The case for the extensive use of taxes in financing a war is strong, yet various circumstances usually exist which make it impracticable to attempt to raise all the needed revenues from this source. The important thing to be kept continually before the minds of the fiscal authorities is that a policy must be adopted which will see the war through. The source of the revenue must not be used up, so that the treasury will find no more funds available when the conflict is only partially finished, but the source must be kept intact so that each successive demand will be met with a forthcoming supply. The tree must not be cut down to get the fruit, but must be left to produce more fruit as it is needed to supply the recurring wants.

Administrative Machinery. - The revenue system which is in existence at the outbreak of a war is a consideration of first magnitude when proposals are made to increase many fold the amount secured from taxes. If the policy of taxation is contemplated, it is most certainly true that preparation for war should be made in time of peace. In order to meet the excess demands, the revenue system must be one which is capable of rapid expansion. This can be done only when the revenue system of peace times is broad in its scope; and if its rates are less than the maximum revenue rates. If this be true, all that needs to be done when the crisis comes is to increase the rates up to the maximum revenue yield, if necessary. If, however, the maximum revenue is already being received, the officials are confronted with the task of devising new taxes and new administrative machinery, both of which are time-consuming propositions. New taxes, moreover, are generally unpopular, and a period of education is necessary before people will pay them willingly. The needs of the government will not wait, and while an adequate tax system is being arranged it may be necessary to resort to borrowing.

Importance of Personal Element. - Human nature is an important factor with which fiscal authorities must always reckon. It has already been indicated that individuals discount the future. The fact that taxes must at some time be levied to the full amount of all loans does not weigh heavily enough upon the present generations to induce them to shoulder the entire burden in taxes at present, in order to avoid the future tax payments. While the material sacrifice may be just as great in lending an amount as if it had been taken in taxes, the personal loss is much less in the case of the loan. To the individual the bond merely represents his property in another form. The use of borrowing, therefore, will generally result in a much heartier response, and will secure more adequate returns when funds are needed quickly, because it appeals to human nature.

Confidence in Government. - The confidence which the citizenship has in its government, and the strength of the sentiment in favor of the undertaking, will be somewhat of a guide to the authorities in determining the sources of revenue. If the cause is close to the hearts of the people, and the patriotic zeal at a high pitch, greater personal sacrifices will be willingly borne, and consequently taxes can be used more extensively than if the interest were merely lukewarm. As long as the administration of the government has been conducted in such a way as to strengthen the confidence of the people, great sacrifices will be made to support it in its undertakings. An administration which possesses the absolute confidence of its citizenship, and which embarks upon a cause which meets with their undivided approval, can rely extensively upon taxes to secure the needed revenue.

Industrial Considerations. - The effect of the fiscal policy on the productive capacity of the country must always be kept in the foreground. The appeals must be made in such a way that each will bring results in the form of revenue, and yet always act as a spur to increased energy in production, and never as a discouragement. This is particularly true in the first stages of the conflict, when industry is burdened with discouragements. Some have endured a hard transition from unessential lines of endeavor to the production of war materials. Industry, moreover, has likely been hard hit by the withdrawal of labor to the army. The precipitation of any unexpected and unprepared - for heavy tax burden upon industry under such conditions could scarcely help having a deterrent effect. In order to keep up the productive capacity under these circumstances, a resort to borrowing may be preferable.

The general economic and industrial condition of the country, as compared with the magnitude of the demands, is a factor to be kept in mind. It would be suicidal to attempt to collect in taxes an amount greater than the national income. It may be true, however, that the necessary revenue will exceed this sum. In the case of a life and death struggle it may become necessary to spend many times as much as the national income. In such cases borrowing must be resorted to, from a foreign country, if possible, and the loan be repaid gradually from the income of succeeding years.