Front Page Titles (by Subject) CHAPTER XII.: Protection by Exemption from Taxation. - Taxation and Work: A Series of Treatises on the Tariff and the Currency
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CHAPTER XII.: Protection by Exemption from Taxation. - 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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Protection by Exemption from Taxation.
All advocates of Protection through duties upon imports down to the advent of McKinleyism have supported that system as a temporary policy in preparation for Free Trade.
The only distinction between the intelligent members of the Republican and Democratic parties is now in respect to the time and method of beginning a reform of the tariff.
In beginning to deal with these measures, attention may well be given to two other fundamental propositions previously submitted: First, in view of the fact that measures of taxation may interfere greatly with the progress of industry, such discrimination should be used in framing these measures as will most effectually promote domestic industry in all its branches. Second, since the protection of American labor is bound by indissoluble ties to the protection of domestic industry, every measure of taxation should be so framed as to protect the American workman in the most effective manner.
Dealing with the matter from this point of view, all taxes upon necessary articles of food must, of course, be done away with because food is the most essential element of human power; fuel may be included in almost the same category.
It is manifest that no tax can be imposed upon the import of food without increasing the cost of that food to the consumer. Such taxes inflict privation under the semblance of protection. The tax may happen to be a very necessary article of food. We may take potatoes as an example, as they are now subject to a tax on imports of twenty-five cents per bushel. Potatoes are only imported for common use in years of scarcity and of short crops in this country. In other years the import consists merely in the early spring luxuries from Bermuda and elsewhere. When there is a short crop in New England, New York, and along the sea-coast, the prices of necessity rise to a very high point, because potatoes will not bear a very long haul by railway. Then the tax oppresses the poorest in the community in greatest measure. It is then that this tax becomes malignant. It adds nothing to the income of the farmer, while it oppresses the poor. In one year, not long since, this tax added a million and a quarter dollars to the unnecessary surplus revenue of the people of the United States and this burden fell mainly upon the poorer classes in the northeastern part of the country.
The same reasoning applies to every kind of food which is of necessary use. Sugar has lately been added to the free list. This will be to the great advantage of consumers, and when hereafter the tax is taken from tin-plates this abatement of the tax on sugar will also become of great advantage to the farmers and canners of fruit, of preserved milk, and other agricultural products, in which sugar and tin-plates are the component materials of chief cost.
By the same rule any tax which is imposed on the crude or partly manufactured materials of foreign origin which are necessary in the processes of our domestic industry, becomes a most serious obstruction to the development of domestic industry and indirectly a most serious obstruction to the progress of the farmer. It burdens the domestic manufacturer, restricting his power of purchase, while it cuts off the farmer from one of his principal outlets for the excess of his crops by export. Such a tax very often works to the greatest injury of the producers of the specific crude material which it had been intended to benefit. We may again take domestic wool as an example of such grave injury. When it was first proposed to adopt the so-called “wool and woollen tariff,” of which the present measure is but an aggravated continuation, the most skilful and competent of the woollen manufacturers under the lead of the late Edward Harris, of Woonsocket, presented arguments to the Committee of Ways and Means against the duty on wool, upon the distinct ground that such a tax, while it would seriously injure the domestic manufactures of woollen or worsted goods, making it necessary to advance the cost of the fabric and also the price of clothing, would also depress the price of domestic wool, gravely injuring the farmer. Such has been its exact effect. What was predicted twenty-five years ago has been verified to the letter.
This subject has been dealt with many times, and as often as the prices of wool have been set off against the varying rates of the tariffs since that of 1824, in which wool was first made subject to duty, it has been made very plain that while the prices of wool have varied from other causes, yet so far as the tariff appears to have had any effect at all, the high tariffs after one or two years of adjustment have caused domestic wool to become very much lower in price; while on the other hand, within a year or two after low tariffs had been enacted the prices of domestic wool have always advanced. These changes have been fully explained both by the advocates of protection to the woollen manufacture and by the advocates of freer trade. In order that the manufacture of woollen and worsted goods may prosper, manufacturers must have the same free access to all the varieties of wool in the world as that enjoyed by their competitors, especially the manufacturers of Great Britain. Otherwise the whole balance of the industry is broken up.
When duties are high an undue proportion of woollen machinery is put upon the few varieties of fabric that can be wholly made of domestic wool. This branch of work is soon overdone, the price of the fabric goes down and the price of domestic wool goes with it. On the other hand, the representatives of other branches of the woollen industry which are obstructed by the duties on foreign wool are obliged to advance the prices of their goods in order to cover the additional cost; clothing as a whole costs more, while the farmer gets less for his wool than he ever did before. The same process of reasoning, varied according to the conditions in each case, can be applied to all other crude materials.
In respect to partly manufactured materials such as sheet and rolled iron, iron bars, tin-plates, and the like, it will be observed that while through invention and discovery there has been a very steady and consecutive reduction in the cost and thereafter in the price, these inventions have been of equal effect in other countries, and the prices of metal in other countries, especially in Great Britain, have been reduced in even greater measure than they have in this country. The effect of this has already been stated. Dealing with pig-iron only, we find that the price of this crude material, of which we are the largest consumers in the world, for ten years, to our shipbuilders, machinists, railway constructors, manufacturers of agricultural tools, and all other artisans who work in metal, has been on the average $70,000,000 a year more than the price of the same quantity and the same quality delivered in Great Britain to the artisans and machinists in her own works and in those of other countries. We have paid in ten years $700,000,000 in the additional cost of pig-iron, and yet the incompetent among the pig-iron men still cry for higher protection.
Again, taking as example the single article of tin-plates: The competition in Wales has steadily reduced the cost of this important material, of which we are also the greatest consumers in the world. The tax which has been paid by the consumers of tin-plates in this country for the last ten years up to 1891 inclusive has amounted to over $60,000,000. With singular fatuity the advocates of McKinleyism are now endeavoring to promote the transfer of the production of tin-plates from Wales to this country by so advancing the prices as to enable persons who have not heretofore proved themselves to be competent, to undertake this somewhat objectionable branch of industry at the cost of the consumers of this country. This art is in many respects a very loathsome and undesirable branch of industry, for which there is now no supply of laborers in this country. All the work, except the mere rolling of the plates of iron or steel, is done under such offensive conditions as to make it one of the kinds of work about which Daniel Webster long since said that “we cannot afford to do for ourselves what foreign paupers can do so well for us.” The people who do this work in Wales are not paupers,—they are fairly well paid, but the conditions of the work are such that those who do it might become a very undesirable element in our population. Until the offensive and unwholesome parts of the work of dipping plates of metal into oil and acid and then in melted tin are removed by invention, it is the greatest folly to attempt to transfer this branch of work from any other country to this country. Moreover this change would cut off from Great Britain her present means of paying to the extent of about $30,000,000 a year, which is now applied to the purchase of our wheat and our cotton. Great Britain, rich as she is, cannot buy what she needs from us and pay for it only in gold. Commerce must of necessity consist in an exchange of products. A transfer of the art of making tin-plates would bring over to this country a few thousand somewhat objectionable people who would become consumers in very small measure of our wheat and of our cotton, while the means of payment of Great Britain would be diminished to the extent of the value of the tin-plates which she pays back to us for the products of our farms at the rate of nearly $30,000,000 a year. This $30,000,000 annually received by Great Britain is now spent by her for our cotton, wheat, and provisions. If we deprive her of the means of payment to that extent—the tin-plate makers moved over here would become consumers in limited measure of the same articles. These goods require a large amount of capital and but a moderate amount of labor of a rather low grade, hence we should lose more than we should gain, even if success were attained in establishing this art, which does not, however, seem probable. We have no working people to spare for such work.
The worst effect of this kind of interference with this course of trade is often to be found in the mere obstruction to exports, which of necessity ensues from the cutting off of imports. Its effect in this country is the more malignant because the export of the excess of our products of agriculture is one of the main elements in our continued prosperity. The proportion of the products of our farms exported, except cotton, may be small, but every one who is conversant with trade at all is well aware that an excess of even five per cent. of any given product may for the time reduce the price in fivefold measure, and this is the matter of main importance to us. At this present moment the effect of a moderate supply of cotton has put the price at the lowest point ever reached but once before. We export more than ten per cent. of the aggregate of our farm products; in some years our exports have amounted to nearly twenty per cent. of the whole product, computed at farm values. It is upon the sale for export of this excess that the price of the whole crop of everything depends. Consequently an obstruction to imports, of small apparent importance in itself, may exert an adverse influence on prices of farm products which are exported and therefore on the whole product, in a measure which one can hardly comprehend except for the depression that has ensued.
It therefore follows that the promotion of domestic industry, both in agriculture as well as in manufacturing, rests upon the free import of all articles of food and of crude or partly manufactured materials which are necessary to the processes of domestic industry, and upon the correspondingly free export of our great crops and of many kinds of manufactured goods in which we already excel all nations. It is manifest that if we were permitted to secure wool, iron, copper, and other crude materials which are necessary in the processes of our domestic industry on the same terms with our foreign competitors, we should increase our markets in other countries in very great measure. We are even deprived of the free use of our own copper in competition with others, because the producers sometimes sell our surplus of copper to foreign consumers at a less price than is charged to our own.
When this country fully believes in itself,—when it no longer subjects its own imagination to the humiliating idea that a free, intelligent, well paid, and fully nourished people cannot compete with the underfed pauper laborers of Europe, we shall be enabled to take our true place among the nations. We shall then be far on the way toward the ultimate abatement of every national tax of every kind upon every import, except the taxes which we may put upon liquors and tobacco in order to support our government. When that condition is attained the true Protection to domestic industry will be established. It will then consist in Free Men, Free Soil, Free Speech, and Free Trade.