Front Page Titles (by Subject) CHAPTER VI.: Taxation Which the Government does not Receive. - Taxation and Work: A Series of Treatises on the Tariff and the Currency
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CHAPTER VI.: Taxation Which the Government does not Receive. - Edward Atkinson, Taxation and Work: A Series of Treatises on the Tariff and the Currency 
Taxation and Work: A Series of Treatises on the Tariff and the Currency (New York: G.P. Putnam’s Sons, 1892).
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Taxation Which the Government does not Receive.
In dealing with the proposed remission of taxes on crude and partly-manufactured materials, consideration must be given to the relative burden of one class of taxes as compared to another.
In twelve years, 1880 to 1891 inclusive, the duties upon the imports of articles of luxury or of voluntary use, entered at a valuation at the port of shipment (disregarding fractions in this and the subsequent statements),
So far, the duties upon these classes may be justified under the necessity for a revenue from customs, provided they are rightly adjusted.
It is to be observed that a very considerable part of the revenue which is derived from the import of textile fabrics is yielded by articles which are not of prime necessity. It is secured from kinds of goods that depend mainly upon fashion and fancy rather than upon utility for their sale; these taxes may, therefore, do no injury to consumers even if for a time or even permanently continued at high rates of duty for revenue only.
In the same period of twelve years, 1880 to 1891 inclusive, the dutiable imports of crude materials, which are necessary in the process of domestic industry, valued at port of shipment,
This annual tax of about $35,600,000 has been but a small part of the excess of revenue which has been expended in the rapid payment of our national debt by the purchase of bonds before maturity at a high premium. This reduction of debt is a benefit, and may be set down as so much gain to the people.
The evils of these taxes are, however, manifold while the actual cost of their collection can hardly be measured. These evils consist in the following relative disabilities or additional charges upon consumers of sums of money which the people pay but which the government does not receive.
First.—In the maintenance of the prices of some of the most important materials which are consumed in domestic arts, year by year, above the prices of the same materials in foreign countries, whatever the actual prices of each year may be.
Second.—In depressing the prices of these same materials in other manufacturing countries by the obstruction to the demand of this country which possesses the greatest purchasing power of any nation in the world.
Third—In diminishing the purchasing power of other nations in respect to the excess of our farm products, thus reducing the demand upon us and depressing the price of our excess which is necessarily sold for export upon which the price of our whole crop depends.
Fourth—In rendering it necessary to grant compensatory duties on the import of manufactures ready for consumption, in order to overcome in part the evil done to domestic manufacturers by the enhanced cost of their materials in consequence of this bad system of duties on crude materials.
Fifth—In the grave injury done to the workmen occupied in the special production of ores, pig-iron, wool, and other crude materials by the uncertainty of their occupation, by the import of foreign laborers for special service and in many other ways. Any advantages given by such duties being as a rule wholly secured by owners rather than by workmen.
It is of course impossible to measure the exact burden of the taxes which the people pay but which the government does not receive. The imposition of these taxes upon imports in Class B, crude materials, and in Class C, partly manufactured materials, vastly increases the burden of taxation while yielding a revenue which is insignificant in amount.
From the closest computation which I have been able to make, I should estimate it at nearly ten-fold the revenue derived from the import—or at a sum exceeding $326,000,000 each year—which is equivalent to doubling the normal cost of the government with the pensions added.
In justification of this estimate I will give a few examples.
First.—In respect to the maintenance of the prices of most important crude materials above those in other countries. Since 1880 there has been a very great reduction in the cost of producing iron and steel in this and all other countries, accompanied by a very great reduction in prices. By a very careful computation made by myself and by Mr. David A. Wells, the disparity in the cost of pig-iron only, to the consumers of this country as compared to consumers supplied from other sources in other countries, has amounted to $70,000,000 a year. The workmen in mines and laborers in furnaces have received no benefit from this interference; their actual earnings as a body are barely sufficient to support the life even of the imported laborers who constitute the majority of their number. There are a few exceptionally high-priced men in nearly every establishment. The disparity in the price of the higher forms of iron and of steel as compared to the lower prices in Great Britain has been much greater than on pig-iron. The evil effect of this tax upon coal, ores, and crude iron cannot be estimated at less than $100,000,000 a year, which is a handicap on all iron and steel consumers.
The effect of duties upon ores, coal, and crude iron has been to keep the average price of pig-iron several dollars per ton above the price in other countries, varying year by year with the urgency of the demand.
This excess of price has been in some years more than the duty in such years—being accompanied by imports in such years. In some years the excess of price has been less than the duty—then without imports except of some special qualities—the general result has been low wages to the miners and furnace workmen as a body, and large profits to a very limited number of iron masters. In the census year just reported, the iron miners of Pennsylvania secured intermittent work by which they earned on the average $259 each per year for the whole year’s work.
Second.—The effect of the duty upon wool has been very different. Wool is produced by very many flock owners and in many places throughout the world; there is no such limit of numbers as that which affects iron mining, and no limit to a few places. Hence, when the imports of the wool of South America and Australia were obstructed by the duty imposed in the original wool and woollen tariff of 1867, the precise effect followed which was foretold by the opponents of that measure. The prices of wool in the two great markets of London and Antwerp were reduced in the lack of our demand—the manufactures of Europe were promoted at the expense of our own—the cost of foreign worsted and woollen goods was thereby reduced while our manufacturers being deprived of a proper mixing of wool, were limited to the fabrics to which American fleeces are adapted, which are also limited in variety. The price of American wool was lowered and yet the manufacturer was not protected. Imports of wool, and of fabrics at the artificially lowered prices, but at very high rates of duty, increased. These conditions, varying in different seasons, have continued to the present day. Thus the farmer has paid the cost of bad legislation by being forced to take a lower price for his wool and also to pay a higher price for his clothes. How much this double disadvantage costs in money cannot be even approximately computed, but it must come to a large sum annually.
The disadvantages under which we exist from the misdirection of our taxes are mainly confined to the two classes of duties treated in this chapter, i. e., the taxes upon crude and partly manufactured articles. When these are removed, the manufactures of this country will for the first time in the present generation be enabled to measure their own power.
As I have stated, I cannot compute the true cost of the duties which have yielded an annual average of $35,600,000 from taxes upon articles of necessary use at less than tenfold, or more than the entire cost of the government, including pensions. If any one contests this estimate, I shall be glad to know on what grounds.
Revenue duties on the other classes of manufactured goods, and upon articles of voluntary use as well as luxuries, will yield increasing revenues with the greater abundance, lower prices, and consequent increase in consumption.
This is not a theory, but a matter of observation and experience.