Democratic Sentinel, Volume 17, Number 12, Rensselaer, Jasper County, 7 April 1893 — LETTER TO CLEVELAND [ARTICLE]

LETTER TO CLEVELAND

TARIFF REFORM DISCUSSED BY MR. SHEARMAN. Specific Button Are a Device of Manufacturers to Obtain Increasing; Protection— They Oppress the Poor uiul Are Tools of Corruption. Ad Valorem Dutle. Sound In Theory. By xtutual agreement Mr. Thomas G. Shearman is addressing, through the New York Times, a series of letters to President Cleveland on the subject of tariff reform. Former letters dealt with the necessity for radical reduction of duties in accordance with the Chicago platform; the great benefits to the producers of cotton, grains, and meats of lower duties on what must be Imported in exchange for these products; the present extraordinary expenditures due to new pension legislation; the connection between excessive duties and a demand for cheap money; the reasons, political and moral, way sugar, coffee, and tea should not be taxed; and the necessity for the removal of old rather than the imposition of any new duties. Mr. Shearman Is one of the oldest students of the subject of taxation, and because of his long experience as a customs attorney, bis exceptional ability, and his sympathy with the tax-burdened masses, his opinions have come to have great weight with all earnest thinking men. His sixth letter deals with the kind of duties tha,t should be levied. It contains perhaps the most cottcise statement in favor of ad valorem duties ever made. His position is absolutely impregnable. The subject is so little understood and of such vital importance that we reproduce below the entire letter: Dear Sih —One of the most Important questions to be deoided in framing a tariff—probaAy the most Important question of more method—is: Shall duties be speoiflc or ad valorem, or a little of both? In other words, shall taxes on goods be proportioned to their value or to their weight and measure? The answers of all tax-eaters to this question are practically unanimous. Public officials whose duty it is to collect taxes prefer speoiflo duties, because It is vastly easier to weigh goods and oharge so muoh a pound than it is to aeoortain their true value and assess them in proportion to that. Protected manufacturers prefer speoiflc duties, because it is easy, in this manner, to tax the people 100 per oent. for firivate gain in cases where 60 per oent, openly evled on values would not be tolerated. They prefer such duties booaußO, as we shall presently show, these duties have a self-acting power of oonstantly-lnoreasing taxation, until, after the lapse of a few years, suoh duties become prohibitory and secure to the domestic manufacturer a monopoly, so that, in multitudes of cases, that which was intended as a proper revenue duty, and was suoh whon enacted, soon produces no revenue to tho public, while it extorts enormous tribute from the masses for the benefit of a small class of capitalists. They prefer speoiflo duties, for the very reason whfoh should make such duties a crime—because they fall more heavily upon articles used by the poor than upon those used by the rich. Not that these gentlemen have any animosity toward the poor or any desire to increase the amount which the poor shall pay to the Government. They have ifc suoh unbusinesslike motives. -But experience has taught them that the poorer classes afford a market vastly more valuable, taken altogether, than which can be found among the rich, whose nnmber is so small as to make their consuming power, as a class, unimportant to most manufacturers, Specific duties, under which the poor man’s coat and hat arc taxed precisely as much as those of the rich man, worth five times as muoh, Inevitably prohibit importations of goods suitable for the poor, and thus give to the home manufacturers a monopoly of their supply. No wonder that those manufacturers are enthusiastic advocates of specific duties.

Many Importers, however, are advocates of the same system for different reasons. It is, undoubtedly, difficult to ascertain the predso values of many articles, and, therefore, honest and conscientious importers often find that, under a system of heavy ad valorem duties, their dishonest rivals, by making a few false oaths as to value, pay less tax upon the same kind of articles, and so can undersell them. Severe penalties are Imposed for such offenses, but so long as the reward of crime is great such risks will be taken. None of these reasons, however, suffices to justify speoiflo duties. The ease and convenience of public servants are not to be consldereerfor a moment against the demand* of justice and equal rights. The reasons whv protected manufacturers prefer Buch duties aro the very reasons why such duties Bhould not be tolorated. There Is no rcspeocablo argument in favor of speoiflc duties, except that whloh is assigned by importers—the danger of undervaluation and the consequent advantages of dishonest competition In trade. Let us begin, then, with this argument. We are practical men, and therefore proceed to a practical test. The first and all-sufficient answer to the argument for specific duties, as a necessity to prevent frand, Is that the experience of eighty years of effort in this direction proves that it Is Impossible to prevent such frauds by such means. For more than sixty of the last eighty years, the National Government has been in the hands of men who have taxed their Ingenuity to devise specific duties, as a means of preventing fraud, and the only result has been a continual Increase In the clamor about frand, and a development of new frauds under specific dutieathemselves. Moreover, at the end of all this incessant effort to make duties specific, when twenty different Congresses have sought with Intense zeal to abolish all ad valorem duties, so far as they dared to do it, what do we find? Far more than one-third of all the revenue collected from ad valorem duties, and more than half of all enumerated articles admitted under ad valorem rates! The tariff of 1883 was the culminating effort ot the specific fanatics; and yet 38 per cent, of all the revenue under that act was collected on ad valorems, while only 590 artioles were subjected to purely specific rates, against 789 which were dutiable ad valorem In whole or in part. A clear majority was taxed upon a purely ad valorem basis. Such an example of dead failure affords an excellent instance for tho application of the old rule: “That which never was never ought to be.” Let us now consider the reasons for a uniform ad valorem system. In the first place, it has existed once, and therefore it can exist again. It was in force from 1846 to 1801, and it worked better than any other system ever put into practioe. It is universally conceded to be sound in theory and absolutely just in principle. If all values were correctly stated, taxation upon that basis would be Ideally perfect. No one proposes for a moment to tax every house alike, or to tax land by the square foot instead of the market yalue. F.very Intelligent man knows that assessors make gross errors in valuation of real estate, but no human being proposes to interfere with the ad valorem principle in local taxation. The idea of taxing the poor man’s acre in Kansas, worth *2O, as much as the rioh man’s acre in New York City, worth *2,000,000, would be so monstrous that no one would venture to mention it. Yet the principle is precisely the same with that which taxes a yard of cloth worth 50 cents as much as another yard worth *6. Specific duties always and inevitably bear very heavily npon the poor and very (ightlv upon the rich. This is their conclusive Condemnation. No matter what may be the loss of the Government by evasions of taxes—no matter what may be the loss of honest importers by the frauds of their rivals—nothing can justify the wholesale robbery of the poorer classes, which is inherent in every system of tax by mere weight or measure. So powerful is this, consideration that even the unscrupulous Congress of 1890 did not dare entirely to disregard it. They did as all previous Congresses have done—they combined all the iniquities of both the specific and the ad valorem systems. They piled up heavy taxes per pound or yard to make the bnrden of the poor greater than that of the rioh; and then, to balance this monstrous wrong, they added heavy ad valorem duties, so as to give dishonest importers all the advantage over their honest rivals which an exclusive ad valorem system could give them. Then, to rectify the frauds, which were certain to multiply under such a tariff, they prescribed a schedule of oaths or statements so complicated and inconsistent that it is utterly impossible for the mr.jority of importers to carry on business at all without telling lies with every invoice. Importers are regularly compelled to make positive statements as to matters concerning which they have not. and cannot have, any knowledge, information, or belief. Finally, judges arc appointed to pass upon this evidence, who threw it all out of the window, and proceed to decide each case upon backstairs whisperings or their own infallible consciousness. Among the device 3 by which the present tariff seeks to avoid the gross injustice of specific duties is the Increase of such duties according to increase of valne in the article taxed. Thus, in siany articles of iron and steel, as well as m wools and woolens, the specific daty rises with the cost of the goods. Stockings of cot ■ on, which are valued at 60 cents a dozen, are taxed 82 cents; bnt, if tbey are worth 61 ceDf s, they are taxed 68 cents. These which are i orth *2 are taxed *1.10; If worth *3.06, they ire taxed *1.57. Similar provisions appear as to cutlery, steel Ingots, bars, etc., and many cl her articles. The enormous temptation offered by such laws to undervaluation is man iest at a glance. By swear-

tag down th« price i cents a fat df. *T cent* ft one case or 47 cents In another may he coadeil. No pnrely ad valorem tan 1 * offers eno- tenth of the inducement to false invoices wMeb 1» offered by such laws as these. Moreover, such regulations fart a premium npon the degradation of goods eo the bordei line. By lowering the quality of a pair ol stockings from 17 cents to I#, thev can be honestly sold in our market at a price 8 cents lower. Accordingly, It Is notorious that the quality of these artioles has been greatly degraded since the new tariff took effeot. Speoiflc duties on manufactured goods have a self-acting tendency to Increase the burdens of the people and tne power of extortion by home manufacturers. Manufacturing processes are continually improving, and the cost of production continually grows loss. But the specific duty remains the same. Thus, when the duty of S2B was imposed upou steel rails In 1870, it was, and was intended to be, only the equivalent of the ad valorem duty of 43 per cent, ad valorem. But oonstant Improvements in manufacturing methods reduced the cost in Europe so much that In less than five years this duty became a tax of nearly 100 per cent, ad valorem, and was absolutely prohibitory. The same thing has happened in equal or little less degree in hundreds of other instanoes. Thus duties, which at first were laid purely for revenue purposes, become first highly protective and finally prohibitory. They are | gradually perverted, by automatic action, from fulfilling their only justifiable purpose, that of providing revenue tor the public good, into forced contributions for private profit, and finally into mere engines of monopoly anu extbitlon. Sinoe. then, specific duties in most oases are impossible; since they are in all oaees unjust, unequal, and oppressive; since they increase the burdens of poverty and lessen the burdens of wealth; since they offor even greater temptations to fraud than other dntieß, and since they insidiously increase tho burdens of taxation aud stealthily diminish the public revenue to increase the trlhute levied bv Individuals upon tne masses, they should not bo tolerated In any case except one. The ono exception Is where artioles are imported which, if produoed hero, would be subject to a speoltto Internal revenue tax. Suoh artioles must, of course, be taxed upon the same footing with similar domestic articles. Spirits and malt liquor* should therefore pay tho Internal revenue tax, In addition to such ad valorem duty as will produoe the moßt rovonue. This, however, ts not a real exception to the rule as to the tariff, because these artioles are govornod by tho Internal revenue system, concerning which wo have nothing at present to do. Opium should pay the Internal revenue tax, and nothing else. The Internal tax upon wines and tobacco Is so small that It can easily he allowed for in ad valorem rates. An ad valorem tariff is the only ono which Is sound In theory; and long experleuoo has proved that It is, after all allowance Is made for its faults, tho fairest and most honest In practlco. It has grave faults. It Is true; but those faults are Inherent and unavoidable In every tariff. All taxes upon merchandise or production, whether domestlo or foreign, arc Inevitably vicious, unequal, unjust, and corrupting. Under an ad valorem tariff somo sow hundred business men suffer inoonvenlence and lobs. Under a specific tariff the samo classes suffer half as much Inconvenience, while millions of our peoplo suffer enormous losses. Bad as smuggling is, It is far better to endure some smuggling by undervaluations than It is to deprive millions of the comforts, or even luxuries, of life through tho stealthy and snaky oppressions of specific dutlcß. Yours very respectfully, Thomas G. shearman. Tho Hon. Grover Cleveland.