The Pamphlet Collection of Sir Robert Stout: Volume 56
Specific and Ad Valorem Rates
Specific and Ad Valorem Rates.
It will be apparent, I hope, from what has been said above, and in my Annual Report, that I fully appreciate whatever superiorities, in an ideal system of custom-house taxation, low ad valorem rates may have over specific rates. So long as the disposition of Congress shall be to continue to levy high war duties upon some thousands of imported articles, rather than low duties upon a few, a general application of specific rates would be impossible without inflicting still further hardship and injustice upon the wage-receiving classes in the community, and those who are constrained to live on small incomes. Specific rates levied upon all imported articles, and especially on all articles of clothing, would for them be highly oppressive, unequal and unjust. A system of specific rates must be adjusted, and arranged, with regard to the values, and, therefore, when prices of imported articles are, as now, tending downward, specific rates are obviously increasing without a textual change in the law. I have it also clearly in mind how vexing and unjust is a compound system, made up of ad valorem and specific rates on the same article, and how still more vexing and unjust is a specific rate on a specified article, varying with foreign value, as is the present scale of rates on steel and wool. But we are confronted with the fact that the Treasury must annually obtain a sum hardly less than one hundred and fifty millions of dollars from imported merchandise, which is a sum less by some twenty millions than was received last year. It will be well-nigh impossible, in my opinion, for human wit to levy that amount of tax without inflicting hardship and injustice upon somebody, either importer or consumer, or on some vested interest, whether agricultural or manufacturing. Especially is that true of taxes levied on our coasts, or on our frontier, upon arriving merchandise. The Government is now beset, on one side, with the comparative injustice and hardship upon individuals, and vested interests, inflicted by specific rates if levied on all articles, and, on the other side, by the impossibility of enforcing and collecting high ad valorem rates levied on foreign values without the use of coercive and penal laws quite unsuitable for a free government to put in operation, and which when put in operation are quite likely to demoralize alarmingly not only the officers who are called upon to execute the law, but the importers who are compelled to do business under it. One advantage, and perhaps the chief advantage, of a specific over an ad valorem system, is in the fact that, under the former, duties are levied by a positive test, which can be applied by page XLIV our officers while the merchandise is in the possession of the Government, and according to a standard which is altogether national and domestic. That would be partially true of an ad valorem system levied upon "home value," but there are constitutional impediments in the way of such a system which appear to be insuperable. But under an ad valorem system, the facts to which the ad valorem rate is to be applied must be gathered in places many thousand miles away, and under circumstances most unfavorable to the administration of justice.
One hears it often said that if our ad valorem rates did not exceed twenty-five or thirty per cent, undervaluation and temptation to undervaluation would disappear, but the records of this Department for the years 1817, 1840, and 1857, do not uphold that conclusion. Of course I am very far from advocating the universal application of specific rates, but I do believe it to be possible for the more experienced and conscientious of our appraising or examining officers in different parts of the country, and for the experts in this Department, to prepare a plan for the prudent enlargement of specific rates which will greatly promote the welfare of the Government, and of the country, and, as a matter of administration, not work injustice to any class in the community beyond the injustice inevitably entailed by any system that levies annually one hundred and fifty millions of dollars tax on imported merchandise of so many kinds, at war rates, and on a scheme otherwise so unscientific and disorderly. A complete system of rates of duty has not, in the last quarter of a century, as I am informed, been prepared by the official experts in our custom-houses, under the general advice and direction of this Department, and commended by the Secretary to Congress. I have caused a careful examination to be made of the tariff law of March, 1883, to ascertain the number of specifications, ad valorem, specific, and mixed, contained in that enactment, and I present below the result: