the proposed 16 per cent. profit tax and an excess profit tax on the British model, at the rate of say twice that figure—to begin with—the general consensus of opinion would consider the latter as much the fairer, much the less cumbersome to handle and collect, and much the less hampering upon business activities. Yet, statistics seem to show that such an excess profit tax would bring in a far larger return than the proposed 16 per cent. profit tax. From figures which were shown to me it would appear that a 40 per cent. tax on excess profits over and above the average earnings for the past three years would yield for the present year the amazing total of at least $800,000,000 (in addition to the yield from the corporate income tax taken at the rate of 4 per cent.).

These figures are based on the assumption that the aggregate profits for 1917 will approximately equal those of 1916—a not unreasonable assumption provided always that unscientific taxation or other unwise measures do not destroy prosperity. (As a matter of fact, the profits for the first half of 1917 are likely to exceed those for the same period of 1916.) The three-year average was selected on the theory that 1914 was an exceedingly poor business year, 1915 was a year of fair prosperity and in 1916 the full effect of our stupendous war business had come to raise profits to an exceedingly high level.

3. There are very numerous forms of taxes, stamp-taxes, etc. (such as, for instance, a 2 cent tax on checks), which, whilst they would mainly fall on the well-to-do, would be in no way burdensome, and would produce a very large aggregate of revenue.

What seems to me in principle a very sensible tax, has been suggested, namely, a tax on purchases (i.e., each single purchase) of all kinds of merchandise (excepting foodstuffs, and probably raw material) of one cent for each dollar or greater part thereof, exempting single purchases of less than say five dollars.

This tax, which should be paid by the purchaser, would produce a very large revenue. It would be borne mainly by the well-to-do, would be more widely distributed than almost any other form of taxation and would be felt but very little. It would be easily and cheaply collected and would begin to accrue much sooner than most other taxes.

4. I am not convinced that the total amount which needs to be spent or which as a matter of fact can be spent in the course of the year requires so huge a sum to be raised by taxation as our legislators appear to contemplate.

The policy of raising a large portion of war expenditures by taxation is wise and sound. But to be iconoclastic in applying that policy, to make that portion so large as to chill the spirit and lame the enterprise of the country is neither good politics nor good economics.

The present has its rights as well as the future. Sacrifices should be reasonably averaged. An annual sinking fund of 5 per cent. would extinguish the war debt in fifteen years.

5. Democratic England under two Prime Ministers belonging to the Liberal party has shown how huge amounts of increased revenue—much greater relatively and greater even absolutely than are required in this country during the first year of the war—can be obtained by taxation without undue dislocation of the existing economic structure and without banefully affecting the country's prosperity. While it would not do for us to follow the English method of taxation in all respects, it would seem the part of wisdom for us to profit from her successful experience. And I hope it will not be deemed presumptuous if I venture to suggest that it might not be amiss for our Government in this connection to permit to the practical experience and judgment of business men some recognized scope in the deliberations, as I understand was freely done in England. I am entirely certain that the spokesmen for the business community would give their time, their best thought and their disinterested service to the task of co-operating in devising a wise and fair scheme of taxation as fully, readily and patriotically as they have done and are doing to the task of placing the Liberty Loan.

6. In determining upon the scheme and detail of taxation, it should be borne in mind that the intent of the proceedings is not punitive, neither is it to apply practical Socialism under the guise of war finance.

Taxation is a problem in mathematics and national economics. It cannot be tackled successfully by hit or miss methods, or upon the impulse of the moment. It needs to be approached "sine ira et studio" if the best results are to be obtained for the country at large.

Congress and public opinion might well ponder the advice recently cabled here by one of the leading financial writers in England: "You should go slow in your tax plans. Too violent a financial dislocation would be caused, unless taxation is most judiciously and scientifically apportioned."

The desire to place the financial burden incident to war preponderantly upon the wealthy is just and right, but even in doing things from entirely praiseworthy motives, it is well to remember the old French saying, that virtue is apt to be more dangerous than vice, because it is not subject to the restraint of conscience.

Since this article was published, I have received several letters stating that, owing to the excessively high cost of living and for other reasons, men of small means could not afford and should not be asked to bear additional taxation to any appreciable extent and that therefore the proposed vast increase in the income tax is a necessity.

I fully agree with the premise, but not with the conclusion. Economics are stubborn things and cannot be successfully dealt with emotionally. I yield to no one in my sympathy for those who have to struggle to make both ends meet and in my desire to see their difficulties lightened. I quite agree that the financial burden of the war should be made to weigh as little as possible upon the shoulders of the poor and those of small means. Will a two-cent tax on checks be a burden upon the poor and those of small means? Will a five-cent tax on single purchases (excepting foodstuffs) of $5? Will an excess-profit tax on the lines which I propose? The list of similar queries could easily be continued.

The present cost of living is undoubtedly alarmingly high. I believe this condition of affairs, to a certain extent at least, could be alleviated by appropriate measures and that every effort should be made to that end. But a huge increase in the income tax and unwise business taxation will not accomplish this. It will, in fact, rather accomplish the opposite, apart from lessening employment.

LETTERS

I

The Income Tax