Such disputes as the two nation-wide industrial strikes of 1922, the coal miners and the railway craftsmen, are rapidly forcing those not directly connected with the “operators” or the “strikers” to the opinion that government ownership is the remedy for industrial ailments of this character. They point to the Post Office Department as an argument in favor. While it is a fact there has been no trouble so far with postoffice employees, it does not follow that the same would be true with the railway, coal mining, and cotton industries. And if the Government should begin taking over industrial and commercial enterprises, where would be the end of such paternalism, and would it lead to sovietism? It is barely possible that governmental regulation has already gone too far.
But, nevertheless, from some such sources as have been mentioned or from a sales tax on gasoline may eventually come a relief to the burden of taxation which now and increasingly so in the future must otherwise be borne by the land.
Bonds.
—It is not always possible to raise by taxes sufficient money to make public improvements on a pay-as-you-go basis. It would not be economical to attempt to pave one-tenth the width of a street each year. One patch would be worn out before the next is put down. The whole must be done at the same time in order not to be vastly wasteful. And, in order to enjoy the improvement while money is being collected for its payment, the municipality must resort to borrowing. It is also argued that since future generations will enjoy the improvement they should be required to help pay for the same. The indebtedness represented by the bonds become a lien against the assessed property in the state, county, township, or district over which they have been laid. The taxes to pay off the bonds will be levied uniformly over all property or specially in proportion to accruing benefits according to conditions prescribed at the time the improvements were made.
Kinds of Bonds.
—Bonds are certificates of indebtedness by means of which the repayment of borrowed money may be spread over a series of years. They are classified as Sinking Fund, Annuity and Serial, depending on their manner of payment.
Sinking fund bonds are paid as a whole at the end of their term, interest being paid annually, or at some other fixed regular period, upon their face value. The name arises because of the custom of establishing a sinking-fund into which a certain proportion of the debt is to be paid annually, and this loaned out so that at the end of the period it will amount to the face of the bonds. Since there is always time lost between the collection and loaning of the sinking fund money the interest derived therefrom will not usually be the same as that of the bonds. For this reason and from the further fact that sinking funds are frequently drawn upon for other purposes than that for which they were created this type of bonds is less economical than either of the other two types.
The sinking fund which must be raised annually to discharge a debt of P dollars in n payments, if it can be loaned at i per cent, is given by the formula:[197]
Sinking fund = i (1 + i)n - 1 . P
To illustrate the use of the formula let the debt be $10,000, the average rate that can be expected from the sinking fund 4 per cent, and the time five years. Substituting in the formula,