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 V.

How the Tariff should be Reformed.

In the previous chapter it has been computed that the present Congress in its second session may rightly deal with an excess of revenue above all expenditures of every kind, of $35,000,000 or more.

If in the interval, assurance shall be given that credit will no longer be shaken by a prospective debasement of the standard of value through the free coinage of silver dollars of full legal tender which are now worth after being melted less than seventy cents, this surplus income or revenue may be much larger.

It may be remarked that the revenues already received the present fiscal year fully warrant the expectation of a normal increase on liquors and tobacco, while the customs revenue may be largely in excess of the estimates upon which the above computations are made. It is almost certain, therefore, that the excess of revenue from liquors, tobacco, and permanent receipts in the fiscal years ending June 30, 1893 and 1894, will suffice to cover any increase in pensions above the estimate for the present year. In a recent hearing, the Commissioner of Pensions testified that pensions would reach the highest point under existing laws in the fiscal year ending June 30, 1894, and after that would diminish rapidly.

But it will be borne in mind that with the relief to domestic industry from the abatement of duties proposed to the amount of $33,000,000, the duties on manufactured goods may also be considerably reduced; then with the ensuing prosperity and the great increase in the export of farm products (especially canned fruits and milk promoted by free sugar and tin-plates) of which free exports we already witness the beginning since sugar, sisal, manilla, and some other articles were put in the free list—our dutiable imports would be very greatly increased, because our general consumption can always be stimulated by a reduction in prices. At the same time wages would rise with the greater activity in manufactures, agriculture, and commerce.

Under these conditions, substantially all the partly manufactured articles which enter into the processes of domestic industry could very soon be added to the free list.

Then alternative would be, after having put all articles of food and all crude materials into the free list, and having reduced the duty on manufactured goods in proportion to the reduction on materials, then to adjust the duties by a reduction by percentage, year by year, until we reached an equilibrium of expenditure with the income derived from liquors, tobacco, and dutiable imports of the nature of luxuries or of purely voluntary use.

Another method of tariff reform might be considered. One-half of the specified articles on which duties are now imposed, yield so insignificant a revenue, that if put into the free list the amount of tax abated would not exceed fifteen per cent. of the total revenue. This change would greatly promote commerce, and might diminish the cost of collecting customs even more than one-half.

The way to tariff reform is very plain—the will is not wanting—what is now needed is concentration upon a definite and consistent plan of tariff reduction.

The preparation of such a measure is a very simple matter, provided those who undertake to frame it proceed upon the rule that all taxes that the people pay the government should receive.

There have been three attempts to reform the war tariff of this country. The present system is intellectually dead; it lives only by a vis inertia and through an undefined fear of change. The Tariff Commission appointed by a Republican administration made one futile attempt. The Democratic Congress, which reported the Mills Bill, made the second effort. The last Congress brought forth a measure known as the McKinley Bill, which is the scorn and contempt in its dutiable list, even of a majority, or at least of a large minority, of those who voted for it.

The movement of the people is slow but sure. Every great reform in this country has passed through the same sequence of blind and misdirected effort, until at last when the time has arrived the true leaders have taken their places, and the reform has been accomplished.

The will of this people now is that taxation shall be reduced; that revenue measures shall be so framed that the government shall receive all the taxes that the people pay; that the civil service shall be maintained on the basis of honest and faithful service, without regard to party politics.

The Supreme Court of the nation has defined the principle of taxation by which Congress must in the end be governed. In Loan Association vs. Topeka, Justice Miller established the limits of taxation in terms that admit of no evasion (20th Wallace, 655).

“The power to tax is therefore the strongest, the most pervading of all the powers of government, reaching directly or indirectly to all classes of the people. This power can as readily be employed against one class of individuals and in favor of another, so as to ruin one class and give unlimited wealth and prosperity to the other, if there is no implied limitation of the uses for which the powers may be exercised. To lay with one hand the power of government on the property of the citizen, and with the other to bestow it upon favored individuals to aid private enterprises and build up private fortunes, is none the less a robbery because it is done under the forms of law and is called taxation. This is not legislation. It is a decree under legislative forms.”

The huge abundance with which this country is endowed, coupled with the continental system of absolute Free Trade among the several States, over a wider area and among a greater number of people than ever enjoyed such rights before, has saved us from any disaster like that in which the protective system culminated in Great Britain in 1840.

Yet signs are not wanted of a very false distribution of products—notwithstanding the rapid accumulation of wealth and the undoubted progress which has ensued in spite of the obstructions to commerce—great centres of poverty are found in our midst and great classes, especially in agriculture, are suffering from causes which they cannot define, and which in some instances they propose to remedy by measures which would be worse than the disease.

The one merit of the McKinley Bill was its free-trade part. The placing of sugar, fibres, and some other small articles upon the free list has already given an impetus to exports, which is but an example of what may follow in yet greater measure when a tariff for revenue is enacted which shall be so framed that all the taxes that the people pay the government will receive.