OUR PRESENT PROLONGED WAR-TARIFF TAXES.

It is actually the war rates of the war-tariff of the last generation under which we are now living; for the undebated, unsifted law of 1883, made by a conference committee, did but keep alive the body of the tariff of 1864.

The average percentage of the taxes on, to the values of, imported commodities has been as follows:

Morrill tariff of 1859-'61, (before the war,) was........... 18.84 per cent. War-tariff of 1862-'64 (in 1866 was highest) was.......... 48.35 per cent. Present Prolonged War-tariff (was in 1885)....

46.07 per cent.

My last annual report reviews the history of this strange survival. "Like our currency laws, our tariff laws are a legacy of war. If its exigencies excuse their origin, their defects are unnecessary after twenty years of peace. They have been retained without sifting and discrimination, although enacted without legislative debate, criticism, or examination. A horizontal reduction of 10 per cent. was made in 1872, but was repealed in 1875, and rejected in 1884. They require at our custom-houses the employment of a force sufficient to examine, appraise, and levy duties upon more than 4,182 different articles. Many rates of duty begun in war have been increased since, although the late Tariff Commission declared them 'injurious to the interests supposed to be benefited,' and said that a 'reduction would be conducive to the general prosperity.' They have been retained, although the long era of falling prices, in the case of specific duties, has operated a large increase of rates. They have been retained at an average ad valorem rate for the last year of over 46 per cent., which is but 21 per cent. less than the highest rate of the war period, and is nearly 4 per cent. more than the rate before the latest revision. The highest endurable rates of duty, which were adopted in 1862-'64 to off-set internal taxes upon almost every taxable article, have in most cases been retained now from fourteen to twenty years after every such internal tax has been removed. They have been retained while purely revenue duties upon articles not competing with anything produced in the thirty-eight States have been discarded. They have been retained upon articles used as materials for our own manufactures, (in 1884 adding $30,000,000 to their cost,) which, if exported, compete in other countries against similar manufactures from untaxed materials. Some rates have been retained after ruining the industries they were meant to advantage. Other rates have been retained after effecting a higher price for a domestic product at home than it was sold for abroad. The general high level of rates has been retained on the theory of countervailing lower wages abroad, when, in fact, the higher wages of American labor are at once the secret and the security of our capacity to distance all competition from 'pauper labor,' in any market. All changes have left unchanged, or changed for the worse, by new schemes of classification and otherwise, a complicated, cumbrous, intricate group of laws which are not capable of being administered with impartiality to all our merchants. As nothing in the ordinary course of business is imported unless the price here of the domestic, as well as of the imported, article is higher by the amount of the duty and the cost of

sea-transit than the price abroad, the preference of the tax-payer for duties upon articles not produced in the United States is justified by the fact that such duties cost him no more than the Treasury of his country gets. As for duties affecting articles that are also produced in the United States, the first to be safely discarded are those upon materials used by our own manufacturers, which now subject them to a hopeless competition, at home and abroad, with the manufacturing nations, none of which taxes raw materials."

FIELD OF FEDERAL TAXES, NOT LAND, NOT INCOMES.

The Federal power of taxation is almost uncircumscribed. It must pe "for the general welfare," not for a partial or class benefit. Exports cannot be taxed. Direct taxes must be apportioned among the several States according to their population. Indirect taxes must be uniform. throughout the United States. These include "all duties, imposts, and excises," which are, though advanced by the home producer or the importing merchant, alike actually paid by the final consumer.

Our experience of the difficulty and inequalities of the direct tax when applied to land, of which a square foot in one place is costlier than 100 miles square in another place, and in proportion to population, which varies in density now and changes continually; or when applied to individual incomes (the most direct tax conceivable, for when paid it cannot be shifted-it has no repercussion, which is the only common feature of the taxes held to be direct before war had disturbed the vision of courts and legislatures) under the prescribed rule of apportionment to the States according to population, confines their utility to State purposes, and excludes them from the just purview of Federal taxation.

BUT THINGS HERE CONSUMED; WITH INLAND AND SEAPORT COLLECTORS OF TAXES.

It is indirect taxes only which the Federal Government now levies, and to which, being thus practically restricted by those provisions of the Constitution, it must look for its revenues, and its remissions when revenue outruns expense. It is out of indirect taxes that arise contentions about protection and free trade, as they arose before the war when our debt was little and our expense so small that many thought Congress might have abolished custom-houses, and no harm.

"Free trade" accurately describes the internal commerce of our States. It applies to the commerce, one with another, of no other great and sovereign States. It does not apply to our trade with foreign nations. No man now living will ever see "free trade" adopted by these United States in their commerce with foreign nations; for taxes on imports, from the foundation of this Government, have ever been one chief source

of Federal revenue, and such they will continue to be. They are taxes upon consumption, like our internal-revenue taxes; and the true ground of choice among articles suitable for taxation is not the circumstance that they are produced at home or 'imported from abroad, for neither the producer nor the importer finally pays the tax. The consumer pays it. The place of origin is no criterion. The place of collection is no criterion. The place of consumption is where duties as well as excise are paid at last; seaport taxes and inland taxes, are alike in cost of collection, (33 and 3 per cent.,) and alike in this, that although the importer or distiller advances the tax, he reimburses himself in the price to the consumer, who alone is taxed. The true ground of choice is that among all articles thus consumed within our own borders some are better suited for an equitable taxation than others. They are universally consumed, like sugar, or easily identified, like coffee, or their consumption may be safely impeded, like distilled spirits or fermented liquors or tobacco, or they are luxuries, like wines, silks, and diamonds. But of these articles suitable for taxation, foreign production affords as many as home production, or more. Taxes on imports are levied by all nations. Last year England raised a revenue of $95,978,583 from taxes on imports; France, $68,616,325; Germany, $47,557,160. But no foreign nation taxes raw materials. Such taxes injure home industries, in which those materials are worked up and increased in value by home labor. Such taxes on raw materials, instead of excluding foreign competition from the home market, put our own employers of labor at a great disadvantage in the home market, and a greater disadvantage in every foreign market, compared with the foreigner employing labor upon untaxed raw materials.

"Protection" is also a misnomer. It implies superiority elsewhere. That superiority over any great industry of ours does not exist upon the globe. It implies infants here and adults elsewhere. Such is not our reputation. It implies that amid competition universal, where the fittest survive, we shall perish. But it is everywhere else believed that whenever we shall release ourselves from bad laws and enter that competition unmanacled, rivals will be distanced, and our primacy established in the markets and commerce of the world.

Such is also my own belief, making allowance for those misleading forms of speech which we seem obliged to use, but which state industrial intercourse in terms of military strife. It is a mistake to conceive it so. In warlike encounters one may gain what another loses, but on the whole, in industrial intercourse, every desired exchange is profitable to both parties, and this relation of things exhibits the nature of property, and is a corner-stone of society.

AMERICAN LABOR GETS AND EARNS THE HIGHEST WAGES.

Now, one proud fact attests the substance of our prosperity, and is the guaranty as well as proof of our power to hold against all competition the markets of the United States for everything we choose to dig or fabricate or grow, and to command and control for our surplus products, against all rivals, any foreign market.

We pay to labor the highest wages in the world. Highly-paid labor signifies the most efficient labor-signifies that high wages are the most profitable wages-signifies that the high rate is earned. The highest wages to the laborer thus involve and imply the lowest percentage of labor-cost in the product. But, other things being equal, the lowest percentage of labor-cost in any product is the guaranty that competition is outstripped.

Protectionists have done service to humanity by insisting upon the fact that we pay to labor the highest wages in the world. While debate has been going on whether our high wages were because of taxation or despite taxation, economists have discovered and demonstrated the correlative fact that labor-cost in our products is the least in the world.

HIGH WAGES ENSURE LOW LABOR-COST IN PRODUCT.

Were trade as free with and within all the ununited states of Europe as it is among the United States of America, the great surplus products of our industry, including the manufactured, would have the pick of foreign markets, for the reason that our labor, being the most highly paid and insuring lowest percentage of labor-cost, would everywhere surpass rivalry. Great Britain would follow next, for next to our labor hers is the highest paid, therefore the most efficient, and therefore next in effecting a low percentage of labor-cost in her chief products. France and Germany would follow next, and command the next unsupplied markets, and last of all, at the foot of the list, quite unable to compete with a single rival in whatever that rival chose to produce, would come the "pauper labor" of Europe and Asia. The low wages of pauper labor signify least efficiency, which is but another name for highest percentage of labor cost in the product. Other things being equal, it is obvious that high wages can never be paid unless it is profitable to pay them, and it can only be a good business to pay the highest wages, because the efficiency of those who earn them vindicates its superiority by the reduction of labor-cost in the product.

High wages to labor and cheaper product are correlative terms. Low wages to labor and a costlier product are correlative terms. The one im.

plies the other wherever labor competes with labor upon otherwise equal ground. What pauper stands any chance competing with the intelligent artisan? The "pauper-labor-of-Europe" cry is a bugaboo, except that, in truth, our war-tariff taxes favor "pauper-labor" at the expense of American labor. Its products are not fenced out by our tariff laws. They come in because we ourselves destroy our own easy power of successful competition, even in our home market. By tariff taxes on raw materials we fence in our own surplus products, making them cost too much to compete at home, and, of course, too much to compete abroad, with manufactures from untaxed raw materials. In Mexico, Central and South America, we can of course make no better headway against European competi tion than at home. Diplomacy is not an acceptable substitute for trade and its laws. Our highly-paid labor ensures the lowest percentage of labor-cost in the product, but our tariff taxes upon raw materials handicap American manufacturers with the highest percentage of cost of material in the product. The result is that capital and labor united in our American industrial products, despite our advantage in the most highly-paid and efficient labor, are put into a hopeless competition with the industrial products of other nations, none of which taxes raw materials. The advantage we possess in the most efficient and highly-paid labor in the world is nullified by the self-imposed disadvantage of tariff-taxed raw material, with which our labor is inwrought.

OUR SUICIDAL TAXES ON RAW MATERIALS.

The total value of our domestic exports for the last fiscal year was almost exactly $666,000,000, of which 86 per cent. were the products of our fields, forests, fisheries, and mines, and 16 per cent. only were the sum total of manufactured products in which American labor was inwrought.

In the last quarter of a century, progress in telegraphs, transportation, labor-saving inventions, and the mechanic arts has reduced the profits of capital and the rate of interest by more than one-half; has increased the wages of labor throughout the world; has augmented by at least a third the surplus which our manufacturers can produce beyond domestic needs for sale abroad. Prolonging without necessity our wartariff taxes on raw materials, we have been undersold and excluded from foreign markets by nations not taxing raw materials. Despite their low-priced inferior labor, and the high percentage of labor-cost therefore included in their product, our taxed raw materials and their free raw materials have protected the so-called "pauper labor" of