Skip to main content

Can Taxes Be Lowered?


ISSUE:  Winter 1933

I

The average citizen thinks of Government as a remote, incorporeal agency, that takes away a large part of his income if he is very rich, and gives him a large part of his income if he is very poor. What the government does with its money is of relatively minor interest to the plutocrat: where the government gets its money is of no concern to the pauper. The middle-class man of moderate income is less concerned either way. While he may give more intelligent thought and study to the matter than either of the others, he is not very vocal. He is “the forgotten man”; he is seldom dragged out into the limelight except in times of political stress, and hence nobody pays much attention to him. The conspicuously expressed attitudes toward government finance, accordingly, are likely to be of a twofold, and utterly contradictory, character.

“In a time like this,” naturally, these opposite attitudes become accentuated. Everybody being poorer than usual, the wealthy classes insist that the government shall cut down on its impositions, while the destitute, vastly augmented in numbers and having nowhere else to turn, plead for an immense enlargement of relief expenditures. Thus there arises the situation, most vividly exemplified in the case of the federal government in Washington, of officials discouraged from venturesomeness by a heavy barrage from the big guns of industry, and at the same time stimulated to action by the perpetual peppering of rifle and machine-gun fire. On the one hand, the Chamber of Commerce, Wall Street, the manufacturers, and the bankers join together in making demands on Washington, which are diametrically opposed to the more dramatic ones made by the B. E. F., the Unemployed Councils, and the National Farmers’ League.

Of the two groups, the banker-manufacturer group, at the present writing, has a decided ascendency. With the whole nation in an unprecedented state of poverty, and, according to its retiring Chief Executive, actually slipping on the brink of bankruptcy, the necessity of economy seems almost axiomatic. But whatever the necessity, it is a great deal harder for a nation—as for an individual—to economize when its income is greatly reduced than when it is pleasura-bly inflated. Saving hurts. To the individual, however, there is one kind of saving that can be endured cheerfully, and that is saving in taxes. If we can only do our saving vicariously, through the government, we will be able to bear up under it. One is inevitably more impressed by those aspects of a situation which are concrete, and touch him immediately, than by those which are remote, devious, and indirect. The average taxpayer knows to a cent just what he pays to government—hasn’t he spent hours, with expert legal assistance if he can afford it, trying to reduce the sum to the lowest minimum that he thinks he can get away with?— but he would be a rare individual who had ever computed with care the value of the benefits he derives from government, or even listed them in a superficial way. To most of us, government is the great spender, and what it spends it takes from us, giving no immediate and direct return. If government would only relax its demands, the money which otherwise would go for taxes could be so much more efficaciously spent under our immediate supervision!

These considerations explain in part, if explanation is necessary, the widespread and insistent clamour for economy in every department of government, federal, state, and municipal. But they also raise the question whether this demand may not be ignorant and short-sighted, and whether a response to it on the part of government might not be actually prejudicial to the welfare of the country. When an individual considers his own personal budget, he does not settle the matter by determining simply to spend as little as possible; he considers what he can secure by spending all the money that he can possibly get. Is it not possible that a corresponding attitude with reference to government expenditures would be more salutary than an undiscriminating clamour for a wholesale slashing of budgets?

One reason for the present situation, of course, is that most of us have more trust in our own ability to spend money wisely than we have in government. We have no fear of spending our own money dishonestly with respect to ourselves, but we have a great deal of suspicion that government will do precisely that. The question of waste and corruption, then, is always present in every discussion of government economy. But waste and corruption are inherently abnormal, and are subject to restraint or elimination by other means than blind curtailment of funds. Particularly at a time like this, when the clearest political thinking is required to relieve present disaster and to forestall possible greater calamity, the red herring of waste and corruption should not be allowed to divert us from the trail of constructive and salutary government spending. Unfortunately, we have reached the point where few voters will support any candidate who does not promise to slash government expenses and thereby reduce taxes. How else explain the wild promises of the two leading presidential candidates in the past election? One would have had the voters believe that, if he were returned to office, the federal budget would be reduced by $1,500,000,000; another promised, in exchange for votes, a reduction of from $800,000,000 to $1,000,000,-000! The voter, rather naturally, demands and receives such promises, incapable of fulfillment though they are; for hasn’t he repeatedly heard over the radio, until he has accepted, the charge and counter-charge of graft, mismanagement, waste, and corruption in the use of taxpayers’ money?

II

Let us, then, seek to set up a mental picture of government as it is designed to be, and should be, in a democratic society, namely, a great communal agency erected, among other things, for the purpose of taking a part of the total income of society, and spending it for purposes which can better be handled on a communal, than on an individual, basis. Illustrations of such purposes suggest themselves in wide variety: the protection of life and property from internal and external attack and disaster, the building and maintenance of roads, the improvement of waterways, the provision of general educational facilities, the handling of communication through the mails, and possibly also by telephone and telegraph, and the provision for other basic needs such as water, light, and heat. Obviously the test of expenditure by such a government would not be its volume, but its results. If the basic assumption is true, that a communal agency can, and does, provide some utilities more efficiently and economically than individuals could do for themselves, clearly the criterion of government expenditure is furnished by the limits to which this principle can be carried, either because individuals can provide some things better for themselves than government can for them, or else because for the sake of a feeling of independence they prefer to do. their own buying, even though it is not so efficacious. This latter consideration will begin to operate very definitely if and when the level of broad necessities is exceeded. The people as a whole have a right to prescribe how their joint funds shall be spent, and as soon as the realm of luxuries is entered there will be immense diversity in tastes and preferences. There is, accordingly, the remote danger that a government with great taxing resources may spend money for a variety of nonessentials which individual citizens would prefer to handle for themselves.

We can throw light on the present dilemma if we examine government expenditures over a longer period of time than the average person is likely to consider, especially if he is faced with an immediate problem of either getting his tax burden reduced, or of carrying an election. Reflection should convince us that, over long-time trends, government expenditures must increase rather than decrease. If for no other reason than the obvious one of population increase, this would be true. But should this be the sole reason for, and the sole explanation of, the rising sums demanded by governments, no immediate problems would probably arise, for the increased government demands would be met, by and large, by the increased heads to be taxed, as well as by the resultant increase in property values. There must be, then, more fundamental reasons than this increase in population for the rising cost of government.

One, especially in a new country such as ours, is found in the decline in numbers, both relative and absolute, of an agricultural population at the expense of a growing urban population. Clearly, with the growth of urban areas, more demands of a communal nature are made on governments, which can only mean an increase in government expenditures. The city dweller, unlike the farmer, cannot supply his own water, for example, and consequently looks to his own municipality to do this for him. Likewise, he turns to the municipality for streets, parks, garbage disposal, and a host of services peculiarly urban in nature. Should he enjoy electricity, gas, street transportation, and so on, as he is more than likely to do, he turns to a government agency for protection from monopolistic charges. It is in these ways that government becomes something more than a mere institution for the preservation of law and order; in a genuine sense it is a gigantic corporation openly engaged in selling those goods and services which the citizen cannot supply for himself because of the very nature of his surroundings.

But this process of urbanization is only one aspect of a general trend toward social complexity, and is therefore only one reason why government budgets grow. Another, omnibus in nature, includes every thing that can be listed under the vague heading of “social consciousness.” Without attempting any exact identification of the term here, one may observe that we have come to depend more and more on government as an agency for balancing the positions of the contestants in society for material and cultural possessions. Demands on government made by conservatives of today were rarely made even by radicals of yesterday. This constantly increasing pressure on governments to strengthen the positions of the weaker contestants in society is well illustrated by a glance at the growing number of schools, hospitals, libraries, forest preserves, agricultural experiment stations, baby clinics, municipal lodging houses, and so on. A glance at the growing demands now being made for unemployment insurance, old-age pensions, national planning, and the like, is thoroughly indicative of even greater government responsibility in the future. This is a far cry from the pure individualistic philosophy on which our economic system is based and which it tends still to approximate. At its inception, the core of this philosophy was that under almost no circumstances was a government to interfere in the economic activities of citizens. Economic affairs would be better determined by the “natural” laws of economics than by governmental authority. The cry, then, for a newer conception of government indicates a growing realization of how rusty are the hinges of a system of natural law which only in rarefied theory preserves economic equilibrium.

Even, then, leaving aside the mounting cost of bigger and better wars, jails, psycopathic wards, reform schools, and so on, one reaches the inescapable fact of increasing government costs—a fact which no amount of campaign oratory can make less real, a fact which is further borne out by the statistics of the case. Over the past twenty years, for example, federal expenditure has increased 467 per cent, while during the same period population has increased only thirty-four per cent, and national wealth only ninety-four per cent. While New York City’s population increased over the same period from less than 5,000,000 to more than 7,000,000, its annual budget rose from less than $175,000,000 to more than $620,000,000. In only one year (1917) was the total annual budget smaller than that of the preceding year.

III

Government costs inevitably increase; but a recognition of this is of no assistance to those faced with the immediate problem of balancing expenditures with incomes—a problem accentuated by the present depression—so as to minimize the effective resentment against whatever plans they propose. As already indicated, this is no light task. They are confronted first of all with a great amount of mass thinking— and much of it is coherent—to the effect that society owes to its less fortunate members a measure of protection against the ravages of a cyclical depression of unusual intensity and duration. With around twelve million (no one knows the exact number) wage earners, out of less than forty million for the country as a whole, out of work, and with more than this number working on a part-time basis, the existing relief agencies are overtaxed and all eyes are turned towards the government for the necessities of life for those hardest hit. Municipalities, counties, and states respond; lodging houses, breadlines, extra charity wards in hospitals, and so on are increased ; and doles of money and goods are dispensed out of public funds, with, however, a reluctance that seems to suggest that an increase in such expenditures is influenced more by the vehemence and volubility of the demands than by the specific need. Likewise the clamour for relief on the part of those who, in the last analysis, control the destinies of political organizations, opens treasuries, especially the Federal Treasury, for the relief of railroads, banks, insurance companies, building and loan associations, and so on. Paradoxically enough, it is chiefly from representatives of this latter group that the inconsistent cry of tax reduction also comes.

This would not be so bad in itself if it were not for the other half of the scissors. But during a depression the anticipated income from taxes, fees, and duties is not realized. With thousands of idle fields, factories, and workshops, taxable income and profits drop appreciably; highly deflated real estate values yield less revenue; purchases of foreign goods diminish and less is realized from tariff duties; income from fees slumps, since fewer persons have the courage to secure licenses to marry, run restaurants, or go abroad.

To meet even usual expenditures without assuming any of the social obligations arising from an economic breakdown, governments must, in some way, either increase their income or curtail their expenses. One of these a government must do, since it enters each period of depression without adequate reserves. Indeed, so accustomed are we to heavy indebtedness that we view with alarm even a hint of a real surplus in a government budget and shudder to think of the number of post offices, junketing trips, and pork barrel projects which would come into existence if a genuine surplus should threaten. Because of this, then, governments are now attempting both to decrease expenditure and increase revenue, a process which becomes more frantic as the social and economic consequences of the depression become accentuated.

Taxes are placed where taxes did not formerly exist—the sale of jewelry, theatre tickets, materials for home brew, lipsticks, motor cars, checks, telephone calls, and the like may be made to assist in balancing a cantankerous budget. States, as well as the federal government, have canvassed the list of such goods with the idea of seeking additional taxation revenue. For the quarter July-September of this year, the results of the federal taxes on such commodities have been disappointing; only the tax on stock transfers has netted more than the estimate. In every other case the more important taxes have signally failed, notably the tax on home-brew materials which realized only $1,400,000 instead of the expected $20,500,000; the tax on checks which netted not $19,500,000, but $8,300,000; the tax on automobiles which earned $2,000,000 instead of $8,000,000; and the tax on jewelry which, instead of $2,250,000, netted $282,000.

Solvent governments not already burdened by heavy debt charges may seek additional loans in the open market. Mildly insolvent governments may ease the situation by turning to the funds established by the federal government. Short-time financing may give way to long-time financing. All these methods are being tried, the success of which can be measured not so much by the amount of money secured as by the size of future incomes, profits, and property values, which alone can liquidate the present loans.

As a last resort existing tax rates may be increased on a progressive basis and money which now finds its way into ostentatious display, stock market inflation, safety deposit boxes, and old socks, as well as into surplus and hence idle productive equipment, may be placed in the hands of those only too eager to spend it for consumption goods, a process which would tend to eliminate the paradox of a depression in the midst of plenty. The cry for tax reduction merely anticipates a tax increase and serves to postpone the event.

IV

The other half of this attempt at budget balancing finds its expression in curtailing existing expenditures. Simplest of all attempts is to cut salaries, force employees of government agencies into the ranks of the unemployed, stop the construction of public works and equipment, and so on. If the sole purpose of a balanced budget is to secure identical totals at the foot of two columns of figures without any regard to the welfare of society, then the problem is simplicity itself. With the same limited purpose in mind it should likewise be relatively easy to secure a measure of public satisfaction over proposed budgetary changes, which have been made mandatory by this depression, by the judicious use of logrolling and back-room politics.

This is well illustrated by the situation in New York City, where bankers and business men descended on the budget hearings and, aided by the press, which played up petty graft and frivolous expenditures, demanded a reduction in City expenditures sufficient to warrant a reduction in taxes, on pain of denying credit to the City if their demands were not met. Should the City have granted this, it would probably have involved, amongst other things, a substantial reduction in the salaries of City employees. Even a less shrewd group of politicians than New York City boasts would have been quick to defend existing salaries, especially with an election around the corner. But a solution was found. On the one hand salaries were saved, City employees pacified, while on the other hand sufficient savings of a dubious sort—which will be considered later—were made, the bankers satisfied, and the City’s credit temporarily saved.

Even a cursory examination of governmental finances during this depression will show that budgets are balanced without much consideration of the social consequences of the acts necessary to reach a balance. It is exceedingly doubtful if any sizeable percentage of the governments within our country which collect and spend public monies will be able to make substantial reductions in their expenditures for this year. It is even more doubtful if the sum of all government expenses will be reduced, though the average annual increase may not be maintained, this even in the face of the increased buying power of the depression dollar. This is surprising only in the light of the public clamour for reduction, and not at all if one considers the demands on government budgets arising out of the depression. What will happen, of course, is that the attempts being made to reduce and curtail certain expenditures, in order to keep down taxes, despite depleted income plus unexpected demands for relief, will alter the present budgetary arrangements. We may expect, then, to go on making sizeable cuts in certain appropriations, and, because of the nature of our political arrangements, these cuts will probably follow the line of least resistance. Any analysis of federal, state, and municipal budgets will show what kind of reductions the legislator will most readily approve. For example, almost eighty per cent of the federal funds go for the army and navy, pensions, veterans bureau, interest charges, and sinking funds to retire public debts. Substantial reductions are likely only in those expenditures not covered in the above. Under these conditions, a blind clamour for economy can only confuse and embarrass the conscientious legislator; not help him.

In somewhat similar manner substantial savings in municipal expenditures can be made only by reducing those items which are not fixed, comprising a minority portion of the total budget. In 1931, for example, more than one-third of the entire budget of New York City went for interest, redemption, and amortization of debts. In that year the total City budget was $620,840,183, which was an increase of almost ten per cent over the budget of 1930. For 1932, the budget as amended stood at $631,366,279.97. In the preparation for the 1933 budget, the various departmental estimates reached a total of $639,497,256.15, which was reduced in the tentative budget to $614,648,912.81, and still further reduced in the proposed budget to $558,406,601.02, leaving a hoped-for saving of $72,959,696.24. This proposed saving comes largely from the decision to convert short-time subway bonds to fifty-year bonds, accounting for almost fifty million dollars. This is a mere expedient and represents no saving at all, for under the long-time bonds the City will be forced to pay $254.42 in principal and interest for each $100.00 borrowed for subway construction, as opposed to only $143.82 under a short-time plan. Since this charge will be spread out over a longer period of years it naturally makes the right side of the present budget look smaller, but since it will add to the cost of operating the subway system, it is reasonable to suppose that the “saving” will be passed on to the strap-hangers by means of a higher fare. The balance of the saving is to be found where expected—in those items which, when reduced, will produce the least reverberation. For example, the appropriations for parks are reduced (in round numbers) by $763,000; for libraries the reduction is $367,000; for education, $8,737,000 (of which $3,815,000 represents a surplus from the Teachers’ Retirement Fund and is used as a credit against budget debt service) ; for museums, zoological and botanical gardens, etc., $265,000; and for health, sanitation, hospitals, and child welfare, the reduction is $6,738,000.

A somewhat hasty check-up on several city and state budgets reveals data indicating that New York City is not alone in making such savings. One New England textile town, facing a mounting budget and a falling off in revenue, has just dismissed a substantial number of employees (150 teachers alone), cut the salaries of the remainder of its employees from the mayor and city manager on down by an even twenty per cent, eliminated all Americanization classes for foreigners, all branch libraries, the city dispensary, all supervised city recreation (including either drastic curtailment or abolition of high school coaches, assistant supervisors of music and art, and physical directors), kindergartens, and maternity and child welfare activities.

Attempts to balance budgets have resulted in other schemes. These include: abolition of school gardens and teacher training schools; increase in fees for municipal golf courses and tennis courts; elimination of medical inspection in school rooms; eliminating adult education classes, vocational guidance work, summer schools, and fire prevention departments; cutting into the appropriations of museums, libraries, harbour and levee construction, airports, public printing departments, hospitals, old-age homes, and homes for handicapped children; and changing the diet of animals kept in zoological gardens from beef to whale meat.

In this manner, then, we attempt to secure balanced budgets. No matter where we live today the chances are that we are affected; the difference is only one of degree. Our wide clamour, if limited solely to a demand for lower government costs, is likely to continue to bring on additional cuts where society as a whole can least afford them. In addition, it is no less serious to have governments meet the problem—still following the line of least resistance—by increasing the public debt at the expense of our own and future generations. If the Technocrats are correct—and they probably are—our burden of debt, public and private, has now reached the enormous sum of $200,000,000,000, with an annual charge for interest and amortization of more than $20,000,000,000, a sum not far from half the present estimated national income. To follow either course to any degree is certain to affect adversely the future physical, cultural, and educational development of our people.

V

But in addition to the above, the question of cyclical recovery in the face of present government practices may well be raised in a final indictment against the sort of reduction in public expenditure which is now common. Because of its bearing upon our present hopes of financial recovery, a somewhat lengthy analysis is necessary.

Specifically, what are the probable consequences of reductions in government expenditure during a depression like ours today? The answer, of course, depends on what we consider to be the nature and causes of the depression. Fortunately, there is at least general agreement today that the root of our difficulties is an over-development of productive plant, and an excess of available goods and services, relative to the purchasing power of the community. The outstanding visible expression of the situation is its most painful concrete feature: unemployment. It is generally conceded that increased purchasing power in the hands of those who now lack it can alone turn the tide. There are only two ways of securing this. One is to give money; the other is to provide jobs. Between the two, assuming an equal increase in purchasing power, there can be no question of choice. From the point of view of the effect on character, and from every other social consideration, it is immeasurably preferable to permit members of the normal working force of society to earn their money, rather than to hand it to them gratuitously, whether such benefactions be called by the name of “dole” or by some less odious term. Any measures, then, which will tend to reduce employment, or diminish the number of jobs, must operate in precisely the wrong direction.

But government, taken in the aggregate, is far and away the largest employer in the country. It would probably be impossible to get complete statistics on this point, but some hints are furnished by the fact that there are probably more than one million public school teachers, 132,000 policemen, and 175,000 persons employed in handling the mails. Not only is the government a vast employer of labor; it is also an extensive purchaser of commodities. As compared with other great businesses, probably the government spends relatively more of its revenue for services, and less for commodities, than the average. But the proportion is not a matter of great importance for the present analysis. Money spent for commodities ordinarily expresses itself in the long run, in part at least, as a demand for labor and services. The important thing is that these two items, services and commodities, are the only things for which the government spends its money—just as they are, indeed, for any other business or individual. A reduction in government expenses, accordingly, must inevitably mean a reduction in money spent for services or in money spent for commodities. As far as commodities are concerned, government purchases do not differ materially from unofficial purchases. A diminution in government purchases of goods means simply a decline in the total demand for the products of industry, and therefore adds directly and proportionately to the conditions which are responsible for business depression.

As regards the services paid for by government funds, a reduction in expenses may take two forms, the dismissal of workers or a reduction in salaries. The former, obviously, can mean only one thing—an increase in the number of the unemployed, a diminution in consumer demand, and an aggravation of all the evils from which we are seeking an escape. But what of the reduction in salaries ? This is the sole form of government economy to promote prosperity which at least invites profitable debate. Will the money saved by reductions in government salaries be spent in ways more helpful to business, and more conducive to recovery, than if it had been expended by the officials themselves? We can not, of course, ignore the fact that the government gets its money from somewhere, and that money saved through government economy is thereby made available for someone else to spend—someone who otherwise would not have had it. The crux of the whole matter obviously and emphatically lies in one question. Where does the government get the money that it spends? That is, who keeps the money that the government does not spend as the result of a process of economy? If the money so saved remains in the hands of those who will spend it in ways more calculated to promote prosperity than if the government had spent it for services and commodities, then government economy is a measure toward revival. If, on the other hand, as seems probable, the money so saved remains in the hands of those who are likely to devote it to the same sort of uses that helped to produce the mad orgy of 1929, and the consequent collapse, then government economy is merely one more instance of the futile and insane behavior of a society which is pitifully ignorant of the social and economic principles that underlie its own welfare and stability. That it will most likely remain in the same hands that dug the pitfall of 1929 is indicated by the fact that about seventy-five per cent of the federal income tax is derived from incomes in excess of $50,000.

The justifiability of government expenditure, and the wisdom of government economy, are to be judged not at all by the magnitude of the funds involved, but by the sources from which they come and the ends to which they go.

The key, not only to periodic depressions like the present, but to the chronic instability and irregularity of our whole industrial life, is the inequality of purchasing power which results from the operation of the accepted economic order. The only permanently and penetratingly efficacious remedy must be a greater equalization of purchasing power, and a more equitable per capita adjustment of income to desires. If government will use its taxing power to reduce the incomes of those who have a large surplus over and above their practical desires for consumption, and who are consequently under the constant incentive to invest large sums in un-needed additional productive plant, and will expend it for services honestly rendered by those who otherwise would have no jobs, and for goods honestly produced for which there would otherwise be no demand, then government expense will be a positive factor towards business stability, and an increase in expense will be a positive means of promoting recovery.

The reference to “honesty” brings us directly back to the question of waste and graft which we earlier set aside. It should now be clear that these matters have no bearing whatever upon depression or prosperity. Since our trouble is largely an overproduction of goods, relative to consumption, waste by the government, just as waste by an individual, may be an economically beneficial procedure. It is, to be sure, a very silly procedure, viewed in the light of intelligent reason. But when a society’s whole economic system is irrational, absurd, and self-contradictory, an incidental item of silliness may be an advantage. As far as graft is concerned, from the point of view of its effect upon the depression, the criterion is precisely the same as for money honestly received—will the recipient spend it in ways more likely to promote recovery than would those from whom the money has been taken? This is not an apologia for corruption, or even for waste. Corruption and waste must be judged by themselves, and dealt with according to the best ability of society. But their prominence and their unpleasant aspects ought not to befog our perception of the inherent result and functions of government expenditure.

In this connection, a clear distinction must be made between ethics and economics. The point under consideration is the effect of government manipulation of the funds of the community upon business prosperity and recovery from the depression. If corruption results in increasing the number of recipients of grossly inflated incomes it is economically as well as ethically abhorrent. If, on the other hand, waste takes the form of paying small salaries for petty and inconsequential jobs to a large number of individuals who would otherwise be standing in bread-lines, it is economically justifiable and socially constructive. Of course, it would be better still to spend the same amount of money for work effectively and honestly performed on public undertakings of broad and enduring general utility, preferably not self-liquidating. These considerations have an obvious bearing on the question of the payment of the cash bonus. However repugnant to one’s sense of justice and fair play this may be, it might prove economically beneficial in the present juncture, provided the money was derived from the right sources and in the right way. Whether the economic benefits would be great enough to offset the outrage to ethical principles, each individual must judge for himself.

VI

Naturally, the views expressed in this article will offend the average American business man. To him, the whole difficulty seems to be traceable to his inability to make money. This inability, in turn, is traceable to the fact that his cost of production comes too close to the total selling price that he can get for his products. If this cost of production can be sufficiently diminished by a reduction in his taxes, so that he can attain a margin of profit that will enable him to conduct his business satisfactorily, then he will start the wheels turning once more, and open the door of his hiring office to the waiting stream of applicants for jobs. Conversely, if the government increases his taxes further, the hope of operating his business profitably becomes even more remote. His clamour for a reduction of government expenses is perfectly sincere, and presumably honest.

In such a situation, what is the legislator, or the executive who directs fiscal policy, to do? It is, indeed, an ugly dilemma. The fact that the dilemma rests ultimately upon the illogicality of an economic system based upon general and competitive profit-seeking, does not help him in the immediate crisis. There is no hope of altering the basic system swiftly enough to relieve our immediate and urgent distress. The only practical procedure is to recognize clearly and frankly the basic principle involved, and to adjust government expenditures accordingly. This principle should now be perfectly clear. The relation of government expenditures to the prosperity of a community is not governed by volume, but by sources and uses. The tax system, not only during periods of depression but during stretches of normal business activity, should be so devised as to impose the least possible burden upon legitimate productive activity, but at the same time should be aimed primarily at the maximum equalization of purchasing power in the hands of the final consumer. In other words, it should be animated by a genuine philosophy of consumption, rather than by the antiquated and anomalous philosophy of production. Taxes should be levied primarily not upon business, but upon individual incomes. They should be very heavily graduated so as to promote the buying power of those who at present have desires far in advance of their incomes and to reduce the excessive amounts which are habitually offered for investment by those whose incomes are far beyond their practical consumer desires. Finally, so long as the profit system persists, just so long should taxes fall directly and heavily on that distinct form of income which we call profits.

0 Comments

By submitting this form, you accept the Mollom privacy policy.

Recommended Reading