Tax Breaks

Sometimes taxes actually work to favor the monopolies. In his book, The New Freedom, Woodrow Wilson details how “protectionism” is used to guarantee profits for corporations (read: trusts) that have carved out special deals for themselves through government intervention.

“When I reflect upon the ‘protective’ policy of this country, and observe that it is the later aspects and the later uses of that policy which have built up trusts and monopoly in the United States…

“What is the present tariff policy of the protectionists? It is not the ancient protective policy to which I would give all due credit, but an entirely new doctrine. I ask anybody who is interested in the history of high ‘protective’ tariffs to compare the latest platforms of the two ‘protective’ tariff parties with the old doctrine. Men have been struck, students of this matter, by an entirely new departure. The new doctrine of the protectionist is that the tariff should represent the difference between the cost of production in America and the cost of production in other countries, plus a reasonable profit to those who are engaged in industry. This is the new part of the protective doctrine: ‘plus a reasonable profit.’ It openly guarantees profit to the men who come and ask favors of Congress. The old idea of a protective tariff was designed to keep American industries alive and, therefore, keep American labor employed. But the favors of protection have become so permanent that this is what has happened: Men, seeing that they need not fear foreign competition, have drawn together in great combinations. These combinations include factories (if it is a combination of factories) of all grades: old factories and new factories, factories with antiquated machinery and factories with brand-new machinery; factories that are economically and factories that are not economically administered; factories that have been long in the family, which have been allowed to run down, and factories with all the new modern inventions. As soon as the combination is effected the less efficient factories are generally put out of operation. But the stock issued in payment for them has to pay dividends. And the United States government guarantees profit on investment in factories that have gone out of business. As soon as these combinations see prices falling they reduce the hours of labor, they reduce production, they reduce wages, they throw men out of employment,—in order to do what? In order to keep the prices up in spite of their lack of efficiency.”

Wilson, Woodrow. “Chapter 7/The Tariff.” The New Freedom; a Call for the Emancipation of the Generous Energies of a People. New York and Garden City: Doubleday, Page, 1913. 148-149. Print.

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