Front Page Titles (by Subject) CHAPTER XIII.: Free Trade the Objective Point. - Taxation and Work: A Series of Treatises on the Tariff and the Currency
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CHAPTER XIII.: Free Trade the Objective Point. - 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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Free Trade the Objective Point.
The purpose of the writer in the preparation of this series of treatises has been to present the whole subject of national taxation in a reasonable and, to some extent, judicial manner, wholly free from party bias. This method of dealing with the subject has manifestly become a necessity, for the reason that as political parties are now divided, neither one has as yet been able to present a thoroughly complete and well digested measure of general tariff reduction. In each party there are underneath the surface great differences of opinion. In the Democratic party there are as yet relatively few men who are yet prepared to take the wholly independent position which was assumed by Mr. Mills, Mr. Carlisle, the Messrs. Breckinridge, Mr. McMillin, and Mr. Wilson in framing what was known as the Mills Tariff Bill. Their first step was to put wool, hemp, flax, and other fibres into the free list, these being typical and somewhat important products of the particular States which these gentlemen themselves represented. They did not frame the measure known as the Mills Bill as a complete act, it was more of a tentative measure or beginning than one intended as a finality. It did not deal effectually with ores, coal, or many articles of prime necessity in domestic manufactures.
On the other hand, there are very conspicuous members of the Republican party whose objections to the McKinley act have only been overcome by the assumed necessity of party coherence. It is not probable that there are ten in one hundred Republicans who regard the McKinley act as one fit in any sense to be considered as a permanent adjustment of the tariff.
There is also great confusion in the public mind upon this subject, and this confusion is of course reflected in varying action and demands upon the members of Congress. Hence it has become necessary in the present session to make a beginning only by introducing simple and separate measures for removing the duty from wool and a few other crude materials.
On the other hand, we may be wholly dissatisfied with the motive, form, and substance of all the tariff bills that have been enacted since the year 1861 inclusive, except as war measures; yet they have been in force on substantially the same lines for almost a generation. Great branches of industry have become adjusted to these conditions. It is therefore expedient for all who take part in this discussion to treat this matter in a judicial way, so as to give a true direction to the process of tariff reduction, dealing especially with the element of time in the most careful manner in making great changes.
It seems to be very certain that whoever may be elected President in November next, the majority of the House of Representatives, without strict regard to party lines, will be elected only upon the assurance of nearly every candidate that he will sustain a complete measure for the reduction of the tariff. Even if a majority of the members of the Senate may not have been chosen upon that issue, it is yet very certain that a working majority will sustain any judicious measure of general tariff reduction that may have been carefully framed in the House of Representatives. In this view it becomes interesting to note the signs of the times.
The beginning of an alliance of members of both parties in dealing with financial questions has been brought about in the recent action upon the free coinage of silver. After the Presidential election is ended, in the second session of the present Congress, what is more likely to occur than that men who have co-operated together in endeavoring to establish the currency of the country upon a safe and solid basis should again co-operate in the reform of the present system of excessive and badly adjusted taxation?
It has been demonstrated that the revenue from liquors and tobacco under existing acts even now suffices to meet all the expenses of the government, except the pensions, with a margin over. In the second session of the present Congress, legislation will be directed toward making provision for the expenditures for the fiscal year beginning June 30, 1893, and ending June 30, 1894. In that financial year, according to the statements recently submitted by the Commissioner of Pensions, nearly all claims for pensions under existing acts will have been audited, to the end that there will be no longer any first payments or payment of arrears to be made. These first payments now constitute about one third of the outgo. After they are all liquidated the annual pension roll will not exceed the sum of $100,000,000 a year, if it comes to so much. When that point is reached another year will have elapsed, and the revenue from liquors and tobacco will then be so much in excess of the other expenditures as to cover a considerable part of the pension roll. The revenue needed from customs on other articles than liquor and tobacco may then be less than $100,000,000.
It would therefore, be wholly within the power of this Congress at its second session to abate all duties upon crude and partly manufactured articles that are necessary in the processes of domestic industry, and to frame a simple and consistent measure of duties upon other materials at such rates as might yield the desired revenue. It needs only that the people of this country should exert their will and make their will manifest, and then every obstacle that now stands in the way of such a simple and effectual method of dealing with the subject of taxation will vanish like dew before the sun.
In anticipation of such an alliance of Republicans and Democrats, without regard to party affiliations, for tariff reform and for a reduction of taxation, it becomes expedient to deal with the fundamental principles of taxation. From the days of Alexander Hamilton, through the discussions in the time of Clay and Webster, thence down to the date in 1867 when the late Erastus B. Bigelow was one of the most conspicuous devotees of the protective system, as well as at the present time, the objective point of the protective system has been held to be ultimate Free Trade. The only difference between reasonable men—putting aside the dogma of “Protection with incidental revenue” as one that requires no further consideration—now is as to the time and method of beginning the reform of which the agreed objective point is ultimate Free Trade. This fact is demonstrated by the Republican measures for treaties of reciprocity. Such measures are merely indirect devices for attaining partial Free Trade by discrimination among countries and subjects of taxation, and also by the increase in the free list in the McKinley act.
The time is therefore now ripe to deal with fundamental principles. The Republican party, as a party, has planted itself upon what it holds to be the “Principle of Protection.” Its representatives have constantly affirmed that any changes which may be made in existing acts for the collection of duties must be made only by those who will deal with it as a principle. The Democratic party has not declared absolute Free Trade to be its motive, because that would involve a discontinuance of custom-houses. Under our present system it will long remain necessary for Free Trade to be qualified by the necessity for the collection of a certain amount of revenue from duties upon imports.
Under such conditions it follows that the whole subject should be removed from party politics, and ought to cease to be an element in party divisions, to the end that all obstructions which have heretofore prevented men of either party from acting together may be removed, as they have been in dealing with the silver question.
It cannot be doubted that it is the will of the people of this country that its unit of value shall remain what it now is; to wit, a dollar which is worth as much after it is melted as it is in the coin. It is the will of the people of this country that no fiat dollar, or dollar made of silver that is not worth as much after it is melted as it purports to be worth in the coin, shall be coined without limit or continue to be made a full legal tender. It is the will of the people of this country that the money in which the workman is paid shall be equal in its purchasing power or value to the money in which banks and bankers must of necessity transact their business in order to maintain their credit and to retain the confidence of the business community.
It is the will of the people of this country that its system of taxation shall be simple and plain; that the sum of money raised by taxation shall not exceed what is required for the conduct of the government when economically administered; and that all taxes that the people pay, the government shall receive. The problem is how to adjust legislation so as to give expression to these purposes. That is a question of practical legislation.
Now it will be apparent that no true or just solution of this problem can be reached except through a discussion of the underlying principles which must govern any policy of taxation. If there were no necessity for a revenue to support the government, no sane man would propose to put a tax or duty upon anything either of foreign or domestic origin; but since there is a necessity for raising a certain amount of revenue by duties upon imports, no judicious person would assess these duties without such discrimination in the choice of subjects of taxation and in the mode of applying the duties as would most effectually promote domestic industry and protect home labor from injury.
The objective point of both the systems now contending for preference is the same. Their representatives, as a rule, are equally sincere in the conviction that their chosen method will most fully secure the objects named. What is called Protection and what is called Free Trade, qualified only by the necessity of a moderate tariff for revenue purposes, are simply names representing the same purpose.
Ultimate Free Trade is the declared object of the advocates of what is commonly called Protection, to be reached at some future date, when certain conditions precedent have been secured. Free trade, qualified by a tariff for revenue only, is the objective point of the other side. The difference is only upon the question of the time when to begin so as to reach the objective point which is common to both. Recourse may therefore be had to the simple elements of the case which may be developed by the consideration of two plain questions:
First, the principle of Protection, what is it?
Second, the principle of Free Trade, what is it?
If there is a distinct underlying principle governing the case, then, of course, the policy of the country must sooner or later become adjusted to that fundamental principle, whatever it is, because the definition of a principle is, “a rule of action among human beings.” If there is a principle underlying the one and not the other theory, then the one which is based upon a principle will in the end be adopted and will govern the policy of the country.
English jurists have an excellent method of defining the meaning of words before proceeding to incorporate them in any acts of legislation. It may be well to adopt this method in dealing with the fundamental questions upon which our acts of taxation should be framed. That method will be adopted in the subsequent chapters.