Tax or Tariff

Earlier this year the federal income tax turned 100 years old. I’ve previously been curious as to how the government was funded prior to the income tax but never bother to find out.

Recently reading about Alexander Hamilton I learned the answer.

The second element of Hamilton’s grand plan was to stimulate the growth of domestic manufacturers. Rejecting the common assumption that America could prosper with just an agricultural base, he argued that the new nation should concentrate on developing the nation’s small business entrepreneurs. But his strategy was not to assist domestic industry through state control of the market. Hamilton was neither a mercantilist nor a protectionist.  He envisioned the role of government as using limited bounties or subsidies(contingent on a surplus of revenue) to help infant American industries overcome barriers to entry erected by the existing terms of trade. His advocacy of limited tariffs was not to advantage particular manufacturers, but to yield customs revenue, then the leading source of government funds. In general, Hamilton maintained that trade was directed by its own natural rules and was, for the most part, best left alone. He considered it the role of government to create a stable framework that would allow the free market to prosper.

In the US today we’ve seen manufacturing moved overseas, while foreign products fill our own shelves. Could you imagine if we still had a system that funded the government through trade/business rather than individual extortion?(Or even a mix of both) Why we might still be a serious country if we had that. Instead China is using trade to its advantage by pricing out their Japanese competitors as they did to us.

I’ve never learned much about Alexander Hamilton but I know that he was(and still is) disliked by a lot of people, and I can see why. He seemed to reject the ideas of both sides in order to create the better system overall.

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Posted on November 18, 2013, in Uncategorized. Bookmark the permalink. Leave a comment.

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