Prices and Excess Profits Taxes

Abstract

IF we may judge by utterances of business men and of press, great mass of American public believes that excess profits tax has been largely responsible for present high level of prices. Most of those who have spoken or written to this effect have thought it unnecessary to present proof in support of this conclusion; nor have they gone to trouble to examine in detail logic of supposed causal connection. The report of New York Chamber of Commerce states that the effect of excess profits taxes on business enterprises and on high cost of living is so evident as to require little explanation. May it not be possible that here, as in so many other instances in history of political economy, co-existence of two phenomena in time may have led to an erroneous conclusion with respect to their causal relations? The excess profits tax will no doubt be abandoned before presidential election next fall. Its repeal will be conditioned upon considerations other than its effect upon prices, but it is incumbent upon economist to examine critically assertion that our first differential tax upon profits raised price level by an amount greater than tax.