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Subject Area: Economics
Topic: Free Trade

ESSAY No. XXVIII. - Condy Raguet, The Principles of Free Trade [1835]

Edition used:

The Principles of Free Trade illustrated in a series of short and familiar Essays originally published in the Banner of the Constitution, 2nd ed. (Philadelphia, 1840).

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Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


ESSAY No. XXVIII.

march 27, 1830.

Advantages of direct taxation over indirect taxation. Difference shewn in the case of the expenses of a labouring man. Probable amount of indirect tax paid by the population of the United States.

A SENSIBLE writer in Georgia, who has favoured us with an article which appears to day, has advanced the opinion that it would be for the interest of the people of this country to support the government by raising an adequate fund by direct taxation, rather than by imposts. That his position is sound, we are perfectly satisfied, but the misfortune is, that, in the actual state of public information, it would be impossible to convince the people that it was better for them to put their hands into their own pockets and take out one dollar, than to let somebody else do it for them, and take out five. That the custom-house process of taxing the nation costs five times the amount that the process of a direct tax would cost, we think can easily be demonstrated, and although we have not the most remote idea of ever seeing so much good sense in the nation, as would lead us to make, our ports free ports, yet we think the subject is one which is worth commenting on.

After the year 1834, when the whole of the public debt will have been extinguished, and the world will be presented with a phenomenon in politics never before beheld, of a nation containing a population of twelve millions of people, without a national debt of a single cent, the expenses of this government will amount to an annual sum not exceeding twelve millions of dollars. This sum would average, upon the whole population, 1 dollar per head, or, say 5 dollars upon every family of five persons; but if assessed in the mode in which state taxes, or county rates and levies, or corporation taxes, all of which are direct taxes, are assessed, would vary in such a way as would probably not fall upon the generality of the poor at a higher rate than fifty cents per family, nor upon any of the rich, at more than fifty dollars per family. That such a compromise would be immensely for the benefit of all, will not be disputed by any one who will for a moment reflect upon the indirect tax he pays under the present system of duties.

We will first notice the rich man, who lives in more or less affluence, and who has a family of five persons. The tax he pays upon his clothing for himself, his wife and three children—upon his carpeting, bedding, bed linen, blankets, table linen, towels and furniture—upon his knives and forks, plates, dishes, china and glass ware—upon his hats, shoes and boots—upon his carriage and harness—the locks and hinges, bolts and nails, and window glass, employed in building his house—upon his sugar, coffee, tea, wine, brandy, porter, beer, spices, and the hundreds of other articles which form a part of his consumption—the tax he pays, we say, will probably amount to several hundred dollars per annum, and certainly to not less than twice or thrice the amount he would have to contribute in the form of a direct tax. But it is not for the rich that we have any concern. They are able to take care of themselves, and if they are willing to pay two or three taxes instead of one, they are at liberty to dispose of their wealth as suits them best.

The case is not so, however, with the poor and labouring man. He is obliged to toil from morning till night, to procure a humble subsistence; and instead of being taxed lighter in proportion to his inability to pay, he is taxed heavier. It would be no difficult matter to shew how he would be a gainer by the substitution of a direct tax for a custom-house tax, and as his bill of fare can be easily made up, we shall trouble the reader with a short statement. We shall take a mechanic who earns one dollar per day, upon an average, or, say, $300 per annum, who has a wife and three children.

His rent we will suppose to be $50, but if his landlord had not been compelled to pay high duties upon the window glass, locks, bolts, nails, hinges, fastenings, screws, and other articles used in building the house, he could have obtained it for less, say,$1
For himself, he would require one suit of good woollen clothes, containing three square yards, at $2.25 per yard, the duty of which is just one half, or,337½
One suit of working clothes, three square yards, at 90 cents, the duty on which is just half, or135
For himself, his wife, and children, he would require ten square yards of coarse flannel, upon which the duty is 22½ cents per square yard, equal to225
He would also want for lining, 10 square yards of baize, upon which the duty is also 22½ cents per square yard, equal to225
The other clothing of himself and family, hats, shoes, blankets, stockings, &c., would not cost less than $30, upon which the duty would be at least10
They would consume two bushels of salt, on meat, fish, the table, &c., the duty on which would be50
Six pounds of tea—duty at 50 cts.3
Fifty pounds of sugar—duty 3 cts.150
Twelve pounds of coffee—duty at 5 cts.60
One gallon of foreign liquor—duty 40 cts.40
All other articles not enumerated,077½
$2700
Amount brought up,$ 2700
Instead of this enormous sum which he now pays, he would, under a direct tax, have to pay1
Leaving a clear gain in his favour of$ 2600

That the duty system operates as a tax upon the whole nation, to the extent of sixty millions of dollars per annum at least, that is, upon an average, of five dollars per head of the whole population, can easily be ascertained by any one who will take the trouble of making a detailed calculation of his own expenses, keeping in mind that whether he consumes foreign or domestic commodities, he is to estimate the duty charged upon the foreign article, as a part of the price he pays for the domestic acticle. For it is evident, that if a man pays for a yard of domestic muslin ten cents, which, were it not for the protecting duty, he could purchase for eight cents, he is taxed two cents, or twenty-five per cent., which he would otherwise escape. Thus it is evident, that the amount of duties collected in the year, is no evidence whatever of the amount of the tax which consumers pay; for, were the case otherwise, the absurdity would exist, of supposing that the higher the duty the less the tax, inasmuch as fewer goods would be imported under high duties, than under low duties.

We should like some domestic economist, who keeps an account of the expenses of his family, to furnish us with an accurate statement of the articles he consumes in the year, with a statement of their cost under the present rates of duty, and of what would be their cost if there were no duty. Some important and striking views on this subject of indirect taxation might be presented to the people, which would open their eyes, and lead them to regard as their best friends, those who are most anxious to see them relieved from all burthens, except those which are absolutely necessary for the support of a cheap government, such as ours ought to be.