PRINCIPLES OF TAXATION. 327 



Confederation by duties on imports, which then was not permissible, 

 was blocked by the refusal of the State of Rhode Island to concur 

 in it, the Legislature of that State unanimously rejecting the measure 

 for three reasons — one of which was that it would bear hardest on the 

 few commercial States, particularly Rhode Island, which in virtue 

 of their relations with foreign commerce monopolize imports, and 

 lightest on the agricultural States, that directly imported little or 

 nothing. Congress appointed Alexander Hamilton to draft a reply 

 to Rhode Island, and in his answer he relied mainly on what he re- 

 garded as an incontrovertible fact, that duties on imports would not 

 prove a charge on an importing State, but on the final consumers of 

 imports, wherever they may be located. 



If the theory and assumption so confidently and generally as- 

 serted are to be accepted as correct, that the foreigner pays the pro- 

 tective taxes which a country levies on its imports, and that they do 

 not fall upon or are not paid by its people who consume them, then 

 it must follow that to the extent that a country taxes its imports it 

 lives at the expense of foreign nations; and that, as Great Britain is 

 the country with which the United States has the largest foreign 

 trade, it must pay the largest share of the customs taxes of the United 

 States, or a good share of its annual revenue from all sources. Atten- 

 tion is further asked to the exact practical application of this theory. 

 Thus, the United States in 1895 imported $36,438,196 worth of 

 woolen manufactures, on which it assessed and collected duties (taxes) 

 to the amount of $20,698,264, or 56.80 per cent of the value of 

 such imports. Certainly this was a pretty heavy tax on foreign na- 

 tions in respect to the sales of only one class of these commodities; 

 but it represented but a tithe of what the tariff taxes of the United 

 States, if paid by foreigners, cost them. Thus they had to sell their 

 woolens to the people of the latter country at less than half their 

 value in order to compensate for the 56.8 per cent tax. But a nation 

 engaged in foreign trade can not as a rule have two prices for the 

 product of its industries; or one price for what it sells at home and 

 another and different price for what it sells to foreigners. So the 

 fifty-six per cent deducted from the cost of the woolens sold by for- 

 eigners to the United States necessarily had to be deducted not only 

 from so much of their product consumed at home, but also from what 

 they sent for sale to all foreign countries. A further practical appli- 

 cation of this theory is worthy of consideration. As Great Britain 

 imposes no protective duties or taxes on its imports, it evidently can 

 not collect anything from other nations by the system of taxation 

 under consideration. On the other hand, the aggregate value of its 

 exports sent to foreign nations during the year 1892 was $1,135,- 

 000,000, and if these several nations taxed this value at the average 



