Mr. MAXWELL then moved that one thousand copies be printed. This motion, after some observations from Messrs. WRIGHT, FISK, and FINDLEY, in which they urged the impropriety of giving any countenance to a letter, containing propositions which would not probably be agreed to by Congress, and which would serve only unnecessarily to alarm the people, was negatived 60 to 52. Mr. DAVENPORT moved to have five hundred copies printed, which motion was also negatived, and the usual number ordered to be printed. The Letter and Answer are as follows: COMMITTEE Room, December 9, 1811. SIR: In your annual report, prepared in obedience to the act supplementary to the act, entitled "An act to establish the Treasury Department," and transmitted to the House of Representatives on the 22d ultimo, it is stated, 1st. That, to place the financial system of the United States on a solid foundation, it requires the aid of a revenue, sufficient at least, to defray the ordinary expenses of Government, and to pay the interest on the public debt, including that on new loans which may be authorized. That the expenses of the year 1812, calculated on the existing state of affairs, and including the interest on the public debt, will amount to $9,400,000 00 That the whole amount of actual receipts into the Treasury, during the year Leaving a deficiency (which it is pro- Making the whole sum, which it is pro- - 8,200,000 00 - 1,200,000 00 2,135,318 41 $3,335,318 41 Under this view of the subject, the Committee of Ways and Means instructed me to inquire of you, whether, according to the principle first above stated, it does not become necessary to provide "a fixed revenue," to be received during the year 1812, equal as well to the estimated expense of that year, and amounting, as above stated, to $9,400,000, as also to the interest which will arise on the proposed loan of $1,200,000; or, otherwise, whether it is proposed to provide for the payment of such interest out of the money of the Treasury at the commencement of the year, or from any other source? 2d. It is stated in your report, "that a fixed revenue of about nine millions of dollars is necessary, under the existing circumstances of the United States; and that the same amount would be necessary, and, with the aid of loans, will, in your opinion, be sufficient, in case of war." In reference to this state of things, the Committee wish you to state, whether, as, in the event of war, increased loans will undoubtedly be required, it will be necessary to provide an additional and gradually increasing revenue, to pay the interest on such loans? JANUARY, 1812. 3d. It is stated in your report, “ that the permanent revenue, or annual receipts, after the year 1812, (calculated on the existing state of affairs,) together with an addition of fifty per cent. on the present amount of duties, may be estimated at nine millions of dollars; and that, should any deficiency arise, in the event of war, it may be supplied, without difficulty, by a further increase of duties, by a restoration of that on salt, and by a proper selection of moderate internal taxes." The Committee request that you would favor them with the best opinion which you are able to form (calculated on the event of war) of the probable amount of the receipts from duties; a specification of the increase of duties which you would think practicable and advisable; an estimate of the amount of that on salt; and such a selection of moderate internal taxes as you would reccommend, with the probable expense of collection, and the amount of net revenue estimated to arise therefrom. 4th. The Committee request that you would furnish them, in connexion with your replies to the preceding inquiries, with an estimate of ways and means, (calcu lated on the event of war,) which will provide a revenue sufficient to meet the ordinary expenses of Government, and provide for the legal reimbursement and interest of the public debt, including the interest on new loans, to the amount at least of ten millions of dollars per annum, accompanied with such a scheme for the reimbursement of the principal of the new loans as you should deem expedient, together with such opinions as you may have formed respecting the terms on which such loans may probably be obtained; also, such further views or information, connected with, or touching the foregoing objects of inquiry, as you may deem necessary and expedient. With great respect, I have the honor to be, your obedient servant, E. BACON. Hon. ALBERT GALLATIN, Sec. Treasury. TREASURY DEPARTMENT, Jan. 10, 1812. SIR: In answer to the first inquiry of the Committee of Ways and Means, relative to the interest arising on the proposed loan of $1,200,000, necessary to supply the deficiency in the receipts of the year 1812, I beg leave to observe that that item was not included amongst the expenses of that year, because, the estimate being made with reference to the expenses alone which had previously been authorized by law, and a considerable proportion of those on account of the pub lic debt falling on the last day of the year, it would not have been necessary, in that view of the subject, to borrow that sum previous to that day, and the interest would not, therefore, have become a charge till the year 1813. With respect to the second inquiry of the Committee, it was certainly contemplated, in conformity with the recommendation of the President, whose expressions were adopted in the report," to raise a revenue sufficient, at least, to defray the ordinary expenses of Government, and to pay the interest on the public debt, including that on new loans which may be authorized." The sum of about nine millions of dollars was assumed as answering that description for the present, and the expression of "fixed revenue," which had been used in reference to existing circumstances, was inadvertently applied to the case of war. It will undoubtedly be proper, as remarked by the Committee, to provide, annually, an additional and gradually increasing revenue, sufficient to pay the interest on the loans required in the event of war. If, therefore, the loan for the present year will, according to the suggestion of the Committee, amount to ten millions of dollars, the receipts into the Treasury, to be provided for the year 1813, should on those data, amount to about nine millions six hundred thousand dollars. The Committee ask, in the next place, the best opinion which I am able to form of the probable amount of receipts from duties on merchandise, in the event of war. As that amount will depend on the extent of the commerce between the United States and nations at peace with them, and on the numbers of the captures respectively made by our own privateers, and by the enemy, it is a matter of conjecture, and not a subject of calculation; for which reason it was stated in the report, that that amount could not at present be determined. Considering the restrictions laid by France on the commerce of the United States, with her own dominions and other countries under her influence, the dangers to which our commerce with the Baltic and with China will be exposed, the relations of England with Portugal and with Spain, and also that no inconsiderable part of the captures made by our privateers will be sent into foreign ports, a great defalcation in the receipts on duties on imported merchandise must be expected. The amount, under existing laws and circumstances, has, from correct data, been stated in the annual report at six millions of dollars. It would, in my opinion, be unsafe, in an estimate of ways and means, intended to be relied on with certainty, to calculate, in the event of a war, on more than two million five hundred thousand dollars, at the present rate of duties. To the next inquiry of the Committee, respecting the increase of those duties which is thought practicable and advisable, it is answered, without hesitation, thal the rate of duties may, in the event of war, be doubled, without danger or inconvenience. There will, in such event, be less danger of smuggling, at that rate, than there is now, with the existing duties. With that increase, the duties will still be much less, on an average, than those paid on importations in England, France, and most other countries. And they will be collected with more ease to Government, and less inconvenience to the people, than could be devised, to the same amount, in any other manner. A duty on imported salt might now be calculated on at least three million five hundred thousand bushels; but, in time of war, cannot be estimated on more than two millions of bushels, producing, at the rate of twenty cents per bushel, four hundred thousand dollars. The duties on tonnage and imported merchandise, including the former duty on salt, and doubling the rate of all the others, would, according to that esti$5,400,000 mate, amount to To which, adding the proceeds of the sales of public lands, estimated, as by the annual report, at Makes an aggregate of And leaves a deficiency of 600,000 6,000,000 3,600,000 H. of R. ing the expenses already voted by Congress, is not more than will be wanted, and estimating at the lowest rate the interest on the loan of 1813, the deficiency for 1814, to be provided for by other sources, will amount to four million two hundred thousand dollars. The expenses of assessment and collection, and incidental losses, on the internal taxes, from the proceeds of which this deficiency must be supplied, may be estimated at fifteen per cent. In order to produce a net revenue of four million two hundred thousand dollars, the gross amount of taxes must therefore be near five millions of dollars. As the taxes, which may be organized during the present session of Congress, will not become due till the ensuing year, and as it is sufficiently ascertained, from universal experience, that taxes will not produce their full nominal amount the first year they are in operation, it may be relied on that a gross amount of five millions, intended to produce a net revenue of four million two hundred thousand dollars, will not yield that sum till the year 1814, nor produce, in 1813, more than the required sum of three million six hundred thousand dollars. Five millions of dollars will, therefore, be assumed as the gross amount of taxes (including the expenses of assessment and collection, and the incidental losses) necessary to be raised at this time. That sum is calculated to cover the interest on the loans of ten millions a year, wanted for the service of the years 1812 and 1813, leaving the selection of additional taxes, which may thereafter be necessary to provide for the interest of subsequent loans, to be made according to the experience which will be afforded by those two years. Before I proceed to answer the inquiry of the committee, respecting a selection of the internal taxes now necessary, permit me to observe, that it was stated in the annual report of December 10, 1808, that "no internal taxes, either direct or indirect, were contemplated, even in the case of hostilities carried against the two great belligerent Powers"-an assertion which renders it necessary to show that the prospect then held out was not deceptive, and why it has not been realized. The balance in the Treasury amounted, at that time, to near fourteen millions of dollars; but, aware that that surplus would, in a short time, be expended, and having stated that the revenue was daily decreasing, it was, in the same report, proposed "that all the existing duties should be doubled on importations subsequent to the first day of January, 1809." As the net revenues accrued from customs during the three years, 1809, 1810, and 1811, has, without any increase of duties, exceeded twenty-six millions of dollars, it follows that, if the measure, then submitted, had been adopted, we should, after making a large deduction for any supposed diminution of consumption arising from the proposed increase, have had, at this time, about twenty millions of dollars on hand-a şum greater than the net amount of the proposed internal taxes for four years. In proportion as the ability to borrow is diminished, the necessity of resorting to taxation is increased. It is, therefore, also proper to observe, that, at that time, the subject of the renewal of the charter of the Bank of the United States had been referred by the Senate to the Secretary of the Treasury; nor had any symptom appeared, from which its absolute dissolution, without any substitute, could have then been anticipated. The On the basis of annual loans of ten millions of dol- renewal, in some shape, and on a more extensive scale, lars, during the continuance of the war, (which is the was confiently relied on; and, accordingly, in the resum assumed by the committee, and which, consider-port made during the same session, to the Senate, the In order to complete the net revenue, wanted for the service of 1813, of $9,600,000 H. OF R. Increase of Revenue. JANUARY, 1812. State) hardly exceed 365,000 dollars. The proposed tax will, therefore, so far as relates to Pennsylvania, be near twenty per cent. lighter, in proportion to the respective population, than that paid during the years 1785 to 1789. propriety of increasing the capital of the bank to thirty millions of dollars, was submitted, with the condition that that institution should, if required, be obliged to lend one-half of its capital to the United States. The amount thus loaned might, without any inconvenience, have been increased to twenty millions. And with The rule of apportionment, prescribed by the Contwenty millions of dollars in hand, and loans being stitution, operates with perhaps as much equality as is secured for twenty millions more, without any increase practicable, in relation to States not materially differof the stock of the public debt at market, internal tax-ing in wealth and situation. It may, therefore, be ination would have been unnecessary for at least four ferred, that, a direct tax, which is not greater than years of war, nor any other resource been wanted, than Pennsylvania can pay with facility, will not press heaan additional annual loan of five millions—a sum suffi- vily upon any of the other Atlantic States. It is only ciently moderate to be obtained from individuals, and in reference to the Western States that the Constitu tional rule of apportionment, according to the respective number of inhabitants in each State, may be supposed to be unequal. Being at a greater distance from a market, and having, on account of the recent date of their settlements, less accumulated capital, it is cerlainly true that they cannot, in proportion to their population, pay as much, or with the same facility, as the Atlantic States. Two considerations will, however, much diminish the weight, if they do not altogether obviate that objection. on favorable terms. These observations are made only in reference to the finances and resources of the General Government. Considerations of a different nature have, on both these subjects, produced a different result, which makes a resort to internal taxes, now, necessary, and will render loans more difficult to obtain, and their terms less favorable. But the resources of the country remain the same; and, if promptly and earnestly brought into action, will be found amply sufficient to meet the present emergency. With respect to internal taxes, the whole amount to be raised is so moderate, when compared either with the population and wealth of the United States, or with the burdens laid on European nations by their Governments, that no doubt exists of the ability or will of the people to pay, without any real inconvenience, and with cheerfulness, the proposed war taxes. For, it is still hoped that the ordinary peace revenue of the United States will be sufficient to reimburse, within a reasonable period, the loans obtained during the war, and that neither a perpetual and increasing public debt, nor a permanent system of ever progressing taxation shall be entailed on the nation. These evils cannot, however, be otherwise avoided, than by the speedy organization of a certain revenue. Delays in that respect, and a reliance on indefinite loans, to defray the war expenditure, the ordinary expenses of Government, and the interest on the loans themselves, would be equally unsafe and ruinous would in a short time, injure public credit, impair the national resources, and ultimately render much heavier and perpetual taxes absolutely necessary. Of the gross amount of five millions of dollars to be now provided, according to the preceding estimates, by internal taxation, it is respectfully proposed that three millions should be raised by a direct tax, and two mil-proportion may not be the same in the other Western lions by indirect taxes. 1. Of the articles actually consumed in the Western States, there are two of general consumption, on which duties are laid, or proposed to be laid, and on which, being articles produced in those States, they will pay nothing, or less than the Atlantic States. On salt they will pay nothing, as the whole quantity consumed there is of domestic origin; and this observation affords an argument in favor of the restoration of the duty on that article, since it will tend to equalize the operation of the direct tax. A considerable part of the sugar those States consume (nearly seven millions of pounds) is also the produce of the maple, and pays no duty. And, in time of war, it is probable that the res idue of their consumption will, in a great degree, consist of New Orleans sugar; also duty free. The sum of three millions will not, considering the increase of population, be a much greater direct tax than that of two millions, voted in the year 1798. To this, permit me to add another view of the subject. The direct taxes, laid by the several States during the last years of the Revolutionary war, were generally more heavy than could be paid with convenience. But, during the years 1785 to 1789, an annual direct tax of more than 200,000 dollars (205,189) was raised in Pennsylvania, which was not oppressive, and was paid with great punctuality. The increase of population of that State, between the years 1787 and 1812, is, in the ratio of about four to nine. A tax of 450,000 dollars, payable in the year 1813, is not higher, in proportion to population, alone, and without regard even to the still greater increase of wealth, and of circulating medium, than a tax of 200,000 dollars was in the year 1787. But the quota of Pennsylvania, on a tax of three millions of dollars, will (counting Orleans as a 2. A considerable portion of the direct taxes, in those States, is laid on lands owned by persons residing in other States, and will not fall on the inhabitants. It appears, by a late official statement, that more than two-thirds of the land tax of the State of Ohio are raised on lands owned by non-residents. The portion of the quota of that State on the United States' direct tax, which will be payable by its inhabitants, will, for that reason alone, be reduced to one-third part of the nominal amount of such quota. And, although the States, it is well known that a similar result, though not perhaps to the same extent, will take place in all. From every view which has been taken of the subject, it satisfactorily appears that the proposed amount of three millions is moderate, and cannot be productive of any real inconvenience, provided that the objects on which the tax shall be assessed be properly selected. A direct tax may be assessed either on the whole amount of the property or income of the people, or on certain specific objects selected for that purpose. The first mode may, on abstract principles, be considered as most correct; and a tax laid in case of selection, on the same articles, in all the States, as was done in the direct tax of 1798, is recommended by its uniformity, and supported by respectable authority. It is, neverthe less, believed that the systems of taxation, respectively, adopted by the several States, matured, modified, and improved, as they have been by long expe rience, will generally be found to be best adapted to the local situation and circumstances of each State; and they are certainly most congenial with the feelings and habits of the people. It is therefore proposed that the direct tax should be laid and assessed in each State upon the same objects of taxation on which the direct taxes, levied under the authority of the State, are laid and assessed. The attempt made, under the former direct tax of the United States, to equalize the tax by authorizing a Board of Commissioners, in each State, to correct the valuations made by the local assessors, was attended with considerable expense, and productive of great delay. In order to obviate this inconvenience, it is proposed that the quota assigned to each State, according to the rule prescribed by the Constitution, should be apportioned by law amongst the several counties, towns, or other subdivisions of each State; adopting, in each State, where a State tax is now levied, the apportionment of the State tax, whether that be an absolute quota, fixed by a previous State law on the county or town, or whether it be only the amount which shall appear to have been last laid on such county by the operation of the general State laws, imposing a direct tax; making the apportionment in the States where no State tax is now levied, according to the best information and materials which can be obtained; and authorizing the States, respectively, to alter the apportionment thus made by law, at any time previous to the day fixed by law for assessing the United States' tax on individuals. The whole process of assessment will thereby be reduced to that of assessing the quota of each county, town, or other subdivision, on the lands and inhabitants of such division. It will be as simple, and may be effected as promptly, and with as little expense, as the assessment of a county tax; and the objects of taxation being the same, it may be still more facilitated by authorizing an adoption of the State assessment on individuals, whenever it may be obtained from the proper authority.. H. OF R. dred gallons, at the rate of three cents per gallon, distilled; and that, instead of a duty on the spirits, or of licenses in proportion to the time employed, all other distillers should only pay an annual tax of five dollars for each still solely employed in the distillation of fruit, and of fifteen dollars for each still otherwise employed. This tax may, also, still, without reference to time, be made to vary according to the size of the stills. At those rates, this class of duties is estimated to produce, at most, $400,000; and it is intended, in that case, that another duty should be levied on the same article, in the shape of licenses to retailers. By the adoption of that mode, the expenses of collection will be considerably diminished, penalties for not entering stills will be unnecessary, and they will be confined, with respect to country stills, to the case of clandestine distilling without paying the tax. heretofore laid, viz: at the rate of four cents per pound, 28. Duties on refined sugar.-A duty double of that is estimated to produce 200,000 dollars. The drawback, both of that duty and of that on the importation of the raw material, to be allowed. 3d. Licenses to retailers,-These are believed to be susceptible of considerable and very proper augmentation and extension. The following rates are estimated to produce 700,000 dollars. For a license to retail wines do. do. do. do. spirits generally $20 20 15 10 Tavern keepers, licensed under the authority of any State, and not living in any city, town, village, or within five miles thereof, to be excepted. Every other person who sells wines, foreign spirits, or foreign merchandise, otherwise than in the vessel or package of importation, or in the case of dry goods, otherwise than by the piece, and every person who sells domestic spirits in less quantity than thirty gallons, to be considered as a retailer. 4th. Duties on sales at auction. These, confined to the sale of articles of foreign produce or manufacture, and at the same rate as heretofore, may produce about 50,000 dollars. 5th. Duties upon carriages for the conveyance of persons.These duties, adding at the rate of fifty per cent. on the duties formerly raised, are estimated to produce 150,000 dollars. With respect to indirect taxes, it does not appear necessary to resort to any other than those which had been formerly levied by the United States. As they were in operation during several years, their defects, and the modifications and improvements of which they are susceptible, are better understood than new taxes could be. With some alterations they may produce the amount now wanted; and it does not appear that any other, equally productive, could be substituted 6th. Stamp duties.-An association of ideas which with any real advantage. The gross amount of those taxes, in the year 1801, was near one million of dol-ain to tax America, and which might, with equal proconnects these duties with the attempt of Great Britlars. They would, according to the increase of popu-priety, attach odium to the duty on the importation of lation, and without any augmentation in their rate, tea, has rendered their name in some degree unpopu yield, now, near $1,400,000. An average increase of lar. The great extension of post roads, and the facility about fifty per cent. in the rate would produce the of distribution, have, however, removed the most subintended gross amount of two millions. But it is be- stantial objection to which they were liable. They do lieved that that increase ought not to be the same in all those taxes, and that some are susceptible of greater ternal tax, and the expenses of collection are less than not appear to be more inconvenient than any other inaugmentation, or extension, than others. on any other, being only a commission on the sale, and the cost of paper and stamping. At the same rate as heretofore, with the exception of bank notes, on which an increase appears proper, (with an option to the banks to pay one-twentieth part of their dividends in lieu thereof,) they are estimated to produce 500,000 dollars. 1. Duties on domestic spirits distilled.-There is not any more eligible object of taxation than ardent spirits. But the mode of taxation is liable to strong objections, particularly with respect to persons who are not professional manufacturers, and who, only occasionally, distil the produce of their farms. It is therefore proposed, that the duties on the quantity of spirits distilled should be levied only on spirits distilled from foreign materials, at the rate of ten cents per gallon, distilled, and on other distilleries employing stills, the aggregate of which shall contain more than four hun Increase of Revenue. 2,000,000 5,000,000 JANUARY, 1812. should be rejected, unless another, less inconvenient, be substituted.. The necessity of such an addition to the revenue has, in the course of this letter, been strongly urged, because it was strongly felt; but with respect to the taxes proposed, the selection is submitted with diffidence; and it will be highly gratifying that some more eligible may be devised. The last inquiry of the committee relates principally to the terms on which loans, amounting to at least ten millions of dollars per annum, may be obtained, and to 750,000 the plan proper to be adopted for the reimbursement of such loans. 4,250,000 3,600,000 Most of the internal taxes have been estimated at their maximum; but it is hoped that any defalcation from the estimated amount will be compensated by a diminution in the expenses of collection, which have also been computed at the highest rate. The terms on which annual loans to that amount may be obtained, can be ascertained only by experiment. Government has never, since its organization, obtained considerable loans within the United States, at the rate of six per cent. a year, except from the Bank of the United States; and these, on a capital of ten millions, never amounted to seven millions in the whole. In proportion to the amount wanted for the service of the year, and to the increase of stock of the public debt at market, the terms must naturally become less favorable. It must, also, be recollected that, in addition to the sum wanted to defray the extraordinary expenses of the war, an annual loan, equal to the annual reimbursement of the six per cent. and deferred stocks, prescribed by law, will also be required. This, together with the reimbursement of the residue of the converted stock, amounting to $565,000, will, for this year, amount, as has been stated in the annual For the superintendence of those taxes, both direct and indirect, it appears indispensable that the office of commissioner of the revenue should be re-established. For their collection, the former offices of supervisor and inspector are believed to have been unnecessary and injurious links in the system, and that the expense will be diminished, and the collection and accountability better secured, by the division of the States into convenient collection districts, and by the appoint-report, to $2,135,000. As the interest on the existing ment of a collector to each district, who will pay into the Treasury, and be immediately accountable to that department, in the same manner as the collectors of customs. This arrangement, the greater amount to be collected, and the simplification in the objects and mode of taxation, will, it is hoped, reduce, in a short time, the expenses of collection of the indirect taxes to seven and a half instead of thirteen per cent., which they formerly cost, when brought to their highest degree of improvement. In estimating the charges on the direct tax at fifteen per cent., five per cent. have been allowed for the assessment, five per cent. for the collection, and five per cent. for losses. This last item is principally on account of losses on unseated lands, and on some remote districts of country, and is not susceptible of much reduction. That for assessment may be lessened in those States where the objects of taxation do not require an annual valuation, or where the State or county assessments may be used. The expense of collection proper may be, also, in some degree, lessened in cities and populous districts, and by uniting it with that of the internal taxes. It is, however, necessary that the compensation of the collectors be sufficient to command the services of men properly qualified, and in every respect worthy of the trust. debt is included in the "current expenses," the loan necessary for the reimbursement of the six per cent. and deferred stocks, will, for each subsequent year, amount only to $1,570,000. The loans for those sums will, indeed, create no addition to the amount of the debt, but will, nevertheless, increase the total sum to be annually borrowed. It must also be observed, that, if the price of stocks should sink below par, the Commissioners of the Sinking Fund are bound, by the existing laws, to apply the residue of the annual appropriation of eight millions a year to the purchase of stock; and that residue will, this year, amount to $3,640,000, which, in that case, must also be borrowed. It is a view of those several considerations which has created an apprehension that loans, to such large amount, might not, perhaps, be obtained on as favorable terms as under other circumstances, and, with the powerful assistance of a National Bank, has been formerly anticipated. The same view of the subject has most forcibly impressed a conviction of the necessity of an additional revenue: for, if further loans be also resorted to for defraying the ordinary expenses and the interest, they must, if at all practicable, be obtained on the most ruinous terms. Excluding that idea, and embracing only the loans which are absolutely necessary, it appears to me more prudent not to limit the rate of interest by law. A discretionary ecutive, altogether ineligible, but it is preferable to the risk of leaving the public service unprovided for. It is, also, for the same reason, requisite that the loans may be made irredeemable for a term not less than ten years. In performing the ungracious task of pointing out new objects of taxation, those have been submitted which appeared sufficiently productive and least oppres-power, in that respect, is, so far as relates to the Exsive. The objections to which each, including the increase of duties on importations, is liable, have not been stated, not because I was insensible of them, but because no substitute of any importance was perceived, which was not still more objectionable. Every tax being in some degree an evil, is, therefore, liable to some objection; and every one, taken singly, may, for that reason, be easily combatted. But, if the necessity of an additional revenue be admitted, the objections afford no argument why the tax proposed In a former communication to the Committee of Ways and Means, it was suggested that "Treasury notes," bearing interest, might, to a certain extent, be issued, and to that extent diminish the amount to be directly borrowed. The advantage they would have, |