Can a tax be so riddled with conflicts of interest that it systematically fails to serve its supposed purpose?
In Chapter 8, "Tariffs for Revenue," Henry George addresses the final, most seemingly innocuous defense of the tariff system: that it is necessary, or at least useful, for generating Federal revenues. George argues that this is the weakest excuse of all, demonstrating that using tariffs to raise money is administratively wasteful, morally corrupting, and economically inferior to almost any other form of taxation.
1. The Revenue Goal vs. The Protective Goal 🎯
George highlights the fundamental internal conflict that makes a tariff a poor tool for taxation:
The Conflict: A tariff is inherently designed to reduce or prevent trade (the protective goal). But for the tariff to collect revenue, trade must occur.
The Impossible Balance: A government attempting to use tariffs for both purposes—protecting domestic industry and raising money—is trying to achieve two mutually exclusive goals.
If the tariff rate is set high enough to fully protect a domestic industry, no imports come in, and zero revenue is collected.
If the tariff is set low enough to raise significant revenue, it fails to protect the domestic industry.
The Result: The tariff system is a political compromise that performs both functions poorly, achieving inadequate protection while collecting revenue in the most inefficient way possible.
2. The Worst Form of Collection: Inefficiency and Cost 💸
George contrasts the tariff with other forms of taxation, revealing its enormous administrative burden:
Customs Machinery: Collecting duties requires an expensive, elaborate, and complex Customs House system, complete with officials, inspectors, warehouses, documentation, and anti-smuggling patrols.
Interference with Commerce: The entire process of international commerce is slowed down, complicated, and made more expensive by the need to navigate the customs system. This is a cost to the national economy far exceeding the money collected.
Corruption and Fraud: High tariffs incentivize smuggling and customs fraud, forcing the government to waste resources fighting criminal activity that the tax itself created.
3. Revenue Tariffs vs. Protective Tariffs (The Better Option) ☕
George makes a distinction, arguing that if a nation must use a tariff for revenue, it should choose goods that are not produced domestically (a true revenue tariff):
Example: Coffee or Tea: If the government places a duty on imported coffee, virtually all the money paid by the consumer is collected by the government as revenue. Since the U.S. doesn't grow coffee, there is no domestic industry to protect, and thus no price is artificially inflated for domestic producers.
The Protectionist Tariff: By contrast, if a tariff is placed on domestic goods (like steel), the consumer pays two costs:
The duty on the imported steel (which goes to the government).
The inflated price on the domestically produced steel (which goes into the pockets of the protected manufacturers).
George argues that for every dollar collected by the government via a protective tariff, the public ends up paying multiple dollars in total cost. He concludes that even highly criticized taxes, like the income tax, are "in all respects better than a tariff" because they don't carry the enormous, hidden economic cost of protecting inefficient industries.
Conclusion
Chapter 8 strips away the final pragmatic defense of the tariff, proving that it is a costly and contradictory way to fund the government. The tariff is exposed as a tax that systematically encourages inefficiency, breeds corruption, imposes massive administrative burdens, and is constantly undermined by its own protective goals.
Considering George's arguments, is there any scenario where the ease of collecting tariffs at the border outweighs the economic disadvantages of the protectionist goals they often entail?
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