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two hundred and sixty-four will no longer be required, and the number of articles released, in proportion to the whole number remaining taxed, is still greater.

The law authorizing the Secretary of the Treasury to assign to the Bureau of Internal Revenue a sufficient force to carry it on will expire by its own limitation on the 1st of July next, and it therefore becomes necessary to make some arrangement for the permanent organization of the bureau. It will be seen that the bill makes provision for this object. The operations of this bureau are now on so large a scale as to require the services of able, clearheaded men, trained to business, and of unquestioned integrity. Such men in our country are highly prized, and command the highest salaries paid in financial and commercial employments, and unless we fix salaries at an adequate or competing point we shall only command the services of second-rate men. The bane of the Treasury Department is that so soon as officers receive the stamp of its confidence they receive a loud call and the offer of more pay to go elsewhere. The best officers are, therefore, often mere birds of passage, here to-day but may be gone to-morrow. The Bureau of Internal Revenue, it is quite apparent, is deficient in executive force. It is impossible that the Commissioner, however faithful and industrious, and I know of no man more so, should be able to consider all the complicated cases daily arising for investigation in the administration of his office, and we have conceded not only the propriety but the absolute necessity of reënforcing the office by two additional deputies and one solicitor.

Notwithstanding all the disadvantages we have labored under in putting new and untried laws suddenly into operation, it is gratifying to find that the expense of collecting the revenue has been far less than was anticipatedincluding everything except printing done by the Public Printer-amounting, in 1865, to no more than two and seventy-five one hundredths, or two and three fourths per cent. This contrasts most favorably with the cost of collection in Great Britain, where, after years of experience, the cost varies from four and one quarter to five and three fourths per cent.

The services of the gentlemen employed on the revenue commission, I have no doubt, are properly appreciated by Congress, as they will be by the country, and the Committee of Ways and Means were unanimously, I believe, of the opinion that this kind of service should not be entirely discontinued. Believing that at least one similar officer can be profitably employed permanently, they have added a section to the bill for this purpose, and I have no doubt it will prove wise economy to adopt and continue it so long as we may be compelled to raise anything like our present revenues from taxation.



The military power of the United States needs no eulogiums from any quarter. supremacy at home is not likely to be questioned, and when it is challenged elsewhere it will be time enough to answer back. Its financial power, also, even in the agonies of civil strife, has been vindicated. No stain of dishonor rests upon its credit. Every promise has been kept with entire good faith. No creditor, holding the obligations of the nation, has had to do more than to ask and receive. faithful soldier has closed his service without receiving at the same moment with his honorable discharge the last dollar due. Is there, then, any lurking danger as to our present and future financial condition? The confidence of the people in their own Government cannot be shaken; the vigor and elasticity of American industry is unrivaled; our resources, abundant to-day, will be greater to-morrow; no empire, ancient or modern, ever received, daily or annually, revenues of equal magnitude, and the wealth hidden in some of our single mountains, if it could be placed in the balance, would make our national debt kick the beam. Where, then, is the cloud no bigger than a man's hand? It rises only in that quarter from whence dis

loyal representatives may come. Open and inchoate repudiators lust for power. Save us from these and the United States Government will survive, with its credit and civil glories radiant with youth and the fame of ages, long after the final chapter in the history of anti-republican Governments shall have been written. APPENDIX. Estimated deductions on articles exempted and partly exempted from tax.

Animal charcoal...

Barrels, casks, boxes.
Blooms, slabs, loops....
Boots and shoes....

Brass, rolled sheet copper.....
Sheathing and yellow metal..

Building-stone of all kinds, burr-stones, grind-stones, monuments, roofing slate, slabs and tiles....

Brick, draining-tiles and water-pipes........
Bichromate of potash....

Blue vitriol and copperas..............................................
Coffins and burial cases...


Not estimated.

Bristles, flavoring extracts, deerskins, oakum, verdigris, illuminating gas of educational institutions, paintings and statues, aniline colors, bleaching-powders, tar, turpentine, candle wicking.

Mr. RAYMOND. I am sure the House has listened with very great satisfaction to the clear and interesting statement which has just been. made by the chairman of the Committee of Ways and Means of the financial condition of the country. It cannot but give satisfaction to find the country prepared for an immediate reduction in the amount of its internal revenue so very considerable as that which the committee proposes to make. And it will be equally 700,000 satisfactory to the House and to the country to find that this reduction is to operate so generally upon those processes and articles which are of most importance to the great mass of the people of this nation.

5,000 3,000 250,000 60,000 4,400,000

400,000 282,000 30,000 10,000



15,000 25,000 400,000

11,600,000 125,000

100,000 5,000 30,000 32,000


Crates and baskets..

[blocks in formation]

175,000 500,000


Income, reduction from ten to five percent. on sums over $10,000....


Iron advanced beyond pig, slabs, and loops Iron, railroad rerolled.

Iron, pig...


Iron, railroad..


Iron castings for bridges....


Iron, malleable..


Keys, actions, and strings for musical instruments.


[blocks in formation]

Masts, spars, and ship clocks.
Oxide of zinc..

Paper, books, charts, and book-binding.....
Productions of stereotypers, electrotypers,
lithographers, and engravers.

Plows, cultivators, harrows, straw and hay
cutters, planters, seed-drills, horse-rakes,
and winnowing-mills........
Paints and colors.......

Paraffine oil and crude petroleum.......
Quinine, morphine, &c..

Railroad chairs, ship-spikes, ax-poles, horse-shoes, rivets, horse-shoe nails, nuts, washers, bolts, vises, iron chains, anchors, anvils.....

Roman and water-cement and,lime........ Starch...

Soap Steel..

400,000 582,000

50,000 5,000 125,000 1,250,000

12,000 50,000 45,000 60,000

I am unwilling to trespass to any considerable extent upon the patience of the House; but I shall be glad, with its indulgence, to make a few remarks upon the general subject of taxation, especially in the attitude in which we approach it now. Perhaps I may find an apology for so doing in the fact that it is a wholly new subject. Until within the last few years, we have made it our boast, justly and truly, that we were the most lightly taxed nation on the face of the earth. Now we are compelled to confess that we are among the most heavily burdened of them all. This, sir, is one of the many vast changes which have been wrought in our condition by the rebellion we have just suppressed. We have incurred a vast debt consequent on the war for the suppression of that rebellion.

We have, moreover, provided, necessarily, for a permanent increase, more or less considerable, in the ordinary expenses of the Government. Those expenses must be met year by year. The interest upon the debt must also be met as it becomes due; and I think it of the utmost importance in all respects to our credit, to our character, and to the courage with which all burdens will be borne by the people, that we should lose no time in making a begin2,072,000 ning toward paying off the principal of that debt. It does not seem to me wise, sir, that we should begin to accustom ourselves or the creditors of the nation, the people upon whom these obligations rest, to the idea that this debt may be fastened upon us like the debts of England and of France, never to be paid through all time to come.

[blocks in formation]



Saleratus, soda ash, caustic soda, crude soda, bicarbonate of soda, &c........ Sulphate of barytes....

Spindles and castings for locks and machinery..


Stoves in part of cast iron and sheet iron or soapstone.....

Sails, tents, awnings, and bags....

Tin cans...

50,000 125,000 25,000

Umbrellas and parasols.


Vegetable, animal, and fish oil.


Value of bullion used in wares and in watches...



White lead and whiting..


Yeast powders...


13,000 5,000 1,200,000


Yarn and warp.



Slaughtered animals.
Schedule A..

Schedule C (receipts)..
Soap (additional)..
Steam-engines, &c.
Brokers' sales.
Savings banks.

General tax reduced from six to five per cent....



The ordinary expenses of the Government, as they are estimated by the Secretary of the Treasury in his report, laid upon our tables at the opening of the session, are $143,000,000. The interest to be paid during this year is fixed at about the same amount, some two millions less. Both these sums, I think there is reason to suppose, may be somewhat reduced. The expenses of the Army and Navy are not likely to be as high as they were originally estimated; and the amount which will be due for interest will be somewhat reduced by the fact that the Secretary of the Treasury is not likely to fund so much of the debt now bearing no interest as it was originally supposed he would. But these two sums, taking them at his estimates, make the considerable amount of $284,000,000, which will be required to meet the expenses of the Government and the interest on the debt for one year.

I think we ought also to begin at once to make some provision for paying the principal of the national debt. I do not think it would be wise for us to provide less than $50,000,000 4,850,000 per annum for that purpose, the sum to be increased from year to year as our system of taxation may be perfected, and as the industry may gradually adapt itself to the new burdens which are imposed upon it. This would make an aggregate sum of $334,000,000 to be provided 12,000,000 annually toward meeting the expenses of the Government and the interest and installments on the principal of the public debt. This sum will be required annually, without any serious

[blocks in formation]

125,000 $75,684,000

diminution from year to year, until we shall have paid off so much of the principal of the public debt as will allow us to estimate the interest at a sum considerably less. It will of course be growing less and less from year to year. Three hundred and thirty-four million dollars, in round numbers $350,000,000, is a very large sum for a nation to pay annually. It is very large for us, in consideration of the fact that it is so much larger than we have ever before been called upon to pay or have any perfected machinery for raising the means to pay. The aggregate revenues of Great Britain during the last year were but $354,000,000, and those of France but $350,000,000.

A MEMBER. Dollars or pounds?

Mr. RAYMOND. It is reduced to dollars. So that the three great nations of the world are substantially upon the same footing so far as the annual taxation imposed upon their people is concerned.

But we have the advantage of these nations in some respects, although both their population and their aggregate wealth are somewhat in excess of ours. We have a free Government, a Government which allows to every one of its individual members entire and perfect freedom of individual action; and that, sir, is a source of energy, of enterprise, of industrial vigor and elasticity which cannot well be overrated. Nothing more is needed to show the effect of this great principle of freedom upon the industry of a nation than a comparison of the rate at which the wealth of these three nations has increased during successive decades. I have not before me, nor have I in mind, the exact proportion of increase of popalation of Great Britain and France to the increase in their aggregate wealth. Our own has been very great. The increase in our wealth has been in much more rapid ratio than the increase of our population. During ten years, ending in 1860, the increase of our population was but thirty-five per cent., while in the aggregate wealth of the nation, it was one hundred and twenty-eight per cent. This is three times the disproportion which obtains either in England or France.

And more than that, our annual income is greater than theirs-in a much larger proportion. We have sources of wealth, moreover, sources of fresh vigor, sources of industrial productiveness to which none of the old nations of the world can make the least pretense. Immigration for one, and it is the only one I will mention, is itself a source of productive labor which cannot be estimated at less than two or three hundred millions dollars every year.

I refer to this to show that our debt, great as it is, is not beyond our resources; it is not greater than our people can bear. I may add that it is not greater than they will bear cheerfully and readily, because it is a debt incurred by the people themselves, and for the people themselves, for objects and blessings they have in hand to-day, and will have through all time to come.

Now, all we are asked to do-all the people ask us to do in adjusting this great burden, which is to recur year after for many years to come-is that we shall adjust it so the people may bear it easily; that we shall adjust it so that it will not cripple those energies upon which we rely for its payment; that we shall put it where they can bear it best, and not where it will rest heaviest upon them; that we shall put it upon their back and not upon their


year these were $84,000,000. The Secretary of the Treasury estimates them for the coming year at $100,000,000. I confess I cannot see the data upon which estimates so low as either of these sums can be properly based.

Mr. MORRILL. I referred to the estimate for the year ending the 30th of June, 1867. Mr. RAYMOND. So I understood. The estimate of the Secretary of the Treasury is for the same year.

Now, Mr. Chairman, down to the year 1861, for the five years immediately preceding that year and the commencement of the war, the imports averaged about three hundred and fifty million dollars. I am sure they will not be less than that from this time forward. Our imports are always measured by the amount of our exports. Our capacity to buy usually determines the amount we do buy. We are bringing into direct contribution to our commerce a larger extent of country than ever before. A million and a half of men are going from the field into productive pursuits. The South is soon to be open to commerce, and the South will produce largely with proper encouragement and aid at the hands of the Government; and I was glad to hear the chairman of the Committee of Ways and Means refer to this as one of the great reliances of the country for revenue, namely, encouragement of the industry of the South, and aid in developing the resources of that rich and productive region.

Now, sir, with all these sources of production I am sure we can fairly estimate our exports for the next year and for a series of years to come at not less than $400,000,000, and our imports will be at least as large as they were during the five years previous to 1861. What, then, will be the probable revenue from customs? The present average rate of duty I believe is something over forty per cent., probably nearer forty-five than forty. That is not likely to be reduced, and it gives us one hundred and forty millions. Indeed, the further imposition of these domestic excise duties will render it indispensable that we increase the duty on foreign imports in order to keep the balance even between foreign and domestic duties.

But, sir, without going into any intricate or close calculation on this subject, I adduce these facts merely to show that the estimate of the Secretary of the Treasury, $100,000,000, is exceedingly low, and that it is more likely to be one hundred and fifty millions than one hundred, at the rate at which imports are coming in now.

ern part of the State of New York, [Mr. HULBURD,] then chairman of the Committee of Ways and Means in the Assembly of New York, will remember how universal the cry came to us, as it went to Congress also, that taxes should be increased and that the country should pay the expenses of the war as it went along instead of resorting to loans. Naturally enough Congress responded to that demand. It responded at once, and necessarily without much consideration. The laws of industry and of political economy were but little regarded. Congress issued its decree that everybody and everything should be taxed in every way. Upon all the processes as well as the products of industry, upon all work, and upon all tools by which work was to be done, upon all classes and conditions of men taxes were imposed without stint and without precaution. Every branch of trade, every kind of manufacture, raw material and net results-everything that could be made to pay was swept along in the vast dragnet of that first tax bill.

Now, while the people paid these taxes with the greatest alacrity and readiness, we must not fall into the error of supposing that such a system could be endured permanently. As a temporary necessity, they have borne it with a degree of courage and patience that could never have been exhibited by any other people on the face of the earth; and this is not an empty national boast-it is conceded by the highest authorities of England, that in this as in many other things the people of the United States have proved themselves entirely a people by themselves.

The London Economist, perhaps the highest financial authority in England, in speaking of the taxation through which the United States have passed during the last four or five years, says that "no other nation would have endured a system of excise duties so searching, so effective, and so troublesome." And it adds, that "to have imposed such taxes in England would have caused a revolution."

And it is to the eternal honor of the American people that in this, as in everything else connected with the salvation of their country, they have responded nobly to the calls of the Government. But this, as I have said, was from the necessities of the case a temporary provision. It became necessary, and the last Congress foresaw the necessity, to make provision for some permanent arrangement and system of internal duties. The first step which it took was a judicious step. It was to follow the example of that nation which has had more experience of internal taxation than any other, Great Britain. Great Britain always, in de

Estimating the custom duties at $100,000,000 will leave $250,000,000, or a little less, to be raised by domestic taxation. This bill now on our tables, upon which our action is invoked,vising ways of taxation, appoints commissions proposes to provide for this sum each year for the expenses of the Government. Now, it is || idle to conceal from ourselves the fact that this is a grievous burden, and it will always be felt to be a grievous burden by the mass of the people upon whom it rests. No matter how great may be their alacrity, no matter how determined may be their purpose to pay it, no matter how ready they may be to sacrifice all they have in maintaining the honor of the nation, it will still be felt now and always as a serious burden; and the extent of its weight will depend upon the manner in which it is distributed among the different classss and pursuits of the country.

Now, this is entirely a new subject for us. We have had no experience in devising ways and means to distribute duties upon domestic There are two great sources from which we articles, so as to make them rest more or less have to meet these expenses. One is the cus- lightly upon the mass of the people. The task toms, duties imposed on imported goods, and was thrust upon us suddenly. The war came the other is excise duties, or duties imposed upon us suddenly, and with the war came taxes, on goods of our own production. Both of out of which its expenses could alone be met. these must be drawn upon from year to year. When the rebellion came upon us we all know What either will amount to must be the result how eagerly the people demanded that taxaof estimates. The chairman of the Commit- tion should pay the expenses of the war for tee of Ways and Means, in the statement he its suppression. Their determination to rescue has just submitted, estimates the receipts from the Government from the peril that threatened customs at a sum less than that of last year. it prompted them to demand that taxation He looks forward, if I understood him aright, should be resorted to as the means of produto a diminution of the duties on imports. Last | cing that result. My colleague from the north

or committees who take evidence carefully and elaborately; for taxation, even more than the ordinary action of government is an experimental science-purely deductive in its nature. There are no general principles which will instruct any nation as to the specific taxes it may impose. It must inquire into the facts and be governed by them. It must scrutinize each particular branch of industry, its bearings on all others and the bearing of the whole on the welfare and prosperity of the nation; and the system of taxation must be suited to the emergency in each particular case.

Congress authorized at its last session a commission of three gentlemen familiar with the subject from theoretical study and capable of making personal investigations of the facts relating to it. Those gentlemen have been engaged with assiduity, and intelligence, and, I think, with a degree of success far greater than could have been predicted, in investigating the whole of this great and novel subject. They have collected a vast body of evidence, which I am sorry to say has not yet been printed and delivered to Congress for its instruction, but the summaries made from it and published from time to time must have done much to enlighten all those members who wish to understand the subject in its details and the action proper to be taken.

Now, all that I propose to do upon this oc

casion is to recur briefly to two or three general principles which I think should guide us in acting on the tax bill which is now before us. In imposing taxes upon domestic industry there are certain great principles familiar to all readers of political economy which it will not be wise for us wholly to neglect. We are to impose taxes upon a great variety of articles. The present law, as I have said, taxes everything. We seem to be almost in the condition of England when she first began her system of taxation, so amusingly described by Sidney Smith, when every Englishman came into the world by the aid of a doctor who had paid a tax, and that he paid all the way through life, until he was finally buried in a taxed coffin, in a taxed grave, and by an undertaker who had paid a tax; and it was then, and then only, that his taxation ceased.

Now, I do not suppose that we can reach a full and thorough compliance with all the theoretical principles of taxation laid down by the writers on political economy; but we can keep them steadily in view, and we ought always to aim to come up to them as perfectly as possible. In the first place, it is always desirable to impose taxation upon the results of industry rather than upon its processes. The processes of the manufacturer, the tools of the manufacturer should not be taxed, but the results of the manufacture, when they make their appearance, in profits and income, are proper subjects of taxation. When a man is endeavoring by labor to produce certain products he should not be taxed in his efforts, in his labor, but only in the result, the products of that labor.

It is a very commonplace maxim, but a very true one, and one to be borne in mind in all these economical discussions, that labor is the source and the only source of national wealth. Productive industry feeds all the sources of national wealth. It is the fountain from which we draw all the moneys we need for maintaining the Government or for any purpose whatever. If we tax the processes of production we tax the fountain-head, and thus diminish the ability to keep up the supply. It is rather the duty of the Government not to diminish the force of this productive industry, but to stimulate it, to aid it, to increase it.

Suppose a man is engaged in the manufacture of engines or anything of the kind, like our friend from Massachusetts, [Mr. AMES,] who is so largely engaged in the manufacture of axes, shovels, and other agricultural implements, it is not wise to tax the processes of that manufacture, either in respect to the raw material that is used or the tools that are employed or the food of the workmen that are hired. All those things should be as nearly free from taxation as possible; but when the net results, the profits, the income, are produced, they are the legitimate subjects of taxation, and may be levied upon accordingly.

And that, in my judgment, is what is really involved in what is commonly called the freetrade policy of England. England found herself in a condition when her main and essential interest was the manufacture of goods for the markets of the world. She had to compete with other nations in those markets; and she found it absolutely indispensable for the production of those goods at such a rate as to enable her to successfully maintain that competition to relieve her manufacturers from taxation upon everything that entered into the processes

a more subtle form of protection. Instead of taxing and excluding the goods of other nations, inasmuch as they went to the markets the ports of which she could not control, she very wisely reduced the cost of producing her own goods. That is a principle of universal application, one that we should apply just as rapidly as we can; for the same reasons that make it applicable to England make it applicable to us.

When we perfect our system of internal taxation; when we get it to a point where it will conform to the fundamental principles of political economy, the whole of this long list of manufactured articles that now figures on our tax bills will disappear, and we shall have left simply taxation upon the results of industryupon the profits of labor; in other words, so far as the result of manufactures go, we will have taxation upon incomes alone. I consider incomes to be the fairest of all subjects for taxation, and I was a little surprised to hear the chairman of the Committee of Ways and Means [Mr. MORRILL] apologize for continuing the income tax a little longer. It seems to me that income is the first thing, so far as industry and the products of industry are concerned, which should be taxed; for in taxing income you tax that which a man has and nothing else, and that too in exact proportion to the amount of what he has.

If you encourage your people in their labor, in manufactures, in producing wealth, then after they have produced it and have the net proceeds in their pockets, it is quite just and fair and proper for the Government to claim a proper share of those profits to meet its own necessities. But the industry of the nation should be left unfettered; or if fetters have been imposed upon it, it should be allowed to regain its freedom at the earliest possible


Of necessity, there are exceptions to this rule; and cases where it cannot be at once and fully applied. Cotton is undoubtedly one exception. In my judgment, it is proper to impose a tax upon cotton; and I think the rate proposed by the committee is not too high. However, that question will come up for more careful consideration when the bill comes to be examined by sections. I refer to it now, merely to say that although the tax upon cotton may seem to be an exception to the general principle I have laid down, yet the fact that cotton is a monopoly of this country, and must be bought from us by all other manufacturing countries, takes it out of the category.

It is not, for example, like iron. England has iron, and we have iron. We cannot, therefore, tax iron in the raw state, as we may tax cotton. Should we attempt to do so, we should expose ourselves to unfair, unjust, and injurious competition on the part of England. if we tax cotton England must pay the tax also.


But, not to dwell upon this point, the next principle to which I ask attention for a moment is that we should tax, so far as possible, the superfluities and not the necessaries of life. In the application of this principle to income is, I suppose, to be sought and found the justification of the exception of a minimum which is always made. In England, where an income tax has come to be one of the fixed taxes of the country, and will never be repealed, at least while she needs so large a revenue as she now does, I believe the tax is sixpence to the pound, and £100 of income are exempt from taxation. The cost of living in this country is somewhat higher, and especially for the working classes it is very considerably higher. Our present law exempts $600 of income from taxation. The committee recommend that the amount exempted be increased to $1,000, and in this I think they have It is idle to call that policy free trade. As recommended wisely, although it will subtract it is very properly said by the commissioners $3,000,000 from the revenue in the aggregate. of internal revenue in their admirable report An exemption of $1,000 will be but a just exupon this subject, and as it had been remarkedemption. That amount will not maintain a before by some French economists, it is only working man and his family in this country in

of production. She took the duty off raw cotton because she needed raw cotton for the goods she manufactures. She took the duty off corn, for she needed corn to feed her workmen, and by taxing corn she obliged the manufacturers to increase the wages of their workmen to pay the increased cost of their support. And so everything that entered into the working of her looms, her forges, and her machine-shops was relieved from taxation.

any better condition than that in which he ought to live. The Government should not trench upon the necessities of the great mass of its people. The absolute necessities of the people should be spared, should be held sacred from the hand of the tax collector. The people should be allowed to enjoy undiminished so much of their earnings as they need to supply those necessities.

In regard to the income tax, I observe also that the committee recommend a repeal of the extra five per cent. on income over $5,000. Incomes to the amount of $1,000 are to be wholly exempt. The amount of income above $1,000, up to $5,000, is to be taxed at the rate of five per cent. By the present law an additional tax of five per cent. is imposed on all over $5,000. I know that theoretical writers insist that it is unjust and impolitic to impose a graduated income tax; that every man should pay the same percentage on his income, whatever its amount may be. But there is this fact which, it seems to me, ought to be considered: that the second $5,000 of a man's income is generally much more easily earned than the first $5,000, when any business is entered upon that will insure large profits. Certainly a man can better afford to pay a second tax on all over $5,000 than to pay a heavy tax on the first $5,000 of his income. I confess that I do not think it wise, in the present state of the country, to exempt the second $5,000 of a man's income from a second tax. I know that this may fall heavily upon portions of the community, but fortunately they will be those portions of the community which can best afford to bear it, and those portions of the community, I will add, which have thus far borne all taxation with the utmost readiness, and which show no signs of complaint at the taxation to which they are subjected. Even if it should be deemed wise to reduce somewhat the percentage of tax on the second $5,000 of income, I hope the House will not think it wise to release it from extra taxation altogether.

The same principle of taxing superfluities and incomes instead of necessaries applies to the taxation proposed upon commodities, upon beverages, upon articles consumed. I know that it is somewhat difficult, theoretically, to define what are necessaries and what are superfluities. What is a necessity to one man is a superfluity to another, and what is a superfluity to any man at first becomes soon a necessity of life. But at the same time there are certain things which are used merely to gratify artificial tastes; and such things, I think, may very properly be called superfluities of life. And among these all nations recognize distilled spirits, whisky, fermented liquors, tobacco, and to a certain extent, tea and coffee. These, especially distilled spirits, are always made the subjects of heavy taxation.

In England distilled spirits are heavily taxed, and yield a very large portion of the revenue. Four of these articles-sugar, tea, tobacco, and spirits-yield $97,000,000 out of $112,000,000 received from customs in England; and licenses, malt and spirits, yield $92,000,000 out of $97,000,000 received as excise. They are always resorted to, and bear a very large proportion of the burdens of taxation. Our own tax bill aims at the same thing and goes upon the same principle. Under the law now upon your statute-book whisky is taxed two dollars a gallon, and in England it is taxed $2.50. There is no rate upon these articles which can be so high as to be objectionable. On the contrary, the higher the tax the greater the indirect benefit in diminishing consump tion, for all concede that a law which should largely increase the domestic use of spirits as a beverage would not conduce to the welfare and morality of the nation at large.

The only limit, in my judgment, to the amount of duty to be imposed upon whisky is the practical enforcement and collection of the tax. There we encounter a serious difficulty, for if we put the tax so high as to make the profit on illicit distillation very great we shall tempt or force men into that illicit distillation. I sup

pose the cost, the prime cost, of producing whisky is about twenty-five cents a gallon, and when you put a duty of two dollars on that the profit on every gallon a man can sell in evasion of the law becomes immense. If we get the duty so high as to lead men to see that such enormous profits can be made we shall render it certain that this illicit distillation will be largely resorted to. This has been experienced everywhere. There is but one way to prevent it, and that is by the enactment of severe and rigid laws. We must have one of two things: either the tax shall be so low as not to tempt men to go into illicit distillation, or the law must be so severe that they will not do it.

Since the original internal tax law was enacted, we have made various experiments in the tax on whisky. I believe it began at twenty cents a gallon, then rose to sixty, then to $1 50, and then to two dollars. I do not know whether any one of these taxes continued long enough to enable us to arrive at any general inference as to the rate that would yield the largest returns. It is certain that the present tax of two dollars is promoting illicit distillation to a degree which threatens the collection of any revenue whatever on whisky. In one single collection district in the city of New York, where two years ago there was not a single distillery, there are now thirty illicit distillers in cellars and out-of-the-way places, each making whisky, from one to five gallons a day, on which, of course, they pay no duty and make an enormous profit. I understand that in one district of Virginia, in the neighborhood of Richmond, where there were no distilleries two years since, there are now three hundred making whisky in evasion of the law. And in the State of Georgia, where there were but few a short time ago, there are now fifteen hundred.

of two dollars, until or unless the proposed tax of two dollars is better enforced and more rigorously collected.

I have dwelt longer on that point than I intended. Tobacco is another article which demands careful attention, and it is one of the superfluities which can be heavily taxed.

of bone, ivory, or horn, then the brass tube, then the elastic band of rubber, then the silk tassel, then the button and the cap-each of these may come from a different manufactory and is subject to a separate tax; and when they are all brought together and made into an umbrella then they are taxed again.

More than that, the manufacturer of each one of the various items composing the whole avails himself of the fact that the article is taxed to add to the price of that which he sup.

But the next principle I desire to refer to, and I think it will be the last, is this: that taxes should be imposed upon as few articles as possible. A tax is a blow at best. It is a hurt, an injury inflicted upon somebody by theplies, and not only to the amount of the tax, Government. It must fall somewhere, and wherever it falls it will create complaint and produce injury. It is therefore evident that it should fall upon as few as possible. The expense, moreover, of collecting the revenue depends far more on the number of articles taxed than upon the amount of the aggregate collection. Our present tax law imposes duties upon a great variety of employments which scarcely pay the expenses of collection. Take all the small trades, the tailor, the shoemaker, the milliner, the dress-maker, all the small traders of that sort, and you will find that the amount of tax imposed upon them scarcely pays the expense of collection.

In a note to one of the pages of the report of the commissioners of revenue is inserted an extract from the books of one of the tax collectors in the city of New York, from which it appears that there are many milliners, dressmakers, manufacturers of cloaks, &c., whose monthly taxes amount to $1 04, another to $1 20, in another to $1 58, in another to $175, and in another to only forty-two cents, &c. I need not say that this scarcely pays omnibus fare to collect these taxes. All these and all like them should be, it seems to me, dismissed from the tax bill at once.

So I think in regard to all manufactures of articles of indispensable necessity for the great mass of the community. Clothing has been taxed five per cent. during the past year, and the chairman of the committee reports this year a reduction to one per cent. Now, one per cent. will simply vex the producers and yield very little revenue. Clothing is an article of universal use; it is consumed by all classes. But any considerable tax upon it must operate unequally, because the poor man or the man in middle life wears just about as much clothing as the rich man, and has to pay substantially the same amount of tax.

How is this to be remedied? It can only be done by making the law so stringent that it will not be evaded. That is almost impossible in this country. The English Government has succeeded by looking into the detail of every man's business, by having an inspector in every man's distillery. In our country the facilities for evasion are so great that it is impossible to provide these remedies. I do not know what particular remedy the committee has recommended, but I cannot think of any likely to be more effective than a very heavy license tax and a very severe punishment for evading the law. If none are allowed to distill except those who pay a heavy license, all who evade or defy the law may be subjected to severe punishment. Large distilleries are willing to pay a license as large as may be demanded, provided they can be protected against illicit distillation. But how many of these same large distilleries which pay the taxes on their products have been forced to suspend. They cannot pay the tax of two dollars a gallon and carry on their business in competition with illicit distilleries all over the country, which make and sell their whisky and pay no tax whatever. This House has to choose, after deliberation, between these two things: either to reduce the tax on whisky|munication on business matters, and taxes upon so as to destroy this enormous temptation to illicit distillation, or to enact laws so stringent as to prevent the evasion of the law and the entire destruction of those who pay the tax.

I believe the manufacture of whisky is not less than from forty to fifty million gallons a year. Last year it reached the enormous amount of eighty million gallons, as the chairman of the committee has just stated. But forty millions may probably be regarded as the minimum production of the country. At two dollars this would yield $80,000,000, and at one dollar it would yield $40,000,000; but certainly, as the law is now enforced, it is not likely to yield even half of that amount. This matter should demand careful attention, and I trust the House will act upon it with due and sole regard to the interest of the revenue. The commissioners of revenue are of opinion, I believe, that one dollar per gallon will actu ally yield more revenue than the proposed tax

It seems to me, therefore, that we could relieve the great mass of the community from that tax without interfering materially with the revenue. Last year it yielded something like six million dollars. This year it would no doubt yield much more at the same rate. But at one per cent. it will yield but little. And if no one else does so, I shall submit, at the proper time, an amendment to the bill to strike out clothing from the list of taxable articles altogether. So, I think, taxes upon paper, upon type, upon books, and upon newspapers as taxes upon knowledge, and taxes upon advertisements as checking free interchange of com

insurance and savings as tending to discourage prudence and forethought; and all other taxes, of which these are samples, should be swept away as speedily as possible.

The effect of our present system of imposing taxes upon every article that is manufactured, and upon every part of such article, is very important in increasing prices by duplicating taxation. I will not dwell upon this branch of the subject, which you will find discussed clearly and fully in the report of the revenue commissioners to which I have referred.

They cite the instance of an umbrella as an illustration. Formerly an umbrella was made at a single manufactory. Now it is made by putting together the various parts, each made by a different process and each paying a sepa rate tax. The stick of wood is one article, part domestic and part foreign, the foreign article being already taxed. Then the wire comes from another establishment; the handle

but so as to give him a little additional profit. He takes advantage of the tax to increase his profit. It is so in every department of business. You find that the price of everything is raised, and raised beyond the amount of the tax imposed upon it. They manage the matter pretty much as the owners of the city railroad cars did when they were authorized to add to their fare the amount of the tax. The amount of the tax was one fifth of one cent, and they added one cent. And it is so in all departments of business. It is in human nature, and we cannot by any act we can pass here expel human nature from the masses of our people.

Now, apply this rule to all the products of manufacturing industry. Consider that, on all these processes this duplication is going on, and that each man adds something in addition to the tax to his part, and you will see a much more potent reason for the enormous prices that obtain to-day for everything than is to be found in the high price of gold. Why did not the price of everything fall when gold fell from 280 to 130? Simply because the price of gold and the inflation of the currency had comparatively little to do with the exaggerated prices at which all articles were held, not nearly as much as the fact of the duplication of taxes, and the exaggeration of profits which followed upon it.

Now, by abolishing all these taxes on manufactured articles the tendency would be to correct this most serious evil. When England began her system of internal taxation, the list of taxed articles was enormous; everything she had was taxed, and taxed roundly; but gradually, year by year, she has gone on reducing the number of articles on which internal taxes are imposed.

Her internal revenue now amounts to $161,000,000. It is drawn from three great sources: excises, stamp duties, and assessed taxes. The excises amount to $97,000,000, and of that sum more than ninety millions are raised from three articles, and there are but nine articles embraced in her whole list of excise duties. So, too, of her stamp duties. Her assessed taxes amount only to $10,000,000 a year in all, and of these one half are raised from two items-inhabited houses, and carriages. This shows that a reduction of the number of articles taxed is quite consistent with an increased aggregate amount of taxation, provided the distribution is properly made. By nursing the great sources of internal revenue, by imposing taxes only where they can be easily borne, by putting them on superfluities, by not taxing processes, but income, we should obtain the means, gradually, of reducing more and more the number of articles upon our list for taxation.

Now, sir, I do not go into any examination of other items of this bill. These are the main principles which I think it would be well for us to bear in mind.

But, after all, nearly everything will depend upon the administration of the law. There is no department of law in which administration, execution, rigid execution, careful execution, honest execution, is so important as it is in connection with our internal revenue. If it is honest, vigilant, and correct, revenue can easily be collected so as to yield large returns. If it be lax, negligent, and still worse, if it be corrupt, there is no end to the losses which the Government will sustain. With a rigid system of collection, which involves the necessity of employing capable men at remunerative prices,

and having a good, efficient, and energetic staff, without reference to its cost-with such a system the people of this country can bear all the burdens of taxation now imposed upon them, or which any unforeseen emergency may hereafter require.

I hope the House, in discussing this bill, will have due and careful reference to that fact, as well as to the details of the tax itself. With a proper adjustment of this law, to be made from year to year, I am confident that this nation, with its resistless enterprise, its boundless resources, its rapidly increasing population, will meet the emergency for which it is now required to provide with the same degree of honor and success that has attended its conduct of the war which has just been closed.

The first reading of the bill having been dispensed with by unanimous consent, the committee proceeded to reconsider it by sections for amendment.

The first section was read, as follows:

That on and after the 1st day of July, 1866, in lieu of the duties on unmanufactured cotton, as provided in an act to provide internal revenue to support the Government, to pay interest on the public debt, and for other purposes, approved June 30, 1864, as amended by the act of March 3, 1865, there shall be paid by the producer, owner, or holder; upon all cotton produced within the United States, and upon which no tax has been levied, paid, or collected, a tax of five cents per pound, as hereinafter provided; and the weight of such cotton shall be ascertained by deducting four per cent. for tare from the gross weight of each bale or package; and such tax shall be and remain a lien thereon, in the possession of any person whomsoever, from the time when such cotton is produced as aforesaid until the same shall have been paid; and no drawback shall in any case be allowed on raw or unmanufactured cotton of any tax paid thereon when exported in the raw or unmanufactured condition. But no tax shall be imposed upon any cotton imported from other countries, and on which an import duty shall have been paid.

Mr. LYNCH moved to amend the section by adding the following:

Provided, That any producer may procure an exemption of not more than six hundred pounds of cotton in any one year, as follows:


Upon exhibiting the same to the assistant assessor of the district where said producer resides and where the cotton was raised, at the place of production, and making oath that he raised and now owns said cotton, and satisfying the assistant assessor that his sworn statement is true, the assistant assessor shall fitly mark the bale or bales of said cotton with the number of pounds, being not more than six hundred as ascertained by weight then and there, and with the following words: "Cotton produced in thement district in the collection district in -, by -, and owned by him on the day of 18and exempt from taxation;" filling said blanks with the designation of the assessment district and also of the collection district, the name of the State, the name of the producer and owner, and the date when said exemption is so ascertained and marked thereon. The assistant assessor shall give to said producer a certificate of such exemption setting forth the above facts, and also the place of production as near as can be, and the payment of his fee. He shall also make a full record of all such exemptions and transmit a transcript of the same to the assessor. The assistant assessor shall be allowed a fee of two dollars for all his services in each case of exemption, to be paid by the producer. Any person swearing falsely in procuring such exemption; and any person using or attempting to use the exemption certificate or marks provided for in this section with intent to procure exemption for any other cotton than that which was lawfully exempted as such certificate and marks set forth; also, any person selling or giving away, purchasing or receiving such certificate or marks with intent to defraud or to aid in defrauding the revenue shall be liable, upon conviction thereof, to a fine of fifty dollars or to not more than three months' imprisonment. Under the provisions of this section no cotton in its unmanufactured state shall be exempt from taxation for more than ten months after the date of its marks or certificate of exemption. Any person, other than the producer named in the certificate and marks aforesaid, who shall subsequently to such exemption claim property in any cotton so exempted, by virtue of an ownership prior in date to such exemption, shall forfeit all such cotton; and any cotton with reference to which the owner or his agent shall commit any violation of this section shall also be forfeited.

Mr. LYNCH. The object of the amend-. ment I have proposed, as will be seen, is to encourage the smaller producers of cotton. It is following the general spirit of this bill, which exempts all incomes of less than $1,000 a year. It also exempts all manufacturers of less than $600. And the incomes of miners who do not produce $1,000 are exempted from taxation. The amendment I have proposed follows out that same general principle.

There is a great deal of machinery connected with it, for the same reason that there is a great deal of machinery connected with this section levying a tax upon cotton. By referring to the bill it will be seen that sections two, three, four, and five, all long sections, relate to the collection of this tax on cotton. There is necessarily a great deal of machinery connected with this subject, for the reason that the collection of the tax is provided for by a lien upon the cotton produced, instead of, as in the case of manufactures, relying for the payment upon the responsibility of the manufacturer. This amendment is intended simply to encourage the small producers by exempting this small amount; thus following out the general spirit of the bill. I think there should be no objection to it.

Mr. MORRILL. Mr. Chairman, I trust that the amendment proposed by my friend from Maine [Mr. LYNCH] will not be adopted. In the first place, it will open the door through a vast region of country for any quantity of fraud. The owner of a large plantation, for instance, might employ any number of men, each of whom would get the benefit of this exemption.

In addition to this, I think the gentleman from Maine proceeds upon an entirely wrong theory with reference to who pays the tax. On whatever is consumed here in this country we, the consumers, pay the tax, and on whatever goes abroad we expect, of course, to compel foreigners to pay the tax.

The amendment is so voluminous and opens the door to so great a variety of frauds that I think my friend from Maine must on reflection himself see the impropriety of its adoption.

Mr. LYNCH. I desire to call the attention of the gentleman from Vermont, [Mr. MORRILL,] the chairman of the Committee of Ways and Means, to the machinery which the committee have found it necessary to provide, in order to prevent frauds in the collection of this tax upon cotton. While the amendment is somewhat lengthy in its provisions, yet the only point of it is the exemption of six hundred pounds of cotton from taxation. Its lengthy phraseology is designed to secure the Government against frauds in connection with that exemption. If the honorable chairman of the committee will examine the provision of the old law with reference to the exemption of manufacturers to the amount of $600, he will find that that provision is liable to the same objections which he urges against this amendment. The only question is whether the prop osition is so guarded that the Government will not be defrauded. I suppose the gentleman will agree that now when the labor of the South, the cotton-producing portion of the country, is revolutionized, it is desirable that if this tax be imposed on cotton, the small producers there should have some encouragement.

Mr. GARFIELD. I desire to ask the gentleman a question: does he think that, if his amendment should be adopted, it would help in any way the man who raises only six hundred pounds of cotton?

Mr. LYNCH. It would help him certainly to the amount of the drawback which he would receive-five cents per pound. It would help him to the extent of thirty dollars on the six hundred pounds.

Mr. GARFIELD. The whole of this tax would eventually be paid by the consumer, not by the producer. The amendment would multiply greatly the number of those who would be tempted to swear falsely in order to escape the


Mr. LYNCH. I would say in reply to the gentleman that the same objection would apply to the whole bill, for it all depends upon whether the machinery adopted is such as to protect the Government against frauds in the collection of the revenue. The amount proposed to be exempted by the amendment is, it is true, small; but the same might be said with regard to manufacturers to the amount of not more than six hundred dollars. The same may be

said also with regard to the exemption of $1,000 from income tax. The amount of tax exempted would be large to those who would have to pay it. This amendment proceeds upon precisely the same principle which is carried out all through the bill with reference to other products. The gentleman must see that whoever finally pays the tax, the producer must get the benefit of just this five cents per pound on the six hundred pounds.

Mr. MORRILL. I desire to say one word further with reference to this amendment; but before doing so, I will move that the committee now rise, as I wish to submit a motion to close general debate.

The motion was agreed to.

So the committee rose; and the Speaker having resumed the chair, Mr. WASHBURNE, of Illi nois, reported that the Committee of the Whole on the state of the Union, having had under consideration the Union generally, and particularly the bill (H. R. No. 513) to amend an act entitled "An act to provide internal revenue to support the Government, to pay interest on the public debt, and for other purposes," approved June 30, 1864, and acts amendatory thereof, had come to no resolution thereon.

Mr. MORRILL. I move, sir, that when the House shall again resolve itself into the Committee of the Whole on the state of the Union upon the bill No. 513, all general debate upon the bill terminate in one minute, leaving the five-minute debate upon amendments.

Mr. STEVENS. I rise to a point of order. Upon a bill which we are considering in this manner, section by section, is it in order to close debate upon the whole bill? Can the closing of debate extend beyond the pending section?

The SPEAKER. General debate on the bill can be terminated; but that does not interfere with five-minute speeches for and against amendments. The House cannot close debate entirely except upon the pending section.

The motion of Mr. MORRILL was agreed to. Mr. SPALDING. I move that the House adjourn.

The motion was agreed to; and thereupon (at twenty-five minutes past four o'clock, p. m.) the House adjourned.


The following petitions, &c., were presented under the rule and referred to the appropriate committees: By Mr. BANKS: The petition of Nathaniel Swift, Moses Foster, William Chickering, W. S. Slevers, Samuel Merrit, Marcus Morton, and others, for amendment of tax law on savings banks.

By Mr. CONKLING: The petition of citizens of Otsego county, New York, asking passage of laws regulating inter-State insurance.

By Mr. COBB: The memorial of George Cottingham, in relation to his pursuit of the assassins of President Lincoln, dated May 4, 1866.

By Mr. DELANO: The petition of J. B. Fellows & Co., of Mobile, Alabama, praying indemnity for 47,660 pounds of cotton taken at the capture of Mobile by the Government, sold at New York, May 13, 1865, for $14,298 in gold.

Also, the petition of Mrs. Martha A. Booth, widow of Dr. William A. Booth, of Canton, Mississippi, who was a Union man murdered by the enemy, praying indemnity for losses of property by the war.

Also, the petition of Timothy Lyden, of West Virginia, praying compensation as wagoner in the quar termaster's department while he was in captivity and prison by the enemy.

By Mr. ELDRIDGE: The petition of citizens of Dodge county, in the State of Wisconsin, for national insurance law, &c.

By Mr. HULBURD: The petition of H. R. James, and others, citizens of Ogdensburg, New York, asking an increase and an ad valorem duty upon foreign flax imported.

Also, the petition of A. B. James, and others, citizens of St. Lawrence county, New York, on the same subject.

By Mr. LONGYEAR: The petition of A. C. Blodget, and others, citizens of Ypsilanti, Michigan, asking for a bureau of national insurance.

By Mr.ORTH: A petition from James Heaton, and others, praying for legislation on the subject of insurance companies.

By Mr. WASHBURN, of Massachusetts: The petition of Josiah Brown, and 131 others, tobacco-growers in the town of Deerfield, Massachusetts, asking for increased protection against the importation of cigars, Also, the petition of Charles Haywood, and 51 others, tobacco-growers of Gill and Northfield, for the same purpose.

Also, the petition of Lemuel Cooley, and 59 c'hers,

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