incomes or inheritances. For the feeling was still very strong that income and property taxes ought to be left to the separate states, which had in the meantime considerably increased their revenue from such sources. A federal tax on war profits was, however, imposed. On the other hand, the tax on tobacco was largely increased, a high tax was levied on bills of lading, and a considerable augmentation was made in postal, telegraph, and telephone rates. From all these sources an additional revenue of about 500 million marks was expected. When the bill passed through the Reichstag, a tax on sales was added, estimated to yield about 130 millions. In the next year, 1917, the war profits tax was considerably increased, so as to produce about 400 million marks additional; but, on the other hand, a high tax on coal was now imposed, designed to yield 500 million marks and provision was made for a tax on railroad transportation to yield 310 millions. Finally, in 1918, the government recognized the necessity for very much greater revenues from taxation and a law provided for additional receipts estimated at 3 billions of marks, on the one hand, from an increased tax on war profits and, on the other, from taxes on sales, luxuries, and higher rates on drinks and postal communication. The exact figures as to the proportion between the two categories of taxation are not yet available; but it is quite safe to say that in the federal government, at least, the revenue from indirect taxes considerably exceeded that from direct taxes. In the separate commonwealths the situation was the reverse, without, however, materially changing the general result.

In contrast to all the continental countries, England pursued from the outset a different path. It is true that a considerable increase of revenue was derived from indirect taxes like customs and excises. From 1914 to 1919, for instance, the customs revenues were actually trebled and the yield of the excise taxes increased about 50 per cent. But the chief reliance for meeting the war expenditures was placed on a new war profits tax and an augmented income tax. The rate of the war profits tax was raised gradually from 50 to 60, and finally to 80 per cent; and the income tax rates were progressively increased until from a quarter to a third of very moderate incomes and over a half of larger incomes were taken for the state. In the last year of the war, as appears from table K, over three quarters of the tax revenue was derived from direct taxes on wealth. This is a great contrast

to the fiscal history of previous wars.

TABLE K.-SOURCES OF REVENUE IN GREAT BRITAIN, 1914-1919.

In the United States, also, we find the democratic movement so strong that the overwhelming proportion of the new tax revenue was derived from direct taxation on wealth rather than from indirect taxes on consumption or transactions. Although the excess profits tax was not at first levied at rates as high as in Great Britain, the remarkable prosperity of the country resulted in large revenues from this source. And while the income tax did not reach in the lower stages so high a level as the British, the rates in the upper schedules were made considerably higher, finally attaining the unheard of figures of 77 per cent. As a result of the revenue act of 1917 over 79 per cent of the tax revenue came from direct taxation, principally the income tax and the excess profits tax. As a consequence of the second great revenue act of 1918, the proportions were still more favorable, the amount ascribable to direct taxation in 1919 being, as appears from table L, in reality almost 81 per cent although the introduction of the system of payment by instalments somewhat obscures this result.

TABLE L.-INTERNAL REVENUE RECEIPTS OF THE UNITED STATES, 1918, 1919. (In millions)

1 As the new taxes are payable in instalments, about 2 billions of the 1919 tax will not be received until the fiscal year 1920. Making allowance for this, the proportion of taxes on wealth really ascribable to the year 1919 rises to 80.6 per cent.

It thus appears that the United States succeeded even better than Great Britain in carrying through a democratic fiscal program in the war; and that the Anglo-Saxon countries disclose a very decided contrast to all the other belligerents. The consequences are apparent in the relatively more favorable situation in which Great Britain and the United States find themselves when confronting the problems of post-bellum finance.

IV

With the impossibility of securing more than a comparatively small proportion of the war expenditures from taxation, it became necessary everywhere to resort to borrowing. This was consequently done by all countries on a gigantic scale; although here again the fiscal and economic conditions in the various countries varied so widely that they employed quite diverse expedients.

Great Britain provided at the outset of the war for immediate needs by selling short-time securities, principally treasury bills. Before long, however, these had accumulated to such an extent that it became imperative to issue long-time bonds. Accordingly, subscriptions were invited to the first war loan which was issued in March, 1915, followed in June of the same year by a second war loan. These bore interest at the rate of 32 per cent and 42 per cent respectively and the amount issued was 332 and 592 millions sterling or 1,703 and 2,883 million dollars respectively. On February, 1916, an issue of war savings certificates was inaugurated. In April, 1917, the third war loan was issued at 4.5 per cent, yielding 941 millions sterling, or 4,403 million dollars, followed in June of the same year by an issue of 5 per cent exchequer bonds.

Beginning in October, 1917, a continuous issue of 4 per cent and 5 per cent national war bonds was made, the difference in the rate of interest being due to the tax exemption. The temporary and short-time paper was now gradually funded into these bonds. In the meantime the Anglo-French loan of 500 million dollars, of which England had one half, had been contracted in the United States; and with the entrance of the United States into the war, continually larger sums were borrowed from the American government. By the end of 1918, as will be seen from table M, almost 4 billions sterling, or considerably more than one half of the new debt, was in the form of relatively long-time domestic securities.

France was in a less favorable situation than Great Britain at the outbreak of the war. The total debt of France at the close of 1913 amounted to 32,594 million francs or 6,291 million dollars, and the ordinary budget had closed with a large deficit, so that it had been necessary to issue a loan during the spring and summer of 1914. When the war broke out, precipitating an economic and financial crash, it became practically impossible to issue another loan. The government was therefore compelled to rely upon advances from the Banque de France which was permitted correspondingly to increase its note issue. It was not until November, 1915, that France saw her way to invite subscriptions to her first war loan, which, although bearing interest at the rate of 5 per cent was issued at the low price of 8714. This was followed in August, 1916, by the second war loan, also of 5 per cent bonds. In December, 1917, the third war loan was contracted and

in 1918 the fourth war loan. In these two latter cases France reverted to her old policy of discount bonds so that the issues fetched the price of only about 70. The nominal subscriptions to the loans were therefore quite different from the actual receipts in cash. Even the nominal sums yielded by these four loans, however, amounted to less than 70 billions of francs, so that the chief reliance of France had to be placed on floating debts like advances from the bank of France, on the so-called national defense bonds, which were issued continuously from February, 1915, and, finally, on the foreign loans contracted in England, United States, and Japan. The internal loans as a consequence constitute only about 40 per cent of the war debt, a result which is now proving a serious embarrassment in the French program of fiscal reconstruction.

Russia was the first of the Entente Powers to contract public loans. In September, 1914, Russia began with a 5 per cent issue at 94, followed at regular intervals up to the revolution of 1917 by six more loans. At that time about 6 billion dollars had been raised by relatively long-time securities, constituting, however, only a very small part of the entire debt.

Somewhat similar difficulties were experienced by Italy. The pre-war debt of Italy amounted to 13,636 million lire or 2,621 million dollars. Italy started in 1915 with the so-called mobilization loan followed by the first war loan in July, 1915, and by further war loans in January of each of the following years. Every successive loan showed an increase of the interest rate and a decrease of the issue price, thus disclosing the growing fiscal difficulties. The total proceeds of the internal war loans, as appears from table M, were only about 15 million lire. Italy, therefore, had also to depend primarily upon short-time securities, like treasury bonds and exchequer bills, upon advances from the banks, and upon loans from the Allies. As a matter of fact, less than 30 per cent of the new war debt consists of long-time internal war bonds.

Of the Central Powers, Germany followed a different plan from the outset. She decided to rely at once upon comparatively longtime bonds rather than upon temporary or short-time securities, and for several years prided herself upon her superiority in this respect over Great Britain and France. In October, 1914, a large war loan was issued at 5 per cent. There followed in regular succession eight more war loans bearing 412 per cent and 5 per cent respectively. During the earlier years of the war, accordingly,