House Report No. 1496, Fiftieth Congress, first session. TO REDUCE TAXATION AND SIMPLIFY THE LAWS IN RELATION TO THE COLLECTION OF THE REVENUE. APRIL 2, 1888.-Committed to the Committee of the Whole House on the state of Mr. MILLS, from the Committee on Ways and Means, submitted the following report (to accompany bill H. R. 9051): The Committee of Ways and Means, to whom was referred the annual message of the President, calling the attention of Congress to the large surplus now in the Treasury, daily growing larger on account of the excess of receipts over expenditures, have given to the subject that careful consideration which its importance demands, and in response to his recommendations beg leave to report to the House a bill to prevent the accumulation of surplus revenue by reducing the present excessive and unjust rates of taxation imposed upon the people. Our revenues for the fiscal year ending June 30, 1887, amounted to $371,403,277.66, while our expenditures for the same time, including interest and sinking fund for the public debt, amounted to $315,835,428.12; leaving a surplus of $55,567,849.54 over and above all requirements for current expenditure. The receipts for the current year up to March 1 amounted to $253,905,890, and the estimates for the remaining four months are $136,094,110; making total receipts for the year $390,000,000. The expenditures for the current year to March 1 amount to $180,594,915, and the estimates of expenditure for the remaining four months amount to $128,405,085; making a total of expenditures of $309,000,000; leaving a surplus of $81,000,000. As our customs and internal taxes are levied on articles which go into consumption, we may expect our revenues to increase with the increase of consumption, which must keep pace with the growth of popu lation and wealth. On the other hand, with an honest and economical administration of public affairs, our annual expenditures may be expected to decrease. The large surplus now in the Treasury, which it is estimated will exceed $150,000,000 by the 1st day of July next, together with such as may thereafter be in the Treasury, may be applied to the reduction of the debt and the payment of annual interest charge on the same. It is, then, safe to say that the above surplus, together with the yearly purchase of bonds required by law for the sinking fund, which is an expenditure included in the annual estimates of expenditures, and not in the estimate of the surplus, will extinguish by the date of their maturity in 1891 all the outstanding 43 per cent. bonds, amounting at this time to $234,427.250, and still leave over $60,000,000. With receipts growing larger and expenditures growing smaller, we must soon gather into the Treasury the larger part of the circulation of the country to the great injury of its business and the bankruptcy of many of its people. Some method must be adopted by Congress to prevent the congestion which must occur under existing laws. There are two ways in which this excessive accumulation may be prevented. We may reduce taxation to the level of expenditures and leave in the pockets of the people all moneys not needed for public purposes, or we may raise expenditures to the height of taxation, seeking out new and useless objects of appropriation on which to lavish the great and growing revenues, not needed for any legitimate wants of the public service. If we adopt the latter course these very objects of useless expenditure will gather upon Congress in such increasing numbers and with such growing demands as to fasten upon the Government a permanent and unchangeable policy of extravagant and reckless appropriations. This policy once adopted will not only breed corruption in public life and demoralization in private life, but will compel, in periods of depres sion, an increased rate of taxation for the people or an increase of bonded debt for the Government. There is but one safe course, and that is to reduce taxation to the necessary requirments of an honest, economical, and efficient administration of Government. Having determined upon this course as the one which a wige and just policy demands, we are confronted with the question, Upon what articles shall the reduction be made? Shall we leave our import duties as they are and repeal the internal-revenue taxes on alcoholic liquors and tobacco? Or shall we leave the internalrevenue tax as it is and make the reduction on imports alone? Or shall we reduce the taxes on both? The committee have determined to recommend a reduction of the revenues from both customs and internal taxes. They have given the whole subject a careful and painstaking examination, and in the revision of the schedules have endeavored to act with a spirit of fairness to all interests. They have carefully kept in view at all times the interests of the manufacturer, the laborer, the producer, and the consumer. The bill herewith reported to the House is not offered as a perfect bill. Many articles are left subject to duty which might well be transferred to the free list. Many articles are left subject to rates of duty which might well be lessened. In both respects the bill could be improved; but in its preparation the committee have not undertaken or felt authorized to construct a new and consistent system of tariff taxation. They have dealt with the existing system, seeking to free it of much of its injustice, to simplify its provisions, to diminish its complexity, and, as far as practicable, to lighten its pressure on the taxpayer, and make it more contributory to our industrial prosperity and progress. Furthermore, we have felt constrained to consult the opinions and give weight as far as possible to the views of our associates from different parts of the United States, always subordinate, however, to the paramount consideration of the welfare of the entire country. From the beginning of our Government tariff legislation has been based on the principles of mutual concession. The present bill does not depart from this precedent. In the progressive growth of our manufactures, we have reached the point where our capacity to produce is far in excess of the requirements of our home consumption. As a consequence, many of our mills are closed, and many of those still in operation are running on short time. This condition is hurtful to the manufacturer, to the laborer, and pro ducer of the materials consumed in manufacture. The manufacturer loses the profit on his capital, the laborer loses his wages, and the producer of the materials consumed in manufacture loses the market for his products. Manufacturers, in many instances, to guard against losses by low prices caused by an oversupply in the home market, are organizing trusts, combinations, and pools to limit production and keep up prices. This vicious condition of business could not exist with low duties, but is the legitimate outgrowth of prohibitory duties on imports. Prohibitory tariffs surround the country with lines of investment and prevent all relief from without, while trusts, combinations, and pools plunder the people within. In a country like ours, prolific in its resources, where the rewards of labor ought to be large, the capitalist may by such methods keep his investment secure and still make profits, but what is to become of the laborers who are thrown out of employment by stopping the wheels of machinery and limiting the amount of product? And what is to become of the producer of the materials to be consumed by the manufacturer ? When the fires are shut off, the laborer and the materials are shut off at the same time, and the market for both is gone; whether they labor in the factory or the field; whether they produce cotton, wool, hemp, flax, coal, or ore; whether the product of their daily labor is cloth, iron, steel, boots, or shoes, they must have constant employment to obtain for themselves and families the necessaries and comforts of life. When out of employment, with earnings cut short, with low prices for their products caused by the closing of the market, they still must pay for whatever their daily wants require the prices which the trusts have fixed. What is the remedy for this wrong? It is more extended markets for the sale of our products and a constant and active competition in business. With active competition combinations and pools are impossible. With the markets of the world open to us our manufacturers may run their mills on full time, give constant employment to their laborers, with a steadily-increasing rate of wages. With the markets of the world open to the sale of their products they will create an active and constant demand for all the raw materials required in manufactures, which will stimulate, promote, and reward the wool-grower and the producer of cotton, bemp, flax, hides, ores, and other materials of manufacture. We are the largest producers of cotton in the world, we are second in the production of wool, we put on the market annually quantities of hemp and flax, and our country is full of ores and coal. What we need is manufactures enough to consume all the annual product of these materials, and create an active demand for them, so that all our workmen may be constantly employed and receive high prices for their labor. To accomplish this our manufacturers must have markets for the sale of their wares, and these markets are to be found in foreign countries as well as at home. To take the foreign market from the foreign manufacturer, we must produce our goods at a lower cost than he can. The principal elements of cost are labor and material. In many of our manufactures the labor cost is lower than in any country in the world, and if the cost of materials were as low here as in foreign countries we could produce our goods more cheaply than they, and largely increase our exports to foreign markets. The annual product of our manufactories is now estimated at $7,000,000,000, of which amount we export only about $136,000,000, or less than 2 per cent. If we could obtain free of duty such raw materials as we do not produce and can only be procured in foreign coun tries, and mix with our home product in the various branches of manufacture, we could soon increase our exports several hundred millions. With untaxed raw materials we could keep our mills running on full time, our operatives in constant employment, and have an active demand for our raw materials in our own factories. If there should be no duty on any materials entering into manufactures many articles now made abroad would be made at home, which, while it would give more employment to our own labor, would give a better market to many articles which we produce and which enter into manufactures, such as cot. ton, wool, hemp, flax, and others. With this end in view we have gone as far as we could and done what we could in the present condition of things to place our manufacturers upon a firm and unshaken foundation, where they would have advantages over all the manufacturers of the world. Our manufacturers, having the advantage of all others in the intelligence, skill, and productive capacity of their labor, need only to be placed on the same footing with their rivals in having their materials at the same cost in the open markets of the world. In starting on this policy, we have transferred many articles from the dutiable to the free list. The revenues now received on these articles amount to $22,189,595.48. Three fourths of this amount is collected on articles that enter into manufactures, of which wool and tin plates are the most important. The revenues derived from wool during the last fiscal year amounted to $5,899,816.63, and the revenues from tin plates to $5,706,433.89. The repeal of all duties on wool enables us to reduce the duties on the manufactures of wool $12,332,211.65. The largest reduction we have made is in the woolen schedule, and this reduction was only made possible by placing wool on the free list. There is no greater reason for a duty on wool than there is for a duty on any other raw material. - A duty on wool makes it necessary to impose a higher duty on the goods made from wool, and the consumer has to pay a double tax. If we leave wool untaxed the consumer has to pay a tax only on the manufactured goods. It is contended by some that if we put wool on the free list we should also put woolen goods on the free list. If this is sound policy we should also put cotton goods on the free list, for raw cotton is free, and we should put silk goods on the free list, for raw silk is free. Then where would the Government get its revenues? Duties are imposed to raise revenue, and they should be so imposed as to obtain the revenue with as little burden as possible to the tax-payer and as little disturb. ance as possible to the business of the country. This is accomplished by imposing the duty on the finished goods alone, and in no tariff, from the first to the last, have woolens, cottons, silks, or linens been placed on the free list. We say to the manufacturer we have put wool on the free list to enable him to obtain foreign wools cheaper, make his goods cheaper, and send them into foreign markets and successfully compete with the foreign manufacturer. We say to the laborer in the factory we have put wool on the free list so that it may be imported and he may be employed to make the goods that are now made by foreign labor and imported into the United States. We say to the consumer we have put wool on the free list that he may have woolen goods cheaper. We say to the domestic wool-grower we have put wool on the free list to enable the manufacturer to import foreign wool to mix with his, and thus enlarge his market and quicken the demand for the consumption of home wool, while it lightens the burden of the tax-payer. The duty on wool now prevents nearly all the better classes of wool from coming into the country; the domestic product can supply only about one-half of the amount required for home consumption. The statistician of the Agricultural Department puts the domestic product for the year 1887 at 265,000,000 pounds. Others place it higher, but none at more than half the annual consumption of our people. It requires about 600,000,000 pounds of wool and other fibers manufactured with it, which are now paying duty, to supply the annual demands of home consumption. Why, then, should we keep out by high duties the foreign wools so necessary to the clothing of the people? The Wool Growers' Association ask us to put on a duty high enough to prevent the importation of all wools. The Wool Manufacturers' Association ask us to put on a duty high enough to keep out all manufactures of wool. If Congress grants this joint request, what are the people to do for woolen clothing?! Are the people to be compelled by Congress to wear cotton goods in the winter or go without, to give bounties to wool-growers and wool manufacturers? During the last fiscal year there were 114,404,173 pounds of wool imported, and of that amount 81,504,447 were cheap carpet wool, the greater part of which paid 2 cents per pound duty. The high duty of 10 cents per pound on the finer wools that go into clothing was so great a barrier against the importation of the better wools that only 33,099,696 pounds were imported. But our people required clothing, and if Cougress put a duty so high on wool as to keep it out, still, high as was the duty on woolen goods, $44,235,243 worth were imported and consumed in this country, upon which duties were paid amounting to $29,729,717. If the charges constantly being made are true, that great quantities of these goods are coming in undervalued, underweighed, and undermeasured, then the aggregate amount is much larger. Frauds of this character, smuggling, and bribery follow prohibitory duties just as the shadow follows the substance. These goods for the most part could be manufactured in the United States, and if the wools in them could be admitted free of duty, it would give employment to many thousands of our own operatives, start into life and keep in active operation many of our factories now idle, and largely reduce the cost of these goods to the consumers. We must find a way to foreign markets for our woolen goods. In the foreign market we must compete with the foreign producer, and in order to do so successfully we must produce our goods at a lower cost and be able to undersell the foreign product and take the market. We are now exporting less than $500,000 worth of woolen goods, while Eng land, with free wool, exports more than $100,000,000. With free wool we may not only supply the home market with the greater part of the woolen goods now imported, but we can begin to export woolen goods and soon build up a prosperous foreign trade. We submit herewith a table showing equivalent ad valorem duties now paid on manufactures of wool-those proposed by the committee and those proposed by the joint agreement of Wool-Growers' and Wool Manufacturers' Association, adopted in Washington, D. C., January 14, 1888. |