The report that many firms and corporations have been unable to find the money with which to pay their last instalment of the income tax for last year is not surprising. It but fulfills the predictions of economic prophets, and reveals the need for a change in the income tax laws themselves.

As matters stand at present, the law requires that the taxes on the profits of one year shall be paid out of the earnings of the next. The fault of this is clearly demonstrated by the conditions now existing throughout the country. The year 1919 was a profitable one for all business both large and small; as a result there are large taxes to be paid, most of which fall due in the calendar year 1920. But this year has been vastly different from the last; with the acknowledged diminishing of trade have also come the decline of inventory values, receipts and profits. It is obvious that the earnings of this year have been too scanty to pay for the taxes accrued by the previous year's bounty.

Besides this fact, there is also the consideration that the money which was turned over to the government was drawn in most cases from funds which would otherwise have gone to promote the expansion of trade and industries. Such a consequence is unavoidable when the government's revenues are drawn from only a few sources. The investment funds of the country cannot be allowed to disappear into the Treasury year after year without ultimately harmful effects upon the stability of business and of the government itself.

There have been many suggestions made as to some remedy for this situation. Postponement of the day for payment of the taxes; the demand that inventory losses be considered in abatement of profits; the proposal of a final-sales tax; these are some of the plans mentioned at the hearing of the Ways and Means Committee of the House. Some change is assuredly needed. It must be one which will reduce the amount of the burden now placed upon the heads of the comparatively few, and distribute it in smaller quantities to be shared more uniformly by the many. The industries of the country must not be stunted in their growth by another financial crisis similar to the one through which they are now struggling to pass.