Principles of Political Economy

by Arthur Latham Perry

Our average price at the mines is $1.20; we sell some higher. I have just now taken a contract for 40,000 tons to be delivered between now and the 1st of February, 1891, at $1.12½. This is the lowest contract price we have ever made, and likely that has ever been made in this locality; but I did it to get into a different market. That ore is to go to Nashville—a distance of 120 miles. The reason for cutting the price to get the increased quantity I will not need to explain to you. You taught it to me. The freight to Nashville is 75 cents. To our other furnaces in Alabama, at Sheffield and Florence, the freight is only 35 cents. What other contracts I have at present are at $1.25.

With three shovels we make from 600 to 800 tons a day. With one shovel we made from 150 to 250 a day. The variation from day to day depends on the quality of the material we handle.

The ore is all washed and picked and screened before it is loaded on the cars. A very important part of the work is the work done in the washer. It requires very expensive machinery, and the wear and tear is enormous.

We pay unskilled laborers ten cents an hour, skilled men as high as twenty-five. We work eleven hours a day. Our general foreman gets $100 a month."

Sugar and Molasses brought in through the tariff in the fiscal year 1889, $55,995,137. The quantity of domestic sugar and molasses relatively to the quantity imported is so small, that an excise upon it in accordance with the general principle of these paragraphs is not worth while, but would be far more just and rational than to offer bounties to the domestic producers out of the taxes paid by the consumers of foreign sugar. A "bounty" in this sense is at once an abuse of a good word, and an abomination in point of fact. For any Government, which is nothing but a Committee of all the citizens to attend to certain joint concerns of all, to abstract money through taxes from the pockets of a part of these citizens in order to reward another part for carrying on an unprofitable branch of business, is something equally repugnant to Economy and Equality.

10. What, then, is the Bottom-Principle in the Mode of Taxation? It is this: Relatively low taxes so adjusted on comparatively few things as not to disturb natural prices. The principle is simple: the problem is difficult; but wonderfully less so the moment all attempts are given up to foster any branch of industry whatever. Our legislators are not called upon to foster any industries. It is out of their beat. They cannot permanently do it, if they try; and they do immense harm while they try. Their "bounty," instead of being a gift, as the word imports, is a haphazard bestowment of other people's money extorted from them by public taxes. The problem becomes simpler every year of public experience under the practical design of so laying the public burdens as to realize to the Treasury the most money with the least possible interference with what would otherwise be the on-going of Exchanges in all directions. So relatively simple and easy has the English taxing system become, under this one leading design, that Gladstone performed without difficulty the functions of Chancellor of the Exchequer in conjunction with the far more arduous and complicated duties of Prime Minister.

Low taxes on few things. The opposite of this principle at either of its two points becomes at once pernicious. High taxes in general prevent exchanges altogether, by cutting in too deeply in the gain of them, which is the sole motive to them; high imposts prevent importations, and of course destroy the profitable exportations consequent to, and conditioned on, such importations; high taxes even on few things are apt to raise prices of other articles than those on which they are directly levied, and so become objectionable always, and unbearable whenever it is their purpose to raise such prices: taxes on many things, and even on few things every time they change hands, throw an indefinite burden on Exchange, whose weight cannot well be calculated beforehand, either by the consumer or by the government, through uncertainty as to the number of transfers. Once for all, and then an end. Exchanges are indeed the only legitimate subject of taxation, but not every specific and subordinate exchange. An attempt to tax all sales whatever was followed in Spain, and will be followed everywhere, by a sluggish indisposition to trade at all. Let the amount of the tax be definite, and let everybody be sure that when it is once paid government will produce no further claim, and industry will go along under heavy taxes better than under those nominally lighter to which uncertainty as to time or amount attaches. All the more advanced governments have been simplifying of late years their systems of taxation, and collecting their revenue at fewer points, and under more tangible conditions, in order to interfere as little as possible with a free industry and free exchange.

The subsidiary principle is important, namely, that all taxes should be collected by the government in as economical a manner as possible, inasmuch as all direct and indirect costs of collection are so much added to the burdens of the People. This covers two practical points: (1) the number and efficiency of the tax-gatherers, and the whole outward machinery of collection, such as the custom-houses, offices of internal revenue, and so on. These, as they concern the whole people equally, should be separated as far as possible from party politics, and the inevitable corruptions thereupon attendant. All the fiscal officers of the United States, from the Secretary of the Treasury down to the lowest tide-waiter, are liable to be changed every four years, and as a matter of fact are usually to a very large extent so changed, to the great detriment of the service and ultimate expense of the people, to say nothing of the moral losses and crevasses involved. (2) The tax-money should be kept out of the pockets of the people as short a time as possible, disbursement following quick upon collection. It is poor policy to gather taxes at the beginning of the year which will not be disbursed till the end of the year. Let the people use their funds till they are wanted at the treasury; and if the taxes do not then come in as fast as wanted, it is better to issue what are called in England exchequer-bills, and in the United States certificates of indebtedness, to be redeemed at the end of the year from the proceeds of the taxes, than to let the people's money lie idle in the treasury. The Secretary of the Treasury should have nothing to do or say about the circulating medium of the country, or the loanable price of the units of it, under any circumstances whatever. He is neither competent enough in Knowledge nor enough established in Integrity to be trusted with any such functions.

11. Should there be any exemptions from Taxation? If the necessities of the State require it, government has the right to demand from all persons who are capable of making exchanges, and who do make them, something in the form of taxes. But it is every way better, when possible, that people of very moderate means should be exempted altogether from direct taxes; and the payment of indirect taxes is a matter more in their own option, since they are at liberty to buy much or little of those commodities subjected to an indirect tax. In the State of Massachusetts, incomes not exceeding $2000 are exempted by the law. If a house-tax should be levied, all houses below a certain grade of style and comfort should be exempted, and the tax pass up by easy gradations from those just taxed to the palatial residences of the rich. In the present age of the world, the well-to-do citizens of every country are able to bear without too great difficulty the burdens of the government, and nothing tests better the degree of civilization which a nation has reached than the care and solicitude it displays for the welfare of its poorer citizens.

12. Who pays the indirect taxes? At a court ball, Napoleon the First once observed a lady noticeable as richly dressed and as wearing splendid diamonds, and on asking her name, found that she was the wife of a tobacco manufacturer of Paris; it occurred at once to the quick mind of the French ruler, that the State might just as well have those profits as an individual; and the sale of tobacco in all its forms became accordingly a State monopoly, which now yields about 400,000,000 francs a year. That is indirect taxation. So is the British and United States tariff and excise on tobacco. Producers and dealers and bankers and companies add the tax demanded from them, and sometimes more than the tax under color of it, to the price of their wares. But it is not true that they can always realize the whole of this enhanced price. Generally they can, sometimes they cannot. If the article be one of necessity, or a luxury that has become equivalent to a necessity, and there be no other source of supply than the taxed one, then, as a rule, the tax falls wholly on the consumer, and is a matter of indifference to the producer or dealer. But the usual effect of an enhanced price is to lessen demand, and if the article is dispensable, or its consumption can be lessened, or it can be obtained elsewhere, the market will be sluggish under the tax, and producers or dealers will be likely to tempt it by lowering prices, in other words, by sharing the tax with consumers, and paying that share out of profits. This is the principle. Producers and dealers would rather the tax were off. Consumers generally, but do not always, pay the whole of it.