War Increases the National Debt. When the United States entered the war our national debt amounted to about $1,208,000,000 or $11.33 per capita. More than half of it bore interest at the low rate of two per cent, and the bonds sold at a premium. The annual revenue collected for the last fiscal year before we entered the war ending June 30, 1916, was $779,664,552. The United States entered the war April 6, 1917. New taxes were enacted. The income tax was increased, corporation taxes were levied, excise taxes were placed upon many articles, a new tax known as a war profit or excess profit tax was provided for with the hope of compelling the war profiteer to contribute heavily to the government's needs. The total revenue collected between April 6, 1917, and October 31, 1919, reached the enormous sum of $11,280,000,000. The total war expenditure during that period was $35,413,000,000 and the national debt on the latter date was $26,210,000,000 or about $249 per capita.

A Tax System. The great tax problem in America is the development of a just system for local and state taxation. The general property tax has been objected to, and when used alone it is not always just. The income tax seems to be a fair way of raising money for the government provided other sources of revenue are used at the same time. Inheritance and corporation taxes are in general use. Paying taxes is a patriotic duty which is more willingly performed when each knows that he is paying a just share toward the support of our government.

Suggested Activities.

1. Through a talk with someone at your local bank learn:

(a) Whether this bank is a state, a national, or a federal reserve bank.

(b) Three different plans which the bank finds most successful in helping people to save money.

2. Consult the secretary or treasurer or a member of the Board of Education of your school district. Find out:

(1) The approximate annual income of the district.

(2) The various sources from which this income is derived. Plan a Budget based upon the income which is secured, making provision for the various items of expense and keeping within the income. 3. Is the amount of income which your district has sufficient to meet the expenses required in conducting your school. If not, how could a larger amount of money be raised? Are there improvements which your school should make? If so, how could the money be raised?

4. Choose sides and debate one or more of the following questions: (a) Resolved, that everyone who has an income should help support our government by paying an income tax.

(b) Resolved, that it is better to tax articles that are desirable but not necessary than those which all must have.

Study Questions.

1. A ten-year-old boy offered at a depot window what would be worth in our money five dollars in payment for a five-dollar ticket. The ticket seller said, "I am sorry but your paper money is worth only four dollars today and I cannot give you the ticket." Trouble with paper money is very common in most European countries; perhaps we do not fully realize how fortunate we are in having a government which keeps all money worth one hundred cents on the dollar everywhere. What keeps our paper money as good as gold?

2. "This note is receivable by all NATIONAL AND MEMBER BANKS and FEDERAL RESERVE BANKS and for all TAXES, CUSTOMS and other public dues. It is redeemable in gold ON DEMAND at the treasury department of the United States in the city of Washington, District of Columbia, or in gold or lawful money at any federal reserve bank." (From a twenty dollar bill-federal reserve note.) Explain the words or expressions in capitals. 3. What qualities should good money have? What substance most nearly has all these qualities?

4. In the presidential campaign of 1896, the platform of one of the great political parties declared in favor of the "free and unlimited coinage of silver at the ratio of 16 to 1." Explain what this meant.

5. A national bank has deposits amounting to $400,000. Of this the bank has loaned $300,000 leaving $100,000 in its vaults and exchange banks. Suppose all the depositors should want their money at the same time. Ask a banker how the bank could meet this sudden

demand.

6. What should be determined first, the amount of money to be expended or the tax levy? What determines whether public expenditure is wise or unwise?

7. Cities spend more money per person than rural communities. What do they spend it for?

8. What per cent of the 1920 national appropriation was expended for war including past wars and preparation for war?

9. Give examples of public service in which the expense is divided between the state and the individual. Who pays fees? 10. How may our government obtain money? justified?

11. List the following as direct or indirect taxes:

(a) Tax on real estate.

(b) Tax upon imports.

(c) Tax upon tobacco.
(d) Stamp tax.

(e) Inheritance tax.

When is borrowing

12. "You do not earn your salt" is now used as a joke. Long ago when salt was very scarce kings raised money by very high salt taxes. Earning one's salt was a serious matter. What objection is there to high taxes upon the necessities of life?

In studying this chapter the expressions listed here need to be understood. Explain each.

Several

Going to School Is Working for the United States. times as many persons attend school in America as were ever assembled in the world's largest army; yet this great army of peace causes small excitement for we have grown accustomed to universal education. Perhaps when you started to school this year, you took school privileges for granted as if they had always been; yet they are really of recent origin, and the arguments which have brought such privileges are so important that no intelligent citizen can afford not to think of them. They show that going to school is closely related to the government we are studying.

When you buy a newspaper, you are hardly likely to think that it may have an important relationship to the United States. Yet when you read one of these, a magazine or a book,

you are doing what comparatively few could have done a hundred years ago and our government has had much to do with making these things possible. And even when a letter is mailed you may not have considered many of the reasons why our country carries letters so cheaply. Educated citizens who read newspapers and books and write letters are the best citizens. Political freedom and ignorance have never gone hand in hand.

Free Education and Communication Necessary. American public schools are our pride; in no other country are so many newspapers read or so many letters mailed. In addition to being proud of these we may well realize that America could not be without them. Because they could not comprehend the power of popular education, cheap reading material, and opportunities for travel, the wisest men who framed our Constitution could not picture a united country so large and varied in its industries. Common, that is communicated, ideas