The Online Library of Liberty

A project of Liberty Fund, Inc.

• Introduction.
• Taxation and Work.
• Chapter I.: Occupations. Distribution of Products.
• Chapter II.: Taxation Measured By Work.
• Chapter III.: Taxation Measured In Money.
• Chapter IV.: Principal Sources of Revenue.
• Chapter V.: How the Tariff Should Be Reformed.
• Chapter VI.: Taxation Which the Government Does Not Receive.
• Chapter VII.: British Tariff Reform.
• Chapter VIII.: Beggarly Compensation of United States Officials.
• Chapter IX.: What Is Protection?
• Chapter X.: Occupations That Cannot Be Protected By Duties On Imports.
• Chapter XI.: Method of Tariff Reform.
• Chapter XII.: Protection By Exemption From Taxation.
• Chapter XIII.: Free Trade the Objective Point.
• Chapter XIV.: Attempted Definition of the Principle of Protection By Senators Sherman, Hoar, and Aldrich.
• Chapter XV.: Hamilton’s Policy.
• Chapter XVI.: Tariff Protection Does Not Raise Wages.
• Chapter XVII.: Protection Promotes War; Free Trade Promotes Peace.
• Chapter XVIII.: Does Tariff Protection Promote Liberty?
• Chapter XIX.: Progressive Reduction of Duties.
• Chapter XX.: Cost of a High Tariff.
• Chapter XXI.: Development By Free Commerce.
• Chapter XXII.: High Wages and Low Cost.
• Chapter XXIII.: The Use of Machinery By Nations.
• Chapter XXIV.: The Waste of Armies.
• Chapter XXV.: Senator Morrill’s Report On Canada Received. Food and Wages.
• Chapter XXVI.: In the Matter of Silver, Bi-metallism, and Free Coinage.
• Chapter XXVII.: Volume of Trade.
• Chapter XXVIII.: Taxation By Bad Money.
• Chapter XXIX.: How to Maintain Silver Equal to Gold.
• Chapter XXX.: The Issue Joined.
• Chapter XXXI.: Personal Observations—conclusion.

CHAPTER I.

Occupations. Distribution of Products.

InThe Forum, for September, 1891, the writer presented a condensed statement of the income and expenditure of the United States for the fiscal year ending June 30, 1889, in the customary form of an account current such as every merchant or banker renders to his correspondents who trust their money or merchandise in his control. It were well that the government of the United States should be held to the same form of accountability, as the national taxes are placed in its hands under the same conditions of trust.

Nothing is more common in public discussion, especially on the part of very sincere men who represent what is called Nationalism, Collectivism, and other more or less mild forms of Socialism, Despotism, or Communism, than to impute to the State the possession of an immense property which it should deal with in a so-called liberal manner. Again, nothing is more common than for shallow and unthinking men, even in business life, to advocate “liberal appropriations” by Congress for bounties, subsidies and expenditures of all kinds that are esteemed semi-public enterprises, but are in fact undertaken mainly if not wholly for private gain.

Now the State, in the sense in which that word is used to designate either the nation, or each separate member of the Union—or the city or the town—possesses no property except public buildings, which have been paid for out of taxes, and the unsold portions of public lands. The income of the State is wholly derived from taxation and all its funds are held in trust for the public service only. It can impropriate or become possessed of property only by way of taxation.

The very definition of a tax in the dictionary, by which a court must be governed in the construction of revenue acts, is “a rate or sum of money assessed on the person or property of a citizen by government for the use of the nation or state.”

The definition of a duty is also “an impost, customs, tribute, or tax.” Some persons hold that “a tariff is not a tax.” A tariff is only a list of taxes or duties. There is no difference between a duty or a tax in law or equity, and no distinction can be made. All the fallacies about putting our burdens upon other nations by taxing imports may be set aside. A duty is a tax and all the taxes that the government receives the people pay; when such taxes are badly assessed the people may pay a great deal more than the government receives; or what is perhaps worse, many people may be deprived of the opportunity to apply their work in the most productive way by a bad system of taxation.

Taxation is but one of the several methods by which the annual product of the community is distributed. These methods of distribution are named: Rents, Profits, Interest, Salaries, Earnings, Wages, Stealings, and Taxes.

The annual product, which is the subject of such distribution, is the measure or result of the annual work, whether the work be mental, manual, or mechanical. It corresponds to the effective work or exertion of productive energy of that part of the population which does the work, numbering about one in three of the population—such being the proportion occupied for gain. The aggregate of taxation—national, State, county, city, and town,—so far as the writer has been able to compute it, comes to about six or seven per cent. of the product; it therefore represents six or seven per cent. of the whole work of the community, to which all contribute in ratio to their consumption or use of subjects of taxation. National taxes, including postal service, come to more than one-half the total burden.

Out of our present population of over sixty-five millions (65,000,000) there are about twenty-three millions (23,000,000) who are at work in the sense of being “occupied for gain” in professional and personal service, trade and transportation, manufacturing, mechanic arts and mining, and agriculture. Their average earnings which are the measure of the value of their product may be at the rate of two dollars a day for three hundred days in the year—six hundred dollars’ worth for each group of three persons. But there are a vastly greater number, probably ninety per cent. of all who are occupied for gain, who secure less than that sum than there are who secure more in the distribution of the product.

The average product of the whole working community—mental, manual, and mechanical—includes, of course, the share of the product which falls to capital as well as to labor—to the administrative as well as the working force. It represents a division of the total product at its final valuation by the total number who share the work in any way.

In 1880 the list of persons who were occupied for gain was made out under four titles and under each of these titles the subdivisions were given. The subsequent variations in the ratio of one class to another have not been great. If we apply the proportions of 1880 to the working force of the present day, computed at 23,000,000 men, women, and young persons, we get the following results: These are approximately in each thousand persons the following divisions of occupations:

I think that $600,000 worth of product is now the average annual value of the result of the average work of each thousand persons who are occupied for gain substantially in these proportions; upon each one of these two others depend. At this ratio our present annual product, measured in gold, comes to $13,500,000,000.

Every tax imposed by nation, State, town, or city is a demand on the community to give so many days’ work to be devoted to the service of the State. If we adopt two dollars a day as the unit of labor by which to measure taxation, the analysis of the cost of the government of the United States may become a little more interesting to the masses who are taxed “unbeknownst like” for its support, it being observed that all so-called “indirect” taxes, that is to say, all taxes which are put upon articles which enter into common consumption, are paid by consumers in proportion to their consumption of such articles.

It being assumed that no great change has occurred in this distribution of occupations since 1880, the present numbers who bear the burden of taxation are as follows:

If the joint product of this great body by whom the work of the country is done can be computed at two hundred dollars’ worth per head, or at six hundred dollars’ worth for each one of the twenty-three million persons by whom the work is done, then that product is the source from which all rents, profits, interest, salaries, earnings, wages, stealings, and

TAXES

are derived. Taxation and work are therefore synonymous terms or different words for the same thing.