MANY scholars think of fiscal policy as almost synonymous with statecraft. The term is used to cover not only the selection of tax measures that will least impede production-- our main concern--but also the determination of policy with regard to balancing the budget; paying off, stabilizing, or adding to the debt; other matters of budget and debt management; public spending; banking and currency control; and foreign trade, investment, and exchange. Fiscal policy, so defined, is highly significant and might make or break the economy. This chapter deals mainly with the broad taxation aspects of this extensive field.
The key to good fiscal policy during war is a strong tax program. This is important to relieve the pressure on prices, to keep the debt within bounds, and to balance, to some extent, the sacrifices of persons in the armed services with those of civilians. If prices were not controlled, the deferred purchasing power vital to postwar prosperity would be dissipated. The opinion is widespread that out wartime tax burden was stabilized at the maximum which industry and labor could assume. This is open to question. The elasticity of the personal-income tax was not exhausted, and there were important loopholes in this tax that could and should have been plugged. During a war, when resistance to desirable change is at a minimum, the time is especially