ALL BOOTS AND SHOES ARE TAXED 35 PER CENT See how the school things are taxed: IF YOU VOTE FOR TARIFF REFORM YOU WILL VOTE TO TAX TARIFF REFORM MEANS LEGALISED ROBBERY Tariff reformers want to tax goods which come from abroad, so as to increase the price of the goods which are made at home. The extra cost of the goods would come out of your pockets. THAT WOULD BE ROBBERY They have this kind of taxation in Germany. What happens? A German economist, Dr. Lotz, has calculated that for every penny the German government gets from the tax on iron, the German ironmasters get elevenpence. THAT IS ROBBERY Germany taxes the bread and meat of her people. Dr. Gothein stated in the German parliament that out of every 80s. which the bread and meat taxes took out of the pockets of the German people, the German government only got 3s. THAT IS ROBBERY If a free trade government takes money out of your pocket, it takes it only to pay for the necessary expenses of the government. Under free trade every penny taken from the people in taxes is spent for the people and by the people. A tariff reform government would take money out of your pocket and put it into the pockets of landlords and manufacturers. THAT ALSO WOULD BE ROBBERY THE OBJECT OF TARIFF REFORM IS TO TAX THE POOR MAN'S FOOD IN ORDER TO FILL THE RICH MAN'S POCKET ARE YOU GOING TO LET THEM 344. The Incidence of the Customs Tax BY EDWIN R. A. SELIGMAN The elements that enter into the equation of international demand are so numerous and so complex that an investigation of the actual effects of tax upon any one class of commodities would require for its proper solution, not only an acquaintance with the details of the theories of the shifting of taxes, but also an intimate knowledge of all the forces influencing the supply of, and the demand for, the commodities affected in the two countries immediately concerned, as well as in the other countries which constitute the worldmarket. Among the considerations affecting the problem of the incidence of a tax on imports, the following are most important: (1) To what extent does the exporting country control the supply of the commodity? (2) To what extent does the importing country constitute the sole market for the commodity? (3) To what extent can the commodity in question be produced at home? (4) What is the ratio of product to cost? (5) To what extent is the demand elastic? The imposition of the tax may be considered, in ordinary cases, as an addition to the cost of production, and as such increases the price of the article in the importing country by the amount of the Adapted from The Shifting and Incidence of Taxation, 374–378. Copyright by Columbia University Press (1910). duty. Under such conditions it is true that "the tariff is a tax," and that it falls on the consumer. The conclusion is based on the assumption that the producers do not bear any part of the tax; that, although the sales necessarily fall off more or less, according as the demand is sensitive or not, by reason of the increased price the producers find an outlet for their goods in some other country. The assumption, however, is not always correct. It may happen that the importing country constitutes either the sole market for the commodity, or such an important part of the market that the producer finds it difficult to extend his sales in other countries. To the extent that this is true, the producer finds it to his interest to avoid any substantial diminution of demand in his chief market. This can be accomplished, however, only by consenting to bear a portion of the tax himself. If the importing country constitutes the sole market for the commodity and if the demand is very elastic, the conditions are most favorable to the consumer in the importing country. But from this very exceptional case, where the producer bears the larger share of the tax, down to the ordinary case, where the consumer bears the whole of it, there are all kinds of gradations. Another very important element in the problem is the extent to which the home production in the importing country may fill the gap caused by the diminution in the imports from the exporting country. The ordinary reasoning that "the tariff is a tax" is based on the assumption that the equilibrium will be reached when the decreased supply from the foreign country sells at the increased price. If the home country cannot produce the article at all, this assumption is valid. But if the home country has hitherto been prevented from producing the article solely because the price has been too low to admit of profits, the degree to which home production can round out the supply depends entirely upon the extent to which the price rises. Suppose that an imported commodity can be produced abroad so as to sell in the importing country for $10.00, while the article can be produced in the importing country only at an initial cost of $12.50. If a tax of $2.00 per unit is imposed, the price will rise to $12.00 and the demand will fall off. But, suppose the importing country can now furnish part of the supply, and because of the larger output will be able to produce the article for $11.00. Despite the tax of $2.00, the price cannot rise above $11.00, the demand will not fall off as much as before, and the tax will be divided between the foreign producer and the home consumer. The extent to which the home producer can capture a part of the market depends, among other things, upon the ratio of product to cost. If the product is produced at home under the law of increasing cost, which is the usual case in competitive industries, the chance of the home producer is not so good; if under the law of decreasing cost, which as we know implies a trend toward monopoly, his chances are better. But it is obvious that cases may arise where it is not true that "the tariff is a tax" in the sense that the whole burden of the import duty is necessarily borne by the consumer. The greater the supply that is captured by the home producer, the less will be the proceeds of the tax. If the foreign product is entirely shut out, the revenue will be zero. If, in the extreme case mentioned, the home producer supplies the entire market at a price of $12.00, the government loses its whole revenue from the tax, and the consumers lose the entire amount of the tax through the increase in price. If, on the other hand, the price of the home product after the shutting out of foreign competition and the development of improved processes at home can be finally brought down to a point lower than $10.00, the revenue will indeed still be zero, but the consumers will lose nothing, and the community will have gained the advantages resulting from an increase in industry. D. "UNSCIENTIFIC” TAXATION 345. Defects of the General Property Tax There are two reasons why the general property tax has failed in operation: First, because under modern conditions it cannot be enforced effectively; secondly, because of a more or less conscious recognition of the fact that strict enforcement would result in a still greater injustice than now prevails. The practical difficulties in the way of enforcing the general property tax are well known. Under modern conditions much property that is valuable to its individual owner is in a form that permits of easy evasion. The paper evidences of the ownership of property which the general property tax system seeks to reach in the hands of the owner, can readily be concealed, or there can be a colorable transfer of title. Credits and debts can be juggled. Visible personal property can be temporarily transferred into another district or state. Where the taxpayer makes his own return, he can undervalue or omit some of his property. If the assessor tries to inventory the property, he may overlook much of it and fail to estimate the value of that which he does find. 'Adapted from "Report of Committee on Causes of Failure of General Property Tax," in State and Local Taxation, Fourth International Conference, 307-310. Copyright by National Tax Association (1910). Then there is the ever-present feeling which exerts a conscious or unconscious influence with the average administrator, that he drives away productive capital by the strict enforcement of laws which hinder the business interests of his community in competition with those in localities where greater "leniency" is shown. Public opinion almost invariably recognizes the unfairness of taxing all property by the same rule and at the same rate, whenever a strict enforcement of the law is attempted. The abstract demand for the taxation of all property alike then gives place to concrete indignation over the actual results. It is always some unknown "they" who ought to be made to pay on everything "they" own. But the property which the assessor does find often is, in the opinion of its owners, either greatly overvalued, or has been "singled out," or is otherwise quite improperly on the rolls. This attitude of the average property-owner is an unconscious resentment at the unfairness of the general property tax theory. The attempt to tax all property at a uniform standard of valuation and at the same rate, regardless of its special characteristics, earning power, or the benefits derived from the expenditures of government, violates the primary rules of just taxation and offends the natural sense of justice. The two theories of taxation most widely accepted by economists are: One, that each individual should be taxed in proportion to his ability to pay; the other, that taxes should be levied in proportion to benefits or privileges received from government. However the advocates of either theory may differ, they will agree that at least taxation should conform to one of these two theories in order to approach fairness. The general property tax conforms to neither. It establishes an arbitrary measure for taxation that bears no relation either to ability to pay or to benefits received. Apart from these theoretical objections, there is a practical injustice inseparable from strict enforcement. The fact that the real estate tax has been enforced regularly, has led to an amortization of the average tax. The rental received from real estate is gross; therefore the purchaser deducts the tax and finds the net income before he purchases, thus securing for his investment the current rate of return, tax-free. The investor in securities usually pays a purchase price which is fixed in a country-wide market, and is calculated on the assumption that the investment will escape taxation, and that his whole income will therefore be net. When by spasmodic enforcement of the law, or disclosure of personalty in a probate court, securities that bear, say, 4 per cent interest are made subject to a 2 or 3 per cent tax on their market or face value, the moral sense revolts at this practical confiscation of so large a share of the income. |