The Online Library of Liberty

A project of Liberty Fund, Inc.

• Foreword
• A Note On the Text
• Preface to the First Edition
• Tyranny Unmasked
• Section One: Unmasking the Protecting-tariff Policy and Its Advocates From Many Perspectives
• Section Two: Arguments Against the Protecting Duty Summarized Through an Analysis of Its Major Consequences
• 1.: Protecting Duties Are Unconstitutional
• 2.: Manufactures Are Injurious to Morals, and Produce Pauperism
• 3.: No Further Protection Necessary
• 4.: The Increase of Duties Will Lead to Smuggling
• 5.: A Tax On the Many, a Bounty to the Few
• 6.: A Restrictive System
• 7.: Destroy Revenue
• 8.: Ruin Commerce
• 9.: Destroy Agriculture
• Section Three: a General Discussion of Tyranny and the Choice That Americans Face

7.

Destroy Revenue

This objection, like several others, is mis-stated. It means that protecting duties impair the productiveness of revenue duties, and not that they will destroy other sources of revenue; and that the very consequence will ensue which the Committee think so desirable, namely, a resort to unlimited excises and other internal taxes, in order to supply the deficiency. This consequence is the evil deprecated by the objection, and the Committee admit that it will ensue, and justify it as a blessing, because it will enable us to rival the masterly policy, by which Britain is enabled to extract an enormous revenue from a few people.

They rest their preference of excises over duties upon a single comparison, from which they deduce an equality between them in that one respect, and exclude from their consideration every sound argument disclosing the disparities between the two modes of taxation. They suppose that the preference of duties to excises, rests solely on the notion, that one mode is less compulsive and more avoidable than the other; and contend, because both are avoidable by submitting to privations, that the two modes are perfectly equal in this problematical or humble merit. It might be contended that even this imperfect test chosen by the Committee, is insufficient to establish an equality so destitute of importance, because it is evidently easier to forbear the use of foreign luxuries than domestick necessaries; but waving this undoubted fact, it is sufficient to recollect that the comparison is wholly delusive. Neither duties nor excises are avoidable; if they were, they could not be relied upon for revenue. Both will operate as a general tax, and if some evasions by particular subterfuges may be practised under both modes of taxation, these confer no benefit upon those who pay the tax. The Committee admit that excises, at least, are a compulsory mode of taxation, by contending that they may be relied upon for a revenue. But let us enquire if other comparisons, more substantial, between the two modes of taxation, do not exist. The collection of duties is less expensive than the collection of excises; therefore the people must pay a larger sum by one mode than the other, to place the same amount in the treasury. To provide objects for excises to operate upon, bounties to an enormous extent must be paid to capitalists; thus the amount paid by the people, compared with what the treasury will receive, may possibly be doubled. Excises are keys to every lock, and penetrate like foul air into every recess; duties leave our homes unviolated, and our quiet undisturbed by the eternal intrusions of vulgar officers hunting for penalties or bribes. Duties are liable to the limitations of the importation, which cannot long exceed the demand; of an ability to pay which is the only lasting source of demand; and of the check arising from a certain degree of moderation to make them productive; excises are liable to no such limitations, and may be pushed to any extent. Duties fall chiefly on the rich, and on those who are most able to pay, because these classes are the chief purchasers of imported commodities, and the poor chiefly subsist on home products; excises will reach the poor in a multitude of consumption beyond the reach of duties, and increase pauperism. Duties preserve a rule of taxation, between the States, fair and just, corresponding with the inhibition to tax exports, and unlikely to generate local dissatisfactions; by excises, irregularities may be created by a majority in Congress sufficient to shake or dissolve the Union. Yet the Committee say, “had the word impost been applied to domestick articles, and excise to foreign, the popularity of the two modes of taxation would have been transposed, for their operation on the people is the same.” Transpose the names horse and rat, and their qualities would also be transposed. The rat, when called a horse, would become a useful labourer to supply the family with necessaries; and the horse, when called a rat, would gnaw our clothes, steal our food, infest our houses, and produce a great expense in cats, not to prevent, but to assist his depredations. In this, and many other instances throughout the report, the Committee have reasoned upon the ground that words make or change the qualities of things; and, having previously gotten rid of monopolies, and exclusive privileges by calling them regulations of commerce, they now propose in the same way to convert excises into imposts. Is it possible that the universal opinion of mankind, that excises are the most troublesome and oppressive mode of taxation, has been imbibed, not from an experience of their qualities, but from the sound of their names? There was a dog once in this State, famous for following and taking thieves. Upon one occasion, a thief and an innocent person were made to change clothes, and mingle with the crowd, into which the dog was sent to search for the thief. When he came to the clothes on the innocent man, he growled, but discovering his mistake, left him, continued his search, found, and seized the thief, though concealed in the borrowed dress. Do the Committee think that men are less sagacious than this dog?

The impolicy of borrowing, and the inability of the land owners to pay taxes, are two other arguments urged by the Committee in favour of excises, if not more profound, at least more conciliating. The national aversion to borrowing is courted by one, and its aversion to a land tax, by the other. Our system of revenue, they truly say, is at present composed of duties and loans, and they propose to exchange it for a system of excises. They ought in justice to have said for one of excises and loans; for two bad modes of providing revenue, instead of the best which can probably be devised. I summon all experience to testify, whether the mode of obtaining revenue by excises, has diminished or extended the mode of obtaining it by loans. Has the masterly effort of human policy in England had this effect? The reason why it has not, is plain. That policy is a system for transferring property, in which borrowing is an efficacious item; and an increase of taxes by excises is a mode of making it more productive to the gainers, and oppressive to the losers of the property transferred. By adopting it, we shall also adopt its effects, among which the additional funds it furnishes for borrowing, is most prominent.

Land holders must not be taxed, say the Committee, because the depression of agricultural produce forbids it; and it would be equally repugnant to the wishes of the legislature and the interest of the nation. They are too poor to pay a land tax, and yet rich enough to pay excises, sufficient to maintain and increase our present system of extravagance. How are they to pay these excises? With money. How are they to get this money? By the same depressed prices. These are not only to pay more than they now do to government, in order to prevent a recurrence to loans, but also more than they now do to capitalists, in order to create objects for excises to operate upon. Excises, like all other taxes, must chiefly fall on land and labour in the United States for some centuries; I might say for ever; and a suggestion to land owners that this mode of taxation will be a favour to them, is therefore evidently only soothing or cajoling. Whiskey itself, the example exhibited by the Committee, does not prove that excises will relieve the poor land owners from taxation. A tax upon it, reaches the grain of which it is made, the land which produces the grain, and the labour which cultivates the land. The example, however, affords other testimony. Let those who remember how many officers were necessary to enforce this small excise, compute the number which will be necessary to enforce a general excise; and let the land owners recollect that they must chiefly pay this expense, in addition to the excises upon their consumption; and then determine, whether the sympathy for their inability to pay taxes, expressed by the Committee, is genuine or delusive.

“The important question,” say the Committee, “presents itself. Will the proposed changes be beneficial to the revenue, or is it necessary for its preservation and increase? The revenue from the customs has rapidly decreased. Consumption diminishes with the increase of population. A reduction of duties will not increase the revenue. When the expenses of a government exceed its income, there must be a responsibility somewhere.” Loss to the revenue is, throughout the report, the great evil to be deprecated, and gain to the revenue, the great good coveted. Far from apprehending that the treasury will be starved by an excise, I agree that it must be fattened because it can feed upon every thing; and that the patronage of the Federal government will be vastly increased also, by the multiplication of tax gatherers, and the bounties to capitalists. But ought the liberty and happiness of the people to be overlooked, in the ardent pursuit of these jewels, however brilliant they may appear to those eyes fixed upon the object of getting money for themselves; and ought we not to pause upon being told, that the agriculturists are too poor to bear a land tax, and yet that their taxes ought to be increased to enrich the treasury, extend patronage, and pay bounties? This is said to be necessary, because consumption, and consequently the customs, have diminished as population has increased. Are there no artificial causes for this phenomenon? Must not our ill-judged tariff, and other commercial restrictions be among them? The responsibility must lie somewhere. Can it be found anywhere but in bad laws? New laws must be the true causes of new effects. But the Committee, overlooking this truth, have ascribed our past prosperity solely to wars between foreign nations. If we could compare the losses we sustained from armed robbers, with the profits we reaped from these wars, it might be problematical on which side the balance would lie; but these enormous losses are suppressed to deprive our former republican policy of all its laurels, and to hide the visage of that which scowls more and more upon our prosperity, as it gradually supplants its rival. During the long experience which the United States had of the policy decried by the Committee, they found it good in periods of peace, as well as in those of foreign wars, and that it should now fail, must be owing to causes which did not then exist. Foreign commercial restrictions and prohibitions existed during these periods to a greater extent than now, but they could not prevent our prosperity and therefore no causes, but those of a domestick nature, can account for the gradual disappearance of the national prosperity then our elevation, now our regret. Do not the facts stated by the Committee, point directly to these causes? Why have consumptions diminished? Because the protecting-duty tariff has increased. Why have duties diminished? Because this tariff and other property-transferring measures, have diverted the profits of labour from being expended in consumption, by which the public treasury would have been supplied, to enrich the treasuries of capitalists. Why are agricultural products so excessively depressed? Because of the expulsion of foreign commodities by the existing tariff, which would have enhanced the value of domestick products by multiplying exchanges. To these internal regulations, add our imitations of English extravagance, in the expenses of government, and both the causes and the remedies we are in search of must be very easily discovered. Restore our renowned republican frugality, reform our tariff for the object of revenue only, and suppress exclusive privileges; and our treasuries will no longer be empty, government will not be obliged to plunge the nation deeper and deeper into debt, taxation will be light, and the national happiness, gradually lost, will be recovered by a reoccupation of the principles gradually deserted.

The Committee have disclosed one great cause of the decrease of consumption in proportion to population, by reminding us of the fact, that capital has increased in a few hands up to a redundancy. The same policy which begets this enormous transfer of profits or property, must beget a correspondent diminution of consumption, by depriving labour of that portion of its income applicable to consumption, and transferring it to the employment of accumulating capitals in other hands. Reversing the principle of a fertilizing irrigation, it collects the streamlets into a few lakes, and drowns many a fertile vale. These reservoirs of capital, drawn from the small profits of labour, and unfruitful to the treasury, can only have been created by legal mechanism. If the system for transferring property by banking, protecting duties, bounties, and political extravagance, has not done the deed, what has? Have foreign commercial restrictions, always existing, suddenly bethought themselves of inflicting upon us the two evils of exuberant, and empty purses? Why should they have operated so partially as to have enriched a sect of capitalists, and impoverished the rest of the nation? Why should this sect be encumbered with wealth by peace, and the people be reduced to poverty? Can the cessation of foreign wars have been the cause of both these effects? But if the accumulation of wealth in a few hands was not caused by foreign wars, it clearly follows that it is caused by domestick regulations; that this accumulation, and not peace, is the cause of that distress in which the capitalists do not participate, though exposed equally with other people to the cessation of foreign wars; and that it is this artificial accumulation which has diminished consumption, impoverished both the treasury and the people, and suspended the improvements of agriculture. Can it be denied, that the more of their profits are expended by the great body of the nation which subsists by agriculture, the more of them will be employed in obtaining the comforts of consumption, and in aiding the revenue; and that the more of these profits are taken from this great body of consumers, and taxpayers, and applied to the interest, bounties, and dividends which have created our exuberant capitals, the less can be applied to the other objects.

But instead of removing the causes of the disease, the Committee propose to increase them. The impost being crippled, by diverting the profits of labour from procuring the comforts of consumption, to the accumulation of artificial capitals, they propose to bestow more bounties upon this accumulation. The tariff having produced less and less in proportion to population, as it has been raised and raised, the Committee assert that it would not again become productive, by being lowered, and that it ought to be raised yet higher. If they had asserted that the same productiveness of the customs, experienced when the duties were low, could not be expected so long as an infinitely greater amount of the profits of labour, were diverted from consumption to accumulations, they would have been right. It would then follow that a diminution of the duties and a restoration of profits to the object of consumptions, united, would certainly increase the revenue; and on the other hand, that both an increase of duties, and also an increase of the policy of transferring profits to pecuniary accumulations, will diminish it. The Committee, therefore, had no design to assist the revenue, by increasing the rates of the tariff; and indeed they fairly acknowledge, that their object is still further to diminish the profits of labour, applicable to consumption, by transferring more of them to capitalists, that they may be able to prepare objects for an excise.

The Committee have justly observed, that taxation, either by excises or imposts, must fall on consumptions. To consider them with an eye to this equality only, is a concession which grants all that could be asked, and more than the excise system can reasonably expect. From this position it is obvious, that the system of augmenting capital, by diminishing the portion of income applicable to consumption, will cripple an excise, just as it has crippled the impost mode of taxation. Now as the policy of transferring property, coupled with imposts, has almost famished both the treasury and the nation, whilst it has created an exuberant capital in a few hands; it is but a dreary kind of comfort to be told, that the same policy, coupled with excises, also a tax upon consumptions, will fatten both. But the Committee go further, and say, that the transition to excises must cost us anew augmentation of capital, by monopolies of indefinite duration, to enable these monopolies to fabricate commodities for excises to operate upon; and as the bounties paid under these monopolies will still further reduce the profits of labour applicable to consumption, these excises must be applied to articles of the first necessity, and must be made more oppressive, in order to extort from necessaries, what could not be gotten from superfluities by the impost mode of taxation, when coupled with a monopoly, diminishing consumptions.

Upon this ground, the project of the Committee promises less than nothing. A change in the mere name of a tax, which is still collected through the medium of consumption, would leave us substantially where we were; but the payment of a great and indefinite bounty to capitalists, for this difference between names, and the additional expenses of collection, would make the remedy worse than the disease. One plan to relieve both the nation and the treasury, consists of frugality, free exchanges, free trade, and an abandonment of the policy of creating capitalists by exclusive privileges, bounties, and monopolies; general excises, and an increase of public expenditure, united with these universal instruments of tyranny, constitute the other. We have only to ask ourselves two questions. Which of these plans would be preferred by a patriot, and which by a capitalist? Am I a patriot, or capitalist?