existing, and contributing thereby to an increase of prices, must give to any tariff such elements of weakness as to render it unstable, thus exposing the manufacturing and producing industry of the country to an evil which past experience has taught it specially to dread; for certainly, next to positive hostile legislation, nothing is more damaging to the manufacturing interests of the country than instability in tariff legislation.

Finally. The investigations of the commissioner tend to the conclusion that an increase of the rates of duty on importations, equivalent to those given in the House Bill No. 718, would reduce, through a prohibition or reduction of importations, the gold resources of the national treasury to a point beyond what it would be either safe or expedient, and militate against the practicability

of a continued reduction of internal taxation.

It may, however, be urged that an increase of the tariff at the present time, even if it should benefit the manufacturers to a less extent than what is expected and desired, would nevertheless, by increasing wages, increase the ability of the laboring classes to consume, and would also stimulate an emigration of skilled labor from other countries. To this it may be replied that the facts submitted in this report fully confirm a generally acknowledged principle in political economy, viz., that an increase in the price of labor follows and rarely or never precedes an advance in the price of commodities; and that although there has been a large absolute advance in the prices of labor since 1862, yet the advance on the whole has been greater during the same time in the price of commodities; and that through the decrease in the purchasing power of wages thus occasioned, the American laborer has not been relatively benefited by his increase of wages, but is in reality in a worse condition than he was before the war.*

The commissionner further maintains that a continuance in the present condition of things, so far from holding out any inducement to an emigration of skilled labor from other countries, in fact tends to repel such emigration. Investigations made under his direction indicate that skilled labor, taking the relative prices of commodities and of rents into consideration, is equally well or better paid in many departments of industry in Great Britain at the present time than in the United States. In some instances the evidence to this effect is conclusive.

Further confirmation of this point is also to be found in the fact, that within a comparatively recent period skilled laborers in the manufacture of metals have visited the United States with a view of engaging in their special industries, but after investigation have returned, feeling convinced that the wages obtainable at home, though nominally less than in this country, were, taking all things into consideration, in reality equal, or greater.

The question at issue, in the opinion of the commissioner, is not one legiti mately involving any discussion of the principles of either protection or free trade. On these points the policy of the nation may be considered, for the present at least, as definitely settled. With a tariff averaging nearly fifty per cent. in its rates, free trade in any form is simply an impossibility. Neither is it believed that any considerable portion of the people of the country are in favor of the adoption of "free trade" in the European sense, even were the necessities of the treasury far less urgent than at present. But the simple

In confirmation of this statement, the commissioner would refer to the results of a careful examination, made at his instance, into the relative advance in the price of commodities and of labor, in a manufacturing town in the centre of a large agricultural producing region-the town of Canton, Stark county, Ohio. This result showed that while the advance in wages employed in the manufacture of agricultural machinery was from fifty-five to sixty per cent. in November, 1866, as compared with the same month of 1860, the advance in the cost of living, as deduced from the prices of sixteen of the leading articles of domestic consumption, viz., flour, corn-meal, buckwheat-flour, beef, butter, eggs, lard, potatoes, apples, chickens, dried apples, coffee, sugar, sirup, calicoes, and muslins, showed an average increase of about one hundred and thirty per cent.

question now at issue is, what course of policy can best be pursued which will bring back most rapidly the country to its normal condition of industry and development. If it be urged that an increase of tariff is calculated to effect this result, it is replied, first, that the present tariff rates are already of an extreme character, and that any legislation in the same direction must necessarily soon reach a limit, unless the country is prepared to adopt the policy of entire prohibition and commercial non-intercourse; and, secondly, that if a tariff whose average rates (nearly fifty per cent.) are higher than have ever been levied by the United States, or by any other civilized nation in modern times, fails to be reasonably protective, the remedy should be sought in removing the causes which have neutralized its protection, rather than by increasing the average of the duties.

Improvements in the processes of manufacture and agriculture ought, and in a normal condition of affairs would, tend to increase the comfort and add to the prosperity of the mass of the people. It has been proved that in no other recent period have there been so many of such improvements. They should give to the country the power of increasing its production so much per capita as to enable each producer, with the expenditure of the same time and amount of labor as in 1860, to realize for himself the same amount of comfort and prosperity, and at the same time to pay his proportion of the taxes. That such has not been the result can be attributed only to the unwise legislation by which the burden of taxation has been unequally distributed, and the problem now to be worked out is to distribute the burden so as not to impede that absolute increase in the production of the country which should be the result of improved tools and better methods.

The point cannot be too strongly insisted upon that, in order to extend our markets by the export of finished products, rather than of raw materials, and thereby to give employment to the largest amount of labor in our own country, the cost of commodities and of labor must both be reduced, and such direction must be given to the legislation of the country as to relieve from the burden of taxation, as far as possible, the commodities used by the laborer, either for his own consumption or as the tools and implements by which he gains his wages. It has been proved that during the past four years the cost of living has, on the whole, increased in a greater proportion than the wages of labor; no proposition ought, therefore, to be made or entertained for a moment tending to a reduction in wages, unless accompanied by such measures as shall reduce the prices of commodities in a much greater ratio, and thus give to the laborer the power to purchase, with a less nominal amount of money, more of the necessaries and comforts of life.

In view of these several conclusions, the commissioner, therefore, recommends that the relief now unquestionably needed and sought for by the producing interests of the country, should be mainly given by Congress through a reduction of taxation on the raw materials indicated, and on the machinery and results of domestic industry, rather than by an extensive and large increase of the rates of duty on importations. Such legislation, coupled with an early adoption and adherence to some fixed policy, looking, through contraction, to the resumption of specie payments, would, in the opinion of the commissioner, by decreasing the cost of production and increasing the purchasing power of wages, go very far toward diminishing the evils which now tend to arrest the development of the trade, industry, and commerce of the country.

At the same time, in view of the very decided expression of opinion in respect to the tariff by the House of Representatives at its last session, which the commissioner feels that he has no right to disregard, and in view, further, of the fact that, during the present transition state of the national finances consequent upon funding, and upon the adoption of measures looking to the resumption of specie payments, the industry of the country is threatened with

disturbances for which the manufacturers and producers ought not to be held. responsible, an increase of the tariff on some articles, as a measure of temporary expediency, is also recommended. Such an increase, in the opinion of the commissioner, should, however, be extremely moderate, and should have regard, first, to the interests of the revenue, and, secondly, to the supplying of such deficiencies in the existing tariff as are due especially to a want of proper adjustment between the rates of imposts and those of the internal revenue, or to a failure heretofore to sufficiently recognize the relation that exists between the market value of certain articles and the cost of the labor entering into their production.

As respects the House bill No. 718, now before the Senate, the commissioner respectfully asks of Congress its reconsideration, inasmuch as he believes it to be exorbitant in its rates, tending to further inflation of prices, destructive of revenue and of what little of foreign commerce yet remains, and prejudicial to the general interests of the country. And, in confirmation of these conclusions, he would add that admissions have been made to him by representatives of many of the producing interests of the country likely to be affected by this bill, that the rates of duty imposed by it are higher than are necessary for the adequate protection of their interests.

In conformity with the principles adopted in this report, and in accordance with the instructions of the Secretary of the Treasury before cited, the commissioner herewith presents the form of a bill, designed to be sufficiently comprehensive and complete, to allow, if adopted by Congress, of the repeal of all the numerous and complicated laws under which rates of duty on imports are now levied and collected.

He would further ask attention to the following statement of reasons for the rates recommended in the form of bill presented, and of the results of his investigations touching the relations of the existing and proposed tariffs and the internal revenue, to some of the great leading industries of the country; the principal classes of articles included under the tariff being considered separately.

TEAS, COFFEE, SUGARS, SPICES, WINES, LIQUORS, CIGARS, AND TOBACCO.

In entering upon a revision of the tariff, the first consideration of importance at the present time "is to provide for a large, certain, and permanent revenue." To accomplish this, it is necessary to select certain articles of extensive and regular importation and consumption, of standard prices, and not easily smuggled, which, through the duties imposed on them, may be always relied on as sources for a definite amount of revenue.

The articles which our own experience, and the experience of other countries, have shown to especially answer these conditions, are teas, coffee, sugars, spices, wines, and liquors. From the first four of these classes of articles, the commissioner estimates that the revenue is now accruing (and likely to continue to accrue, provided the rates of duty remain unchanged) at the rate of from fortyfive to fifty millions of dollars per annum-the current importations and consumption being in advance of the estimates made by the revenue commission in their report of February, 1866.

By the House bill No. 718 the duties on tea and coffee are reduced fifty per cent., thus entailing a prospective loss of from eight to ten millions of dollars per annum in the customs receipts from these sources. This measure appears to have been very generally received with favor, on the ground that, as these articles are of almost universal consumption, an abatement of taxation upon them would result in special and direct benefit to the masses. That such a conclusion is fallacious, and that the effect will be in fact the reverse of what is anticipated, is, however, in the opinion of the commissioner, evident, for the following reasons: No principle in the economy of taxation, as has been already

stated, is better recognized than that a tax upon one of the necessaries of life, is, in fact, a tax upon all; and that, therefore, so long as the necessities of the government require that this class of articles should be taxed at all, an abatement of taxation on one of them is simply equivalent to shifting it upon another. Under this condition of necessity, the main point of interest to the consumer is, that the taxes of this nature should be raised in the simplest, cheapest, and most equable manner, and afford the least possible occasion for an increase of the burden through duplication. In the case of tea and coffee, the duties are assessed mainly at five or six principal ports of the country, and, being wholly specific, are collected without delay and with little trouble. It is not probable, moreover, that the revenue on these articles is evaded by smuggling to any great extent, while under-valuation is impossible. Being, furthermore, of almost universal consumption, the duties levied upon them are very uniformly distributed, and fall upon the consumer in small amounts at any one time; while, as they cannot be considered necessaries of life in a sense so absolute as breadstuffs and clothing, the payment of the tax, through their use, is, in a great measure, voluntary. Through these circumstances, therefore, the conditions of effectiveness, economy, and equality, as regards collection and distribution, are secured most perfectly. Tea and coffee, furthermore, being articles of standard use and general sale, forming directly no component part of manufactured products, it is at all times within the power of the consumer to accurately and easily determine their importing price, as well as the duties assessed upon them; thus obviating, in the first instance, any extensive duplication of taxation, and rendering it nearly impossible, in the second, for the unscrupulous dealer to unduly enhance prices, through the plea of excessive government taxation.

Let us next consider the conditions of raising an equivalent sum from a taxation on one or more of the products of domestic industry. We select iron and its manufactures as an illustration, for the reason that these articles yielded by internal taxation, during the fiscal year 1865, an amount ($8,494,989) very nearly equivalent to what it is now proposed to relinquish from the customs revenue, through the abatement of fifty per cent. on the duties on tea and coffee. It must be obvious, in the first place, that the collection of this amount of revenue from iron and its manufactures is an exceedingly complicated matter. In the place of five points of collection, the collection districts extend over every furnace, rolling-mill, forge, foundry, machine-shop, and hardware establishment in the country; entailing an additional proportionate increase of expense and taxation. As comparatively few, moreover, of the manufactures of iron come to the consumer, except as the result of several processes; and as each process, in turn, is levied upon by the tax collector, an extensive duplication of taxes, and a great enhancement of prices, necessarily follows; and as the details of this duplication of taxes cannot, in a majority of cases, be known to the consumer, the unscrupulous dealer is freed from nearly all restraint in his efforts to enhance and maintain prices.

Again: iron being an essential component element of almost all forms of machinery, the taxation which enhances its price necessarily multiplies the price of all articles produced through its agency, thus restricting consumption and the extension of domestic and foreign commerce, and unfairly exposing almost every brauch of domestic industry to a competition with foreign producers who are free from similar disabilities. And what is thus true of iron is almost equally true of almost every other article of ordinary domestic produc

tion.

In confirmation of the position taken it may be also added that there is a close correspondence between the duties levied on tea and coffee in the United States and in the leading states of Europe, and, therefore, an equality as regards this form of taxation; while in the latter countries domestic industry is almost universally exempt from taxation.

If, however, it be urged that our argument loses in weight through the circumstance that the government has at present an available surplus revenue, and that, therefore, so high a tax on tea and coffee is not necessary, we reply, that so long as the government is under the necessity of taxing the industry of the country at all it cannot fairly claim to have any legitimate surplus revenne ; while, so far as the question is one of relief to the masses, we maintain that a reduction of internal taxation to the amount of eight or ten millions of dollars will diminish the burden on the masses, through a reduction of prices, to a three or four-fold greater extent than what would be experienced through the abatement of duties to a sum equivalent to that above named on the articles of tea and coffee.

Finally. That the present tax on tea and coffee is not regarded by the co community as a burden, is, we believe, clearly proved by the circumstance that the consumption of these two articles, and also of sugars, has increased more rapidly since the present system of national taxation was adopted than that of any other article on the whole list of assessments. The commissioner, therefore, earnestly recommends that no change be made in the existing rates of duty on tea and coffee.

For similar reasons the commissioner would also recommend that no material change be made in the present rates of duty on spices.

In respect to sugars some slight alteration in the existing rates of duty may be necessary. During the last few years such extensive improvements have been made in the machinery and processes for the manufacture of sugar from the cane that an improved article can now be produced at a much less cost than formerly.

This improved product of foreign sugar can now be entered at a duty which is not equivalent to and does not compensate for the aggregate taxes (tariff and internal revenue) paid by the refiners on a lower grade of sugars and on their products. The law, as it stands, therefore, offers, in fact, a bounty to the foreign producer in competing with the American refiner, and threatens to destroy the prosperity of the great industry of sugar-refining in the United States.

The relief, therefore, needed may be given either by slightly changing the duties on the various grades of sugar-a measure asked for by the refiners, but earnestly opposed by the importing and grocery interests-or by entirely removing the internal taxes on the products of refining. The question is a diffcult one to determine, and the commissioner asks for it the careful consideration of Congress.

In respect to the tariff on spirituous liquors, the main question to be determined is, what rates will prove most productive of revenue? it being, it is assumed, a settled principle of our revenue system that the taxation on articles of this character is to be limited only by the consideration above stated.

On brandies and spirituous liquors, other than wines, the returns of importations for the year 1865 apparently indicated that the existing rates of duties were all but prohibitory; the importations of brandy into the port of New York for the first ten months of 1865 having been only 4,376 packages, (i. e., 789 half-pipes, 2,313 quarter-casks and barrels, and 1,974 cases.) For the corre sponding period of 1866, however, the importations of brandies into the same port are returned at 32,043 packages, (i. e., 752 half-pipes, 15,502 quartercasks and barrels, and 15,789 cases,) thus showing a large increase in quantity as well as in revenue.

The returns of importations of spirituous liquors, distilled from grain, for the first ten months of 1866, also show an increase of three hundred per cent. over those of the corresponding period of 1865. As the present rate of duty imposed on "gins" and other spirituous liquors distilled from grain is, however, greatly disproportionate to their invoiced value, the commissioner is of opinion