tax should be imposed on
the use of cars for pleasure pur?
poses. This can be accomplished
through a system of licenses to pur?
chasers of gasolene. In England, be- I
fore the purchase of gasolene for
pleasure use was cut off altogether, it ?
was found to be perfectly feasible to I
distinguish between commercial and j
recreational uses, even when the I
same car was used for both pur- j
poses. A tax of 20 cents a gallon on
gasolene may seem excessive at first
blush, but it should be borne in mind I
that there is no kind of expenditure |
which is so conspicuous as the omni- j
present motor car.
A Stamp Tax on
Articles of Luxury
It"would certainly be far more easy
, to convince the workmen in receipt of
high wages that thrift and the pur?
chase ?of war savings stamps are
vitally important factors in winning
the war if the unnecessary use of
motor cars were to be discontinued.
Upon a small class of automobil?
owners still another tax should be
Chauffers have mechanical aptitudes
and possess not a little mechanical
skill. All of them could be usefully
employed in connection with our
shipbuilding programme or in allied
occupations. What conceivable objec?
tion then can there be to a tax of $10
a month, rising by stages to $50 a
month, on all employers of chauffeurs
for other than commercial and pro?
Automobile expenditure has been
considered in some detail for illus?
trative purposes only. All other ave?
nues of large unnecessary expend?
Origin of Playing Card Symbols
PLAYING cards have an interesting |
history. Popularly spcakmp, |
they are supposed to date from
their so-called invention for the enter?
tainment of Charles VT of France by
i Gringonneur, a miniature painter. One
authority says that the game Jeu de
Itoi is derived from the game of cards
invented in days of yore by an illus?
trious and learned person. Such a dis?
covery, however, is not likely to have
gone unchallenged, and Gringonneur
most probably got his ideas from the
i original cards with emblematic figures
? then in use for fortune-telling through
? out Europe by the gypsies.
No specimen exists of the original
cards, but traces of them may be found
in the cards called "tarots," from the
Greek "to pierce." A complete tarot
pack numbers seventy-eight, of which
fifty-two have their equivalents in the
modern pack, namely, the forty "pip"
cards from the ace to ten and the four
kings, queeti3 and knaves. There were
originally besides four knights, which
later wer? suppressed. The balance of
the pack is made up of the "Fool,"
which has no number, and twenty-one
"atouts": (1) The Juggler, (2) the
Papes>s, (3) the Emperor, (4) the
Empress, (5) the Pope, (C) the Lover,
(7) the Chariot, (8) Justice, (9) the
Hermit, (10) the Wheel of Fortune,
(11) Fortitude, (12) the Pendu, or man
hanging by one leg, (13) Death, (14)
Temperance, (15) the Devil. (16) the
House of God, or Thunderbolt, (17) the
Star, (18) the Moon, (19) the"*"Sun!
(20) Judgment, (21) the World.
This last is reckoned highest among
atouts, which again are of superior
value to tho court or coat and minor
cards. The "Fool" counts separately.
It has no independent value but the
power to increase that of any card in
combination with it, and answers to
the sero in Arabic numerals. It also
corresponds to the ancient Phil, or ele?
phant, of Indian chess, or the "Fol,"
or "Fou," in the tower or castle.
The Juggler, or Master of Fortune,
with his oap and bells, is another Ori?
ental symbol, modified to suit the
times. "Pope Jean," or the "Papess,"
refers to an alleged female occupant of
the Holy See for a reriod of nearly
two year? and a half between the pon
tification of Leo IV and Benedict III,
On^he Italian tarots the "Lover" is
represented by a regular Cupid, what?
ever may have been the original love
emblem. The "Pendu" is suggestive of
a Chinese torture, and possibly im?
plied suspense, as the Egyptian "Char?
iot" speed or promptitude. It is signifi?
cant that 13 is the "Death" card. A
universally accepted emblem is the
"Devil," who had his personal appear?
ance much embellished in the Middle
Ages. "The House of God," which
shows a house shattered by lightning,
is symbolical of desolation, the conse?
quence of a catastrophe. The "Star,"
the "Moon," the "Sun," objects of prim?
itive worship, are sufficiently emblem?
atic, and their accessories on European
tarots, as in the "World," which has a
prayer meeting, are plainly after?
The only method traceable in such is
that of class distinction, as in tarots of
the four Indian canted; the vase is the
symbol of the priest, money of the
merchant, the sword of the warrior and
the club of the tiller of the soil. Sim?
ilarly on mediasval cards swords sig?
nified the nobility, chalices the clergy,
coins the citizens and clubs or staves
Yet, taking the entire tarot pack, the
whole ia held together by a, ayaUa not
at first apparent, but which is also to
be found in Chinese packs of 77 tab?
lets. Thus, omit the fool, or zero, and
there remain in the puck 77 cards, or!
11x7, while the atouts and the others
separated give, respectively, 7x3 and
8x7. Now, 7 is the sacred number of |
the Orient, which occultism uses also
to distinguish the periods of human?
ity's development from matter into
spirit, and this connection which it
makes is therefore worth remark.
Otherwise with tarots it is the cards
which correspond to European atouts
that afford the clew to the original con?
ception. Thus, in certain Indian cir?
cular cards the pack consists of 120
pieces in 10 suits each, with its pre?
siding "atavar," or incarnation of
Vishnu. These are the Fish with fish
aa emblems on the court and "pip"
carda,'the Tortoise with tortoises, the
Boar with shells, the Manlion with
disks, the Buddha with lotuses, the
Dwarf with watering pota, Paraeurama
with clubs, Rama with arrows, Vala
rama with clubs. Of tbese Rama ranks
aa the most powerful, club-rama com?
ing next. Here, too, the first five suits
are headed by four-handed kings and
the ten is reckoned highest, while to
reverse the process two-handed king?
control the last five groups, in which
' the ace count? moat.
Must Pay for
;ure should likewise be subjected to
?nerous taxes. Here the luxury taxes
idopted in Great Britain and in
Prance furnish valuable precedents.
The recent British budget, for exam?
ple, contain? provisions for the im?
position of a stamp tax on purchases
sf all commodities which are deemed
uxuries, either from their nature or
;heir price, at the rate of two
lence to the shilling. This is a meth?
od of dealing with the matter which
is far more satisfactory than the
taxation of producers or of dealers.
Neither class would have valid
ground for complaint, since, owing to
the curtailment of production of lux?
uries which is an unavoidable conse
sequence of the war, stocks of sucbj
goods are certain to appreciate W
Four Billions Could
Thus Be Added *
? From these various sources $4,
000,000,000 of additional revenue can
be derived without the slightest dan?
ger of retarding war industrial ac?
tivities. On the contrary, the mobili?
zation of the economic power of the
country would be positively stimu?
li) ted. It is also a reasonable as?
sumption that the savings available
for subscriptions to Liberty bonds
would not be reduced by anything
like the amount of the additional
revenue derived from the taxes. In?
deed, it is not at all improbable that
there would be a positive increase in
the total as result of a diminution
of wasteful extravagance induced by
the luxury taxes.
Taxation, if properly devised,
might be made to provide all the
funds required for the war. Public
opinion is apparently not prepared
for so drastic a course and adequate
: administrative machinery is lacking.
Much more than half the funds
i needed for the next twelve months of
j the war will be borrowed. Will there
be sufficient increase in savings to
; enable us to escape the evils of fur
| ther credit inflation? It does not
j seem probable, if we continue to rely
I entirely upon voluntary action stim?
ulated only by the interest rate on
Each Liberty bond campaign is
: followed by a drop in the price of
bonds. This is an inevitable conse
I quence of subscriptions far in excess
j of actual savings. Each successive
future bond issue will therefore pre?
sumably involve an advance in the
interest rate unless savings make a
closer approach to the amount which
the government must borrow.
j An Involuntary
j Economy Bond
One possible means of inducing
adequate savings may be mentioned.
In New Zealand income tax payers
are required to subscribe a certain
percentage of their income to gov?
ernment bonds. A more elastic ar?
rangement would doubtless prove
more satisfactory to taxpayers and
so permit a more rigorous applica?
tion of this method of securing funds.
This could be accomplished by im?
posing a further tax of 10 per cent
in addition to whatever regular rates
of income tax may be carried in the
new revenue measure. Taxpayers
might then be allowed the option of
paying the additior.nl tax or of buy?
ing three or four times the amount of
the tax in bonds. These bonds, which
might be called economy bonds, would
in many respects be quite unlike Lib?
erty bonds. They would be regis?
tered and non-transferable until one
year after the close of the war; they
would be ineligible as a basis for
rediscounts at Federal Reserve
banks, and all bankers would be
urged, as a patriotic duty, not to
grant loans to facilitate their pur?
chase. Further, in order to gain ex?
emption from the extra tax, the tax?
payer would be required to state in
his income tax return that ho had
purchased his quota of economy
bonds from savings and from no
other source; and that his holdings
of securities and other property were
the same, or the equivalent in value
of those which he owned at the be?
ginning of the previous year. The
adoption of an arrangement of this
kind would furnish the individual
| citizen with a powerful motive for
economy and would set free much
labor and materials for war use?. It
would also diminish materially tho
extent to which the further expan?
sion of credit will be required to
finance the war, and so enable us to
! escape the burdens attendant upoq
a further advance in prie?*?