(July 6, 2018) Suppose Congress enacted a law setting income tax rates at a flat ten percent for everyone. Assume that future historians characterize any contemporaries who opposed the law for being unfairly high as undeniably greedy and that any statues to such persons should be destroyed. Finally, suppose that the future historians deliberately fail to tell students that the law had a deceptive provision. Specifically, it stipulated that anyone making more than $100,000 annually was required to be taxed as if their income was a minimum of one million dollars a year. Thus, someone earning only $125,000 would be required to pay four-fifths of their gross income as taxes. That’s precisely the type of deception some modern historians use when the dismiss regional differences over the tariff as a cause of the Civil War.
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During the antebellum era tariffs accounted for about ninety-percent of federal tax revenues. Thus, they were certain to be a major conflict point between the importing and exporting regions of our country. Northerners generally wanted high tariffs on manufactured goods so that their factories could avoid competing on price with less costly merchandise manufactured overseas, most notably Europe. Southerners objected to paying the higher prices for finished goods, regardless of whether the prices resulted directly from the customs tax on imports or the artificially inflated price of domestic manufactured goods protected from European competition by such tariffs. They also objected to high tariffs because the European buyers of their cotton resented that the USA tariffs cut American demand for imported manufactured goods from Europe.
Since high tariff rates were unfair to all American consumers as well as the South’s export economy, Northern tariff advocates used trickery to make the rates look lower than they really were. One technique used minimum valuations. Thus, while a tariff might be set at a fixed percentage it might also require that the nominal rate be applied to the applicable import at a “minimum valuation” that was above the market value.
Consider, for example, the impact of minimum valuations on the tariffs paid for imported finished cotton cloth between the 1842 Black Tariff and the 1846 Walker Tariff. Domestically, such cloth was made in New England—not the South—while the biggest overseas supplier was Great Britain, which was also the World’s most economical producer.
Northern protectionists were responsible for the high Black Tariff. It so sharply increased effective rates that it forced a 50% drop in imports that caused a steep decline in tariffs collected, despite the higher rates. As one example the Black Tariff placed a nominal import duty on finished cotton cloth of about 25%, but it also mandated a minimum valuation on such cloth that was more than twice the market price. Therefore, the effective tariff rate was actually 57%. It not only shut-out British competition but it angered the Brits so much that they sought alternate raw cotton sources other than the American South. When the Black Tariff was replaced by the lower Walker Tariff in 1846, the nominal rate on finished cotton cloth remained 25% but the minimum valuation was eliminated. Thus, the effective rate on imported cotton cloth dropped from 57% to 25%.*
In short, the Yankee-promoted Black Tariff falsely represented a 57% tariff as 25% whereas the truth-in-advertising Walker Tariff represented its 25% rate for the 25% it really was. Southern congressmen voted ten-to-one against the Black Tariff whereas they voted four-to-one in favor of the lower Walker Tariff.**
*Douglas Irwin and Peter Temin, “The Antebellum Tariffs on Cotton Textiles Revisited,” The Journal of Economic History, V61, N3 (September, 2001), 780
**The United States Tariff of 1861 With an Historical Sketch (New York: Merchant’s Magazine, 1861), 581