of any commodity have never met with favor, and stand condemned in the desire for individual initiative. As sources of revenue, the public lands, state control of the post office, and of such municipal undertakings as the water and, in a very few cases, the gas supply, has been employed, and in place of profit the mere cost of management is sought. More than any country of continental Europe, the United States has depended upon taxes, pure and simple, unsupported or modified by state domains, state mines, state manufactures, or state monopolies. Even Great Britain in her local taxation is bound and hampered by precedent, and pursues a system that is notoriously confused, costly, and vexatious. Long usage and the erection of independent and conflicting authorities on principles other than fiscal have imposed upon the local agents the duty of assessing and collecting county and borough taxes which are as indefensible in theory as they are difficult in practice.
From this weight of tradition and precedent the United States has been almost entirely free, and it was possible to construct out of small beginnings systems of Federal and State taxation at least reasonable and consistent, producing an increasing revenue with the rapid development of wealth and the larger number of taxable objects; and so elastic as to adapt themselves to such changes as are inevitable in any progressive movement of commerce or industry. That no such system has resulted after a century of national life, and an even longer term of local (colonial and State) activities, these papers have tended to show. That the time is at hand when the problem of a thorough reform of both State and Federal taxation must be met, current facts prove beyond any doubt. If I have aided in a proper comprehension of these problems, and, by collecting certain experiences in taxation among other peoples and in different stages of civilization, contributed toward a proper solution, the end of this work will have been attained. It is not possible to introduce a complete change of policy at once; it is not only feasible but necessary to indicate the direction this change should take, and the ends to be secured in making them. And first as to Federal taxation:
In a democracy like that of the United States, the continuance of a mixed system of direct and indirect taxes is a foregone conclusion. Not that there is an absence of change or modification in the details of this double system, or in the application or distribution of a particular impost or duty. To deny such modification is to deny any movement in the body politic, or any progress in the industrial and commercial economy of the people. There is a steady and continuous movement in every direction, and the mere effort to escape taxation results in a new adjustment of related facts. This development has, partly through necessity and partly through a rising consciousness of what a tax implies, been tending from indirect to direct taxes. Ever restive under a rigid supervision by the state of private concerns, there has been a wholesome opposition to inquisitorial taxes. But this opposition has been carried too far, and is due more to the ignorant and at times brutal disregard by the agents selected for enforcing the law than to an appreciation of the injustice of the tax. Whether in customs or excise, the same blunders of management have been committed, and created a spirit in the people that is injurious to their best interests. On the one hand, private enterprises have been unduly favored by the removal of foreign competition, a favor that is now disappearing through the remarkable development of domestic competition. Thus taxes have been extensively used for other purposes than to obtain revenue, and for private ends. On the other hand, there has been created the feeling that taxation is a proper instrument for effecting a more equal distribution of wealth among the people, and readily becomes an instrument of oppression.
The almost absolute dependence of the Federal Government upon the customs duties for revenue through a great part of its existence was a striking fact. The simplicity of collection and the comparatively moderate scale of duties, although considered high at the time of imposition, gave this branch of the possible sources of revenue a magnified importance. The development of the country was slow, and at times greatly hampered by the tariff policy; but until about 1857 no other source of income was needed to meet the expenditures of the Government in a time of peace.
In recent years this has all changed, and not for the better. The immense development in manufactures and financial ability accomplished since 1860 has made a tariff for protection an anachronism. The political features of customs legislation have been pushed so far as almost to overshadow the fiscal qualities. The wave of protectionism that followed the abrogation of the commercial treaties of Europe about 1880 has resulted in tariffs framed with the desire to injure the commerce of other states rather than to meet the needs of a treasury. In the United States this policy has been carried beyond that of Europe, and the tariff now in existence is more protective than any hitherto enforced, short of absolute prohibition of imports.
In more respects than one the tariff law of 1897 was an extreme application of the protective policy. Each year the United States has demonstrated its ability not only to meet the industrial competition of the world on an equal footing, but to engage with it aggressively and with complete success. It is not necessary to give the figures of exports of manufactures to establish this fact; it is now beyond question. To frame a measure of extreme protection was, therefore, to overlook the most striking phase of the industrial situation existing in the United States. With an ability to manufacture cheaply and on a grand scale, and with a capacity to supply the demands of a market larger than any home market, there was no foreign competition to encounter, and the higher rates of duties meant nothing, either for protection or for revenue. In carrying further into action a tariff framed more for protection than for revenue, a twofold error was committed. The provisions were so complicated as to make the application difficult, and in applying these provisions inquisitorial and vexatious regulations were necessary to assure even a reasonable fulfillment of the requirements. In former tariff laws a general description carried a large class of articles, and a uniform duty, usually ad valorem, was collected. But under the demand for a more scientific tariff, these general classes were broken up into a number of enumerated articles, each one carrying a specific or mixed duty, and an omnium or basket clause at the end to catch any article that could not be included in any enumeration. This desire to fix specific rates upon each imported commodity has been applied more generally in the law of 1897 than in any previous tariff act. An examination of the imports of manufactures of textile fibers will illustrate this increase of complexity without any increase of revenue. Indeed, these classifications and rates, being suggested by interested parties, have for their object a reduction of imports, and as a rule a reduction in revenue from them follows.
The second objection to the increasing complexity of the tariff laws is to be found in the petty annoyances imposed upon importers and others in enforcing the not always consistent provisions of the law. These vexations are made all the more telling by the fact that the administration of the law is apt to be in the hands of those who are openly hostile to foreign importations, and therefore regard the importer in an unfriendly spirit. The power given to the customs agents is enormous, and it is not remarkable that it is abused. The demand for samples, the appraisement of articles, the classification of new or compound commodities, all offer room for controversy, which is not always decided by an appeal to the courts of justice. In special instances, where a section of the law has been framed in behalf of a special interest, the attempt to enforce it becomes petty tyranny of the most intolerable kind.
In operation the law soon exhibited its failure as a revenue measure. Although duties were generally increased, the more important articles taxed yielded a smaller revenue than under lower rates. The aggregate collections under the bill did not meet the expectations of its sponsors, and for two reasons: first, because the higher duties discouraged imports; and secondly, the demand for imported articles was steadily decreasing under the expanding ability of home manufactures to meet the needs of the market. No measure short of a direct encouragement to importations can change this situation, or prevent the further shrinkage in the use of foreign manufactures. It follows that the tariff, unless radically altered, can no longer be depended on for a return sufficient to defray one half of the rapidly increasing expenditures of the national Government. By refusing to impose moderate duties on articles of general consumption, revenue is sacrificed; by insisting upon imposing protective duties where little revenue can be had, the tariff is converted into a political weapon. Its dangerous qualities are strengthened by turning these duties against the products of certain countries, a policy specially fit to invite reprisals.
