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Americans Loathed The Tariff

As tariffs go up against Chinese imports, and as new American trade barriers to the goods of other nations stay up, it is apt to call upon history to see how things worked out when the tariff was the dominant form of taxation. For that it was, in this country, for the first half of our history, from 1789 until 1913, the year the income tax came into being.

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The stately columns on the facade of the United States Custom House in Charleston, South Carolina. photocredit: Getty

In 1789, the year the Congress first met, the United States created both “internal” and “external” means of taxation. Internal taxes were the various excise, sales, property, and potentially income taxes paid by inhabitants on their domestic commerce and wealth. The “external” tax was the tariff, a list of duties on imports paid at the customs house before a ship offloaded its cargo.

Americans promptly tarred and feathered domestic tax collectors (such as in the Pennsylvania Whiskey Rebellion), rendering internal taxation a dead letter. Guns were fixed at the ports such that foreign shippers had either to pay up or not come. The effect was that the tariff became the preponderant, and for one long stretch (1817-1861) the only form of federal taxation.

As schoolchildren used to know, Americans loathed the tariff in this period. They used to be able to recite, for example, that the “Era of Good Feelings” of the years after 1815 ended with the tariff wars of the late 1820s and early 1830s. This is when South Carolina nullified the tariff, John C. Calhoun quit the Vice Presidency to be with his state as a Senator, and Congress and the president had to threaten force upon the state to enforce duty collections in Charleston. The garrison the feds were completing there, to help ensure payments, was Fort Sumter.

The crisis was diffused only when Congress pledged to take the tariff down from an average duty level near 60%, which it ultimately did by more than half. Still, South Carolinians and their sympathizers felt that their concerns over the tariff—how it marked up prices and spawned influence-peddling in Washington—were not given due concern. They wondered how much the union should be treasured and perpetuated if the federal government acted as imperiously as it had over its tariff.

As slavery boomed egregiously over the next several decades, it was the North that came calling to the South to change its ways. In the tariff battle, it had been the other way around. However, that tariff battle had sufficiently frayed the lines of communication, and strained the sense of mutuality and trust, between the sections, to make resolution of the new foremost problem unlikely. One of the consequences of the politically correct insistence of our age that the civil war was “about” slavery is that it blocks analysis of how the tariff had loosened the bonds of unionism in the first place.

During and after the civil war, the United States jacked up the tariff, for a period that lasted fifty years. To be sure, the United States grew handsomely in this period. Its economy became the largest in the world and took over leadership of the industrial revolution. The means of taxation was the tariff, supplemented by taxes on alcohol.

Yet in this tariff-dominant period, in which duty rates went past 50%, the revenues that were reeled in accounted for about 3% of national output. Several factors were at work. The first was that much of the tariff was “prohibitive.” Duties on specific goods were so high that foreign producers did not haul their wares over to this country.


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