Sidor som bilder

vested in this business; while the tax on the value of boots and shoes manufactured in the same State during the same year ($52,915,243) was equal to thirty per cent. on the whole capital employed, viz., $10,067,474.

It must, therefore, be obvious that a revenue system like the above necessarily involves a most extensive duplication of taxes, which in turn entails and maintains an undue enhancement of prices—a decrease both of production and consumption, and consequently of wealth ; a restriction of exportation and of foreign commerce, and a large increase in the machinery and expense of col. lection.

In view of these facts, furthermore, the commissioner feels that he needs no apology for the protest made at the last session of Congress, and which he again renews, against the entertainnient of propositions to pay at the present time, from the treasury of the nation, sums for bounties, varying from seventy-five to three hundred millions of dollars ; especially in view of the fact that over five hundred and eighty-six millions of dollars * have already been appropriated and expended by national, State, and local authorities for this purpose. The shoulders that bear the burden of national debt and taxation are indeed broad, but the burden is heavy even for a giant, and is most weighty upon the system when, as now, it is striving under the burden to assume an erect and normal position. The men that have fought the battles of the country have a right to claim from that country a reward that cannot be measured by money, but they have no right to ask it in a form and at a time when its payment would tend to check the development and prosperity of the State. What, moreover, is an individual bounty of one or two hundred dollars compared with a speedy conferring upon Congress the ability to remove such an amount of taxation as will increase the wages as well as the pensions of the soldier by increasing the purchasing power of money, and in addition to that the insurance to each soldier of the, certainty of permanent and remunerative employment, by insuring the prosperity and rapid development of the country.

In considering this question, moreover, it is important that a great and acknowledged principle should not be lost sight of, which is, that in every heavily taxed country, and under any revenue system, it is the working classes on whom the burden of taxation invariably presses the most severely, inasmuch as the rich pay out of their abundance, but the workingmen out of their living. The truth of this principle, once recognized, the commissioner finds it difficult to believe that the soldiers themselves will be willing to impose this additional burden upon all their own friends and associates.

Neither must these men, in whose name the claim for additional bounty is made, delude themselves with the belief that if granted it will be all gain and no loss. They themselves now form a large portion of the most intelligent and energetic mechanics and workingmen in the community, and, as such, they are

*The following letter relating to the above subject has been placed at the disposal of the commissioner: “WAR DEPARTMENT, Provost MARSHAL GENERAL'S BUREAU,

“WASHINGTON CITY, May 26, 1866. SIR: In answer to the request of the Hon. Secretary of the Treasury, of the 22d instant, and referred by you to this bureau, “To furnish him with an estimate of the amount of money expended in the form of bounties during the war by the national and State governments,' I have the honor to report that the amount expended by the national government, as estimated from the records of this office, is $300, 223,500, and from information collected from the State and local authorities, there has been expended by them the sum of $286,029,029 ; but it is thought that this last branch of the subject is not complete, and does not show the full amount expended by State and local authorities. “I am, Sir, very respectfully, your obedient servant,


Provost Marshal General, “Hon. E. M. STANTON, Secretary of War."

among the largest producers, and, consequently, the largest consumers of taxed commodities. Upon them must, therefore, fall a large proportion of the permanert taxation which will be rendered necessary to meet the interest upon the debt incurred in order to defray the proposed appropriations for bounties.

DISCUSSION OF REMEDIES. Having thus presented an exhibit of the abnormal and disturbed condition of the country, and attempted an analysis of the causes which have led to the results cited, we come next to a discussion of remedies :

First, as bearing upon the cause referred to; and secondly, as to the proposed increase of the tariff as a remedial measure.


In respect to the first cause which has contributed to the inflation of prices, viz., scarcity of labor, it is not clear that legislation can be made available for relief, unless by the enactment of measures to stimulate and facilitate immigration. The evil growing out of this cause, must in the course of time cure itself, and that it is already in the process of so doing, is made evident by the acknowledged increasing supply of unskilled labor throughout the country, as well as by the very great increase in the invention and use of labor-saving machinery.*

SECOND REMEDY. The remedy for the second cause, viz., the adoption on the part of the State of an irredeemable paper currency is to be found in a return to specie payments; while the agency through which we must seek for such remedy can, in the main, be no other than contraction-contraction applied to the greatest possible extent, and at the earliest possible moment, compatible with the condition of the industrial interests of the country, and of the public obligations.

What these limits are to be, it is for the judgment of Congress to decide; but every hour's unnecessary delay in determining on and announcing a fixed policy in this direction, perpetuates a state of things prejudicial to healthy business; favorable to speculation and abnormal prices; tending to panics ; discriminating against the masses, and in favor of the shrewd and unscrupulous.

That judicious contraction, following a reduction of taxation, would prove detrimental to any producing interest, the commissioner does not believe. The influence of such a policy, seasonably announced, would go before it; prices would fall in anticipation of a diminished supply of currency, and, with such a decline, the purchasing power of money would so increase as to keep the volume of circulating medium sufficiently ample to facilitate all needful and legitimate exchanges, and at the same time diminish the field of speculation.

The experience of all civilized nations shows that the amount of circulating medium required by any country bears a very small ratio to the volume of its business. What that ratio is, must be determined by the practice of each nation under a system which puts no unnatural restraint on the issue of currency. Such a country was the United States before the war. In a few only of the States, and those the newest and most backward, was there any serious restraint put upon the creation of banks and the issue of bank notes. In most of them, and especially in the commercial States, both the trade of banking, and the issuing of paper money, were freely exercised, subject to certain conditions looking to the public safety. New England and New York not only provided a circulation for their own citizens, but they flooded the agricultural west also

Since the preparation of this report a marked change has, in truth, occurred in New England in the supply of skilled labor available for the manufacture of textile fabrics, a depression of the wollen manufacture having thrown out a large number of hands from their former employment.

with their bills. Speaking generally, therefore, the people of the United States had all the circulating medium which they required, or would receive. And how much was it? Under this free system, the utmost ever called for (and that in the fevered summer solstice of 1857) was less than two hundred and fifteen millions. Now the existing circulation exceeds seven hundred millions. What circumstances in the condition of the country, of its population or business, can be adduced to justify this enormous increase? It is not necessary to go into nice comparisons to show that there are no such justifying circumstances, and it is very probable that the pecular condition of the country since the war demands a permanent addition to the circulating medium. Shortened credits, the increase of sales for cash, the opening up of new territories in the west, and the introductiou of paid labor at the south, are all new influences added to the general effect of national growth. But Congress has provided for these influences by authorizing an issue of national bank notes to the extent of three hundred millions of dollars, an advance of fifty per cent. beyond the highest circulation which the country ever sustained on a specie basis. This provision would seem to be ample for all present wants, and for the future also, so far as it is now necessary to legislate for it. The tendency of all commercial peoples is toward economy in the use of currency. The circulating medium does not advance in the same ratio with the exchanges which it serves to carry on. In the State of New York, in the ten years from 1850 to 1860, the capital of banks increased one hundred and one per cent.; loans and discounts seventy-five per cent.; deposits one hundred and thirteen per cent., and specie one hundred and forty-one per cent. ; while the circulation increased only fifteen per cent. The explanation is, that bank deposits and other economical expedients had largely taken the place of bank notes in domestic exchanges.

It has been urged, that by allowing the present volume of currency to remain unaltered, the increase in business and in the development of the country, would gradually diminish and finally remove all difficuliies growing out of the acknowledged present redundancy. To this, however, it may be replied, that the retaining of the present amount of currency in circulation tends to increase no business except what is speculative, and to check the very development which is expected to prove remedial. There is much that is peculiar and seemingly abnormal in the economic history of the United States, and it is fashionable and comfortable to believe that the experience of older countries is no criterion for our own; but this is a grave error. The difference in our favor is one merely of productive and recuperative power; we cannot set scientific principles at defiance; and the laws of trade and of national development are as truly laws as those which regulate the course of the planets or the alternation of the seasons.

Specie payments, in short, can be resumed in only one way, viz: by lifting the paper money of the government to an equality with gold; and as no one doubts, at the present, that behind every national promise to pay there is both the national will and ability so to do, the enhancement of the credit of the government, therefore, can but be regarded as an adjunct to this end, and as entirely subordinate to the more important work of bringing the existing relations of gold and currency into more harmonious proportions. Reduce the quantity of any article in demand, and an increase of value follows; reduce the quantity of paper money to be redeemed, and the value of the remainder and the ability to redeem it will be increased in a geometrical proportion. In view, moreover, of the fact that no nation issuing paper money has ever succeeded in maintaining its circulation at par, or has redeemed it dollar for dollar, in gold ; and also that the permanent use of paper money by the government cannot be contemplated; whatever measures are now taken looking to the resumption of specie payments should also look to the complete withdrawal of every form of national paper currency issued directly by the treasury.

If it be objected that the conversion of the existing amount of non-interestbearing notes into interest-bearing securities would largely increase the annual burden of national interest, we reply that the gain in the diminution of interest would poorly compensate for the evils of fluctuations and depreciations which our own experience, and the experience of all other nations, have shown to be the invariable accompaniments of the adoption, on the part of a state, of any other than a metallic currency.

THIRD REMEDY. The remedy for the third cause to which we have attributed the present inflation of prices, viz: the extent of the national taxation lies wholly within the control of the legislative department of the government, and as regards application, admits of but little theoretical difference of opinion. The only question to be considered is, in what manner and to what extent can a reduction of existing taxes be now made compatible with the requirements of the treasury for administrative expenditures, interest, and a desirable and certain reduction in the principal of the public debt.

NATIONAL RECEIPTS AND Expenditures For 1867–68. To aid in the formation of an opinion on this subject, the commissioner presents the following estimates of the revenue likely to accrue for the fiscal year 1867–68 under the operation of the existing laws; which estimates, it will be observed, differ somewhat from those presented by the Secretary of the Treasury: From internal revenue...

$275, 000, 000 From customs.....

150,000,000 Miscellaneous—From public lands, premium on gold, &c... 30, 000, 000

455, 000, 000*

The above estimates are believed to be as large as the present condition and prospects of the industry of the country will warrant. According to the estimates of the Secretary of the Treasury, there will be required for the year ending June 30, 1868, to meet the expenditures of the government, and to provide for the interest on the public debt, a revenue of two hundred and eighty-six millions of dollars, and for the payment of bounties sixty-four millions of dollars, leaving a probable available surplus of one hundred and five millions of dollars. From this surplus we assume fifty millions of dollars as the amount to be appropriated for the reduction of the principal of the public debt—a sum which we believe should constitute the maximum to be set aside for this purpose at the present time; leaving fifty-five millions of dollars as the amount applicable for the reduction of taxation.

In the report of the revenue commission, presented February, 1866, the opinion was expressed that at that time not one-half of the legitimate internal revenue was collected under existing laws. The experience of another year has afforded no evidence which tends to induce the commissioner to believe that the above statement was exaggerated. If, therefore, more efficient measures for the pri vention of such losses could be provided for, and if the appropriation of money for the payment of bounties could be deferred, a much larger amount of surplus revenue and a much larger reduction of taxation for the next fiscal year could be anticipated.

* The receipts of the treasury, from all sources, of the first five months of the present fiscal year, July 1si to December 1st, 1866, were as follows: Internal revenue, $146,355,715 73, currency; customs (actual and estimated) $78,843,774 26, gold; making a total (reducing gold at forty per cent. premium to currency) of $256,736,999, currency.


A careful study of the whole subject of the national revenues, and m extended inquiry into the industrial condition of the country, has, however, led the commissioner unhesitatingly to the conclusion, that a rapid reduction of taxation, rather than a rapid reduction of the principal of the public debt, is at present the true policy of the government; and that the adoption of this course, so far from protracting the time at which the national debt can be discharged, will, on the contrary, greatly accelerate it.

The experience of another year has but strengthened the convictions which in the report of the revenue commission were expressed in the following language :

" Looking to the past, we find that, while our population has duplicated itself in every twenty four years, our production has been supposed to increase twice as rapidly, or to quadruple itself in the time required for the duplication of the other. While looking to the future, in view of this fact, we have reason to believe that the power of national production ten years hence will be more than twice as great as it is at present. That it will be so, provided that we remove all those taxes that now tend to impede national development, cannot be doubted; and if so, the revenue system which may now be framed to yield three hundred millions of dollars per annum, cannot fail to yield in 1875 at least double that amount.

“The more completely, therefore, that we now give our attention to the adoption of measures tending to increase the productive power of the country, and to reduce the rate of interest payable on public and private liabilities, the more rapid will be the increase in the money value of the landed property of the Union, the more readily will all the local taxes be paid, and the sooner shall we arrive at that condition of affairs in which it will be possible to boast that the war debt, local and general, whether held at home or abroad, has been once again extinguished.”



In discussing the question of the reduction of taxation some allowance should be made for a continued and certain gain which will undoubtedly accrue to the national revenue under any circumstances, from the continued increase of the wealth and population of the country. The amount of this increase in Great Britain is estimated by the chancellor of the exchequer to have averaged, for the six years prior to the years 1865–66, £1,780,000, ($8,900,000.)

The increase in the value of the real and personal property of the United States, in the decade between 1850 and 1860, was 129.7 per cent., and from 1840 to 1850, 64 per cent.

The average annual increase in the value of the real and personal property of Great Britain, from 1841 to 1863, is estimated at three and a half per cent. Estimating the average in the United States as seven per cent. per annum, we are warranted in assuming the amount of increase of revenue due to the increased wealth of the country as not less than fifteen millions of dollars per annum.

RECOMMENDATIONS FOR REDUCTION OF INTERNAL TAXATION. The commissioner, therefore, in view of the probable surplus of revenue likely to accrue, even under the present administrative condition of the law and the prospective large payments on account of bounties, would recommend the following specific reductions of taxation :

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