The notion seems to be that protective taxes, laid on imports, are the particular kind of taxes which make national prosperity, and which therefore ought not to be touched. It is proposed that internal taxes shall be reduced. If local taxes on real estate, etc., are reduced, every one rejoices; that is supposed to be a clear and simple gain. I have known the same man to exert himself very actively to scrutinize local expenditures, and reduce local taxes, and to boil with rage against free traders who want to reduce protective taxes. However, there is probably no tax of any kind whatsoever which does not interfere with the conditions of supply and demand, or industrial competition, in such a way as to give “protection” to somebody at the expense of somebody else. There are persons who are now enjoying great advantages in their business from the whisky and tobacco taxes which they would lose if those taxes were repealed. This is one of the incidental mischiefs of all taxation and one of the reasons for insisting that taxation shall be as slight as possible, and, to that end, that government functions shall be limited as much as possible.
We are, therefore, face to face with the question whether we are able to reduce our own taxes, and whether we are free to do so. We may fairly ask: if not, why not? It is plain that this is a question of domestic policy and of our own interest altogether. All the attempts to prejudice it by talking about “England” are impertinent, and all allegations that those of us who want to reduce our own taxes are trying “to give away our market,” etc., belong to the worst abuses of political discussion. What is true is that we have built up a vast combination of vested interests, which in a few cases have, and in nearly all cases think they have, an interest in maintaining the taxes. These are among ourselves; what they gain, they gain from us; it is with them that we have to contend. They have thus far carried on the fight by all the methods dear to vested interests; they have put forth plausible fallacies, sought alliances, procured delays, appealed to prejudices.
Behind these selfish and sordid interests, however, there is the strong and sincere prejudice which still prevails among the civilized nations of to-day, and which is dividing them into hostile parties, carrying on tariff wars with each other. I call it “protectionism,” because it is not a policy, but a philosophy of national welfare. In the United States it takes the form of various fallacies about the home markets, diversification of industry, wages, etc. As these are all questions of political economy, and as all who talk on the subject at all are talking political economy of some sort or other, it seems that a great work of education is to be done here on the field of economic doctrine. Hitherto the attempt of the politicians has been not to perform this work of education but to thrust it aside.