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Historical Documents & Okefenokee Swamp Creatures: CHAPTER I - Direct vs. Indirect Taxation

Posted By: Swami
Date: Wednesday, 13-Jan-2021 05:51:59
www.rumormill.news/117497

In Response To: The Real History Of The American Income Tax (Swami)

Great Debates in American History: Revenue: tariff and taxation - Google Books

https://books.google.com/books/download/Great_Debates_in_American_History_Revenu.pdf?id=LQkhAAAAMAAJ&hl=en&capid=AFLRE70FEqF2h0vIOfpVhx_QEnUpo4fF5ppNp7BLMBqjlfs6J9Ohfi27LEILjElZ3TOX-BGqo8XwaxbDstnH18Uy3ynf8A0v4A&continue=https://books.google.com/books/download/Great_Debates_in_American_History_Revenu.pdf%3Fid%3DLQkhAAAAMAAJ%26output%3Dpdf%26hl%3Den

Marion Mills Miller

Current Literature Publishing Company, 1913

INTRODUCTION

Some Moral Aspects of Tariff-Making

DIFFICULT as it would be for one to realize it who took up for the first time the present tariffs of the United States, they rest on a formula which, as it always has been understood by the majority of the people of the country, is not ^especially intricate or confusing. Put yourself back a hundred years or so, when the country was busy with agriculture and commerce and mining. We had an enormous advantage in these pursuits. We were at a disadvantage in manufacturing. To be sure, from the start we did a little. In the nature of things we would gradually do more, and what we did would be on a solid basis. But, obviously, only the born ironmaster, potter, weaver, was going to practice his trade in the new country with the foreigner importing goods cheaper than he as a rule could make them. And so we decided to encourage manufacturing by taxing ourselves.

The amount of the tax decided on was to be only enough to put our would-be manufacturers on an even basis with the foreigner. This meant what? By general consent it meant giving our people enough to cover the difference in the cost of labor. Plainly, Americans were not going to work for the same wages that Europeans did. There were too many ways in which they could earn more.

The country was new and men could have land of their own on easy terms. Commerce called them, for, having land, we were raising foods, and Europe and the Orient, worn and old and privilege-ridden, were crying for food. They could make everything we wanted, and far cheaper. They were eager to exchange. If we were to do our own manufacturing we were obliged to devise a scheme which would make the wages of operatives approximately equal to those which could be earned in our natural occupations. Thus protection was not adopted for the sake of producing generous wages for labor. It was adopted because the rewards to labor in the new country were already generous and promised to be more so.

There is another equally important point to remember, and that is that it was expressly understood that the duty was never to be prohibitive. It was to be one that would permit the man at-home to compete with the man from abroad; no more. Sensible people have always agreed that we would injure ourselves if we allowed prohibitive duties, since they would cut us off from the stimulus of competition and also from models.

The old countries had been for centuries making the goods we wanted. They knew how to do it. We needed constantly before us in our markets the educational effect of their work.

There were few, if any, at the start to deny that this taxing of ourselves to establish industries was dangerous business, undemocratic, of course—probably unconstitutional—and an obvious bait to the greedy; but they comforted themselves with the gains which they believed would speedily result. The list was tempting:

1. We were to build up industries which would supply our own needs.
2. The laborers attracted into these industries were to make a larger home market.
3. We were soon to out-rival the foreigner in cost of production, giving the people in return for the tax they had borne cheaper goods than ever the Old World could give.
4. We were to outstrip the Old World in quality and variety—another reward for taxation patiently borne.
5. We were to over-produce and with our surplus enter the markets of the world.

Nobody pretended to deny that if it was found on fair experiment that these results were impossible in a particular industry the protection must be withdrawn. Otherwise it amounted to supporting an industry at public expense—an un-business like, unfair, and certainly undemocratic performance.

But what has happened when the formula has not worked? Take the failure after decades of costly experiments to grow all the wool we use, to make woolens of as high a quality and at a price equal to those of the English. Fully sixty per cent, of the raw wool used in the United States is brought from other lands, and a tax of 11 or 12 cents is collected on every pound of it. Our high grade woolens cost on an average twice what they do in Europe. The fact is, the protective dogma has not, and probably never can, make good in wools and woolens. It is one of those cases where we can use land, time, labor, and money to better advantage. The doctrine of protection as well as common humanity and common sense orders the gradual but steady wiping out of all duties on everything necessary to the health and * comfort of the people, unless in a reasonable time these duties can supply us better and cheaper goods than we can buy in the world market. That time was passed at least twenty years ago in wool, but Schedule K still stands. It is supported by an interpretation of the formula of protection, which, as one picks it out to-day, from the explanations and practices of the wool growers and wool manufacturers, is only a battered wreck of its old self. It ignores utterly the time limit, the '' reasonable' ' period in which an industry was to make good. It ignores the condition that the duty should not destroy fair competition. Moreover, it stretches the function of the duty from that of temporarily protecting the cost of production to one of permanently insuring profits. The chief appeal of those who employ this distorted notion is not to reason at all, but to sympathy—sympathy for the American working-man. Call their attention to the inequalities of the duties on raw wool, and they will tell you of the difference in the labor cost of dress goods here and in England. Tell them the quality of our goods is deteriorating, and they will draw you a picture of the blessings of the American working-man. Tell them that the wool schedule has taken blankets and woolen garments from the sufferers from tuberculosis, who certainly need them* and they will tell you that''the American people are better clothed than any other people in the world and their clothes are better made'

Any one who had observed the life of the working-mail on both sides of the Atlantic knows that wages, conditions, opportunities are vastly superior as a whole in the United States. It is a New World, with a New World's hopes, But it is only the blind and deaf who do not realize that the same forces of allied greed and privilege which have made life so hard for so many in the Old World are at work, seeking to repeat here what they have done there. The favorite device of those who are engaged in this attempt is picturing the contrast between the most favored labor of the United States and the least favored of Europe. It is a device which "Pig Iron" Kelley used throughout his career with utter disregard of facts. Mr. McKinley followed him. In the course of his defense of the tinplate duty he read, with that incredible satisfaction which the prohibitive protectionist takes in the thought that his policy may cripple the industry of another nation, an English view of the effect the proposed duty would have in Wales. "The great obstacle to tinplate making on a large scale in the States," said the article, "is the entire absence of cheap female labor." Mr. McKinley paused and said impressively, "We do not have cheap female labor here under the protective system, I thank God for that." And yet at that moment in the textile mills of New England, of New York, and of Pennsylvania, not only were thousands of women working ten, eleven, and more hours a day, because their labor was cheap, but thousands of children under twelve years of age were doing the same.

The average weekly earnings for 58 hours in cotton factories in 1907, a "boom" year in the industry, were: For the carding room, $7.80; for mule spinners, $12.92; for speeders, $10.62; for weavers, $10.38. In the woolen industry the picker received $8.00; the woman spinner, $7.25; the man spinner, $12.91, and the weaver, $15.34.

If a man could make these wages for fifty-two weeks a year throughout his working life, if he had a thrifty wife and healthy children, his lot, if not altogether rosy, would be far from hopeless; he might even be able to realize the dream of a little home and garden of his own which lurks in the mind of every normal man, and which, in the case of the textile operative, is almost imperative if he is to have a decent and independent old age. For this man, however husky he may be at the start, however skillful a laborer, has always a short working life. There are few old men and women in textile factories. By 55 they are unfit for the labor. The terrible strain on brain and nerve and muscle has so destroyed the agility and power of attention necessary that they must give up the factory, where, indeed, for several years their output has probably been gradually decreasing. As almost all textile operatives are paid by the piece the wage will gradually fall off as dexterity declines. By 55, then, if not earlier, he drops out, picking up thereafter any odd job he may.

It is this short working life of the father, with the declining wage for years before it actually ends, that makes woman and child labor an essential factor in the solving of the problem of the textile family.

The protectionist who answers every criticism of his rates by conjuring a picture of "pauper labor'' is equally conscienceless in his attitude toward the relation of protection to the two most disquieting industrial phenomena of our day, the increase in the cost of living and the multiplicity of corporations which aim to become and often are monopolies.

In recent years the problems of the operative have been complicated by the soaring cost of living. Almost everything he buys is higher in price, or, if he insists on a standard price, the article is poorer in quality. Take the very protected articles from which a manufacturing State such as Rhode Island draws its wealth. All of the 68,000 textile workers in that State must have clothes. Now the price of women's all-wool dress goods increased in Providence, the center of the industry, over 33 percent, between 1891 and 1907. There was an increase in virtually all the cotton-warp goods, varying from 4 to 40 per cent. Underwear in which there was any mixture of wool cost a fourth more in 1907 than sixteen years before. Bleached muslin used for shirtings was 34 per cent, dearer. That is, their own industries are taking out of the textile operatives the increase in wages which this same period has seen!

No evil concealed in the doctrine of protection was ever more thoroughly advertised than monopoly. At every stage since Hamilton's time we have been warned that it waited us just around the turn. For the last twenty-five years, especially, we have seen it pour down upon us—an army whose ranks yearly grew thicker, stronger, and more cruel. This is the very army against which we have been cautioned for decades as waiting in ambush. There was a counter force provided, of course, for this waiting enemy—domestic competition. Now, we know what has happened to domestic competition in the last thirty years in this country. Freed from foreign competition—something which the doctrine never intended should happen—the home manufacturers have by a succession of guerilla campaigns, often as ruthless and lawless as those of wild Indians or Spanish freebooters, corralled industry after industry so completely that they could control its output and at once cheapen the quality and increase the price.

One of the most serious results of this distortion of the protective system is the kind of man it encourages: a man unwilling to take his chances in a free world-struggle; a man whose sense of propriety and loyalty has been so perverted that he is willing to treat the Congress of the United States as an adjunct to his business; one who regards freedom of speech as a menace, and the quality of his product of less importance than the quantity; one whose whole duty toward his working-man is covered by a pay envelope. This man at every point is a contradiction to the democratic ideal of manhood. The sturdy self-reliance, the quick response to the ideals of free self-government, the unwillingness to restrain the other man, to hamper his opportunity or sap his re-sources, all of these fine things have gone out of him. He is an unsound democratic product, a very good type of the creature that privilege has always produced.

But this man would be impossible were it not that he has the backing of politicians and law-makers. Behind and allied with every successful high-tariff group is a political group. That is, under our operation of the protective doctrine we have developed a politician who encourages the most dangerous kind of citizenship a democracy can know—the panicky, grasping, idealless kind. Moreover, we have developed a politician whose principal method of getting things done is by barter.

Let us admit that reasonable people must not expect in a popular government to arrive at results save by a series of compromises. No reasonable person can expect the protective system to be handled without compromises, backsets, and errors of judgment, but he can expect it to be handled as a principle and not as a commodity. The shock and disgust come in the discovery that our tariffs are not good and bad applications of the principles of protection, but that they are good or bad bargains. Dip into the story of the tariff at any point since the Civil War and you will find wholesale proofs of bargaining in duties; rates fixed with no more relation to the doctrine of protection than they have to the law of precision of the equinoxes. The actual work of carrying out these bargains is of a nature that would revolt any legislator whose sensitiveness to the moral quality of his acts had not been blunted—who had not entirely eliminated ethical considerations from the business of fixing duties. And this is what the high protectionist lawgiver has come to—a complete repudiation of the idea that right and wrong are involved in tariff bills. There is no man more dangerous in a position of power than he who refuses to accept as a working truth the idea that all a man does should make for righteousness and soundness, that even fixing a tariff rate must be moral. But this is the man the doctrine of protection, as we know it, produces, and therein lies the final case against it—men are worse, not better, for its practice.

CHAPTER I

Direct vs. Indirect Taxation

BEFORE the Confederation the tariff had never been a leading American issue. But during the period in which this plan of union was in operation it was the tariff question, together with that of internal revenue, aB we have seen in Vol. I, which brought to light the underlying weakness of the existing system of government, and subsequently led to the adoption of the Constitution.

The first tariff act was passed on July 4, 1789. By this act Congress laid specific duties on many articles, and ad valorem duties, varying from 7% to 15 per cent., on others. There was also a large free list, for the act was only a slight beginning of the protective system. The preamble to this act declared:

It is necessary for the support of the Government, for the discharge of the debts of the United States, and the encouragement and protection of manufacturers that duties be laid.

EARLY DEBATES ON TAXATION

On July 20, to provide additional revenue, an act laying a tonnage duty was passed. This act discriminated in favor of American shipping, higher duties being imposed on foreign than on American bottoms. This system of protection was defended and explained by the Secretary of the Treasury, Alexander Hamilton, in his "Report on Manufactures" (1791), in which he gave the arguments for protection which have been used and elaborated by various writers since his time.

In 1790, the customs receipts having proved inadequate for the purposes of the tariff acts, Hamilton outlined a system of internal revenue. Though this plan was not adopted until four years later, an act was passed in 1791 by which alcoholic beverages were subjected to a moderate tax. This act was extremely unpopular, and in 1794 caused an uprising in western Pennsylvania known as the "Whisky Insurrection."

In the debate on this measure in the House of Representatives the leading speakers in favor of excise were James Madison [Va.], Samuel Livermore [N. HJ^Theo-dore Sedgwick [Mass.], and William B. Giles [Va.], while among the most important of those opposed to this system of taxation were James Jackson [Ga.], Jonathan Parker [Va.], John Steele [N. C.], and William L. Smith [S. C.].

Duties on Spirits, House of Representatives, January 5-25, 1791

Mr. Jackson said this mode of taxation was odious, unequal, unpopular, and oppressive, more particularly in the Southern States; in which he observed its unequal operation would be most sensibly felt, as the citizens of those States have no alternative to adopt by which they can diminish the weight of the tax—no breweries or orchards to furnish a substitute for spirituous liquors; hence they become a necessary article. He contended that they were not only necessary, but salutary in the Southern regions.

Mr. Jackson then gave a short sketch of the history of excises in England. He said they always had been considered by the people of that country as an odious tax from the time of Oliver Cromwell to the present day; even Blackstone, a high prerogative lawyer, has reprobated them. He said he hoped this country would take warning by the experience of the people of Great Britain, and not sacrifice their liberties by wantonly contracting debts which would render it necessary to burden the people by such taxes as would swallow up their privileges. We are, said he, too much in the habit of imitating that country, and I plainly perceive that the time will come when a shirt shall not be washed without an excise.

Mr. Parker touched on the mode of collecting the tax. It will, he said, convulse the Government; it will let loose a swarm of harpies, who, under the denomination of revenue officers, will range through the country, prying into every man's house and affairs, and like a Macedonian phalanx bear down all before them.

Mr. Madison felt the force of the objections which had been urged against the bill. He was in general principled against excises, but, of all excises, that on ardent spirits he considered the least exceptionable. The question now to be determined, he conceived, was this: is an addition to the present amount of the revenue necessary? It had appeared that an addition is necessary; for his own part, he should prefer direct taxation to any excises whatever, but he conceived this would be contrary to the sentiments of the majority of the people of the United States, and he was fully convinced that it was contrary to the opinion of a great majority of the House.

Mr. Jackson doubted not other resources of revenue might be explored which would be more palatable; he instanced a tax on salaries, pensions, and lawyers, and in these particulars he wished that the example of Great Britain might be followed.

He then dilated on the practice of smuggling, which he contended would be promoted by this bill; also the difficulties and opposition which were justly to be expected, by which the dignity of the Government would be insulted. Can this Government, said he, protect its officers from the resentment of any one State in the Union! He reprobated the idea of placing the Government in such a situation.

Mr. Steele said such was the present state of the public mind in various parts of the Union that he should dread taking any measures which might serve to increase the fermentation which the people were in. An excise he considered of this nature; it would in its operation produce the worst consequences. A more exceptionable mode of taxation, he conceived, could not be devised. A direct or poll tax, he supposed, would not be so odious; and though, for his own part, he should prefer an excise to either of the former taxes, yet such was the aversion of the people to it that he should prefer almost any other alternative. He thought other objects might be found from which the necessary revenue could be raised. He instanced duties on inland navigation, law proceedings, legal conveyances, etc.

He then adverted to the operation of an excise, especially in the State of North Carolina, and said that the consumption of ardent spirits in that State was so great that the duty would amount perhaps to ten times as much as in the State of Connecticut. On the whole, he hoped, if the section is not struck out, that the excise will be reduced.

Mr. Livermore was in favor of the bill. He considered it an equal and just mode of taxation, and as such one that would be agreeable to the people; they would consider it as drinking down the national debt. He then obviated the objections to the bill, which, he conceived, arose principally from the word excise. He thought the term very improperly applied on the present occasion, for the duty cannot be said to be an excise. He then gave a description of what had been considered in times past as an excise, which, to be sure, is a very unequal tax, inasmuch as it fell on the poor only, who were obliged to purchase in small quantities, while the rich, by storing their cellars, escaped the duty. But this bill provides that the duty shall fall equally on the rich and poor. It is to be paid, or secured, by the importer of foreign spirits, and on the still-head on domestic spirits. This will equalize the burthen, and leave no room for complaint. He then adverted to direct taxation, and, by a variety of particulars, showed that it was utterly impossible to lay a direct tax that would not prove unjust, unequal, and grievously oppressive.

Mr. Sedgwick was unhappy to hear that discontents prevailed in any part of the United States. He could assure gentlemen that he did not contemplate the execution of the laws by military force. In framing the present bill, great attention had been paid to prevent its being attended with those qualities which, in other countries, rendered taxation by excise justly obnoxious to popular resentment. He believed that of all the subjects of revenue which were within the power of Congress, none was so proper as the duty on ardent spirits, contemplated by the bill. The several species of taxation may be divided into the four following: by impost; a tax on internal negotiations; direct taxes; and that now under consideration, excise.

The impost duties had been extended as far as was, in the opinion of any gentleman, dictated by sound polioy. The tax on internal negotiations, which could not be carried on to any considerable extent without the intervention of stamps, was subject to the objection brought against the present bill, and that in a degree incomparably beyond it, of being opposed by public opinion. Direct taxes are still more objectionable on that account, at least in every part of the country to which his knowledge extended. They are of all taxes the most unequal, and in this country would be found the most oppressive. They are unequal, because, with whatever exactness they may be apportioned upon capital or income, the only two principles on which an apportionment can be made, they may, and will, be very unequal as to the burden imposed; because a man's ability to pay taxes is not in proportion either to his capital, his property, or his income, but to that part of his income which is over and above his necessary expenses, according to the usual manner of living for persons of his degree in the community. They will be oppressive in this country, because in many of the States the plentiful circulation of money, and the facility of obtaining it, does not extend to the interior parts, nor could it be obtained by many of our citizens without a great sacrifice of property. It may be added that, from the extent of our settlements compared with the number of our citizens, the expense of collection would be immense.

In regard to excises, Mr. Sedgwick said that in all insensible modes of taxation it should be observed that a much greater sum would be obtained from an individual than by any mode of direct imposition; this, without entering into a discussion of the reasons upon which it is founded, is demonstrated by fact. He instanced the porters of London, from whom, in the single article of beer, were drawn ten times as much as could be procured by the most rigorous mode of direct taxation. With regard to the proposed duties, though the well-meant consideration of morality which had been urged by some gentlemen weighed but little with him, because he doubted whether it was well founded, yet, if the consumption, which at present amounts to an enormous quantity, should be lessened, he did not believe that it would be attended with any sensible inconvenience.

Mr. Smith said the present bill was not so exceptionable on account of its violating private property as the collection law.

He instanced, in a particular clause of that law, the power of entering houses by warrant from a justice of the peace— trial by jury is secured by this bill, and other provisions friendly to personal rights are added.

Mr. Giles stated certain principles on which taxation should be formed. Taxes should be necessary, and raised on a plan consistent with the principles of liberty. The expediency of the present mode, he argued, from the impost's being carried to the utmost; from the approbation of this mode by a majority of the people, and, though uneasiness might prevail in some of the Southern States, he considered them as originating altogether from the want of due information.

When, in June, 1794, Hamilton's plan was carried into effect, and duties were laid on carriages, sales at auction, snuff, sugar, and tobacco, the measure encountered vigorous opposition. The duty on carriages was declared by many to be unconstitutional, and in Virginia the collection of this tax was disputed until the Supreme Court of the United States declared in favor if it.

In the debate on this bill the relative merits of direct and indirect taxation formed the chief issue.

Those speakers who argued in favor of direct taxation were John Smilie [Pa.], James Madison [Va.], William Findley [Pa.], Samuel Smith [Md.], and John Nicholas [Va.]; the speakers in favor of indirect taxation were .Uriah Tracy [Conn.], Theodore Sedgwick [Mass*], Fisher Ames [Mass.], and William L. Smith [S. C.].

Direct vs. Indirect Taxation House op Representatives, May 1-4, 1794

Mr. Smilie.—Taxes which are paid imperceptibly are more dangerous than others, because by their invisibility the people are seduced from thinking to what purposes their money went.

Mr. Tracy could not believe that the member was serious in advancing such a doctrine, for the sum of it is that when taxes are to be raised Government is in duty bound to give the people who pay these taxes as much trouble as possible! There was nothing but this alternative—a tax on tobacco, or a land tax—which was equivalent to a tax upon necessaries.

Mr. Madison had always opposed every tax of this nature, and he should upon all occasions persist in opposing them. If we look into the state of those nations who are harnessed in taxes, we shall universally find that, in a moral, political, and commercial point of view, excise is the most destructive of all resources. Much of the collection of this tax on tobacco would depend on the oath of the manufacturer, and this was but another term for the multiplication of perjuries. The tax would therefore injure the morals of the people.

Mr. Findley.—Ruin and depravity have always attended excise. It has been one of the principal sources of the corruption of Britain. The same effects must follow in America. He objected to the mode of taxation; and, besides, the tax is partial. It falls on the poor in cities. In the country nobody will pay it.

Mr. Sedgwick would vote against the tax if he thought it was contagious for public morality. But human nature has always been very corrupted without the aid of excise laws. The State which he represents has been excised for two generations, and yet no bad consequence has arisen to the morals of the people. As to the corruption of Britain, described by the member who spoke last, he admitted that the account was just, but this was not to be traced to excise laws. They had been the subject of much clamor, but what, in fact, was their history? A profligate opposition rail at all the measures of a minister, whether they be good or bad, and an excise act is often one of them. In the course of political changes these men get into place. But they do not attempt to take off the taxes against which they declaimed. In the meantime the new ex-minister harangues against the very taxes of which he was the author. As to this law being a source of perjury, oaths are necessary in imposts of all sorts. Why, then, object to them in this particular instance? Is an excise oath worse than a custom-house oath? There is often no other method of getting at truth. If we desert this way of raising revenue, what are we to do? Taxes cannot be imposed on personal income with any sort of justice, because the actual degree of a person's wealth does not depend on the nominal amount of his income. One man has a thousand .dollars a year, but such may be his situation that the taxing him in so small a sum as ten dollars may be distressing. Others, again, with only five hundred dollars per annum, are, perhaps, in much more easy circumstances than the former, upon whom the tax of personal revenue would press with superior weight. Direct taxes Mr. Sedgwick regarded as of an improper nature. But, with regard to snuff and tobacco, nobody can ever feel the burden of a trifling tax upon them.

Mr. Smilie considered this measure as pregnant with serious consequences. He was opposed to every system of excise, because such systems had always produced mischief. If this were a despotic country, he could see a good reason for an excise system of revenue, because it was proper, in that case, to debase, by every possible expedient, the minds of the people, that their feelings might sink to a level with the meanness of their condition. But in a republic taxes should be of a different nature and operate with a different tendency.

Mr. Ames had a better opinion of government than the gentleman who spoke last. He did not think excise a mark of despotism. He did not think the people stocks and stones, or their rulers knaves and fools. The member had spoken of the citizens of this country, as if to rouse their attention it was requisite to keep a flapper, like that of Gulliver, at their ears.

As to the resolution upon the table, is there any comparison between a snuff tax and a land tax? Land is the great substratum of American prosperity. Difficulties had been started as to the collection of excise; an oppressive law was a bad thing, but resistance was worse. Can any man think that a land tax does not open a much greater door to imposition than a tax on tobacco? In what way is a land tax to be laid that can avoid inequality and injustice! Are we to tax the public funds, that last and most desperate resource of national distress, and then to be told that we dare not impose a duty on snuff and tobacco?

Mr. S. Smith considered the observations of the member who had just sat down as amusing and ingenious, but they were not satisfactory. To him it seemed a very odd scheme to crush American manufactures in the bud. Men of capital and enterprise advanced large sums of money in erecting snuff mills. After long exertions they began to reap the reward of their expenses and their labor. At that critical moment the Government souses down upon them with an excise, which ends not in revenue, but extirpation.

Mr. Nicholas.—We are going on exactly in the steps of Britain, of which this excise is one instance. That country once had a revolutionary spirit. How sunk are they now? Not one-tenth part of them dare to say that they are against the war with France, which is sweeping them with velocity over the precipice of ruin. What has degraded and annihilated the spirit of Britain? Public debts, taxes, and officers of excise. One-half of the nation has been loaded with the plunder of the rest. It is too much the American character to bear as right what does pot immediately hurt. It is a duty to keep the citizens alive to the operation of Government. It is somewhat strange to blame this attempt when there is such an alarming indifference on the subject. As to this tax, it will put an end to the consumption of manufactured tobacco. Planters will make it ready for themselves. They can do so with very great ease by a method in the process of curing it. Mr. Nicholas was therefore against the resolution.

Mr. Madison.—Tobacco excise was a burden the most unequal. It fell upon the poor, upon sailors, day-laborers, and other people of these classes, while the rich will often escape it. Much had been said about the taxing of luxury. The pleasures of life consisted in a series of innocent gratifications, and he felt no satisfaction in the prospect of their being squeezed. Sumptuary laws had never, be believed, answered any good purpose. Something had been said about the difference between direct personal taxes and those raised by indirect means, such as excise and customs. He quoted an author of respectable character in England, who estimated the expense of uplifting [collecting] direct taxes in that country, such as the land tax, at 3 per cent., and that of uplifting indirect taxes, such as those of excise and customs, upon the whole, at 30 per cent.

Excise had at first been resorted to upon a few manufactures. The dealer^ indemnify themselves at the expense of their customers. At the same time they endeavored to evade the duties, and thus there commences a struggle which has many bad effects, both upon industry and public morals. In Europe, when tobacco is excised, the Government forbids it from being planted. [Some years ago the British farmers were obliged, by an act of Parliament, to pull up and burn their tobacco before it was full grown.] No such measure, he hoped, would be adopted here, but it was hard to say where the subject might, one day, end. Statesmen, in general, do not study the liberty, the virtue, or the comforts of the people, but merely to collect as much revenue as they can. Taxes are not, for the most part, the work of patriotism. An excise established in America would discourage the emigrations from Europe that might, at this time, be so much expected. He was determined to vote against the resolution.

Mr. Smilie.—An excise, in its very outset, is a violation of the rights of freemen, independent of the extent to which it might or might not be carried and, whether it oppressed the manufacturer, or did not oppress him, by making his house liable to be searched at all hours it violated the natural sanctuary of domestic life. It creates a number of artificial erimes; an additional code of laws must be invented in order to punish them, and this punishment cannot be inflicted without the ruin of American citizens, or neglected without the ruin of American excise revenues. What mischiefs have not excise laws produced in England? It has been found necessary to form a new set of laws in which the British subjects have lost the protection of a trial by jury.

Mr. W. L. Smith observed that, if objections were to be made to every tax, and every sum of duty was to be left blank, what was the occasion for appointing a select Committee of Ways and Means? One gentleman insisted upon striking out this resolution; another on striking out that resolution till in short they would leave nothing at all. This proceeding reminded him of a story in the fables of Phcedrus. A man whose head was covered with black and gray hairs had two female friends. One of them, who desired that he should have a youthful appearance, carefully pulled out some of his gray hairs as often as he paid her a visit. The other lady, who wanted him to look like an old man, was industrious in pulling out the black hairs. Between their joint endeavors he became bald. Thus, by the time that every gentleman has done with plucking, we shall have nothing of the report left.

The original bill contemplated a direct tax of $750,000 apportioned among the States by population. Leading supporters of this measure were Thomas Scott and Theodore Sedgwick, and leading opponents were William Lyman and Samuel Dexter. It was negatived.

Direct Taxation [Land Tax]

House of Representatives, Mat 5-9, 1794

Mr. Lyman moved to strike out the resolution because it contemplated a land tax. Owing to the variation of the tenure of lands in the different States, in some States the lands were pretty well distributed, and held in small parcels by those who cultivated them, and in other States they were held in larger quantities and cultivated in a different way. A tax on them, therefore, which, in the one case might be considered unacceptable, would probably be less so in the other. However, speculative opinions in questions of this sort were but a feeble opposition to fact and experiment. In this country some of the States at least have made the experiment. It had proved oppressive, excited discontents, and even convulsed the Government. The experience of other countries did not furnish much more favorable arguments. In the Republic of Rome they never had a land tax. It had its odious origin under the tyranny of the emperors. In France they have no land tax. This, in that country, he was sensible, was complained of, but it must have been because the lands were held by the nobility, to whom it proved an exemption from the burdens of society, and from that cause the exemption was disagreeable to the people; but, had the lands been of a different tenure, there would have been no such complaint. How stood the case in England, a country where every species of taxation was carried to its utmost stretch? Their land tax was a mere trifle compared with their other impositions, and, trifling as it was, they embraced every occasion, when not pressed by particular exigencies, requiring the utmost exertions, to lessen it from an apprehension of exciting uneasiness and tumult. Indeed he did not know but it might there be deemed a modified relic of their former slavish tenures. Under these impressions, and the consideration of the expense of collecting a tax of this sort, he hoped it would not now be resorted to.

Mr. Scott was firmly persuaded that, in the exigencies of a nation, all sorts of property should be taxed because all sorts of property required to be defended. He was quite satisfied that all property should defend itself—that is, should pay for its own defence. He would cheerfully submit his own property to a general tax, were it even to half its value, if such an impost were necessary for the independence of America.

Mr. Sedgwick, after commenting on the opinion of certain political economists, who held that all taxes ultimately fell upon land, and, therefore, that those which were imposed on it were direct, and all those imposed on any other subject indirect, proceeded to state his own opinion.

He said that, in forming a Constitution for a National Government, to which were intrusted the preservation of that Government and the existence of society itself, it was reasonable to suppose that every means necessary to those important ends should be granted. This was, in fact, the case in the Constitution of the United States. To Congress it was expressly granted to impose taxes, duties, imposts, and excises. It had been universally concluded, and never, to his knowledge, denied, but that the legislature, by those comprehensive words, had authority to impose taxes on every subject of revenue. If this position be just, a construction which limited their operation of this power (in its nature and by the Constitution illimitable) could not be the just construction.

He observed that, to obviate certain mischiefs, the Constitution had provided that capitation and other direct taxes should be apportioned according to the ratio prescribed in it. If, then, the legislature be authorized to impose a tax on every subject of revenue (and surely pleasure carriages, as objects of luxury, and, in general, owned by those to whom contributions would not be inconvenient, were fair and proper subjects of taxation), and a tax on them could not be apportioned by the constitutional ratio, it would follow irresistibly that such a tax, in this sense of the Constitution, is not "direct.'' On this idea he enlarged his reasoning, and showed that such a tax was incapable of apportionment.

He said that, so far as he had been able to form an opinion, there had been a general concurrence in a belief that the ultimate sources of public contributions were labor, and the subjects and effects of labor. That taxes, being permanent, had a tendency to equalize and to diffuse themselves through a community. According to these opinions, a capitation tax and taxes on land, and on property and income generally, were direct charges, as well in the immediate as ultimate sources of contribution. He had considered those, and those only, as direct taxes in their operation and effects. On the other hand, a tax imposed on a specific article of personal property, and particularly if objects of luxury, as in the case under consideration, he had never supposed had been considered a direct tax, within the meaning of the Constitution. The exaction was indeed directly of the owner, but, by the equalizing operation, of which all taxes more or less partook, it created an indirect charge on others besides the owners.

He said it would astonish the people of America to be informed that they had made a Constitution by which pleasure carriages and other objects of luxury were excepted from contributing to the public exigencies, which was undoubtedly the case if the reasoning of gentlemen who opposed the resolution was well founded. If the imposition of a duty on pleasure carriages was a direct tax, it must then be apportioned, but, as several of the States had few or no carriages, no such apportionment could be made, and the duty of course could not be imposed. Such a construction was inadmissible, because it would exempt, in times of the greatest distress, the fairest objects of contribution from the imposition of any burden. If there was doubt, we certainly ought not to incline to that side which, at the same time it might compel the legislature to impose grievous burdens on the poorest and most laborious part of the community, shall exempt the affluent from contributing for their objects of distinguishing enjoyments. This seemed not to carry into effect that doctrine of equality of which gentlemen said so much.

Mr. Dexter said a land tax was a tax on the laborious poor. If every acre is to pay the same tax, it must prove very unequal, as poor men generally live on the poorest lands, and must pay oppressive taxes. If the lands are to be valued, the delay and expense must be enormous. Lands increase in value very unequally in different places, and the proportion will be forever altering. He had been told that two thousand persons had once been concerned in apportioning and collecting the land tax of Pennsylvania. He thought that, if any mode of taxation be permanent, it will soon be equal. The most unequal imposition will, like a fluid, soon diffuse itself equally through all the proper and natural subjects of taxation. Mr. Dexter thought, also, that direct taxation ought not to be pursued by the general Government, except in time of war, because it is the only source of revenue for the support of State governments and payment of State debts.

The revenue act was repealed in 1801, owing to the advent to power of the Democratic party, whose principles were opposed to all forms of internal taxation. But, during the War of 1812 the urgent need of additional revenue made it necessary to resume the former system.



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