Great Debates in American History: Revenue: tariff and taxation - Google Books
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Marion Mills Miller
Current Literature Publishing Company, 1913
CHAPTER VIII
Internal Revenue
On March 3, 1862, Thaddeus Stevens [Pa.], of the Committee of Ways and Means, introduced in the House a bill to provide internal revenue. In its final form this bill established the Bureau of Internal Revenue, under the Treasury Department, with what is essentially the present system for collecting excise from manufacturers of distilled spirits and malt liquors, and from rectifiers of wine and spirits. In addition, annual licenses ranging from $5 to $100 were required from almost every kind of business or profession, the peddler on foot and the juggler being assessed, as well as the banker, lawyer, and doctor. Manufacturers of every kind of commodity, from pins to railroad iron, were taxed at various rates, specific and ad valorem. All sales at auction, whether of real estate, merchandise, or stocks and bonds, were taxed one-tenth of one per cent. Luxuries, such as private carriages, yachts, billiard tables, and plate, were taxed at ad valorem rates. Live stock slaughtered for sale had to be paid for at so much per head, according to the genus. Railroad, steamboat, and ferry companies were assessed three per cent, upon their gross receipts; holders of railroad bonds had the same percent-age deducted from their dividends, as had also investors in banks, trust companies, savings institutions, and insurance companies. Three per cent, was also deducted from the salaries of those in the employ of the Government. The same rate was assessed upon the gross advertising receipts of publishers. The amount exempted by the preceding income tax bill was lowered from $800 to $600, and the rate was increased from three to five per cent, upon incomes exceeding $10,000 per annum. Stamp duties were laid upon legal papers and business instruments, as well as upon medicines, cosmetics, perfumery, and playing cards. Legacies of over $1,000, except from husband to wife, or wife to husband, were taxed at rates varying with the degree of consanguinity.
Internal Revenue
House of Representatives, March 3-July 1, 1862
Justin S. Morrill [Vt.], of the Committee on Ways and Means, supported the bill. After presenting the state of Government finances he said that the bill amply provided for all the great and unusual demands upon the Treasury.
When one of the European governments offered a reward to any person who should discover a new object of taxation, it was bestowed, I believe, upon the discovery of the stamp tax upon paper. That is not by any means our condition. There is but little more than one source, that of imposts, which we have relied upon to any extent for revenue, and that source has not been pushed to its utmost capacity. Driven, however now, like Milton's Adam, from our untaxed garden, to rely upon the sweat of the brow for support, like Adam, we have "all the world before us where to choose." In doing this we have to be just. It would not do to press any single interest with the entire burden that now weighs down upon the treasury. The weight must be distributed equally—not upon each man an equal amount, but a tax proportionate to his ability to pay— equally, yet not one that will be in the exact ratio of population, but in a just proportion to the means and facility of payment. What could be easily sustained in one quarter of the country might sink another in hopeless dishonor and repudiation. A heavy duty upon some articles would banish them from use, while upon others it would merely stimulate greater activity and industry to obtain them. A tax dependent upon the habits or vices of men is the most reliable of all taxes, as it takes centuries to change or eradicate one or the other. No matter what obstacles may be placed in the way of the introduction of opium, the Chinese will brave death itself rather than suffer the deprivation of their favorite stimulant. England taxes spirits enormously, but has her drunkards still. They raise, too, $28,000,000 (or about one dollar for each inhabitant) of revenue from duties on tobacco.
The accustomed objects of State taxation should, in some degree at least, go untouched. The orbit of the United States and the States must be different and not conflicting. Otherwise, we might perplex and jostle, if we did not actually crush, some of the most loyal States of the Union. It has not been possible, so multifarious are the systems of State taxation, and so large our wants, wholly to succeed in carrying out this idea; but it has been attempted in two modes; the first, by the avoidance of any tax or duty on live stock, and by declining to increase the direct tax on real estate—a very moderate one—levied at the last session of Congress; and the second, by a selection of new objects of taxation, and such others as for many reasons can sustain even the double taxation to which they may be for the time subjected.
Some gentlemen, and even some States, have manifested a solicitude that any taxes incident to the present rebellion should be levied in such a way as to allow the several States to assume, assess, and collect them, or, if not to include the assessment, at least to assume and collect after an assessment by the United States. If this were practicable, it might be very desirable. If State officers could be employed, and the increase of Federal patronage avoided by not creating a new corps of office holders, a great point would be gained. We provide in the present bill that the duties, if not paid at the proper time, shall be hereafter collected in the now rebellious States. Authorize the States to assume and collect, and then suppose South Carolina to set about it. How much revenue so farmed should we be likely to obtain? It would be for the interest of all State officials to collude and pay as little as possible. It is not too much to suppose some would improve the opportunity.
This idea is wholly impracticable as may be seen by anyone who looks at the scope of the bill, with its fingers spread out in all directions, ready to clutch something to buoy up the sinking credit of a nation which has hitherto generally sheltered its capital and its labor from all tax gatherers, except through the indirect process of the custom house. It is not enough to know that a debtor has means; he must exhibit the will to pay, otherwise there must be some law to coerce the will. In this emergency we cannot afford to return to the pusillanimity of the old Confederation, and request the States to make their contributions, and shiver in the wind if any should fail to do so, or declare war upon them for delinquency. The Government of the United States—the most parental and benign of all earthly governments—in its hour of need has the right to demand whatever may be the measure of its necessities to sustain the public credit—our honor and existence as one people.
It is indispensable that the Government shall have within its own control—responsive to it at regular and stated periods— the means of meeting all its vast engagements. This can be secured only by its own agents under its own laws. Even where the States are allowed, as they are in the direct tax, fifteen per cent, for assuming and collecting a tax, when all assume it, there is no advantage gained. The effect is to require the tax to be put fifteen per cent, higher than would otherwise be called for; and the general Government can collect 'the amount at a much less expense.
That the bill is perfect the committee are far from supposing. To us at best it is but an experiment, and the wisdom of Congress, now and hereafter, will judge how much of it should be permanently retained and what part must be dropped out. It is no personal or party measure, but one imperiously demanded—sharp as may be the medicine—for the general welfare.
Seeking to avoid all extremes, the committee have thought best to propose duties upon a large number of objects, rather than confine them to a narrow field, and thereby be forced to make them excessive in amount, and for that reason entirely unreliable. If the rates can be hereafter increased in any instance to the benefit of the revenue, and without inflicting any injury upon any quarter of the country, it will soon be ascertained. Meantime is it not wise to set out on a moderate scale —one that will neither shock the sense nor the pockets of the people—rather than attempt to make any one product the victim from which to torture magnificent bounties?
It is to be expected there will be a diversity of opinion con-cerning many features of the bill. If it will produce too much or too little revenue, if it includes objects that should be left free, or omits those which should justly be held to contribute, these are legitimate objects of amendment, as much so as matters of form or detail; but an ample and effective bill—being all for which I personally feel the slightest solicitude—is demanded at our hands by all the motives which can move a lover of his country; and if it were possible for this Congress to desert its responsibilities, and adjourn without passing some equivalent measure, it would deserve to be pickled in history as representative imbeciles. Observers living under other forms of government proclaim that our weak point is incapacity for taxation, and our securities, therefore, have no solidity abroad. Representative democracy is now on trial. Let us see to it that the Republic suffers no shame at our hands.
In starting out with a bill like the present, so important to the vitality of the treasury, which is to touch so many and such various interests, the machinery by which it is to be put into operation, with the least friction and at the least expense, becomes a question of some magnitude. We have, therefore, looked to such examples as we found upon our statutes, and have endeavored to arrange a system by which all descriptions of duties could be assessed and collected through the same officers.
For this purpose we propose a commissioner of internal revenue, under the direction of the Secretary of the Treasury, who is to have the general charge and superintendence of all matters in relation to internal revenue.
(Here the speaker described what is essentially the present system [1913] of the Internal Revenue Bureau.)
The duties proposed by the present bill rest heavily on spirits and malt liquors—being about one hundred per cent, on raw whisky, fifty per cent, on rum, and twenty-five per cent, on ale or beer—but far below the point at which even some prominent distillers thought they might be safely carried, and yet largely above the point indicated by the majority of those engaged in the business. Much the largest quantity of spirits produced in this country is from corn, and many persons engaged in the business apprehend that we shall cut them up by the roots with a duty so high as even fifteen cents per gallon, and that great injury will result to farming interests thereby. The committee were satisfied these fears are not well founded.
So long as consumption keeps equal pace with production—as in the case of all manufactures—the consumer must pay the increased cost price. And consumption will not be seriously checked by this bill.
The amount which will accrue on licenses under the present bill, embracing merchants, traders, bankers, brokers, auctioneers, distillers, brewers, peddlers, manufacturers, theaters, hotels and taverns, and other classes, will be very considerable. Licenses, though heretofore not generally adopted in this country, may be regarded among the least objectionable modes of taxation. They are a shield against unauthorized and irregular competition, and, there being no interference with the private details of business, the duty will be paid with very little dissatisfaction.
The duty proposed on unmanufactured tobacco is three cents per pound, and on manufactured tobacco and snuff an additional duty of five cents per pound. On cigars the rates are in proportion to value.
Everything used for illuminating purposes deserves to be considered with some reference to their power of competition. To be entirely impartial toward all parties, we have proposed a duty on candles, lard oil, gas, and petroleum.
The duty of three per cent, ad valorem proposed on all manufactures, except those specifically provided for, some at heavier rates, will not come out of the manufacturer—though a depression or glut of the market will make him suffer loss as it always does—but will increase the cost to that extent to the consumer, as much so as if added to the cost of labor or the raw material. It was not thought best to propose duties on raw materials generally, but to wait until all the cost, in the finished state at the time of sale, was added to the production, and thus assess the duty on the largest values. From this source much the largest item of revenue will be derived—in all, specific included, not less than $50,000,000.
If manufactures in the history of our Government have been fostered, they are now the strongest pillars of our support. A burden that would paralyze the agriculturists of the country will be taken onto the backs of the steam giants with alacrity and confidence. But it will be indispensable for us to revise the tariff on foreign imports, so far as it may be seriously disturbed by any internal duties—on some things the tax proposed is more than the present tariff—and to make proper reparation, otherwise we shall have destroyed the goose that lays the golden eggs. From such a revision, including some ar-tides that hitherto it has not been considered sound policy to take from the free list and lower schedules of the tariff, it is expected also to increase the revenue several millions of dollars. If we bleed manufactures we must see to it that the proper tonic is administered at the same time. There are many articles, however, where the tariff is now high enough for revenue or protection, which will require no advance.
A tax upon railroads is easily levied and easily collected; but to adjust an equitable tax upon all railroads has been one of the difficult problems the committee have attempted to solve. If we took the basis of cost it was apparent that the nominal cost—including long interest accounts while in course of construction—would, in many instances, be beyond the present value. The market value could be no criterion, as many are not sufficiently known to have any fixed value, and of the whole five hundred and forty-one railroads in the country few are without a moiety or a prominent share of their cost represented in bonds or floating debt. If we were to take the gross receipts as a basis of taxation, many of the roads would be taxed for freights which they now transport over long distances—having competing lines, here and in Canada, by land and water— for little more than the bare cost. In these times of commercial depression it is an object to leave the transit of produce and merchandise as much unfettered as possible.
The subject has been disposed of by proposing a duty of three per cent, on the season or commutation tickets, and on the coupons or interest paid on bonds, and by a duty of two mills on passengers (other than season-ticket passengers) for each mile traveled. This, in some sort, apportions the tax between the owners of the road, whether foreign or domestic, and whether represented in the form of stock or debt.
Obviously the system had to be modified and extended to steamboats and other vessels, in order to deal justly by the roads and obtain justice for the Government.
Stamp duties upon telegraphic dispatches and express packages will not be likely to encounter opposition, especially the latter, as it is a class of business rewarded by unusual profits; nor will the duty on patent medicines, from which so many not inconsiderable fortunes have been accumulated, be regarded with disfavor.
The speaker concluded with an estimate that the internal revenue resulting from the measure would amount to $101,925,000.
The income duty is one, perhaps, of the least defensible that, on the whole, the Committee of Ways and Means concluded to retain or report. The objection to it is that nearly all persons will have been already once taxed upon the sources from which their income has been derived. The income tax is an inquisitorial one at best; but, upon looking at the considerable class of State officers, and the many thousands who are employed on a fixed salary, most of whom would not contribute a penny unless called upon through this tax, it has been thought best not wholly to abandon it. Ought not men, too, with large incomes to pay more in proportion to what they have than those with limited means, who live by the work of their own hands or that of their families ?
The duty on advertisements was thought advisable on the ground that, more than any other tax, it would be likely to fall, where it should fall, upon the person for whose benefit the advertisement is published. Experience has abundantly proven that the bold, ungrudging, and even lavish advertiser is always largely repaid for all costs of advertising, and these are not the men to skulk from a picayune tax.
There is no duty proposed on the circulation of any literary, scientific, or news publication whatever. Printing paper, like any other manufactures, it is proposed to assess, but only to the extent of three mills per pound, which is equal to three per cent, ad valorem. It is to be assessed as a paper manufacture, but at less than half the percentage proposed on writing paper. Can it be asked that it should be exempt ?
Mr. Chairman, whatever we do ought to be done speedily, as every day's delay is a resulting loss to the Government
On March 13 George H. Pendleton [0.] opposed that provision of the bill which placed the collection of the revenue in the hands of the Federal Government.
If a scheme can be devised by which the State, rather than the Federal Government, shall take upon itself the duty of collecting this tax, I hope that it will be done. I think that it will accomplish a great good, and that we will avoid by it a great error. However much gentlemen may desire to try the patriotism of the people by their willingness to pay taxes; however much they may desire, and their constituents may desire, to express their patriotism in that way, let me tell you that when this vast system goes into operation, and these tax gatherers are abroad in the land, there will go up a voice in the country that will make this legislature tremble. Remember that never has the tax gatherer, in the history of this country, gone about under the Federal authority. Remember that never have the people been called upon to pay into the treasury these taxes. I know that, during the war of 1812, there were some instances in which land taxes were raised. But a tax bill like this which goes into every house, into every business, every neighborhood, which taxes everything a man eats and all that he wears, which enters into the consideration of every man engaged in every business of the country, which puts a tax upon every conceivable subject of taxation; such a tax bill has never before appeared in this country.
On March 15 Thaddeus Stevens [Pa.] replied to Mr. Pendleton.
The gentleman from Ohio [Mr. Pendleton] informs us in somewhat of a minatory manner of the tremendous clamor that his bill will raise. He told us that a voice is to come up here which will shake this hall, and make even the firmest of us tremble in our boots. [Laughter.]
It is not, however, the tax gatherer the people hate so much as the taxes. And, if you have no provision in the bill by which the payment of these taxes can be coerced, they will never be paid. The Representatives here will act to represent their constituents, who will turn the friends of this Administration out of power and who will, of course, desire that no taxes may be collected. Some system will then be adopted more consonant to the feelings of the people, and more in accordance with the wishes of demagogues, than that which we are devising for the purpose of enforcing this tax. We intend to lay this tax, and to take the chances of that tremendous voice which is to hurl us from power. What we desire is a tax that will last during this war, and which cannot be disturbed by mere resolutions of one branch of this legislature.
It is objected that the tax cannot be collected in the seceded States. Take Virginia, for instance.
When the Constitution is restored there, I have no doubt that under this bill we can district the State, and find loyal men enough to assess and collect this tax. If we do not collect it to-day, we will next year; and, if not next year, we will the year after; and we will pile up on Virginia her full burden of the taxes which she has brought upon us. It will be a lien upon her real estate, and we can collect it.
How can we do that, if we allow those who have caused this trouble to make the assessment? Even if there were no rebellion, how could you equalize your taxes ? If every State is allowed to assess its own taxes, Pennsylvania might say, let us assess them so as to shirk our fair share, and throw it upon New York.
And, if so, where is the equalizing power? But if you keep this machinery within the power of the United States Government, and they find that anything of this sort is going on, the Government can at once discard their unfaithful agents, and see that the matter is properly adjusted.
On May 80, 1862, James A. McDougall [Cal.] delivered a speech in the Senate criticizing the unscientific nature of the bill. He declared that proper thought had not been given to its framing.
Mr. President, this bill is without system, without policy, without form, without organization; a bill that, if passed into a law, it will take a hundred years for our courts to interpret, and then they will only make it law by construction.
Early in the present session, a committee of three gentlemen from the Boston Board of Trade, gentlemen of large experience in matters of finance, came to this city to advise with the Senate Committee on Finance upon this subject. These gentlemen propose to tax trade—the very business in which they are most engaged. They say that the business of trade, the business of making the exchanges of the country, can most conveniently, economically, and justly furnish the revenue required by the Government.
It is not wealth and capital that pay taxes; it is production that pays taxes. Otherwise, if it were not production, and it depended on capital or accumulations, a country would become weaker year by year, and the result would be national impoverishment and bankruptcy. England did not pay out of her capital or her wealth the great burdens of her French and American wars. She paid them out of her energies, her enterprise, her industry, what she every year produced, or by her enterprise brought from foreign lands through the agency of her commerce spread upon every sea.
I will now proceed to state my particular objections to the measure brought forward from the committee; and the first objection I make to it is that it involves an army of officers. And what skill and knowledge in the various specialties of trade will be required to determine the quantity and quality of these various articles?
Again, I object to this measure from the complexity of the system. It has a different law for every subject of taxation.
I object to this whole system of licenses. When the Constitution was formed, the question of internal taxes was considered, among other things and, although it was conceded that there was concurrent jurisdiction in the States and the Federal Government to levy internal taxes in such form as either might choose, yet possible collision between the several authorities was regarded as a grave and not to be overlooked difficulty; and therefore Mr. Hamilton himself suggested that both the Federal and State governments, in looking to subjects of taxation, should avoid the same subjects of taxation. And there is hardly a subject of license in this bill that is not made the subject of State license.
All license systems are more or less unjust. There is the auctioneer who sells twenty-five dollars' worth a day, and the auctioneer who sells $25,000 a day, both taxed alike. There is the young fellow going to the bar who has not earned his first fee, and there is my friend from Illinois [Orville H. Browning], who accumulates his thousands per annum. This whole system of licenses is wrong. It is a system that restrains young energy, that breaks down the power of the young man full of heart, without money in his pocket. It is a system altogether unworthy of the Federal Government.
Again: I object to the tax on manufactures. I object to the tax particularly as inconveniently, unequally, and unjustly applied, and as being, as was proved by the Senator from Rhode Island [James F. Simmons], a particular burden on the laboring poor. And, again, this tax is a demand for money before money is realized. It is asking for that which the parties taxed may not have, whereas in a tax on sales the price is considered in the purchase and the money is in the hands of the vendor.
Again: the bill imposes a tax upon the salaries of all persons in the service of the Government. That is considered a happy subject of legislation. Why should men in public employment be specially taxed f It has been my impression, it is the result of all my experience, that men in office who are fit for office are, as a general rule, inadequately paid. Who is there here in the Senate who does not make a sacrifice of his personal revenue in undertaking to discharge the duties of his office f I hold a tax upon the salaries of officers in the employment of the Government to be the rankest demagogism.
Again: I object to the tax on advertisements. Why make them a subject of taxation? A person wants to inquire for information; he is a seeker after knowledge of some particular thing; he wants to know something, and you make it a subject of taxation; and in that way tax the press, the vehicle of communication, and by taxing the press tax the person who inquires.
And now, Mr. President, I desire to enter my special protest against all those subjects of taxation which create a charge upon individual, intellectual, and commercial contact, upon moral, intellectual, and material intercommunication. Such taxation is against every rule of public policy.
It has been considered wise policy to promote the construction of railroads, canals, and telegraphs, to construct piers and lighthouses and harbors in the aid of foreign intercourse and trade.
If it is true policy to advance these interests and enterprises, there can be no good cause to disturb or impair them by impositions and charges.
You propose to tax them three per cent, on gross receipts; and what does it amount to? It amounts to at least eight per cent, on the profits of good roads, and probably takes the entire profits of inferior roads, for some of them hardly pay at all.
This brings me to the subject of coal. You say you want to reach everything. I insist that this is the great error of the bill and not any argument in its defence; we should not attempt to reach everything. Coal is the motive power that drives all our machinery, and that is enabling one man to do the work of a hundred—one of the things that when a nation finds anywhere about hidden in her earth she feels rich because of it, and promotes its development. Every development of that kind is something to be promoted, because it is a facility to the aggregation of our national wealth.
Again: I object to this universal system of stamps. Here are several pages of stamp duties. Everything is to be stamped, from the pill box to the locomotive. The child is not to be allowed to take its medicine until it is stamped. Stamps must be everywhere, presenting themselves to every eye at every moment. These things may seem expedient or necessary. I cannot think so. The idea is absurd, impracticable.
Again, Mr. President, I object to this tax on insurances. Insurance is a tax paid by the insured for protection against loss, and this is a tax upon a tax. If those who engage in in-rarance pay a tax upon the income they derive from their investments, this surely should be satisfactory.
Mr. President, it is vain to attempt to enumerate the multitude of objections which may, as I think, be justly raised to this bill. I will content myself with reaffirming that it is an unintelligible, as well as impracticable, measure, one which, I trust, will not be forced upon the country, particularly at this time of general privation and suffering.
The speaker here presented a substitute measure, based on the views of the board of trade previously mentioned. First, this imposed a tax on sales.
These men of commerce say—and they should be authority— that a tax on sales is the simplest, safest, and most just tax. The sale involves a money transaction. A man who sells receives the price, or what he regards as its equivalent. Having received the price, he is prepared to pay. One of the great objections to the bill reported from the committee is that it demands from people what they have not got. When you charge a tax on sales, you always charge it on what a man has received, on what he has in his pocket, which he is bound to account for to the Government.
I propose a tax on fixed incomes. I differ with the Senator from Rhode Island [Mr. Simmons] on that subject. How can you tax the income of a lawyer who keeps no books f It is not the habit of lawyers to keep an exact account either of their expenditures or incomes. They spend all the money they get generally. It is their own, unless it happens to be their clients', and then they pay it over. How are you going to get at the income of a merchant—a man whose life is engaged in venture, whose every enterprise is a risk of fortune, and who, if at the end of a lifetime of friendly and adverse fortune, is able to go quietly to his home among his people, and sit down and rest for the evening of his days, is a fortunate man! How are you going to get at his income ?
Senator Simmons.—If the Senator will look at the provisions of the income tax, passed last August, he will find that that provides that a man shall render an account of his oncome for the year preceding the 1st of January of each year. His year's business ends at the 1st of January, and his income tax will be payable in six months afterward. I do not believe there is a man of business in the country who does not know his income.
Senator McDougall.—How is it with the men who venture in commerce, where the article they purchase at fifty dollars a ton to-day, and in which they invest $50,000, may be thirty dollars to-morrow or eighty dollars? How about those men who may be ruined or made prosperous by the accident of a day, news from Europe or from the East, war, or some treaty of peace, if you please ? How about those ?
Senator Simmons.—We do not tax a man's property. We tax his income. If last year he made a great income on his ships we ought to tax it. If these ships are not worth half as much this year, not paying half as much freight, then we only tax him half as much on his income.
Senator McDougall.—If I have any idea of commerce and its business, a man, say the master of $100,000, goes into trade; his trade runs prosperously along through a series of years, where he expects that he has means enough on hand to carry on an advancing and progressive business, but where in one day a single calamity like that which came in 1836, or came at the commencement of the present year, may destroy the most prosperous fortune: who has an income then?
I propose to tax income, but not the income of the merchant whose capital is invested in commerce, for the merchant is as much of a producer as the man who tills the soil. He who conducts it from hand to hand, who labors in that vocation, is increasing its value and producing wealth to the country. I do not tax the man who builds up machinery, workshops, and factories, whose capital is employed to support labor, for capital and labor are the two great elements of strength that enable us to pay taxes; that is active employed capital and labor. I do not tax employed capital or labor, but fixed capital, such as a man derives from rents, which comes to him as a matter of course. I tax the man who collects his interest on State and corporate securities, but not mortgages. If you tax mortgage interest, the borrower has to pay it; but bonded interests of railroad companies, of all organized companies, of cities, towns, and States of the United States, and of foreign countries, all fixed revenue where the party deriving the revenue has no relation either to active capital or to labor—they are all legitimate subjects of taxation, and have been so held by the best economists.
Then, again, I propose to tax inheritances. I am trying to avoid asking a man to give what he has not got. Inheritances are things that no one has been possessed of until they pass through administration. We have no particular or fixed right in any other person's estate, no matter how near of kin he may be; certainly none in the estate of a stranger. England has adopted a policy by which she imposes as high a tax as ten pounds per cent, where a legacy is given to a person who is foreign to the blood of the testator. We can derive as large a revenue as England from this source, and from what no other person has got any special or particular right to. It is true, we generally feel that a child has a right to inherit from a parent; but suppose there should be taken out of that a tax of one per cent, for the administration of the laws for the benefit of the child, that would be no burden. I propose an ascending scale as high as eight per cent, to persons who are alien to the blood of the testator. That is less than the English rule. Those who pay it, never having had it, never feel the loss of it. Those are taxes that can be most conveniently collected. Estates pass here more readily than they do in England, and it would be a large source of revenue.
Under these various sources of revenue, as I have stated, and putting the income of the tariff at only $50,000,000—and I try to make small figures—I make a revenue of $203,000,000, and it does not ask a person for anything he has not got, and does not employ a large number of officers.
Expenditure is immediately related to production. Production is the subject of taxation. We must every year make the subject-matter out of which taxes are taken, or else there is a loss to the national capital. Expenditure and taxation being equivalent to production, there is no loss. If production is greater than taxation and expenditure, there is a national gain. England has gained through all her wars by the strength and will and energy of her people. Our energy is being expressed now with greater force than in any previous time. We will produce every year more than the equivalent of our expenditure and our revenue.
I think we are a new people with new conditions, and when the men of commerce, the first men of our commercial cities, say commerce can best stand this tax, they should be recognized as the highest authority; and I shall maintain them as authority so far as my conduct is concerned in voting upon this measure.
The bill was passed by Congress, and approved by President Abraham Lincoln on July 1.
On March 29, 1882, William D. Kelley [Pa.], chairman of the Committee on Ways and Means, introduced in the House a bill to reduce the internal revenue. It provided for a repeal of the stamp tax on checks, etc., of the tax on banks, private and national; and of the tax on matches, perfumery, medicinal preparations, etc., and revised the entire system of taxes on tobacco, spirits, etc.
The bill came up for discussion on June 21. The Democrats particularly opposed the abolition of taxes on banks as favoring the rich, in view of the retention of the tariff on articles consumed by the people in general.
Reduction of Internal Revenue
House of Representatives, June 21-27, 1882
Philip B. Thompson [Ky.].—Why should these taxes be taken off! Is the capital of this country to pay no taxes? We have already taken off the income tax. Are all the tax laws of this country to be framed so as to grind the face of the poor and lay heavier weights upon the backs of the laborers of this country, leaving the capitalist, the national banks, the great railroad corporations, and other monopolies, to pay no part of our taxation and contribute nothing toward the support of the Government, who feel no interest in it save the privileges and franchises which they derive from it and by which they add to their increasing wealth, already grown fabulous?
Is a Republican Congress in one way and another, upon the demand of capitalists, to take all the taxes off banking capital, national as well as State, to remit to them nearly $13,000,000 of revenue now going into the public treasury, while at the same time by its legislation it undertakes to relay upon knit woolen stockings and other goods of that kind a tax of 85 per cent., which was taken off a few days ago by decision of the Supreme Court? It is claimed that by some mistake or oversight in the codification of the statutes it was reduced to 35 per cent. It is now proposed to "rectify" this mistake in order to reimpose this tax upon the laboring classes. Are you to leave upon everything that the laboring people use the immense taxes now paid? Are steel rails, over which are transported the products of Western farmers to the seaboard for shipment to foreign countries and to the markets of the world, to pay a tax of $28 a ton—105 per cent.—while at the same time you remove taxes which are paid by the banker and other capitalists? When did these classes become the peculiar pets of this Government, that they are to have exclusive privileges and all their taxes relieved, and no other class of society is to have any relief! This bill is shaped and framed in their interest only. Other things are put into it merely as a blind—as a makeshift to carry it through. The abolition of the match tax is inserted merely to delude the minds of the people so that it may be pretended you have given them some relief? It is the Judas-like kiss with which they are to be betrayed and deceived—beguiled into the belief that the Republican party is adopting measures for their benefit, while in fact you relieve only the capitalist and increase the burdens laid upon labor.
Mr. Chairman, why should the tax upon bank checks be removed ? What tax paid by the people of this country is more easily paid, or what tax is paid by people who are more able to pay it? Since the days of Adam Smith every enlightened government has adopted the principle laid down first by him and followed by every writer on political economy, that taxation should be imposed upon the luxuries of life, that taxes should be made as nearly voluntary in their payment as possible, and where not voluntary should be laid upon that class of society which has the greatest ability to pay them, and should be collected in such a way and at such times as to be least felt. Who has a greater ability to pay than the men who pay the two and a quarter million of dollars collected through the stamp tax upon checks? How many people pay this tax? You will find that the individual depositors in the national and State banks and the savings banks number about 8,000,000 of people.
Eight millions of men subscribe annually a little over two and a quarter million of dollars to support the Government. Each one of those men, according to the statistics, has $350 in the bank to his credit. It is a well-known fact the banks pay more than one-half of this tax. That is where the shoe pinches, and that is why the relief is demanded. It is not in the interest of the depositor, but in the interest of the banker, who sees his profits cut down every year to the amount of a million and a quarter of dollars, which is taken out of his pocket and given away or distributed among his depositors.
Alexander H. Stephens [Ga.] spoke on June 23. He desired to wipe out all internal taxes and rely for national revenue alone on the tariff.
I think we ought to abolish the internal-revenue system of taxation entirely. I would extirpate it root and branch. Allow me to say to both sides of the House that except in time of war these internal-revenue taxes, excise and stamp duties are in my judgment in principle anti-republican, anti-democratic, and anti-American. They are in opposition to the general principles or policy of this Government as taught by the fathers of the Republic.
The best way to raise revenue is by duties on imports. They bear less heavily on the taxpayers, and as legislators that is what we should look to. In levying duties on imports you can at the same time make foreign producers pay for the use of your markets, and in that way incidentally and properly give aid and protection to American industry. It is not true, as a general proposition, that the consumer pays all the duty imposed upon commodities brought from other countries. This is a question that I cannot now argue. In most instances where the duties are judiciously laid they are borne partly by the importer and partly by the consumer.
To allow Congress thus to raise revenue by duties upon imports was one of the main objects in establishing the Federal Constitution of 1787. This system of internal-revenue taxation by excise and stamp duties was not favored by the fathers of the Republic in times of peace. I speak plainly, and say that it was looked upon then as not only of British origin, but there was always the odium of British Toryism attached to it in the American mind. There was never any legislation more abhorrent to the people of this country, even in their colonial condition, than what was known as the infamous stamp act.
In time of war, when foreign trade is interrupted, this country has been compelled to resort to this method of raising revenue. It was thus resorted to in the Revolutionary War by the States. In the war of 1812, after the adoption of the present Constitution, it was again resorted to of necessity. But it was not adhered to one moment longer than the necessity existed. The system was adopted in the administration of the elder Adams, when war was expected with France; but nothing tended more to excite popular opposition to his administration than this system of taxation, except the alien and sedition acts. One of the first acts of Mr. Jefferson's administration was to wipe them from the statute book. The present system was adopted during the late lamentable war between the States. We do not now require its continuance.
On June 24 George M. Robeson [N. J.] supported abolition of the bank taxes.
Mr. Chairman, we hear a great deal from the other side to the effect that all taxes upon the business of the country are paid by the consumer. As a general proposition it is true; but one other thing is also true: all taxes on the business of a bank are paid by the borrower. The consumer of an article meets the manufacturer and vendor upon equal terms; he comes offering his money for the article he needs. The borrower comes asking favors of the man or institution who is to lend him money, and he is obliged to assume the expense imposed by the Government on the money he borrows. All the expenses that you put upon the machinery of banking, therefore, come out of the debtor and borrower class; they are direct taxes upon the business of the country, and upon the resources and credit of the men who carry on the business and employ the labor of the country.
Roger Q. Mills [Tex.] declared that the purpose of the bill was to prevent the payment of the public debt and so fasten the national banking system on the country, and to serve as a plausible excuse for continuing high tariffs.
Mr. Chairman, is it not a little singular that this thing was born in Philadelphia, Pennsylvania? Is it not a little strange that the first gun in favor of the repeal of internal taxes came from the gentleman from Pennsylvania on that side [Mr. Kelley], and from the gentleman from Pennsylvania [Samuel J. Randall] on this side of the House; the speech of one gentleman being delivered in the tariff convention of New York City, and the speech of the other delivered to the national bankers and the tariff men of New York City?
Mr. Randall.—My speech was delivered before a Democratic meeting-
Mr. Mills.—I know what sort of Democrats they were.
Mr. Randall.—And a meeting that gave response by applause.
Mr. Mills.—Yes; and it was a meeting of national bankers and high-tariff men; heretics in the Democratic party, and who have always been regarded as heretics from its very foundation.
Why is it that this thing comes from Pennsylvania? The great cry for reform in taxation comes from Pennsylvania, and the protectionists at that. You do not hear anybody in Texas or in Missouri or in Iowa or through the Western country demanding the repeal of the taxation on banks. You do not hear any great complaint from the people about the money that comes into the treasury being superabundant and about there being no necessity for it.
What man of common sense ever would think of giving away his revenues when he had his debts, bearing interest, due, and demanding payment! But the Congress of the United States is being boldly and insolently asked to-day to throw away the treasures of the people of the United States for the sole purpose of gratifying the godless greed of these monopolists; nothing else in the world. Who is to be benefited by giving away these $17,000,000 that are now reecived from the coffers of the banks ? How many of your people in the West and South will be benefited by that!
The bill passed the House on June 27 by a vote of 128 to 80. It was debated at great length in the Senate, but did not come to a vote during this session.
During the next session of Congress (December, 1882-March, 1883) the bill was again extensively discussed in the Senate. It was finally passed with amendments on February 20, 1883. The House refusing to accept the amendments, a conference was held. The report of this was adopted by both chambers on March 2. President Arthur approved the bill on March 3,1883.
