The Consumer Pays - Commentary on Bastiat's Sophisms - First Series - Chapter 5
A tariff is a tax, and a tax is paid by the consumer. That is the critical point that Bastiat makes in this chapter and one that is worth understanding today as well. And if this reality is recognized, perhaps we might see through the absurdity of some of the justifications for taxation that remain even today.
All sorts of taxes levied and targeted at any particular point in the economic process are ultimately paid by consumers. Bastiat's specific target, given the subject of the book, is the use of tariffs against foreign entities. He tries to make clear to his opponents that whatever their absurd notion of what the taxes might do, perhaps level the playing field of production, the burden of that taxation is never felt by the entities being taxed. In the end, the consumers of the country issuing the tariff will bear the burden.
The reason is fairly simple. Taxes are rolled into prices. And no matter what level the taxation occurs at, the prices are affected all the way down to the consumer level, resting the burden on them.
Although Bastiat is focused on the tariff, we should recognize that this is true of all taxes. So when we see corporations or business practices targeted with taxation today, under the guise of punishing or influencing businesses, we must realize the effect is on the consumer. The same is true of the regulatory process, as the changes to products or higher costs associated with production are felt by the consumer.
Through these two tools, taxation and regulation, government attempts to shape society. The entry point of influence may be the corporations, but the end effect is the prices, products, and choices available to society. And this kind of shaping of society stands in stark opposition to the ideas of liberty and freedom. And any proposed government action should be critiqued in light of this dynamic.
Bastiat goes on to make the distinction between taxation purely for revenue rather than trying to create an outcome. He doesn't challenge the morality of revenue-driven taxation as much as I would, but he does deserve credit for pushing people to consider the motivations behind the action.
He finishes though, by speculating that trade no longer artificially burdened by government-created obstacles, might just reduce the need for standing armies and revenue-driven taxation as well.