OUR PRODUCTIONS ARE OVERLOADED WITH INTERNAL TAXES--
This is but a new wording of the Sophism before noticed. The
demand made is, that the foreign article should be taxed, in order to
neutralize the effects of the internal tax, which weighs down domestic
produce. It is still then but the question of equalizing the
facilities of production. We have but to say that the tax is an
artificial obstacle, which has exactly the same effect as a natural
obstacle, i.e. the increasing of the price. If this increase is so
great that there is more loss in producing the article in question at
home than in attracting it from foreign parts by the production of an
equivalent value of something else--_laissez faire_. Individual
interest will soon learn to choose the lesser of two evils. I might
refer the reader to the preceding demonstration for an answer to this
Sophism; but it is one which recurs so often, that it deserves a
special discussion.
I have said more than once, that I am opposing only the theory of the
protectionists, with the hope of discovering the source of their
errors. Were I disposed to enter into controversy with them, I would
say: Why direct your tariffs principally against England, a country
more overloaded with taxes than any in the world? Have I not a right
to look upon your argument as a mere pretext? But I am not of the
number of those who believe that prohibitionists are guided by
interest, and not by conviction. The doctrine of Protection is too
popular not to be sincere. If the majority could believe in freedom,
we would be free. Without doubt it is individual interest which weighs
us down with tariffs; but it acts upon conviction. "The will (said
Pascal) is one of the principal organs of belief." But belief does not
the less exist because it is rooted in the will and in the secret
inspirations of egotism.
We will return to the Sophism drawn from internal taxes.
The government may make either a good or a bad use of taxes; it makes
a good use of them when it renders to the public services equivalent
to the value received from them; it makes a bad use of them when it
expends this value, giving nothing in return. To say in the first case
that they place the country which pays them in more disadvantageous
conditions for production, than the country which is free from them,
is a Sophism. We pay, it is true, so many millions for the
administration of justice, and the maintenance of order, but we have
justice and order; we have the security which they give, the time
which they save for us; and it is most probable that production is
neither more easy nor more active among nations, where (if there be
such) each individual takes the administration of justice into his own
hands. We pay, I grant, many millions for roads, bridges, ports,
steamships; but we have these steamships, these ports, bridges, and
roads; and unless we maintain that it is a losing business to
establish them, we cannot say that they place us in a position
inferior to that of nations who have, it is true, no budget of public
works, but who likewise have no public works. And here we see why
(even while we accuse taxes of being a cause of industrial
inferiority) we direct our tariffs precisely against those nations
which are the most taxed. It is because these taxes, well used, far
from injuring, have ameliorated the _conditions of production_ to
these nations. Thus we again arrive at the conclusion that the
protectionist Sophisms not only wander from, but are the contrary--the
very antithesis--of truth.
As to unproductive taxes, suppress them if you can; but surely it is a
most singular idea to suppose, that their evil effect is to be
neutralized by the addition of individual taxes to public taxes. Many
thanks for the compensation! The State, you say, has taxed us too
much; surely this is no reason that we should tax each other!
A protective duty is a tax directed against foreign produce, but which
returns, let us keep in mind, upon the national consumer. Is it not
then a singular argument to say to him, "Because the taxes are heavy,
we will raise prices higher for you; and because the State takes a
part of your revenue, we will give another portion of it to benefit a
monopoly?"
But let us examine more closely this Sophism so accredited among our
legislators; although, strange to say, it is precisely those who keep
up the unproductive taxes (according to our present hypothesis) who
attribute to them afterwards our supposed inferiority, and seek to
re-establish the equilibrium by further taxes and new clogs.
It appears to me to be evident that protection, without any change in
its nature and effects, might have taken the form of a direct tax,
raised by the State, and distributed as a premium to privileged
industry.
Let us admit that foreign iron could be sold in our market at $16, but
not lower; and American iron at not lower than $24.
In this hypothesis there are two ways in which the State can secure
the national market to the home producer.
The first, is to put upon foreign iron a duty of $10. This, it is
evident, would exclude it, because it could no longer be sold at less
than $26; $16 for the indemnifying price, $10 for the tax; and at this
price it must be driven from the market by American iron, which we
have supposed to cost $24. In this case the buyer, the consumer, will
have paid all the expenses of the protection given.
The second means would be to lay upon the public an Internal Revenue
tax of $10, and to give it as a premium to the iron manufacturer. The
effect would in either case be equally a protective measure. Foreign
iron would, according to both systems, be alike excluded; for our iron
manufacturer could sell at $14, what, with the $10 premium, would thus
bring him in $24. While the price of sale being $14, foreign iron
could not obtain a market at $16.
In these two systems the principle is the same; the effect is the
same. There is but this single difference; in the first case the
expense of protection is paid by a part, in the second by the whole
of the community. I frankly confess my preference for the second
system, which I regard as more just, more economical, and more legal.
More just, because, if society wishes to give bounties to some of its
members, the whole community ought to contribute; more economical,
because it would banish many difficulties, and save the expenses of
collection; more legal, because the public would see clearly into the
operation, and know what was required of it.
But if the protective system had taken this form, would it not have
been laughable enough to hear it said: "We pay heavy taxes for the
army, the navy, the judiciary, the public works, the debt, &c. These
amount to more than 200 millions. It would therefore be desirable that
the State should take another 200 millions to relieve the poor iron
manufacturers."
This, it must certainly be perceived, by an attentive investigation,
is the result of the Sophism in question. In vain, gentlemen, are all
your efforts; you cannot give money to one without taking it from
another. If you are absolutely determined to exhaust the funds of the
taxable community, well; but, at least, do not mock them; do not tell
them, "We take from you again, in order to compensate you for what we
have already taken."
It would be a too tedious undertaking to endeavor to point out all the
fallacies of this Sophism. I will therefore limit myself to the
consideration of it in three points.
You argue that the United States are overburdened with taxes, and
deduce thence the conclusion that it is necessary to protect such and
such an article of produce. But protection does not relieve us from
the payment of these taxes. If, then, individuals devoting themselves
to any one object of industry, should advance this demand: "We, from
our participation in the payment of taxes, have our expenses of
production increased, and therefore ask for a protective duty which
shall raise our price of sale:" what is this but a demand on their
part to be allowed to free themselves from the burden of the tax, by
laying it on the rest of the community? Their object is to balance, by
the increased price of their produce, the amount which they pay in
taxes. Now, as the whole amount of these taxes must enter into the
Treasury, and the increase of price must be paid by society, it
follows that (where this protective duty is imposed) society has to
bear, not only the general tax, but also that for the protection of
the article in question. But, it is answered, let _everything_ be
protected. Firstly, this is impossible; and, again, were it possible,
how could such a system give relief? _I_ will pay for you, _you_ will
pay for me; but not the less still there remains the tax to be paid.
Thus you are the dupes of an illusion. You determine to raise taxes
for the support of an army, a navy, judges, roads, &c. Afterwards you
seek to disburden from its portion of the tax, first one article of
industry, then another, then a third; always adding to the burden of
the mass of society. You thus only create interminable complications.
If you can prove that the increase of price resulting from protection,
falls upon the foreign producer, I grant something specious in your
argument. But if it be true that the American people paid the tax
before the passing of the protective duty, and afterwards that it has
paid not only the tax but the protective duty also, truly I do not
perceive wherein it has profited.
But I go much further, and maintain that the more oppressive our taxes
are, the more anxiously ought we to open our ports and frontiers to
foreign nations, less burdened than ourselves. And why? _In order that
we may_ SHARE WITH THEM, _as much as possible, the burden
which we bear._ Is it not an incontestable maxim in political economy,
that taxes must, in the end, fall upon the consumer? _The greater then
our commerce, the greater the portion which will be reimbursed to us,
of taxes incorporated in the produce which we will have sold to
foreign consumers; whilst we on our part will have made to them only a
lesser reimbursement, because (according to our hypothesis) their
produce is less taxed than ours._