Taxation on Production and Its Fruits Chapter Twenty-Five first part
|January 9, 2007||Posted by Staff under Uncategorized|
The Menace of Privilege, by Henry George Jr.
We are pleased to present, in installments, a very rare yet significant book written by former Congressman Henry George Jr. in 1905.
Earlier installments are available at the Progress Report Archive.
start of CHAPTER 25, TO STOP TAXATION EVILS, GRANTS AND IMMUNITIES
Special Privileges Hurt Competition
IN the chapter preceding it has been remarked that were we to tax land values to their full, the Steel Trust, which is withholding from use great quantities of most valuable mineral land, would be unable to sustain the heavy burden of the tax and would co llapse like a house of cards.
But besides the great privileges of natural opportunities, the Steel Trust enjoys other important forms of privilege — special relations with transportation lines, which help it against competitors within our borders, and heavy tariff duties against stee l imports, which shelter it from foreign competition. The second of these two forms of Government favor we may now consider.
Tariffs and Other Taxation on Production and its Fruits
Every consideration for the public weal requires that the tariff should be repealed from beginning to end. The men who are looked upon as the fathers of the protective idea in the Republic never dreamed of the monster that has sprung from the loins of thi s policy. They regarded the tariff first of all as a means of obtaining revenue. They referred to its protective principle as incidental. But under various pleas and chiefly of recent years, when Privilege has become so potent in politics, about which t he mass of the people, engrossed in the struggle for a living, have at the same time been so confused and neglectful, the tariff rates have been iaised approximately to twenty-eight per cent. of the value of all the imports into this country and close to fifty per cent. of the value of the imports on the dutiable list.
For generations the plea was for protection of infant industries. Exhibit in our infant industry line is the Leviathan trust, the United States Steel Corporation. With wide command of natural opportunities and transportation advantages, and the lion’s sh are of the home steel trade, and with serious competition from abroad shut out by the tariff wall, this huge concern has only to consult with a few of its larger rivals to establish a mean high price throughout the United States for its products. Yet in t ruth, so capable is the trade of being conducted here without any Government helps or advantages of any kind, that the United States Steel Corporation is developing a great export trade to various parts of the world in free and open competition.
This has no reference to the working off on foreigners of “surplus domestic stocks,” by “job lots,” as it were. Such transactions, although much talked of, are probably insignificant. But what is very large, important and permanent is the growing export trade in which highly protected manufacturing establishments in this country engage. They circulate in foreign countries price-lists intended to undercut the prices of foreigners, where quality, quantity and other essential elements are equal. Americans going abroad are amazed and chagrined, if they are not hardened to it, to find offered for sale in European cities staple American manufactures, like tools and machines, at prices very much below those asked at home. (On lower Broadway, New York, is a jew eler who has bought abroad thousands of Waltham and Elgin American-made watches at such low figures that he finds profit in selling them here at a retail price far below the wholesale prices at which similar watches are sold by the manufacturers in this c ountry.) Export price-lists issued by our manufacturers are rarely to be seen here. They are, in fact, as difficult to procure in this country, if publicity here is suspected, as it is nowadays to find the eggs or the nestlings of the phoenix.
The purpose of our tariff-nurtured trust infants is to battle with the foreign manufacturer for foreign markets, but to keep this market as a private preserve!
Even the Coal Trust has to have its protection against foreign coal, and the Standard Oil Company against foreign oil! With all its boldness, however, the latter monopoly has not had the temerity to have oil put on the dutiable list. It reaches that resu lt by indirection. In the general matter of the law there is a clause that requires the imposition on imported oil of a duty equal to that imposed on oil by the country of shipment. As the only country besides the United States having oil to export is Ru ssia, and since Russia has an oil duty, this clause in our tariff act is leveled against the Russian natural bounty. But for those few words, Russian petroleum would either be competing with Standard oil for consumers in this country, or else it would com pel the latter to sell at much below present figures to hold our market.
Nor does the tariff protect the wages of American workmen. It protects nothing but Privilege, which is doing its utmost to break down labor unions and reduce wages to the minimum at which laborers can continue to engage in production.
Therefore all future tariff grants by Government should cease and present gr~ts be revoked. And while it is thus clear that tariff taxation results to the advantage of the few and the disadvantage of the many, it also is certain that all other taxes imposed on production have precisely the same effect. This was illustrated when the Match Trust, following the Civil War, opposed the removal of the internal revenue stamp tax. The existence of the tax made necessary a larger capital to engage in the manufacturing of matches than would be required without it. The less capital needed, the more competitors.
Hence the match combine favored the tax, knowing full well that, while relieved of competitors, it really would not have to bear the tax in the end, for, competition being reduced, the amount of the tax could be added to the price of the matches and the c onsumer be made to pay both. In a similar way the manufacturing chemists not protected by patents and trade-marks have long opposed the reduction of our exorbitant internal alcohol tax, realizing that its repeal would lower the price of alcohol and stimu la~ competition in lines that they had to themselves.
This curious appearance of desire to be taxed may also be seen in a thousand directions where the tax is not a Federal and specific tax, but local or State and general in its nature. It is thus with capital invested in the buildings, furniture, machinery , tools and other equipment of large manufacturing concerns troubled with competitors. Observation tells the owners or managers of such establishments that if the taxes falling upon the part of real estate called improvements are irksome to them, they ar e calculated to be oppressive to their small rivals for two reasons: first, that the tax adds to the amount of capital needed in the business; and second, that the small concern has less opportunity than the large one to evade collection of its full share of the tax.
Of course where a monopoly becomes established from some other cause – like a patent medicine, which sells on its name — taxation is unnecessary to embarrass rivals. It has no rivals and the tax can only embarrass the monopoly itself. But these cases ar e comparatively few, and they are exceptional to the general cases of production we are considering where the field is open to competition. In that field all kinds of general taxes upon production operate in the end to the benefit of the great producers, because it is more than proportionately hurtful to the small ones.
General taxes, therefore, tend to promote and strengthen Privilege, not to mention the stimulus it gives to perjury and other immorality.
And since land values are publicly made values and should be, unless the public is to be robbed of its due, fully covered into the public treasury, and since these values constitute a fund ample to meet all the reasonable needs of local, State and Federal Governments, neither any kind of tariff tax nor internal tax falling upon industry or the fruits of industry would be necessary for purposes of revenue. So that all plea that these taxes are necessary to supply revenue breaks down.
From this it follows that all tariff taxes and all other taxes falling upon production or its fruits – all of which taxes now constitute a very important element of privilege – should be revoked.
Next Week: Special Government Grants
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