40TH CONGRESS, HOUSE OF REPREESENTATIVES. Ex. Doc. 2d Session. No. 81. REPORT OF THE SPECIAL COMMISSIONER OF THE REVENUE. L E TTE R FROM THE SECRETARY OF THE TREASURY, TRANSMITTING Report of the Special Commissioner oJ the Revenue. JANUARY 7, 1868.-Referred to the Committee of Ways and Means and ordered to be printed. TREASURY DEPARTMENT, January 7, 1868. DEAR SIR: Herewith I hand you a " Report of the Special Commissioner of the Revenue," which I will thank you to present to the House. Very truly, your obedient servant, H. McCULLOCH, Secretary of the Treasury. Hon. SCHUYLER COLFAX, Speaker House of Representatives. REPORT OF THE SPECIAL COMMISSIONER OF THIE REVENUE. TREASURY DEPARTMENT,. OFFICE OF SPECIAL COMMISSIONER OF THE REVENUE, Washington, D. C., January/, 1868. SIR: As Special Commissioner of the Revenue of the United States, I have the honor to submit to you my second annual official report, and would request that the same, if approved, may be presented to Congress for consideration. The law establishing the office of Special' Commissioner of the Revenue requires that he shall investigate the sources of national revenue, the best methods of collecting revenue, the administration of existing revenue laws, and the relations of foreign trade to domestic industry; and in the discharge of these duties, the Commissioner has been actively and uninterruptedly engaged since the adjournment of the XXXIXth Congress; a portion of the time having been devoted, under the directions of the Secretary of the Treasury, to a personal examination of the revenue systems and industrial conditions existing in Great Britain and some of the leading states of continental Europe. In presenting a report based, to a greater or less extent, upon the investigations referred to, it is proposed to ask attention, in the first instance, to the H. Ex. Doc. 81 -1. 2 REPORT OF THE SPECIAL COMMISSIONER present condition of the national finances, so far as the debt and annual obligations for expenditures are concerned; and, secondly, to discuss the conditions, under which the revenue necessgry to meet such expenditures may be raised by taxation with the least detriment to the productive power and well-being of the whole country. If a discussion of the topics included under the first head should seem to trespass somewhat upon the province of the Secretary of' the Treasury, and to. involve a repetition of what the monthly and yearly statements of the department have already made sufficiently clear, an apology must be found in the fact, that.the necessity for national revenue grows out of the existence of the national debt and the requirements for national expenditure; and that a determination of the conditions, amount and prospective management of the latter must pre — cede any intelligent attempt to establish either limits or a fixed policy concerning the former. Sufficient time has also elapsed, since the close of the war, to furnish some data of financial experience which may be used- to advantage in estimating the future. PERIOD OF MAXIMUM DEBT. The amount of the national debt on the 31st of August, 1865, the period of its maximum, less cash in the treasury, was 82,757,689,571 43, involving an annual obligation for interest of $138,031,628 24. The debt in general at this period might be classified as follows: Of long obligations (5-20 bonds, 6s of 1881, 10-40s, &c.) $1,084,222,600; of short-time paper, (temporary loan, certificates of indebtedness, compound interest notes, treasury notes, United States notes, fractional currency, bonds of 1847 and 1848,) $1,673,466,971 43, of which $373,398,256 38 was currency oper.*' The exact classification of all these forms of indebtedness was as follows: Bonds, 10-40s, 5 per cent., due in 1904.............. $172, 770,100 00 Bonds, 5 per cent., due in 1871-'74................. 27, 022, 000 00 Bonds, 5-20s, 6 per cent., due in 1882-'84.. 606, 569, 500 00 Bonds, 6 per cent., due in 1867-...... 9,415,250 00 Bonds, 6 per cent., due in 1868. 8,908. 341 80 Bonds, 6 per cent., due in 1880...... 18, 415, 000 00 Bonds, 6 per cent., due in 1881. 265,210, 000 00 - $1, 108, 310,191 8) DEBT BEARING INTEREST IN LAWFUL MONEY. Bonds, Central Pacific Railroad Company, 6 per cent., due in l895.................................... $1,258,000 00 Compound interest notes, due in 1866-'67............ 217, 024, 160 00 7.30 treasurynotes, due in 1867-'68.... - 830, 000, 000 00 Certificates of indebtedness, 6 per cent., due in 1866-. 85, 093, 000 00 Temporary loan, 10 days' notice, 6 per cent-.. — —.. 71,101,187 53 Temporary loan, 10 days' notice, 5 per cent....35, 429, 397 65 Temporary loan, 10 days' notice, 4 per cent. 618,127 98 One and two-years notes, 5 per cent.. 33, 954,230 00 1, 274,478, 103 16 DEBT ON WHICII INTEREST HAD CEASED. Bonds (Texas indemnity, &c.) $1,047,808 45 Three-years notes, 1861........... 334,450 00 Treasury notes-.................................... 119,561 64 Temporary coin loan................ 1,200 00 1,503,020 09 DEBT BEARING NO INTEREST. United States notes.......................$. 433, 160, 569 00 Fractional currency............................... 26, 344,742 51 OF THlE REVENUE 3 Without attempting to enter into any discussion of, or even to question, in this connection, the policy which left the treasury at the close of the war with so large an amount of early maturing indebtedness, it seems obvious, on reviewing the financial condition of the government as here presented, that'but one line of policy was open for adoption; which was to convert, as rapidly as possible, so much of the temporary debt as could not be then paid, into such a form as to prevent its existence from continually threatening, or ultimately proving a source of serious embarrassment to the treasury. The nation, in fact, was in the condition of an individual who, with abundance of assets, was threatened with loss and possible bankruptcy through inability to seasonably realize upon them. The course thus indicated, and which is popularly known as the " funding process," was adopted, and has up to the present time been steadfastly pursued; a policy the wisdom of which, time, it is believed, will most fully justify. Whether the adoption of any other 4ine of policy, for the lack of which the administration of the national treasury has been for the last three years criticised, would have proved practicable or possible, may well be questioned, inasmuch as all the elements for the determination of a fixed national financial policy, viz., limitations of expenditure, and consequent limitations of revenue requirements, have been and are now entirely wanting; the annual gold receipts for customs having varied during the last three fiscal years from about eighty-five to one hundred and seventy-nine millions of dollars-the internal revenue from two hundred and eleven to nearly three hundred and eleven millions, while the appropriations by the XXXIXth Congress for the fiscalyear 1867, exclusive of bounties amounting to about ninety millions, were over thirty-six millions in excess of the original estimates. In fact, there is but one thing which the financial experience of the United States during the last three years can be considered as having settled, and that is the capcity of th e owuntrry for- yeane; which has been proed to be equal, under the most/ ifay-om~abl]e conditions, to every tequirement for expenditure, and for the extinguishment of the debt at a rate which'frinds no precedent in the history of any other nation. CONDITION OF THE DEBT, NOVEMBER 1, 1867. The condition of the national debt, November 1, 1867, consolidated through the operation of the funding process, and reduced through the application of the surplus revenues to its payment, was as follows: Of long obligations............., 78..................$1, 1, 462, 050 00 ('Of this amount, only $41,712,941 80 matures unqualifiedly prior to 1881.) Of short obligations, exclusive of currency............. 441,655, 120 63 Suspended requisitions -.................... $, 111,000 00 $461. 616, 311 51 Total debt.......-....... 2,845,907,626 56 CASI IN TREASURY. Coin..-................. $45,435,771 14 Currency............. 42,782, 283 99 _ 88,218,055 13 Total debt, less cash in the treasury.......................... 2, 75'7,689,571 43 4 REPORT OF THE SPECIAL COMMISSIONER Of currency, greenbacks, fractional currency, and gold certificates of deposit................................ $402, 385, 677 39 2, 625,502, 848 02 Amount in treasury......................... 133, 99S, 398 02 Total debt, less cash in the treasury*.......... 2, 491,,504, 450 00 REDUCTION OF THE DEBT. By comparison of the tables as above presented it appears that the total reduction of the debt through the surplus revenues since August 31, 1865, the period of its maximum, to November 1, 1867, including cash in the treasury, has been $266,185,121 43, or an average of over ten millions ($10,237,88S9) per mnonth. The reduction of the interest obligation calculated at six per centum on thle amount of the abatement of the debt has been $15,971,107 per annum. PRESENT INTEREST OBLIGATIONS. The national obligations for interest, growing out of the debt as it existed November 1, 1867, — ere as follows: Coin interest-5 per cent. bonds............. $9, 942, 267 6'.............. 94,755,73 Total coin interest... $104, 698, 205 Currency interest-6 per cent. bonds and compound interest notes............................. 4, 836, 056 7.30 notes......................... 24, 426, 362 3 per cent. certificates..................... 346, 800 Total currency interest.............9.............29, 609, 718 Total interest................................. 134, 307, 923 * The classification in detail of these various forms of indebtedness, on November 1. 1867. was as follows: per cet. bons.................... —.... $S, 845, 50 00 6 per cent. bonds of 1867 and 1868.... —---------- 14, 690, 941 80 6 per cent. bonds (6s of 1881 and 5-20s).. —-—... —-- 1,551,574,700 00 Navy pension fund........................ 13, 000, 000 00 - $ -- $1,778, 110,991 80 DEBT BEARING CURRENCY INTEREST. 6 per cent. bonds (Pacific railroad)..:-..............- - - - - - -. - $18, 042, 000 00 3-year compound interest notes-. 62, 558, 940 00 3-year 7.30 notes.......... —...-... - -.....- 334, 607, 700 00 3 per cent. certificates............................. 11,560, 000 00 - 426, 76S, 640 00 Matured debt not presented for payment... —......... —- ------ ----- 18,237, 538 83 DEBT BEARING NO INTEREST. United States notes —.. —-----—. ——............ $357,164,844 00 Fractional currency -.-. —.-. — -—..- ------------- 30,706, 633 39 Gold certificates of deposit............ 14,514,200 00 - 462,3S5,677 39 Total debt.. —--—..-..... —. —. -------- 2,625,502,848 02 Amount in treasury, coin.....- -............... —. 111, 540, 317 35 Amount in treasury, currency...................... —----- 22, 458, 080 67 133, 998,398 02 Amount of debt, less cash in treasury....2.............. 2, 491, 504, 450 00 OF THE REVENUE. 5 Supposing the amount of debt bearing no interest (currency and gold certificates) to remain unchanged, and the debt bearing currency interest, with the exception of bonds issued to the Pacific railroad, to be converted and funded into long bonds bearing 6 per cent. coin interest, the total annual obligations on account of interest on the national debt would be as follows: Coin interest.....$129, 221, 803 Currency interest (6 per cent. Pacific railroad).. 1, 082, 520 Total interest............................. 130, 304, 323 Supposing, on the other hand, the non-interest-bearing currency to be withdrawn at the rate of four millions per month, and converted into 6 per cent. bonds, paying interest in coin, the interest obligations from this cause would be increased at the rate of $2,8S0,000 per annum; which increase would continue during about eight years, the minimum period requisite to effect an entire withdrawal and conversion, with the conditions of restriction heretofore imposed remaining in force..As we are, however, warranted in inferring from experience that, with the avoidance of extraordinary appropriations on the part on Congress, a surplus of receipts, applicable for the reduction of the interest-bearing debt will accrue under almost any system of revenue, more than sufficient to counterbalance any increase in interest obligations, through the funding of the currency, orincreased issue of bonds to the Pacific railroad, no actual increase of interest expenditure is probable; and the present requirement, as above stated, may be fairly regarded as the maximum which the national treasury will ever be required to anticipate and pr~ovide for on account of interest. RESULTS OF THE CONSOLIDATlON OF THE DEBT THROUGH FUNDING. It is important, in this connection, to consider the results, present and prospective, of the funding process, so far as applied to the short-date interest-bearing obligations. First. It has alreadyrelieved, and must ultimately entirely free the treasury from the embarrassment and danger of excessive and early-maturing liabilities;* and will also obviate, to a considerable extent, the necessity of hereafter maintai ning a large currency balance. Secondly. Whenever the funding process is completed, as it probably will be within the next fiscal year, the discontinuance at once and forever of the issue (except for the purpose of replacement) of bonds bearing so high a rate of interest as six per cent. may be anticipated; while the surplus revenues will for the first time be made applicable, through purchase in the open market, to the reduction of the amount of bonds of the same description already issued. In the case of individuals, experience teaches that sound paper cannot usually be purchased before maturity at a discount; and what is true of an individual would be, in a pre-eminent degree, also true of the nation, were national affairs' In fact, the nation may be considered as having successfully passed what, at the close of the war, was looked forward to as the most critical and dangerous period in our national finances; for it seemed at that time, even to those most conversant with and hopeful of the financial condition of the treasury and the country, a matter of great difficulty, if not of absolute impossibility, to satisfactorily arrange for the payment, within three years, of so large a sum as $1,291,000,000; $l07,000,000 of which were payable at thirty days' notice, while more than $350,000,000 became due within the limits of a single month-the payment of all of which, under certain contingencies, might be demanded in cash. That a.ll this has been successfully accomplished, even while the country was still suffering from tmhe effects of the war, without causinog a commercial crisis, is a matter for great national congratulation, as well as of great honor to the officer through whom it has been effected. 6 REPORT OF THE SPECIAL COMMISSIONER in other respects in a normal condition; the 6 per cents of 1848 having advanced in July, 1854, to a premium of 21 per cent., coin, in consequence of an attempt on the part of the government to pay them before maturity. Under any circumstances a marked increase in the gold value of the national securities might be at once expected from the discontinuance of any further issue of 6 per cent. bonds, and the application of the surplus revenues to the purchase of those already issued-which appreciation would in degree apply also to the currency. And although it may be difficult to assign any particular period when the value of the bonds, through the application of the surplus revenues, as above indicated, would be brought to a par with gold, yet, that such a result would follow at no distant day cannot be doubted; and were United States notes (currency) convertible into bonds, a return to specie payments would be at once effected.* The rapidity of the absorption of the notes under these conditions would furthermore furnish a satisfactory test to the redundancy of the currency. The 6 per cent. bonds being once brought to par with gold, and the national credit thus fully restored, the gradual refunding of the national debt, at a lower rate of interest, becomes at once practicable; and a guaranteed fifteen to twenty years' loan at from,4~ to 5 per cent. interestj could, if deemed desirable, be at once negotiated in. Europe for an amount sufficient to replace the entire first issue of the 5-20s with an annual saving of interest of from fiveto eight millions per annum. On this point the Commissioner has reason to believe that he expresses the opinion of the leading bankers of the continent of Europe. GOVERNMTENT EXPE.NDITURES OTHtER THAN FOR INTEREST. The present requirements for revenue on account of interest on the national debt having been considered, we come next to a discussion of the revenue necessary to provide for the ordinary government expenditures; and here it is important to consider what have been the expenditures of the government during the former periods of our history. Going back to the inception of tile government, we find the total ordinary expenditures to have ranged from $1,877,000 in 1792, to $4,623,000 in 1798, and $6,504,000 in 1808. In the year 1820 the annual expenses had increased to $13,134,000, but had previously attained to an arnount of over thirty millions per annum, viz: during the war year of' 1814. The average annual ordinary expenditures of the government from 1821 to 1861, inclusive, have been as follows: During the decade, 1821 to 1831,.$12,390,000, or $1 07 per capita of the whole population. Duringthe decade,.1831 to 1841, $24,740,000, or $1 61 per capita, an increase of' 50 per cent. per capita. During the decade, 1841 to 1851, $33,760,000, or $1 63 per capata, an increase of about 11 per cent. per capita. During the decade, 1851 to 1861, $57,870,000, or $2 06 per capita, an increase of 26 per cent. per capita. During the five years from 1861 to 1866, a period of war, the expenditures, exclusive of appropriations for interest and the public debt, attained the extraordinary average of $71 2,720,000 per annum, being $21 07 per capita, in currency, or $14 32 in gold, a rate of increase, in currency, of over nine lhundred per cent. (920 per cent.) as compared with the previous decade. Including the amount paid for interest, the average expenditure for this period was $773,130,000 per annum. Passing by this abnormal period without further comment, we find the total A.portion of the legal-tender United States notes now outstanding are by the terms of their issue (act of February 25, 1862) thus convertible into bonds. OF THE REVENUE. 7,ordinary expenditures for the fiscal year ending June 30, 1867, according to official returns, to have been over one hundred and ninety-one millions, ($191,564,677,) ~exclusive of bounties, or $5 31 currency, per capita, an increase over the ordinlary expenditures of the fiscal year i861 ($62,537,000) of one hundred and twenty-nine millions, or 206 per cent., and $3 32 per capita. If the sum paid for bounties be included, the aggregate expenditures for the above fiscal year is extended to two hundred and three millions, and the per capita to $5 64, making an increase of more than one hundred and forty millions above the expenditures of the fiscal year 1861. For the current year 1867-'8, the aggregate of ordinary expenditures is estimated at two hundred and ten millions of dollars, or $5 77 per capita, an excess of nineteen millions over the expenditures of the preceding year, and of more tthan one hundred and forty-eight millions, and $3 78 per capita, over the expenditures of 1861. If the sum estimated for the further payment of bounties be included in the.above, the total annual expenditure, other than for interest and the redemption of the public debt, will, however, be considerably augmented. It may not be unprofitable, in this connection, to analyze these large expen-ditures for ordinary purposes in time of peace, and to determine the amount of increase chargeable, respectively, to the different'departments of the government. Such an analysis, based on the official returns for 1860-'61 and 1866-'67, gives the following results: CIVIL LIST, viz: The expenses of Congress, congressional printing, thle Executive, th7ejudiciary, territorial governments, mints, assay ofices, 4'c. Expenditures for the fiscal year 1866-'67.................. $15, 585, 489 Expenditures for the fiscal year 1860-'61................ 6, 074, 141 Increase 156 per cent., or....................... 9, 511, 348 FOREIGN INTERCOTRuSEt.-eExpenditures during the fiscal year 1866-'67...........$........... $1, 548, 589 Expenditures during the fiscal year 1860-'61..... 1, 147, 786 Increase 35 per cent., or........................ 400, 803 MISCELLANEOUS.-Embracing expenses of the mint, coast survey, public buildings, Department of Agriculture, light-houses, surveys of public lands, collection of the revenues, District of Columbia, &c. Expenditures during the fiscal year 1866-'67..... 33, 975, 948 Expenditures during the fiscal year 1860-'61.... 16, 026, 574 Increase 112 per cent., or........................... 17, 949, 374 PENsIoNs.-Expenditures during the fiscal year 1866-'67................................ 20, 992, 690 Expenditures during the fiscal year 1860-'61.... 1, 034, 599 Increase 1,929 per cent., or......................... 19, 958, 091 INDIANS.-Expenditures during the fiscal year 1866-'67........................ 4, 586, 393 Expenditures during the fiscal year 1860-'61..... 2, 865, 487 Increase 60 per cent., or........................ 1, 720, 912 8 REPORT OF THE SPECIAL COMMISSIONER WAR, exclusive of bounties.-Expenditures during the fiscal year 1866-'67......$83, 841, 556 Expenditures during the fiscal year 1860-'61... 23, 001, 530 Increase 264 per cent., or................. $60, 840, 026 NAVY. —Expenditures during the fiscal year 1866-'67 31, 034, 011 Expenditures during the fiscal year 1860-'61.... 12, 387, 156 Increase 150 per cent., or................... 18, 646, 855 For the fiscal year 1868-'69 the appropriations requisite to meet the ordinary expenditures of the government have been estimated by the Secretary of the Treasury, exclusive of bounties, at two hundred and sixteen millions of dollars ($216,000,000.) The following table exhibits a comparison of the average annual expenditures of the government-detail and aggregate-for the decade, 1851-'61; and the actual expenditures for the fiscal year ending June 30, 1867: 1851-'61. 1866-'67. Average annual Actual annual (gold) (currency) millions. millions. For the civil service.................................... $23. 92 $51. 11 For pensions........................................................... 35 2094 For pensions..1. 35 20. 94 For Indians............................................................ 3. 33 4. 64 Fornavy............................................................... 12. 34 31.04 For war, exclusive of bounties........................................... 16. 93 83. 84 Total ordinary expenditures....................................! 57. 87 191. 57 Interest on public debt................................................. 2. 81 143. 78 Bounties to soldiers..11..3.................................................. 11.38 Total, exclusive of payments for redemption of public debt...... 60. 68 346. 73 For further information relative to the comparative increase of expenditures, both in aggregate and in detail, and the proportion of the same to population, reference is made to the table in the appendix accompanying this report, marked B. NATIONAL RECEIPTS AND EXPENDITURES FOR TIlE FISCAL YEAR ENDING JUNE 30, 1867. The exact relation of the receipts and expenditures of the treasury of the United States for the fiscal year ending June 30, 1867, together with the general result of the payment or refunding of the various species of indebtedness during the same period, is clearly exhibited in the balance sheet submitted on page 9. RECEIPTS OF NATIONAL REVENUE FOR THE FISCAL YEARS 1866 AND 1867. The following table shows the aggregate and specific receipts of national revenue for the fiscal years ending June 30, 1866 and 1867, respectively: 1866. 1867. From Internal rcevenue*.............$310,906,984 17 t$265, 920, 474 65 From customs, (coin)............ 179, 046, 651 58 176, 417, 810 88 From public lands................ 665, 031 03 1, 163, 575 76 From miscellaneous sources.......... 67, 119, 369 91 42, 824, 852 50 From direct taxes.................. 1,974,7,54 12 4, 200, 233 70 559, 712,790 81 490,526,947 49'a A detailed statement of the receipts of internal revenue for the fiscal years 1864, 1865, 1866, and 1867, the amount derived from the specific sources, and the percentage ratio of the amount derived from each specific source to the whole, for each of the above-named. periods, is presented in a table in the appendix to this report, marked A. t A small discrepancy between this amount and that reported by the Secretary of the Treasury arises from the fact that the same receipts are not entered upon the books of the treasury and of the internal revenue upon the same day. Cash account of the treasuryfrom July 1, 1866, to June 30, 1867. RECEIPTS. EXPENDITURES. Baiance in the treasury July 1, 1866.................................. $132, 165, 721 18 c For civil service...-.................... $51,110, 027 27 For pensions.-........-....-..-. 20, 936, 551 71. Internal revenue: I For Indians................. 4, 642, 531 77 From taxes on raw cotton................... $23, 769, 78 80 For navy..........0........ 31, 034, 011 04 From taxes on spirituous liquors.................. 29,151,339 78 For war, exclusive of bounties.83, 841, 555 80 From taxes on fermented liquors........ - -.... 5,819,345 49 $191,564,677 59 From taxes on tobacco, cigars, and snuff............... 19, 705, 826 89 For interest on public debt.............143, 781, 591 91 From taxes on iron and its products, including machinery. 7, 928, 252 29 For bounties.1................ 1382,859 83 From taxes on other manufactures -------------------- 59,849,830 4L l Total expenditure ------------------------------------ -. w,. of b s346729129 33 From taxes on other manufactures-..-....... 59, 849, 830 41 From taxes on sales. - -................ 4,114,075 47 Total expenditure.......346, 729,129 33 From taxes on stamps. —-------—...........................16, 094, 718 00 From taxes on special taxes, (licenses)..... —...... -.. 18, 186, 446 50 Balance: From taxes on salaries............................ 1, 029, 991 98 Paid for redemption of public debt, exclusive of interest. $746, 350, 525 94 From taxes on income of individuals....-..... 57, 040, 640 67 Less receipts from loans............................ 640, 426, 910 29 From taxes on income of banks, railroad and insurance companies, &c........................ 7, 943, 796 69 105, 923, 615 65 From taxes on gross receipts of railroads, telegraph and Balance in treasuryJune 30, 1867, agreeably to warrants. 170, 146, 986 47 express companies, &c. —-—. —-—.-,-......-.. 7, 444, 719 00 276, 070, 602 12 From taxes on bank circulation and deposits.......... —., 046, 562 46 From taxes on legacies and successions......... 1, 865, 315 15 From taxes on passports, &c.......................... 28, 217 00 From taxes on fines, penalties, &c..-................. 1, 459, 170 80 From miscellaneous taxes......................... 2, 443,147 27 265, 920, 474 65;From excess of receipts on account of internal revenue............. 107, 062 78 From customs, (gold)...................................... 176, 417, 810 88 From public lands.-..................................-.......... 1,163, 575 76 From direct tax............................ 4, 200, 233 70 From miscellaneous-premium on gold, &c... —.............-...... 42, 824, 852 50 622, 799, 731 45 622, 799, 731 45 * A discrepancy of this amount arises from the fact that the same receipts are not entered upon the books of the treasury and of the internal revenue on the same day. 10 REPORT OF THE SPECIAL COMMISSIONER. A comparison of tile figures above presented indicates a falling off in the receipts of internal revenue for the fiscal year 1867, as compared with those of 1866, $44,986,509. Such a falling off, however, is apparent and not real, as will be evident when the great reduction of internal revenue taxes, made by Congress during the last fiscal year, is taken into the account. To what extent this reduction has actually amounted cannot be precisely stated, but the taxes abated or repealed at the first session of the thirty-ninth Congress were estimated as sufficient to occasion an annual loss of revenue, taking the returns of the preceding fiscal year as a precedent, of about sixty millions of dollars; while the further abatement at the second session of the same Congress was likewise estimated, including the reduction of the income tgx, at from thirty to forty millions of dollars. It would, therefore' have been nothing but reasonable to infer that the revenues for'the last fiscal year (1866-'67) would have fallen short of the aggregate of the preceding year (1865'-66) by an amount equal to the reduction of the taxes, the effect of which was fully experienced during the period referred to; which reduction may be prudently estimated at from sixty to seventy m'illions of dollars. In addition to this, it should be remembered that the last fiscal year in the United States was a year of- great commercial and mercantile depression-a year in which the crops in all sections of the country were much below an average, and in which manufacturing operations were extensively interfered with by disagreements between employers and their operatives; and yet, notwithstanding all this, the internal revenue did not fall off to an extent commensurate with the amount of taxes abated or repealed; but, on the contrary, exhibited a comparative net gain of from fifteen to twenty-five millions of dollars. PROSPECTIVE NATIONAL EXPENDITURES AND REVENUES. Having thus presented the data relative to the present condition of national expenditure and revenue, we come next to the consideration of the question of future expenditures, and of the manner in which the revenue requisite to meet them can be raised with the least burden to the people, the least detriment to industry, and the greatest economy. The expenditure necessary to meet the interest on the public debt must, for the present, be regarded as a fixed and constant quantity. The same ought to be affirmed, also, of some minimum sum to be annually made applicable for the redemption of the principal of the debt; for althoug,' a rapid reduction of taxation, rather than a rapid reduction of the debt, would seem to be, at the present time, the true policy of the government, yet the precedent which the United States-in honorable exception of nearly every other nation-has thus far established, viz: of reducing annually the principal of the debt by some appreciable and significant amount, is one far too valuable, and brings with it too many prospective advantages, to be hereafter lightly disregarded If we assume, therefore, in accordance with this view, that the sum of fifty millions of dollars is to be annually set aside for redemption purposes, we will then have, with the interest, as a present annual " constant" of expenditure, the sum of one hundred and eighty millions, for which an equal " constant" of revenue must be provided. As already stated, the present requirement for interest is about one hundred and thirty millions of' dollars, which amount, on the completion of the funding of the short-date interest obligations, will be mainly payable in gold. To meet this particular requirement, the customs revenues are specifically pledged, but it will undoubtedly remove something of public apprehension in the future, as it might have prevented much unprofitable discussion in the past, if the present and prospective gold resources of the treasury from the duties on imports could be thoroughly appreciated. These resources, under the present tariff, have be OF THE REVENUE. 11 come remarkably uniform,and amply sufficient for all contingencies; the receipts for the thirty months, ending November 30, 1867, having averaged $14,200,000 per month, or over one hundred and seventy millions of dollars per annum; while the total amount of gold paid into the treasury, on account of customs, from the 1st of July, 1861, to the 30th of.September, 1867, has been $709,906,800. The true method, however, of disposing of any cause of uneasiness upon this point would undoubtedly be, to take such efficient measures as would bring the currency to a par with gold; but even so long as the currency is depreciated, there would seem to be no sufficient cause to fear any deficiency in our gold resources. The bulk of the commodities imported, and from which the chief portion of our duties are derived, cannot be called articles of luxury, but are, on the contrary, commodities of almost universal use; such, for example, as tea, coffee, sugar, molasses, spices, drugs, and the like, and which, moreover, cannot be produced at home to an extent sufficient to materially check importations. The experience of the past shows, furthermore, that while in what are called 1" good times" there is a considerable, and perhaps excessive importation of luxuries, the so-called "' hard times" rarely press iponl the great body of the people in the United States-as they do in other countries-to such a degree as to cause any marked reduction in the consumption of those articles of comfort or of necessity which comprise our chief sources of revenue from imports. And this circumstance illustrates what may be considered as an axiom in political science, namely, that to just that extent to which a revenue system can be based on the primitive wants of the great mass of thle people, to that same extent may its results be considered permanent; for so long as men continue to work, eat, drink, house, and amuse tlhemselves, so long can a government with such a system rely on a continuous flow of revenue; for then, with every incident of individual life, a mite is unconsciously added to the resources of the treasury. The average annual gold value of imports into the United States (exclusive of specie) for the five years prior to and including the year 1860, was in excess of three hundred and twenty-one millions of dollars. This amount, the requirements of the country, growing out of an increase of wealth and population, have probably augmented to a present annual average of over four hundred millions, the duty on which, at the rate of the tariff of 1867, (42.79 per cent. on the total imports,) would yield $171,160,000.* Neither does it seem probable that even with a reduction of the tariff, the customs revenue will fall below an annual average of $150,000,000, inasmuch as the duties on some classes of products formerlyof extensive importation are at present all but prohibitory. In determining, moreover, for the future what shall be the average rate of the tariff, it is important to bear in mind that the practical question presented is not so much what the respective advocates of free trade and protection may desire, or what abstract economic science may teach, but rat/her what under existing circumstances is most expedient. And, viewed in this light, it seems certain that, with all its objectionable features, we have as yet devised no system, as a whole, which operates with so much of certainty and equality as the system of taxation levied through the tariff. In proof of this we have only to cite, in general, the recognized failure to collect the internal revenue; and, in particular, the wide discrepancy in the receipts of the income tax from different sections of the country-a single district in the State of New York having paid during the last fiscal year nearly five and a half millions ($5,496,233) to the credit of' this account, while the whole income tax collected from the eleven States of Virginia, Texas,' The total gold value of the importations of the year ending June 30, 1866, exclusive of specie, was $427,309,810; and of the year ending June 30, 1867, 8412,233,123. 12 REPORT OF THE SPECIAL COMMISSIONER Tennessee, South Carolina, North Carolina, Mississippi, Louisiana, Alabama, Georgia, Arkansas, and Florida, during the same period, was only $2,300,931 34.* On the other hand, it is not at all probable that the amount indirectly paid by the people of these same States for the same period, through their voluntary consumption of articles taxed under the tariff, such as tea, coffee, sugar, spices, silks, &c., was any less, proportionately, than that levied and collected through the same agencies in other sections of the country. With these facts before us, there would seem to be neither motive nor occasion to question the adequacy of the gold revenue from customs to meet so much of the interest on the public debt as may now or hereafter be payable in coin. But whatever of certainty or permanence may characterize the interest or redemption items of the national expenditure account, the same cannot be affirmed of the so-called "I ordinary " expenditures, which, within a certain limit, may be arbitrarily increased or diminished at the pleasure of Congress. The data already submitted clearly illustrate the nature and extent of these expenditures, and their mere presentation would seem of itself to constitute a sufficient argument to prove the assertion that the first practical step to be taken by Congress in the direction of financial reform, and for the relief of the country from the present burdens of taxation, should be retrenchment-immediate and most extensive. That the national government can conduct its business at the present time with the same ratio of expenditure to population that it did during the decade prior to the war is not to be expected. The creation of a debt, of a new system of revenu, the )arge increase of the army, and of pensions; the abnormal condition of a portion of the country, and the general increase of prices-all contribute to render such a result impossible; but that an absolute necessity has existed for increasing the ordinary expenditures of the last fiscal year (1866-'67) 206 per cent., or one hundred and twenty-nine millions above the expenses of the fiscal year' 1860-'61, or 247 per cent. above the average of the decade from 1851 to 1861, may well be doubted. The ordinary expenditures for the army and navy-prepalrations for war in a time of peace-are the mill-stones which hang round the necks of the nations of Europe, press them annually deeper into debt, and render the emergence of the great mass of their people from poverty annually more and more difficult. These same items to-day constitute the bulk of the ordinary expenditures of the United States; and as their influence is the same in degree as that already pointed out, it is here that the necessity for a reform is most urgent, while its realization, at the same time, does not appear difficult. Thus, for example, the country is subjected to a present annual tax of over thirty millions for the support of a navy in a time of peace, where an average annual expenditure of only twelve millions for this purpose was considered ample froll 1851 to 1861. And as respects the army, although the existence of an Indian war and the problem of reconstruction have rendered a large increase of expenditures unavoidable, yet an increase so large as sixty-six millions, or upward of 290 per cent., seems excessive. Withl the discontinuance, therefore, of what (it is to be hoped) are temporary exigencies, a very large reduction of the expenses of this department, at no distant day, ought to be anticipated and required, while, in any event, some reduction would seem to be immediately fean sible; as, for example, in the Bureau of Ordnance, the expenses of which are reported as $9,932,000 for the fiscal year 1866, and $4,690,000 for 1867, as against $1,662,000 for 1861. The United States are at present in a state of profound peace with all foreign " The collections on account of income for the fiscal year ending June 30, 1867, from the enumerated eleven States was as follows: from Florida, $14,197 29; Arkansas, $34,180 13; Mississippi, $60,741 53; South Carolina, $62,208 48; North Carolina, $62,450 58; Vir. ginia, $204,613 41; Texas, $155,340 80; Tennessee, $396,327 86; Louisiana, $586,2S2 42; Georgia, $320,552 07; Alabama, $404,036 77. Total, $2,300,931 34. OF TIHE REVENUE. 13 nations. They have placed themselves, moreover, under bonds of more than two thousand millions of dollars to keep the peace; neither is it to be believed that a foreign war is likely to occur, under any circumstances, except through our own seeking. But apart from these considerations, is it not well to recognize, as a truth, that great armies and navies, so far from being elements of strength, are in fact indications of weakness and national apprehension, and that henceforth the continuance, if' not the issue of war, is to be determined by the state of the exchequer, rather than as heretofore by the sword? As regards the Expenditures of the other departments of the government, it -would appear from the data above submitted, that those of the State Department for foreign intercourse have not largely increased since 1861, and are not excessive ($1,54S,589)* compared with a similar annual expenditure on the part of Great Britain of $2,191,000. In the matter of pensions, the increase of expenditure-nearly 2,000 per cent.-has been comparatively greater than that in any other department, viz: $20,902,690 for 1867, as compared with $1,034,599 for 1861. Here alone no diminution of expenditures can be deemed desirable, and, as nearly eighty thousand applications are yet on file, suspended or unacted upon, no reduction can be anticipated; but, on the contrary, it is certain that for some years to come, large appropriations for pensions will be imperative. In the departments of the " civil list " and of the " miscellaneous," an increase of expenditures of 156 and 112 per cent., respectively, making an annual aggregate of over twenty-seven millions, would seem to indicate that some considerable reduction is here, also, entirely practicable. The estimated extraordinary expenditures for the current and succeeding fiscal year, viz: for bounties, reimbursements of State war debts, and the purchase of foreign territory, are in excess of sixty millions, but these and similar outlays are not in any sense a necessity, and -can present no legitimate claim for future continuance. The Commissioner, therefore, having in view the industry and commerce of the country, and the national revenues-whose interests he is by law required to investigate-would respectfully recommend, as a matter of absolute necessity rather than of expediency, and as a condition precedent to any legislation looking to an abatement of taxation. First. That all the expenditures for the navy be restricted to an amount merely sufficient to maintain the police of the seas, and preserve the public property from deterioration. Secondly. That the numerical strength of the army be not increased, but reduced, as soon as practicable; that no appropriations be made for ordnance except what is necessary for immediate use, or for fortifications beyond what is required to keep the same in repair. TkTdtJ, T'at no aqVrogriations be made for;ublic works, other than fortifications, except such as are of the most urgent necessity. Fourthlyr That, so long as the necessities of the nation are paramount to those of individuals, no claims for damages sustained in consequence of the rebellion be either paid or considered. Fifthly. That the heads of the various departments be required by Congress to practice the most rigid economy, and to reduce their employes to the minimum number requisite for the discharge of the public service. Sixthly. That no money be appropriated for the purchase of foreign territory, Of these expenditures, $278,071 for capitalization of the " Scheldt" dues and for the Paris Exposition may be considered as extraordinary. 14 REPORT OF THE SPECIAL COMMISSIONERl and that no commercial treaty with any foreign nation be ratified, of a character calculated materially to diminish tile customs revenue.* With the substantial adoption on the part of Congress of an economical policy as above indicated, the ordinary expenses of the government might, it is believed, be immediately reduced to one hundred and forty millions per annum, which amount would even then be an excess of over 100 per cent. on the ordinary expenditures of the fiscal year 1861. WVith a saving of from fifty to sixty millions per annum thus effected, a reduction of taxation to an extent sufficient to afford an immediate relief and stimulus to the industrial interests of the country, becomes at once practicable; and this even on the assumption that no increase of the internal revenue is likely to accrue from any improvement in the method of assessing and collecting taxes, or from the progress of the country in wealth and population. Thus, for example, a reduction in the annual expenditures of the War Department from $83,841,555, as in 1867, to sixty millions of dollars, would allow a reduction of over 26 per cent. on all the taxes now levied on manufactured products, exclusive of liquors, tobacco, and a few other articles generally classed under the head of luxuries, and still leave to the credit of this department for its increased necessities growing out of a change in the circumstances of the country, a sum 260 per cent. in advance of what was required in 1861. In like manner a reduction in the expenditures of the Navy Department from thirty-one millions, the requirements of the last fiscal year, to fifteen millions, would supplement all the present revenue derived from the following articles, and allow the taxes on the same to be. entirely dispensed with: All fabrics and manufactures of cotton; all manufactures of wool, including carpets and hosiery; Or, all manufactures of iron anid steel, including machinery, steam engines, &c.; together with hats, leather, and all manufactures of leather, including boots and shoes, saddlery, harness and trunks; with paper of all kinds. Or, to put the case differently, if a reduction could be effected of thirty millions in the expenditures of the War Department, of fifteen millions in those of the Navy Department, of fifteen millions in those of the civil service, with a discontinuance of any further appropriations for what may be called extraordinary expenditures, it would permit the removal, substantially, of nearly all of what are understood to be industrial taxes, and also offset the amount derived during the last fiscal year from the tax on raw cotton.t But extensive and sweeping as these changes, founded on a reduction of expenditures, may seem, they, in reality, indicate but a part of what may be effected in the way of reform. The Commissioner, in both of his previous reports, has given it as his opinion. * The most important and reliable source of revenue under the customs is the duty imposed on sugars. With the ratification of a reciprocity treaty with the Sandwich Islands admitting the staple products of those islands into the United States free of duty, the revenue derived from a present annual importation of over fifteen million pounds of sugar, besides molasses, sirups and melado, would be necessarily relinquished; and this importation, fram the stimulus afforded by the maintenance of the present tariff on sugars imported from other countries, might reasonably be expected to increase with great rapidity —thus impairing to a still greater degree the current revenue.' PROPOSED REDUCTION. PROPOSED ABATEMENT. Millions. Millions. In war, (83 to 53 millions)-. 30. Raw cotton -----------—................ —-—. 23.77 In navy, (31 to 16 millions).-....15. Iron and manufactures of -. 9.27. In civil service, (51 to 36 millions). 15. Cotton manufactures............... — 9. 23 In bounties.. —.........-...... 25. 5 Woollen manufactures.............. ----- 4. i0 In purchase of foreign territory, (gold) 7. Other textiles..1 —----------------. 1.80 All other manufactures, except liquors and tobacco...................... 44. 02 92.5 91-54 OF' THE REVENUE. 15 and adduced facts in support of the same, that not over fifty per cent. of the amount of the assessed internal revenue taxes is received in the national treasury. The trouble here is not, in the main, the character of taxation, but the character of the administration and machinery employed to collect the taxes. The discussion of this topic will be entered into hereafter; but it is obvious that if the premises of the Commissioner are correct, even in a degree, a reform in administration will admit of a reduction of taxation, even beyond the limits already indicated. Assuming, then, the payment required for interest on the debt to be, for the present, an essentially constant quantity, ($130,000,000,) it is evident that the amount of revenue required to be annually raised by taxation will vary greatly with the disposition which is made by Congress of the so-called "ordinary expenditures." With a reduction of these expenditures to one hundred and forty millions, the annual sum total required to be, at present, provided for, would be two hundred and seventy millions of dollars; but with the ordinary expenditures of the past fiscal year remaining unchanged, this sum rises to nearly three hundred and twenty-one millions. An appropriation, however, of fifty millions additional for the redemption of the public debt would increase these amounts, respectively, to three hundred and twenty and three hundred and seventy-one millions of dollars. It should be noted in this calculation that the difference between the actual " ordinary" expenditures for 1867 (one hundred and ninety-one millions) and the reduced estimate (one hundred and forty millions) is very nearly equal to the sum proposed by the Commissioner to be set aside for the redemption of the principal of the debt, viz., fifty millions. Reduction of expenditures to the extent indicated may not, however, be practicable, or, by reason of unforeseen circumstances, possible; but reduction of the debt is a matter subject to no contingencies, and is entirely within the control of Congress. The element of uncertainty on the one hand may be considered, therefore, as entirely balanced by the element of certainty on the other; or, in other words, if the ordinary expenditures should not be reduced, any deficiency from this cause may be amply provided for from the sum set apart for the reduction or the debt-a result which leads to the conclusion that the sum of three hundred and twenty millions of dollars is the maximum amount which it will be necessary to raise by taxation under any circumstances in estimating the requirements for revenue for the fiscal year 1868-'69. To meet such a requirement for revenue, the customs may, even with some reduction of the present tariff, as has been already demonstrated, be undoubtedly relied on to furnish from one hundred and fifty to one hundred and seventy millions (in gold) annually; leaving to be provided for by other forms of taxation the sum of one hundred and seventy millions. Of this amount the miscellaneous receipts, which have averaged over forty. seven millions of dollars* ($47,640,835) for the last three fiscal years would, if continued, furnish no inconsiderable proportion; but as the basis of these receipts, mainly the premium on gold, is altogether uncertain, it is safe to refer the collection of the whole amount in question to the internal revenue proper, leaving whatever may accrue from miscellaneous receipts to offset contingent expenditures, the payment of bounties, or unexpected deficiencies. INDUSTRIAL CONDITION OF THE COUNTRY. Preliminary, however, to an inquiry in detail, respecting the manner in which an internal revenue tax of this amount can be best levied and collected, a review * The " miscellaneous" receipts for the last three fiscal years were as follows: 1865..............................................................$32,978, 284 47 1866............................................................. 67,119,369 00 1867.............................................. 42, 824,852 50 1 6 REPORT OF THE SPECIAL COMMISSIONER,of the present condition of the capital and industry of the country, and of their ability to sustain the necessary burden of taxation, seems eminently desirable. In entering upon such a review, the first point which attracts attention is the wonderful rapidity with which the country, as a whole, is recovering from the,effects of the war, and resuming its normal condition of development and progress. The most noticeable results, drawn from purely domestic sources, which present themselves as evidence upon this subject, may be grouped as follows First. Immigration, which continues to flow with uninterrupted volumne, at the rate of over 300,000 per annum; making a positive yearly addition to the wealth and producing capacity of the country of not less than one hundred and fifty millions of dollars. Secondly. A continued increase in the invention of machinery, and the perfecting of processes for improving and cheapening products; as is more espe-,cially made evident by the returns of the Patent Office-the whole number of patents issued for the eleven months ending December 3, 1867,being 10,907, as compared with 9,100 issued during the corresponding period of 1866, 6,220 for the entire year 1865, and 4,637 for the year 1864. This very remarkable increase must not, however, be accepted in its fullest apparent extent, as illustrative of substantial progress. It is so, undoubtedly, in great part; but, on the other,hand, the real value of many patented improvements, as additions to the sub-.stantial wealth of the country, may well'be doubted. Thirdly. An increase in the quantity and value of the national agricultural products-the. aggregate crops of all kinds for the year 1867, although less in.some respects than what was anticipated, having exceeded, both in quantity and value, those of any previous year. Fourthly. An increase in the capital invested, and in the number and capa-,city of establishments for inanufacturing purpses. In order to obtain some certain information on this subject, the Commissioner, at the commencement of the last calender year, instituted measures for collecting and recording such data relative to every department of industrial progress as were available. The results thus obtained would require a volume for their publication; and, although somewhat imperfect and miscellaneous in their character, they establish, nevertheless, beyond a doubt, and in a most curious and interesting manner, the fact that great and substantial progress in manufacturing industry has been achieved in nearly every section of the country. In the manufacture of cotton, the amount of machinery at present in the,country, and which is substantially engaged in the work of production, is from fifteen to twenty per cent. more than existed at the beginning of the war; while the export trade in coarse cottons, formerly (before the war) large, but afterward almost entirely lost, is now recovering with gratifying rapidity.* In the The following table, showing the imports of unmanufactured cotton into the United States since 1850, strikingly illustrates the changes in the course of trade, consequent upon the existence and termination of the war: Year. v Imports. Value. Lbs. 1850................................................ 269,114 $10,086 1854....-................................. ^.... 345, 210 31,318 1857 -........ —2............................... 8( —, 233 62, 172 1861-.-.-..-..-..-.........-.......................... 888,528 67,168 1862 -..-..-.................................... 29,441,752 6, 518,129 -1863...................................................... 33,877,365 10,518, 606 1864...-..........-. 26, 475,957 8,668, 917 1865......-.............................................. 36, 033, 426 14,778,828 1866.....................................6, 282, 341 1,323, 560 1867.................................-..... 825,721 197,445 OF THE REVENUE. 17 department of woollen industry, notwithstanding the recent unusual depression of this interest, the erection of new mills has continued, with a reported general improvement in the character of the products. In regard to this latter point, the secretary of the National Association of American Woollen Manufacturers, in his annual report, (October, 1867,) uses the following language: "The vast improvement in woollen goods exhibited the present year is the subject of universal comment and surprise with merchants." And, again: " Our progress has not been limited to improvement of old fabrics in style or economical production; many new fabrics have been successfully achieved." The recent introduction of important improvements for manufacturing certain descriptions of woollen goods by power, formerly made wholly by hand and imported, is also cited. Another authority on this subject (the New York Economist) also says: " It can truly be said of our (woollen) manufacturers this season,'they have made wonderful progress over last year.' Such continued improvements in the manufacture of woollen goods will soon place us beyond the name of rivals, and cause our products to be emulated the world over, as our most choice styles and salable patterns are the result of American ingenuity both in coloring and style." In the department of iron industry, the number of blast furnaces for the manufacture of pig iron in operation during the past year has been in excess of that of any former period, while an unusually large number of new furnaces are now in process of construction. During the same period the rolling-mills of the country were generally in continuous operation; new establishments of this character, and new and extensive works for the manufacture of Bessemer steel, have also been erected; while a marked increase in the American product of ordinary steel is reported. The Commissioner would also, in this connection, call attention to the fact that, notwithstanding the almost continued reported depression of the iron interest in the United States, the average annual increase in the domestic product of pig iron is remarkably uniform, and greatly in excess of the ratio of the increase of population-the annual ratio of increase of pig iron from 1850 to 1866 having been in excess of eight per centum, while that,f population from 1850 to 1860 was about three and one-half per cent.; or, stated differently, the increase in the production of pig iron from 1810 to 1866 was 2,371 per cent., while that of population was 410 per cent.* The annual ratio of increase in the product of pig iron in the United States since 1855 has also been greater than in Great Britain. The importations from 1850 to 1862 were mainly long staple South American and Egyptian cottons for the manufacture of thread. The large importations of ]862-'65 are believed to have been about three-fifths American, furnished by blockade runners, and two-fifths East Indian. *Comparative production of pig-iron in the United States from 1810 to 1866, inclusive. Production Increase of produc- Decennial increase of Annual increase in pro- Annual increase e in tons. tion per cent. population per cent. duction of iron. of population. 1810 54, 000................................... 1828 130, 000 140. in 18 years..........................I.................................. 1830 165, 000 211.11 in 20 years.... 77.7 in 20 years..., 10. 56 per cent............. 3. 88 per' cent. 1832 200, 000 21. in 2 years.................................................................. 1840 347, 000 110. 30 in 10 years.....' 32.67 in 10 years...-. 11 per cent..3.... 3.26 per cent. 1845 486, 000 40. in 5 years.. —- -..... —-------—......... —-. —-—. -. ——. -.. 1850 564, 755 62. 7 in 10 years.... 35. 87 in 10 years..... 6. 27 per cent............ 3. 58 per cent. 1855 754, 178 33. 7 in 5 years........................ 1860 913, 770 61.8 in 10 years.... 35. 46 in 10 years..-.. 6.18 per cent......... 3.54 per cent. 1864 1, 135, 497 24. 26 in 4 years........................ 6. 06 per cent............ 3 per cent. 1866 1, 334, 704 46. in 6 years......................... 7. 66 per cent........... 3 per cent. Increase of population from 1810 to 1867 410 per cent., or 7. 3 per cent. per annum. Increase in production of pig-iron from 1810 to 1867 2,371 per cent., or 42i per cent. per annum. H. Ex. Doc. 81- 2 18 REPORT OF THE SPECIAL COMMISSIONER The increase in the production of anthracite coal (which may be taken as a measure of the production of all American coal) during the year 1866 was about three millions of tons over the product of 1865, on a gross return for the former year of 12,399,747. This extraordinary increase was referred at the time in part to a speculative revival of trade and industry succeeding the termination of the war, and also to the stimulus of very high prices. These stimulants, however, if they were really influential, have clearly not operated in any degree during the past year, and yet the gross product of anthracite coal sent to market has not materially diminished; the deficiency up to the 30th of November, 1867, in the aggregate of coal sent eastward from Pennsylvania, having been only 170,041 tons, as compared with the movement of the corresponding period of 1866; while the stock on hand at the various markets available for consumption, at the close of the season of 1867, was estimated at less by 250,000 tons than the stock on hand at the close of the two preceding years. It seems, therefore, certain that the conditions of ability to consume-which conditions are mainly industrial-have not become impaired during the past year; or, in other words, the industry of the country has developed during the past year to such an extent as to render what in 1866 seemed abnormal and uncertain, now legitimate and permanent. The record of the export trade in petroleum for the last three years has also been very similar to that of coal. Thus, for the years 1864 and 1865 the annual export of petroleum, with the advantage of a high premium on gold, averaged about thirty millions of gallons; but during the year 1866 the exports suddenly rose to an aggregate of over sixty-five millions, and this extraordinary increase, which originally might have seemed speculative and temporary, has, during the past year, been substantially maintained. In the department of commerce and navigation the Commissioner reports an increase of tonnage upon the northern lakes and other inland waters in excess of that of any former period, the increase of tonnage engaged in commerce upon the lakes during the past year being estimated at fully fifteen per cent., or about forty thousand tons, (exclusive of vessels of small capacity.) According to the rettirns of the Chicago Board of Trade, the increase, under the new classification, in vessels and tonnage upon the lakes for the year ending March 31, 1867, over the corresponding period in 1864, was as follows: 1864................... vessels, 648....... tonnage, 202,304 1866.................... vessels, 997................ tonnage, 281,077 The American commerce employed upon the ocean has also recovered in a degree, during the past year, from its recent extreme depression. The returns of the leading railroads of the country for the ten months ending October 31, 1867, also indicate an increase of commercial movement over the' corresponding period of 1866, the absolute increase in the net earnings of seventeen of the principal lines having been equal during this period to eleven dollars per mile, or to 1.23 per centum. The month of October, 1867, is reported as probably the most prosperous of any recorded month in the history of American railroads. The aggregate business of the country for the fiscal year 1867, as measured by the returns of the internal revenue, from the taxes on sales and special taxes, (licenses,) does not, moreover, indicate any falling off as compared with the preceding year, but, on the contrary, a slight increase. The aggregate amount of the business transacted in the leading commercial cities of the country by wholesale and retail dealers in merchandise and liquors, and by auctioneers and merchandise brokers, during the fiscal year ending June f The sales of stocks, bonds, gold, and exchange being now paid by means of stamps, cannot be included in the above estimate. OF THE REVENUE. 19 03, 1867, as deduced from the returns of taxes on "' sales" and "licenses," was approximately as follows: * New York......... - $3, 313, 618,000 Milwaukee....110, 675, 000 Boston.-.......-..... 928,173, 000 Providence. 91, 876, 000 Philadelphia.. 662, 097, 000 Buffalo 81, 350, 000 New Orleans -526,795, 000 Pittsburg -. 80,9:39, 000 Chicago - - 342, 182, 000 Mobile.. 77, 383, 000 Baltimore -. 324. 966, 000 Brooklyn 69, 676, 000 Cincinnati -. 213, 253,000 Detroit 62,757, 000 St. Louis.-. 213, 034,000 Cleveland-.. 55, 302, 000 -San Francisco -151,367, 000 Charleston.. 46, 7 9, 000 Louisville... 116, 216, 009 Newark...... 36,428, 000 In Europe some measure of the prosperity of the people can, it is believed, be obtained by noting the rise or fall in the consumption of certain articles, which cannot be considered as belonging wholly to the catalogue of necessities, such as tea, coffee, and sugar. If we now apply this standard to the present condition of the United States, the result obtained is certainly not discouraging. Thus, the consumption of coffee for the eleven months ending November 30, 1867, as indicated by the distribution from the five principal Atlantic ports, was 18,628,064 pounds as compared with 14,782,208 pounds for the corresponding period of 1866, and 11,795,616 pounds for that of 1865; while the average monthly consumption of imported sugars for the year 1867, deduced from the same data, has been 7,088,480 pounds, as compared with a monthly average of 5,862,050 pounds for the preceding five years. Omitting any reference in detail to the marked increase in the number of houses erected during the past year, estimated by good authorities to be greater than in any former year of our national existence, or to the increase in the manufacture of agricultural implements, salt, paper, edge tools, cutlery, chains, and a variety of other articles, we will cite but one other illustration, drawn from domestic sources, of the financial strength of the country. As has been already shown, the national expenditures, exclusive of appropriations for the redemption of the public debt and for interest, attained during the five years from 1861 to 1866 the extraordinary average of over seven hundred and twelve millions of dollars per annum; to which must also be added the great increase during the same period of State and local expenditures. Now, while by far the largest portion of the money represented by this expenditure was borrowed, it must nevertheless be borne in mind that the average annual money statement for the years specified is in a great degree, if not entirely, the measure of the labor annually furnished to the government in the form of commodities or services rendered in the army or navy; for the war, in the main, was conducted by means of the services of the soldiers rendered at the time, and by means of the food, clothing, and material of war raised or made during the period of hostilities, and for which money or an acknowledgment of indebtedness was given. It therefore appears that during the years from 1861 to 1866, labor and commodities were continually withdrawn from the productive employments of peace to the destructive occupations of war, and that the measure of this unproductive diversion was in excess of seven hundred and twelve millions per annum; and yet, during the continuance of all this drain, the northern and Pacific States did not cease to make a real progress in the creation of substantial wealth. Thus, the aggregate of the northern crops, measured in bulk or quantity, and not in money, did not decrease, but increased; the area of territory placed under cultivation was continually enlarged; railroads continued to be built, mines to be opened, and mills, stores and dwellings to be erected.* But hostilities have now ceased and peace has returned; and with such a change in the condition of i It is not believed that any great amount of northern capital accumulated prior to the wa r was used or destroyed during the war, but that the service and commodities used were mainly.. the product of the time. 20 REPORT OF THE SPECIAL COMMISSIONER affairs this question becomes both pertinent and suggestive: If a portion of the country could contribute of its surplus labor and capital an annual value of 821 07 per capita, for destructive purposes, will it not be easy for the whole country, with its labor and capital restored to productive employments, to contribute $8 73 per capita for the payment of interest, expenses, and the reduction of the debt? And yet the payment of this sum will meet at present an annual expenditure of one hundred and forty millions for ordinary expenses, one hundred and thirty millions for interest, and fifty millions for the reduction of the principal of the debt; and if the same rate of per capita taxation be continued for the future, it will extinguish the entire principal of the debt in less than twenty years, even if it shall become necessary to add to the above estimate of one hundred and forty millions for ordinary expenses, a sum equal to two dollars per head on the average annual increase of population; which average increase may be expected to augment the population of the United States, by the year 1884, to nearly sixty millions. Furthermore, this proposed rate of $8 73 per capita, which is only about three-fourths of the rate of taxation paid in 1866, after reducing the rate of that year to gold,* can be obtained without a recourse to any of the internal taxes which materially impede production, as will be elsewhere demonstrated; and as all past experience shows that the wealth of this country increases in a much more rapid ratio than population,t the burden of the uniform rate of $8 73 per capita will become annually less and less onerous. But, notwithstanding this exhibit, there are many persons both in public and private stations who, either intimidated by their own apprehensions or misled by their own lack of information, consider it to be their present mission to magnify the burden of the national, State, and local debts of the country, and to predict for the nation an inability to either carry or extinguish them. The data presented sufficiently proves, however, that so far as the material strength and development of the country are concerned, these gloomy anticipations have little or no foundation; and in respect to the largest absolute debt of any one of the States, viz., that of New York, which has recently been discussed in an official report in such a manner as tends to create distrust and impair credit, the Commissioner would call attention to the fact, that the estimated present average annual value of the apples alone, sent to market from eight of the sixty counties of that State, viz., four and a half to five millions of dollars, is sufficient to pay the interest on the entire debt, and add about two millions annually to the sinking fund; or, in other words, if all other forms of industry or production in the State of New York should cease to contribute to the State debt, but the apple trees in the eight counties referred to should continue to grow and produce, their annual product, if devoted to this purpose through the patriotism of their owners, would in less than ten years extinguish the whole debt, including the present unliquidated cost ($15,000,000) of the Erie canal. COMPARISON OF THE FINANCIAL CONDITION OF THE UNITED STATES WITH THAT OF OTHER NATIONALITIES. Turning now from the further immediate consideration of data drawn from domestic sources to a comparison of the financial condition of the United States, present and prospective, with that of other countries, our compeers in wealth, population, and civilization, we are led to the following conclusions: That the United States is the only one of the leading nations of the world which is, at present, materially diminishing its debt and reducing its taxes; and the only one, moreover, which offers any substantial evidence of its ability to pay its debt * Rate per capita in 1866, $16 04 currency, $11 46 gold. t The increase of the population of the United States from 1840 to 1850 was 35.87 per cent., and from 1850 to 1860 35.59 per cent. The increase in the value of real and personal property during the same periods was respectively 64 per cent. and 129.7 per cent. OF THE REVENUE. 21 within any definite period, or even anticipates the probability of any such occurrence.* In proof of which we submit the following statements and statistics: The figures already presented demonstrate that the United States, from the 31st of August, 1865, to the 31st October, 1867, substantially reduced its liabilities by the sum of over two hundred and sixty-six millions of dollars, or at anl average rate of over ten millions per month for the whole included period: and that during the year ending June 30, 1867, taxation was reduced by law to an estimated amount of from eighty to one hundred millions of dollars per annum. The progress made since the close of the war in the reduction or extinguishment of the State and local debts of the Union-created mainly for -war purposes-is also equally gratifying. Thus, for example, the reported reduction of the debt of the State of New Hampshire for the last fiscal year amounted to 6.35 per cent.; of Pennsylvania for the eighteen months ending November 30, 1866, to $3,750,000, or over 91 per cent., with an estimated reduction for the current year of $2,535,880, or 7.40 per cent.; of New York for the last fiscal year of $3,385,400, or 7.67 per cent.; of Ohio in the two years ending November 15, 1867, 15 per cent.; of Vermont in the last two years, 15.45 per cent.; of Illinois from December, 1864, to November, 1867, 32 per cent.; of Indiana from October 31, 1864, to October 31, 1867, 50 per cent.; and of New Jersey from November 30, 1865, to November 30, 1867, 25.34 per cent. And in most of the States, furthermore, an annual reduction of their indebtedness for the future, equal to or greater than the rate reported since 1865, is already provided for or anticipated. For,detailed information relative to the State debts reference is made to the tables given in the appendix to this report, marked C. On the other hand the amount of the local debts, other than State, is believed to be much less than has been represented or supposed. In some instances the war debt of counties, cities and towns was entirely extinguished during the first year after the termination of the war. In other cases these debts have been made payable in annual instalments, one-half to two-thirds of which have been paid. In at least one State of the Union (Indiana) the rate of State taxation during the past year has been reduced to a lower point than at any time during the previous ten years. In short, all the evidence collected on this subject tends to show, that within a period of less than five years from January, 1868, the bulk of the debts contracted by towns and counties, for war purposes, will be extinguished. It is also interesting to note that an analysis of the returns by the Commissioner, received from various sections of the country, where the rate of taxation is represented as most excessive, shows that one of the largest single items is very often that set apart for exclusively educational purposes. In any discussion, moreover, of the State and local debts of the Unrion, it should always be borne in mind that no fair presentation can ever be made of them, which is not at the same time accompanied by an exhibit of the productive property which stands as an offset to such indebtedness. The aggregate of such productive property it is not easy, at present, to ascertain, but it is known to be very considerable. Thus, for, example, in the case of the State of New York, the interest on the State debt, January, 1867, was $2,589,652, while the W We now take the debt of Great Britain as we find it, and by the laws of our own experience; and the result is that we regard the public funds simply as the stock of a commercial company on the largest and grandest possible scale-that is, the scale of the entire state. The nominal capital sum, which never had any real existence, has now vanished out of sight altogether, and enters neither into the arithmetical nor the moral question. We simply find ourselves charged with an immense number and variety of payments, very similar to those that any entailed estate becomes charged with; and the only thing fixed and certain about the affair is the sum we have to pay annually. We have accepted the position of tenants paying a fixed rent and having a good long lease. (London Times, May 18, 1866.) 22 REPORT OF THE SPECIAL COMMISSIONER average annual surplus revenues from the public works of the State, for the seven years ending October 1, 1866, were $2,948,124; and again, in the case of Massachusetts, an aggregate debt of $27,638,918 is offset by collaterals paying interest to the extent of $16,926,588, thus reducing the real interest-bearing debt of that State to $10,712,330. Turning now to Great Britain, we find the total amount of funded and unfunded debt to have been as follows: On the 31st March, 1855............. - -801, 978, 763 = $4, 009, 893, 865 On the 31st March, 1866............. 802, 842, 949 4, 014, 214, 745 On. the 31st March, 1867.800, 758, 847 4, 003, 794, 235 The total gross expenditures of Great Britain for the years ending March 31, 1866 and 1867, were respectively as follows: 1866.................................. 66, 474, 357 = $332, 371, 785 1867............................ 67, 230, 396 336, 151, 980 FRANCE.-The funded debt of France has increased since the year 1851 in the following proportions: 1851........................ 5, 345, 637, 360 francs = $1, 015, 671, 098 1864...................... 12, 315, 946, 794 francs 2, 340, 029, 890 Showing an increase of 130 per cent. in 13 years. The total funded and floating debt of France for the years 1862, 1863, and 1864 was reported as follows: In 1862, 11,274,000,000 francs; 1863, 13,102,000,000; 1864, 13,177,000,000. The estimates for the interest account for 1868 also show an increase of 8,948,791 francs over the amount appropriated for this purpose for the year 1867. As might be expected from such an exhibit, the annual amount to be raised by taxation in France is rapidly increasing, while the population of the empire at the same time remains almost stationary; the whole increase from 1861 to 1865 inclusive being returned at only 680,781, or from 37,386,313 in 1861, to 38,067,094 in 1865-a ratio of about two-thirds of the normal annual increase of the population of the' United States.* AUSTRIA. —The published statement respecting the finances of this empire shows that from 1789 until the present time there has not been a single year in which the expenditures cf the state have not been in excess of the revenue. The total debt of Austria on the 1st of January, 1848, was returned at 1,250,000,000 florins, and on the 1st of January, 1866, at 2,600,994,469 florins, thus showing an increase of 108 per cent. in eighteen years. ITALY.-The total amount of the public debt of the various provinces of the kingdom of Italy amounted, in 1860, to 2,106,383,583 lire, ($400,212,880,) and in August, 1866, to 5,430,626,0001i re, ($1,031,818,940,) exclusive of a Lombardo-Venetian debt of about forty million dollars; showing an increase in six years of 158 per cent. The aggregate deficit arising from the excess of expenditure over revenue for the six years from 1860 to 1865, inclusive, was 2,054,930,000 lire, ($390,436,700,) which deficit, since 1865, has been largely increased. *As bearing on the question of the relative increase of population in the United States, Great Britain, and France, the presentation of the marriage rate in these countries becomes a matter of interest. In the United States, taking Ohio and Massachusetts as representatives of the northern States, the marriage rate for the year 1866 was 11.1 for the former, and 13 for the latter, in every thousand of the population-a noticeable increase over the minimum of the war period, viz: in 1863, when the rate fell as low as 8.4 in Massachusetts, and 8.2 in Ohio. In England and Wales, the marriage rate was officially returned, in the year 1866, as 9; in Scotland, 6.3; and in the whole of Great Britain as 8.12 in every thousand. In France, the marriage rate for 1861 was returned as 8.14 per thousand. OF THE REVENUE. 23 RUSSIA.-The actual excess of the annual expenditures of this empire over receipts necessitates a continued recourse to heavy loans from domestic institutions and foreign capitalists. Thus the average annual deficits for the years between 1832 and 1852 are reported at 57,219,810 roubles, while the war years of 1852-1856 brought with them deficits which averaged 175,504,400 roubles. The total of the financial expedients resorted to between the years 1832 and 1861, to meet these deficits of revenue, may be briefly stated as follows: Foreign loans, 228,385,000 roubles; loans from bank, 557,000,000 roubles; loans from the commission for the extinction of the public debt, 90,000,000 roubles; issue of bank-notes, 407,000,000 roubles; issue of treasury bills, 93,000,000 roubles; total, 1,375,385,000 roubles, or an average deficit of about $35,000,000 per annum. According to the budget estimates of the Rusaian minister of finance, the gross ordinary revenue of the Russian empire for the year 1865 was estimated at $265,956,500, and the gross expenditure at $300,821,095, showing a deficit of $34,864,595, which it was proposed to cover by an issue of exchequer bills to the extent of $13,500,000; by the proceeds of an Anglo-Dutch loan of $30,000,000, contracted in April, 1864, and issued at 85; and by an internal loan of one hundred millions of roubles, issued in January, 1865. PRussIA.-The total public debt of Prussia was returned for 1862 at 274,342,365 thalers. To this debt there were added three new loans in 1864, 1865, and 1866, raising the aggregate for the latter year to 341,342,365 thalers. According to the government estimates, the public revenue for the year 1865 was fixed at 150,714,036 thalers, and the expenditure at 151,821,653 thalers, indicating a deficit of 1,107,617 thalers. SPAIN.-The excess of the expenditure over the revenue of this kingdom from 1859 to 1864 is officially reported at $57,051,995, and from 1850 to 1864 at $105,300,000. The total public debt of Spain on the 1st of March, 1866, with a continental population on the 31st of December, 1864, of 16,302,624, was $819,887,360. TURKEY.-The total deficit of the revenue of this empire for the three years from 1859 to 1862 was $31,742,680, on an annual revenue for the same period varying from $45,000,000 to $55,000,000. A report made by an agent of the foreign bondholders on the state of the Turkish finances for the year 1866, declares "the general debt of Turkey to be a mere fiction, the law in respect to which has been broken on all points; the interest coupons not paid; a sinking fund not provided for; no bonds purchased or cancelled, while the board for the supervision of the debt has been dissolved and does not exist." To make the foregoing exhibit more complete, a comparison of the market prices of the public securities of the various nationalities is only needed; and for this purpose we give the following as the highest quotations in the leading European markets for November 1, 1867: British consols............ 3 per cents. (London).... 94~ Canadian bonds, 6s........ 6 " ".... 104 Cape of Good Hope...... 6 " "..... 104 to 106 New Zealand bonds....... 6 " ".... 1094 " "....... 5 " ".... 98 Ceylon 6s................. ".... 108 to 109 Mauritius 6s.................. ".... 105 to 107 New South Wales 5s.................... 99 to 100 Victoria 6s............................ 1124 Nova Scotia 6s............. ".... 104 New Brunswick 6s..... 103 to 105 24 REPORT OF THE SPECIAL COMMISSIONER Russian bonds, 1S50...... 5 per cents. (London).... 84~ to 85~ " " 1822..... " ".... 85, to 861 " i......". 3 " ".... 51 to 52 ex. div. Moorish imperial bonds.... 5 "s ".... 97 to 99 Egyptian bonds......... 7 9" ".... 82 to 84 Turkish bonds, 1854...... 6 " ".... 81 to 83 (Tribute of Egypt pledged.) Italian bonds, 1861...... 5 " ".... 45{ Sardinian, (Italian)....... 5.... 70 to 721 Peruvian bonds, 1865. 5 ".... 71 United States 5-20s..... 6 " ".... 70J to 707 Massachusetts stg. bonds.. 5 ".... 85 to 87 Brazilian bonds, 1863.... 4 " ".... 63 to 65.... 1865.... 5 " ".... 74 to 75 Spanish bonds.......... 3 " ".... 36~ to 371 French rentes........... 3 " (at Paris).... 68 f. 52 c. Austrian bonds.......... 5 " (at Frankfort).. 65Prussian bonds.......... 5 ".... 105 " "it........... 4~ " ".. 98 If, in the above list, the position of American securities is one not flattering to the national credit, it is evident from the data above submitted that the cause must be referred to some other than lack of national solvency. In the United States, during the month of November, 1867, the premium of gold, as compared with the national currency, was from 33 to 40 per cent. During the same month in Italy exchange was 12 per cent. premium; while in Russia the premium on gold was 14 per cent.; and in Austria, on silver, 22 per cent. RELATIVE MILITARY EXPENDITURES OF DIFFERENT NATIONALITIES. The relative expenditures of the different nationalities, for military purposes, is also a most important element in any attempt to estimate their relative financial abilities. Thus, in the United States, an army of 56,000 is believed to be, excessive and unnecessary; but in Europe the present military peace establishment necessitates the constant withdrawal of 2,800,000 men from productive industry, at a direct cost of four hundred millions of dollars per annum; which amount, if the loss arising from the compulsory abstinence from labor be also included, would, according to the most recent authorities, be further augmented to at least one thousand millions per annum. The present ratio of the number of persons employed in the military service of the different leading nationalities to the whole population is as follows: Belgium, 15.4 in every thousand of the population; Spain, 14.3; Northern Germany, including Prussia, 13.2; Russia in Europe, 11.9; France (without the reserve,) 10.1; Italy, 10.2; Austria, 8.5; Great Britain, 4.6; while, in the United States, with the largest military establishment ever maintained in time of peace, and certain to be considerably reduced, the ratio falls as low as 1.5 in every thousand. THE EXISTING COMMERCIAL DEPRESSION. In presenting a picture so full of encouragement in respect to our financial and industrial future, the Commissioner does not need to be reminded of the depressed condition of commercial, mercantile, and industrial affairs, for a reference to his former reports will prove that much of what has of late occurred was both foreseen and predicted. An analysis of the causes-immediate and directwhich have led to this depression, will, however, show that they are in no small OF THE REVENUE. 25 degree general, and not local in their character; confined to no one country, and the result of a natural and not unexpected reaction from a period of high prices, speculation, and over-production. In fact, the people of the United States have great cause of congratulation that the wave of commercial depression which, since the termination of their war, has swept over the commercial centres of the whole civilized world, has brought so little of disaster to their interests, inasmuch as there is not to-day a country in Europe in which the paralysis of industry is not greater, the failures more numerous, and the prospect of an early return of commercial prosperity and activity less encouraging than in the United States.* In his previous report the Commissioner, as the result of a carefully instituted and conducted inquiry, was led to refer the abnormal and unsatisfactory condition of the producing interests of the country mainly to three agencies, viz., scarcity of skilled labor, an irredeemable paper currency, and unequal and heavy taxation-the general resultant of all which was seen in an unnatural condition of high prices for both labor and commodities. Subsequent and continued investigations have afforded no ground for questioning the accuracy of these conclusions; but at the same time it must be apparent to even the most casual observer that things have not remained stationary. During the past year the supply of labor, disturbed by the war, has more and more returned to its accustomed avocations, and prices in many departments of industry, especially those in which no high degree of skill is requisite, have gradually receded. With cheaper food supplies, consequent upon a more abundant crop of cereals than was really harvested, this reduction would have been even more decided than at present. As it is, the scale of wages reported as generally paid for mining, for the puddling and rolling of iron, for ordinary labor in the manufacture of machinery, and especially for the manufacture of textiles, has been very considerably reduced. On the other hand, the fall in the price of many staple commodities has been even more marked and significant. Thus, for example, the fall in the price of " middling" cotton in the New York market has been from 35 cents per pound in September, 1866, to 16 cents in November, 1867; of cotton fabrics, during the past year, from 30 to 33 per cent.; of domestic wool, average coarse and fine, from 25 to 33 per cent., or to lower prices, in gold, than the average in any one year since 1827; of ordinary woollens, domestic, from 25 to 30 per cent.; foreign, from 35 to 40 per cent.; of lumber, coarser qualities, 15 per cent.; finer, 20 per cent.; of coffee (good Rio,) 11 per cent.; of tea (Oolong,) 12 per cent.; of copper (ingot,) 22 per cent.; of sheet iron (American,) 20 per cent.; of printing paper, 22 to 25 per cent., and of anthracite coal, at tidewater, from $9 93 per ton in October, 1865, to $5 50 in October, 1866, and $4 50 in October, 1867. The following table exhibits in greater detail the recent reductions in the wholesale prices of various articles of ordinary consumption: RAW COTTON —Wholesale prices in New York. Sept., 1866. Dec., 1867. Middling............................ 35c. to 38c. 15- c. to 16c. * During the first five months of 1867 the exports of France declined one hundred and ninety- eight million francs, as compared with the corresponding period of 1866; while the imports increased, during the same period, one hundred and seventeen millions; of which ninety-three were returned as importations of breadstuffs and other articles of food, necessitated by the insufficiency of the harvest. During the first five months of 1866 the exports of France exceeded the imports; but during the first five months of 1867 the imports exceeded the exports by three hundred and thirty-two millions of francs. 26 REPORT OF THE SPECIAL COMMISSIONER COTTON GOODS. Dec., 1866. Dec., 1867. Prints-Hamilton.................18 cents. 124 cents. " Amoskeag..................... 174 " 114 " " Wamsutta.................144 " 9 " Bleached cottons-New York Mills,4....40 " 22 4 " cc" Wamsutta, 4......... 32 " 20 " t" Slater's, 4....... _. 224 " 12i " t" Lewiston,...............17 " 9 " c" Boott R, 4 4.............14 " 8 " "a James, X.............224 " 13," Slaterville, 4..........16 9 Brown cottons-Appleton A, 4............. 22 " 14 4 " It Pepperell R, 4....224 " 12. " c" Pepperell 0, -........ 21 " 11t " " Massachusetts E,....20 " 10 " Go Lawrence H, a............17 " 94 ",' Bedford R, 4........... 15 " 8 " Cotton flannels-Ellerton............37 " 274 " t" Hamilton............30 " 21 " "' Tremont..................22 " 15 " Denims —Amoskeag...................37 " 27 " " Hamilton.......................374 " 24 " Delaines........................25 " 17 " WOOLLEN GOODS. Dec., 1866. Dec., 1867. Cassimeres, good quality... $1 62 $1 30 medium quality 1 25 90 low quality 1 00 724 Satinets, good quality, (124 oz.) 824 65 medium quality, (11 oz.).... 624 50 low quality, (114 oz.)... 32, 274 Kentucky jeans, good quality, (24 oz.). 50 324 low quality, (34 oz.). 19 14 Cloakings, 54 in., water-proof, (13 oz.) 1 75 1 00 Carpets, Lowell, 3-ply............. 2 15 2 (00 extra super............... 1 75 1 55 superfine........... 1 60 1 40 Hartford, extra 3-ply....... 2 25 2 05 DOMESTIC Woo, — Wholesale prices in Boston. Nov. 16, 1866. Nov. 15, 1867. Coarse, Ohio, Pennsylvania, New York, Vermont and Virginia, perlb. $0 45 to $0 50 $0 35 to $0 38 Indiana, Michigan, Wisconsin, and Iowa............... 42 to 47 33 to 35 Medium, Ohio, Pennsylvania, and Virginia................. 50 to 53 38 to 40 Indiana and Michigan..... 47 to 53 35 to 38 New York and Vermont.... 47 to 50 30 to 36 Wisconsin, Iowa, Illinois, and Minnesota............. 43 to 47 35 to 37 Fine, Ohio, Pennsylvania, and Virginia................... 53 to 57 40 to 43 OF THE REVENUE. 27 New York and Vermont... $0 50 to $0 53 $0 35 to $0 38 Combing, Canada................ 70 to 75 58 to 60 Pulled, superfine.......... 50 to 55 33 to 40 M[ETALS- Wholesale prices in New York. Dec., 1866. Dec., 1867. Copper, American ingot, per lb...... $0 27 to $0 28 $0 21 to $0 22 sheet................. 39 314 Zinc.......................... 13 to 131 11 to 11a Lead, Spanish, per 100 lbs.......... 6 75 6 37 to 6 50 PETROLEUM. Crude, 40 to 47 gravity, per gal.... $0 20 to $0 21 $0 16 to $0 161 Refined, prime, in bond............ 33 23 to 26 LINSEED OIL, WHALE OIL, &C. American, per gal.................. $1 40 $1 02 to $1 05 Whale........................ $1 25 to 1 30 68 to 74.Sperm......................... 3 00 to 3 05 2 35 to 2 40 Spirits of turpentine............... 74 50 LINSEED OR FLAXSEED. American, per bushel............. $3 10 to $3 25 $2 35 to $2 40 PAPER. Printing, all rag, per lb............. $0 174 $0 134 Book........................... 32 25 Binders' boards, 25 to 30 per ct. decline. GUNNY CLOTH. Calcutta standard................. $0 29 to $0 30 $0 20 to $0 21 LUMBER. Spruce, per M feet................ $21 00 to $24 00 $18 00 to $20 00 Clear pine................. 0 00 to 100 00 60 00 to 70 00 Southern pine................. 40 00 to 50 00 35 00 to 40 00 COFFEE. Rio, good, per lb.................. $0 17 to $0 18 $0 154 to $0 16 ordinary................... 164 to 163 124 to 13 Maracaibo...................... 174 to 19 16 to 18 SALT. Turk's Island, per bushel.......... $0 56 to $0 57 $0 49 to $0 50 RICE. Carolina, per 100 lbs.............. $12 00 to $13 00 $8 50 to $9 25 TEAs-Average wholesale prices in gold, duty paid. Green, per lb.................... $0 80 to $0 90 $0 70 to $0 80 Japan................... 70 to 75 62 to 65 Oolong..................... 60 to 62, 524 to 55 28 REPORT OF THE SPECIAL COMMISSIONER It is obvious, therefore, that in addition to the causes flowing from the war, and which have been operative since its conclusion, to render unsatisfactory the industrial and financial condition of the country, we have now another disturbing element in the very marked reduction of values above noted; and it is mainly, we believe, to the losses and paralysis of industry thus occasioned, that the protest against taxation and contraction, and the demand for legislative relief, has now become more urgent than at any former period. It should, however, be borne in mind that severe as may be the shrinkage of values recently experienced, affecting alike the producer and exchanger, the process is not only a healthy one, but one which has long been foreseen to be inevitable. It is, in fact, the transition from inflated to legitimate prices —a transition which must precede the re-establishment of industry on any sound and healthy basis. In short, the same tendency to recover from disease through natural agencies would seem to characterize the body social and politic as is recognized in the body organic; and the lesson which enlightened medicine teaches in regard to the one would seem to be equally applicable in respect to the other, viz., that "soothing and sustaining," rather than "heroic" treatment is most likely to promote and hasten recovery. It is not easy, moreover, to see in what manner the shrinkage of values in question —the immediate cause of the present. industrial and financial depres-, sion-could have been averted by any recent legislation of Congress, even if it had been deemed desirable; or what connection-other than purely imaginarythere has been between the policy of the Treasury as regards contraction or funding, and the paralysis of business which is an invariable accompaniment of a fall in prices. Thus, for example, cotton, both in the form of fabric and raw material, has declined because it seems certain that the season of 1867-'68 is to close with a stock of more than a million of bales in excess of the requirements of Europe and the United States for consumption; wool, because the great woolproducing countries of the world have within a comparatively few years again and again doubled their entire product and export; paper, because the capacity to manufacture has been augmented from twenty to thirty per cent. within the last sixteen months; freights on the northern lakes, because more tonnage has been put afloat than was required to transport the entire product that required to be transported; copper, because of the excessive and cheap product of the Chilian mines; and coal, because twice as many mines have been opened, and twice as much capital invested as was necessary to supply the product needed. And this detailed exemplification might be much further extended if deemed desirable. In short, the immediate chief cause of the fall of prices has been an over-production, which the great profits of former high prices have both stimulated and occasioned; and it cannot be shown that the consumption of any one of the great staple commodities (wool possibly excepted) has during the last year materially diminished, while the consumption of some is known to have largely increased.* *Another striking illustration of the difficulty of clearly appreciating the true relations between cause and effect in politico-economical matters, is also afforded in the case of shipbuilding, the depression of which important interest is often considered as entirely within the province of Congress to remedy. That this depression is, however, in a great degree beyond the power of direct legislation to remedy will appear evident, when an analysis of the causes which have led to it is instituted. These causes are in the main three: first, high prices of material; second, high prices of labor; and third, a change in the conditions of maritime trade. Now to the extent to which the prices of materials are enhanced by taxation, to just that extent can legislation, by the removal of taxes, afford relief. But the internal revenue taxes on ships, and on most of the materials which enter into their construction, have already been removed; and although the custom duties are still maintained on the importation of ship-building materials, yet the fall in prices of such materials during the past year has to a considerable degree offset the duty, and in the case of at least one article-copper-has been largely in excess of it. These changes, however, have as yet brought no relief; and simply because the removal of the taxes and the fall of prices of commodities have not as yet suf OF THE REVENUE. 29 Reviewing the events of the past year, it would seem, furthermore, that so far from there having been any adverse influence exerted upon prices through a contraction of the currency, the tendency, in truth, has been entirely in the opposite direction; for it cannot be doubted that afall of prices equivalent, on the whole business of the country, to at least ten per cent. must have been equivalent to a large addition to the machinery of exchange before existing. What the practical increase of the currency effected indirectly in this manner has amounted to, cannot be definitely stated, but in the opinion of the Commissioner it has not been less, during the last twelve months, than one hundred millions of dollars. The true theory of legislation under the present condition of affairs would seem to be, not to suspend or delay recovery-painful though it may be-from abnormal prices and over-production by further inflation, but that relief should be afforded to the greatest extent possible by the removal of taxes which impede production-taxes which, when first imposed, were drawn from profits, and were therefore to a certain extent justified, but which, with the present reduction of values, fall mainly upon capital. The Commissioner, also, would call attention, in this connection, to the fact, that while the material abatement or entire removal of internal revenue taxes from particular articles or classes of articles made by the thirty-ninth Congress has proved of substantial benefit, and has brought to the revenue system something of simplification, yet the relief experienced by the whole country has not been proportioned to the amount of revenue abandoned; or to what the relief probably would have been, had an equivalent reduction been made in the form of a uniform percentage on all the so-called industrial taxes. The reason for this undoubtedly is, that the continued.imposition of taxes on the great majority of ficiently reduced the price of labor-the high cost of which is the main reason why not only the price of ship-building material is high, but also why ships cannot now be built as cheaply in the United States as in other countries. And a reduction of wages, furthermore, to a degree sufficient to enable the American to compete with the foreign ship-builder, cannot be brought about, by legislation, or by any other circumstance, until more abundant and cheaper harvests have materially reduced the cost of subsistence to the laborer. But supposing, on the other hand, that the price of labor and of material could be at once reduced to a point corresponding to the rates which prevailed before the war, it is altogether certain that the change would not be attended with any immediate and substantial revival of ship-building, or of the shipping interest. Labor and material entering into the cost of ships are lower to-day in Great Britain and throughout Europe than at any time for twenty years previous; and yet there are few or no ships in these countries now in the course of construction; while the employment of many that are already constructed is greatly restricted. In fact, the registered tonnage of the British empire ceased to record a progressive increase for the first time in the year 1866; the total registered tonnage (ships and steamers) being 7,306,808 tons for 1866, as compared with 7,322,604 for 1865; while the decrease in the registered tonnage of sailing vessels, alone was nearly 7 per cent. This latter result, apart from the immediate depression of trade, is attributable mainly to the fact that steamers have, to a great extent, taken the place of ships, and that each steamer, through its rapidity of movement, supplements from four to six sailing vessels of equal capacity. Iron vessels are also being rapidly substituted for wooden; a circumstance which finds striking illustration in the fact that out of the 2,808 steam-vessels registered in Great Britain on January 1, 1867, only fifty-three were reported as constructed of wood. Aside, also, from these causes which have tended to restrict the building of wooden vessels, and which are universal in their influence, there are others equally operative in the same direction, which are, in a measure, peculiar to the United States. Thus, previous to 1861 a maritime tonnage was required adequate for a transatlantic movement of about three million bales of cotton per annum; but from 1862 to 1866 this immense business was practically annihilated, and since then has been but partially restored. A similar experience has also characterized the extensive coasting trade that formerly was requisite for the transaction of the business between the northern and southern sections of the country. The repeal of the reciprocity treaty, and the imposition of all but prohibitory duties on the importation of foreign wool-formerly imported to the extent of seventy million pounds per annum-have also contributed to lessen the demand for the employment of vessels. While, therefore, the American ship-building and ship-employing interests have strong claims upon the government for relief, it seems certain that relief can be afforded by legislation to only a very limited extent. 30 REPORT OF THE SPECIAL COMMISSIONER products has been used as a pretext or a cover for refusing to make abatement in the prices of those which were entirely exempted or favored, and in proof of this some instances could be referred to, in which the reduction of taxati,on on particular articles was almost immediately followed by an enhancement of their price; and of many in which the price remained nearly stationary. It cannot, however, be now doubted, that a removal of all the internal taxes which materially impede production, with, possibly, some slight modifications of the tariff, will be followed by an immediate and great revival of domestic industry; inasmuch as evidence of the most conclusive character has been presented to the Commissioner, showing that the decision respecting the continuance or removal of taxes on certain leading branches of industry will, of itself alone, determine whether manufacturing at current prices shall be carried on at an actual loss, or with a small margin of profit. In the previous report of the Commissioner it was proved, that while up to the commencement of the year 1867 the average advance of commodities was about ninety per cent., that of wages was not in excess of sixty per cent. Now, however, the case is being entirely reversed; commodities have fallen so much more rapidly, that the purchasing power of wages, even when reduced, is probably greater at the present time than when they had attained their maximum. The condition, therefore, of domestic industry, when once revived through the removal of taxes, will probably continue to improve with great rapidity, for production will rapidly follow consumption, and production in turn is the great legitimate source of both national wealth and national revenue. But important as may be the demands on behalf of industry, the first and paramount consideration in any proposed revision of the revenue system is to fully insure to the government an ability to meet its expenditures; and although a removal of the so-called industrial taxes can, as already shown, be provided for in a great degree by the reduction of expenditures, yet even then there will remain, over and above the receipts from customs, a very considerable sum to be raised from internal or domestic sources. The assertion, however, is frequently made, and is not unweighty in argument, that the whole of this sum can and ought to be easily raised by the imposition of taxes on spirits, tobacco, and a few other articles of luxury; but such a conclusion, plausible as it may appear, unfortunately finds little support in the results of any previous domestic experience. To determine, however, what basis for practical legislation in the way of reform really does exist, the Commissioner would next ask attention to the sources available for internal revenue, other than those dependent upon the ordinary industries; and for the purpose of eliminating in this discussion to the greatest extent possible the element of uncertainty, he bases his estimates in all instances upon the supposition that the existing faulty and imperfect system of revenue administration is to be, for the present, substantially maintained and continued. DISTILLED SPIRITS. Of the various available sources of internal revenue that of distilled spirits ranks first in importance. The attempt, however, thus far to collect any legitimate revenue from this source has, as is well known, proved a most lamentable failure, and for the following obvious reasons: first, the tax has been placed at such a rate as to constitute in itself so great a temptation to fraud, that average human nature, as it exists in the United States, is not able to resist it; and secondly, the system under which the officers have been selected to collect the tax and supervise the manufacture has not, thus far, recognized honesty, intelligence, and business capacity as the irst, only, and essential qualifications for appointment. OF THE REVENUE. 31 The Commissioner does not propose to enter into any argument to prove the truth of these statements, for the experience of the last two years has made them, as it were, self-evident; but he would ask attention, briefly, to what may be regarded as the positive facts of the case. The amount of distilled spirits produced in the United States, immediately prior to the year 1861, undoubtedly approximated to one hundred millions of gallons per annum. After that year the production greatly declined; first, by reason of the substitution of the cheaper distillates of petroleum in the place of burning fluid for illuminating purposes; and secondly, on account of the tax, which, by greatly enhancing the price of alcohol, largely diminished its uses for industrial, scientific and medicinal purposes. The imposition of the tax, in the first instance, probably reduced, in some degree, the consumption of cheap spirits for drinking; but this influence was only temporary in its duration, and all the evidence obtainable is to the effect that the consumption for drinking purposes is now greater than at any former period. The present production of distilled spirits in the United States, theoretically available for assessment and revenue, is undoubtedly about fifty millions of proof gallons per annum; and although statements implying a larger annual production and consumption are continually put forth, and are made to some extent the basis of financial reasoning, they, are supported by no evidence, and are entirely unworthy of credence.* The largest amount of revenue collected in any one year, since the imposition of the present tax of two dollars, has never been in excess of thirty millions of dollars, ($29,482,078 in 1866, and $29,160,409 in 1867,) or, in other words, the government has thus far succeeded in collecting the tax on somewhat less than one gallon of proof spirits to every three gallons that has been manufactured. The tax thus evaded has not, however, through the enhanced price of spirits, inured, to any considerable extent, to the benefit of the consumer; which enhancement, if not on an average equal to the cost of manufacture, plus the government tax, has been sufficient to afford an annual aggregate of profit to the illicit dealers of at least thirty millions of dollars; which sum, moreover, may be taken as the measure of the present inducement to evade and defeat the law. Under these circumstances the practical question which presents itself is this: What can be done to draw from a source, which all are agreed should contribute largely to the expenses of the government, a greater amount of revenue? As the failure to collect the revenue from distilled spirits has been due, in no small part, to the fraudulent complicity and incompetency of the revenue officials, is a fact that cannot be questioned, the first step, therefore, in the way of reform, would seem to be to provide for the immediate enactment of a new and different administrative system. The success of such a measure, however, judging from the little favor given in the thirty-ninth Congress to the so-called " civil service bill," is, at least, doubtful; and in case the reform under consideration should now be ordered by Congress, some considerable timue would inevitably elapse before the new system could be made effective. But even accepting the question of reform as settled, it is certain, in the opinion of the Commissioner, that its influence would only in degree compass the end desired. The states of central Europe, with a dense population and thoroughly'In Great Britain, where the statistics of the production and consumption of distilled spirits are known to be reliable, the estimate of the consumption of spirits given to the Commissioner by the authorities, during the past year, was 0.743 gallon per capita. In Great Britain, however, the consumption of beer largely supplants that of distilled spirits. In the province of Nova Scotia, where the domestic production of distilled spirits is forbidden by law, and all liquors consumed are imported, the returns of importations, which may be presumed to be accurate, indicate a consumption of 1.3 gallon per head. In Canada, the estimated consumption during the year 1864-'65, based on data which is believed to be entirely reliable, was If gallon per capita. 32 REPORT OF THE SPECIAL COMMISSIONER organized police, have also provided a civil service administration, which insures the highest degree of integrity and capacity in its officers; and yet in Austria, Prussia, Belgium, Holland, and the smaller German states, the idea of collecting any large amount of revenue from a high tax on distilled spirits has been practically abandoned. In France, furthermore, the recent advancement of the tax on spirits from sixty-six cents to about ninety cents per gallon has brought no considerable increase of revenue, and the measure, financially, is reported to the Commissioner as a practical failure. In Russia the government secures a large revenue from spirits only by monopolizing the business of distilling all domestic liquors and selling the products. In Great Britain alone is the collection of a high tax on spirits (ten shillings per gallon) in any degree successful; but here, contrary to general assumption, the tax is not in excess of that adopted in the United States, but somewhat less, (viz., 7s. 4d. = $1 83,) being levied on the imperial gallon and on a different standard of proof. In Great Britain, moreover, a mixture of alcohol is allowed to be used for industrial purposes, duty free, under certain circumstances; and the commissioners of inland revenue, in their annual report for 1863, assert, " that if this mixture had not been devised for the relief of our manufacturers, it would have been almost impossible to maintain the present high rate of duty." In discussing, during the past season, the expediency of a high rate of duty with the leading officers of the British excise, the opinion was also expressed to the Commissioner, that were the system to be commenced de novo in Great Britain, a collection of the present tax, even with their almost perfect revenue administration, would be found very difficult. It should be also noted that in Ireland, where the conditions of population and police are somewhat different, the tax on spirits is resisted to a much greater extent than in England or Wales; the present average number of arrests in Ireland for illicit manufacture being nearly three thousand per annum, which ratio, applied to the population of the United States, would be equivalent to upward of nineteen thousand per annum. But, while admitting the results of European and domestic experience in this matter, the opponents of a reduction in the rate of taxation will undoubtedly again present, as they have heretofore, the argument, that all the reasons to be given in favor of the reduction of the rate of $2 will apply equally well to almost any lower rate that can be practically adopted; or, in other words, that the manufacturer who will cheat with the tax at $2, will continue to do so at fifty cents; and that the removal of all extraordinary inducements to fraud will be equivalent to abandoning all idea of raising from spirits any considerable amount of revenue. -To this it may said: First. That, in determining the tax, there is certainly some line of demarcation between moderation and excess, and that $2 per gallon is excessive, and higher than is imposed by any other nation. Secondly. That the inducement of the great profit to be obtained from evading a $2 tax undoubtedly tempts many to engage in illicit manufacture who would be unwilling to do so with a certainty of realizing a much smaller rate of profit. This proposition, although almost seemingly self-evident, finds a striking confirmation in the fact that the number of distilleries, in certain sections of the country, has increased just in proportion as the tax on spirits has been augmented. Thus, for example: In the eighth collection district of the State of New York, there was, before the internal revenue law went into-operation in 1862, but one distillery; when the tax of twenty cents was imposed some five or six additional distilleries were started. When at sixty cents about one dozen were in operation; but this number under the $2 tax increased to about forty. Furthermore, the tax collected in one distillery in this same district in one month in 1864, under the sixty-cent tax, was one-third more than was paid in the aggregate by thirty distilleries in the eight months succeeding November 4, 1864 when the tax was $2; or, in other words, one distillery in one month in 1864, paid $58,819 at OF THE REVENUE, 33 sixty cents per gallon, while thirty distilleries, in eight months of 1866-'67, paid at $2 per gallon only $33,664. Thirdly. The reduction of the tax to fifty cents per gallon would entirely prevent the extensive and increasing smuggling of distilled spirits on the northern frontier, as the tax in the British provinces would then be in correspondence or in excess of our own, and thus cut off all margin for profit. It would also greatly diminish or entirely destroy the illicit manufacture of spirits from molass s in the seaboard cities, as this article (mainly imported) could not, by ieason o,`'s greater cost, be used to advantage as a substitute for grain. The extent to wt legitimate industry is burdened by the continuance of the present tax was fllhy discussed in the report of the revenue commission in 1865; but one striking illustration, growing out of the events of the past year, may be adverted to. In the spring of' 1867 the Drug Exchange of Philadelphia passed a resolution that, in order to assist the government in the collection of the tax on distilled spirits, they would in no instance buy, or become parties, either directly or indirectly, to the sale of any spirits, for less than the average cost of production, plus the government tax. These resolutions have, it is believed, been faithfully adhered to, and the result is, that the manufacturing druggists and chemists of Philadelphia have experienced a great decay in certain branches of their business, which have been attracted elsewhere by the competition of the more unscrupulous. The Commissioner would therefore recommend, as he has done in his previous repoi'ts, that the attempt be no longer persisted in on the part of the government to collect a tax which all experience shows cannot be collected, and whose continuance is utterly demoralizing in its influence, and in a high degree injurious to industry, but that the rate be reduced to fifty cents per gallon as a maximum. Whether any loss of revenue would occur from any such reduction may well be doubted, especially when it is remembered that the government has thus far received but a small additional revenue in any one year from a tax of two dollars per gallon over and above what it did for the fiscal year ending June 30, 1864, when the tax was from twenty to sixty cents per gallon. In order, however, to insure against any loss of revenue, but rather to make its increase certain, the Commissioner would propose a new system, based on the plan of dividing the collection of the tax between the manufacture of the spirit and its sale, and making both a part of one and the same system. The leading features of this system are as follows: First. To reduce the tax to fifty cents per proof gallon as a maximum, and make its collection obligatory at the place of manufacture; abolish all bonded warehouses for the storage of spirits, except possibly a temporary wareroom at the distillery, and forbid all transportation of spirits in bond. Recognizing, also, the fact that any legislation which is celtain to bring relief to and promote the industrial interests of the whole country is sufficient to warrant the disregard of the interests of a comparatively small number of individuals, the special tax or license to be imposed upon distillers, now $100, should be advanced to at least $1,000, and that the same should be made applicable to rectifiers. The impracticability of the plan of collecting the tax through what is called the " capacity" system, has been so completely demonstrated by the Commissioner of Internal Revenue in his recent report that any further reference to it is unnecessary. Some one of the recently invented spirit meters may, however, afford such additional safeguards against fraud as to render its obligatory use most desirable. It should, however, be borne in mind that the use of a meter will only prove effective against fraud in the case of distilleries which are known and recognized; and that it is the secret distilleries, working illicitly, that are likely to prove hereafter the most difficult to manage. It is not probable that even anl effective reform of the administrative system would do much toward breaking up the very H. Ex. Doc. 81 3. 34 REPORT OF THE SPECIAL COMMISSIONER large number of illicit stills which are believed to,e-in continual operation in the remote and sparsely settled sections of our country; but for these a reduction of the tax is the only remedy, for illicit whiskey, on the average, costs at least fifty per cent. more than that produced legitimately, on a large scale, with the most economical forms of apparatus. In estimating the probable amount of revenue to be derived from a tax of fifty cents per gallon on proof spirits, it should also be remembered that there would be, with this reduction, a very large increase in the use of alcohol for industrial purposes, which increase good authorities have estimated at from eight to ten millions of gallons per annum. Such a result, furthermore, would bring with it this additional advantage: that it would lead to an increased market for several million bushels of western grain; and that much of the grain which would thus be made applicable for use, being damaged by overheating, is of little value for any other purpose than the production of alcohol. On an estimated increased annual product of from fifty:five to sixty millions of gallons of proof spirits, and through the increase'ecommended in the " license" or " special" tax on distillers and rectifiers, the Commissioner is of opinion that a tax of fifty cents per gallon would yield a revenue of over twenty-five millions of dollars per annum. Secondly. The special tax annually imposed on retail dealers in liquorsis now $25, and is at present yielding a revenue of about three millions of dollars per annum. With the reduction of the tax on the manufacture of proof spirits to fifty cents per gallon, this special tax might be advanced to $100, thereby increasing the aggregate revenue from this source to from ten to twelve millions of dollars per annum. Thirdly. The special or license tax imposed on wholesale dealers in liquors is $100 when the annual sales are not in excess of $50,000, and one-tenth of one per cent. on the amount in excess of that sum. The revenue obtained during the last fiscal year from these taxes was, respectively, $982,135 and $114,715, making a total of $1,096,850. The special tax imposed upon rectifiers is $25 for each 500 barrels produced, and yielded, the last fiscal year, the sum of $80,470. The total amount received from both wholesale dealers in liquors and rectifiers was $1,177,320. The Commissioner would propose that the special taxes referred to under this head should be repealed, and that a tax of from two to three per cent. be imposed on the value of all spirits sold at wholesale, to be paid monthly, and-a tax of ten cents per gallon on all spirits rectified, to be paid weekly., A tax of 21 per cent. on sales, and ten cents on spirits rectified, will, in the opinion of the Commissioner, yield a revenue, which cannot be easily evaded, of at least twenty millions of dollars per annum, making a total amount of annual revenue which can probably be derived from the tax on distilled spirits, under the proposed system, of from ifty to sixty millions of dollars. The demoralizing influence of great gain from a successful evasion of the law in the production of distilled spirits being also in a degree taken away by a reduction of the tax in the first instance, a large indirect gain of revenue from other sources might also be reasonably anticipated.* "As indicating in a degree the extent of the traffic in spirituous liquors in the United States, and therefore of the probable success of the proposed new system, the Commissioner would call attention to the following aggregate amount of sales by the retail dealers in liquors in the principal commercial cities of the country during the fiscal year ending June 30, 1867, as deduced from the receipts of internal revenue: New York -..-..-,-... —-....-..... —-.... —-... —- $68,506,155 Cincinnati......-....-... ——. --—.. —----—................. —-—... 44,720,437 Philadelphia............................................................ 43,635,840 New Orleans.-............... —--- -- ---—... -—.. 37,588,582 Chicago. —--------—.. —-------—.. —----- —. —------------. —-. 30,462,920 Baltimore —..- -—.............................................. —---- 28,950.367 OF THE REVENUE. 35 FERMENTED LIQUORS. The continued increase of the revenue from the tax on fermented liquorA is gratifying; yet the amount received from this, in common with all other sources of internal revenue, is undoubtedly much less than what is legitimately due to the government. An annual increase of about $700,000 since the method of collecting the tax by means of stamps was adopted, indicates that the new plan has not been successful; though a part of the increase noted is undoubtedly due to a legitimate increase of production and consumption-especially of lager beer. The amount of revenue that may be relied on from this source during the next fiscal year is about six millions of dollars. The statistics obtained relative to the erection of additional breweries and malting houses furthermore indicate that the production and consumption of malt liquors, and theoretically of revenue, is now increasing at the rate of from tell to fifteen per cent. per annum. Were the proposed reforms in the administration of the civil service to be effected, an immediate increase of revenue from this source to seven millions of dollars per annum might, in the opinion of the Commissioner, be safely anticipated. As an additional safeguard against fraud, it has been proposed to tile Commissioner to substitute for the present paper stamp a species of metallic stamp, secured to the barrel by a simple and ingenious device, in such a way that the stamp can be attached without trouble, and yet not removed without such defacement as to make its further use almost impracticable. If, as seems probable, it may be found for the interests of government to adopt this new method, it is desirable that the power already given to the Commissioner of Intetlnal Revenue to prescribe stamps or change any now in use, should be further increased by the addition of authority to change the mode of cancellation to some other than that now prescribed by law; and for this purpose it is recommended that section 53 of the act of July 13, 1866, be amended by adding after the word " cancelled" the following: " or shall be cancelled in such manner as the Commissioner of Internal Revenue shall deem best." TOBACCO. As a source of internal revenue tobacco ranks next in importance to distilled spirits. The collection of a legitimate revenue from tobacco is, however, environed with even more difficulties than is experienced in the case of distilled spirits; while the frauds perpetrated in the manufacture of tobacco are, in the opinion of the Commissioner, comparatively greater. Some of the principal methods, reported to the Commissioner, by which these frauds are accomplished, will be briefly stated: First. The chief and most extensive agency by which the revenue is successSt. Louis............... —----- -----------------------------—. —-. $24,989,062 Albany....... —---—..... —----------... —--------- -------—.... 23,736,023 Detroit.- 14,308,2'90 Milwaukee-.......................................................... 14,2'21,870 Newark..-.. 3,994,917 Louisville-........................................................... 13,633,335 Brooklyn....-...................... 13,509,675 Cleveland-..................................... 13,344,7.10 Buflalo-..................... 13 085,820 Mobile.........-............................ 1,797,590 San Francisco....................... 10,991,332 Providence.............-.................... 10,234,245 Boston 9,945,255 Charleston-............................................. 8,553,975 Pittsburg..-................................................ 7,434,645 Total........................................................... 457,645,115 36 REPORT OF THE SPECIAL COMMISSIONER fully evaded grows out of the complicity or incompetency of officials. In fact, the present method of collecting the revenue is made so far dependent upon individual inspectors that when honesty is wanting the check derived through inspection becomes almost worthless. Second. The use of counterfeit or illegal inspection brands. Each inspector furnishes his own brands in whatever style he chooses, and there is no uniformity in the method of inspection. In some districts the brand "smoking" appears on the casks or packages which have been inspected and branded as such; while in other districts this word is omitted; thus enabling chewing tobacco to often escape with a fifteen cent tax, when by law it is required to pay forty cents. Inspectors are fiequently removed; but when this is the case they retain their brands, and there is nothing but general vigilance to prevent inspection in large quantities, either by themselves or others, after their removal. Stencil cutters, in executing an order for an inspector, may make any number of fia similes and dispose of them to manufacturers; or any dexterous person can imitate a branding plate so closely as to prevent the counterfeit markings from being readily detected. Third. The continued use of inspected packages, and the collection of the inspected heads and portions of packages once used to be used again in the construction of new ones. Fourth. Having a large quantity of smoking tobacco inspected and afterward removing it and substituting chewing tobacco-charged with a higher tax-in its place. Fifth. In some districts it is customary, in order to facilitate business, to allow small packages or bundles, of from one to ten or more pounds each, to be sold without inspection marks, the manufaeturer simply entering in a small book the amounts, to be added up occasionally by the inspector. In this manner no inconsiderable portion of "fine cut," sold in rolls or foil, escapes taxation. Sixth. An irresponsible person may rent a cheap building, purchase some old machinery, hire motive power, obtain a license, and give bonds for $3,000 for the purpose of manufacturing smoking tobacco. He may obtain his leaf from another interested party, or buy it daily, and dispose of his goods as fast as made. Under the present law he canq continue this business for sixty days, have his tobacco properly and faithfully marked and branded, and become a debtor to the government, on account of the taxes on his product, from $20,000 to $25,000. Before the expiration of the sixty days he disappears, leaving to the government his machinery and bond-if that happen to be good-amounting in all to, perhaps, a value of $5,000. The manufacturer in question, thus disappearing, appears again under another name, in another locality, and again successfully perpetrates the same system of evasion. Seventh. The use of hand-cutting machines in families throughout the country. Eighth. The abuse of the bonding system. Under these circumstances it is not surprising that an inquiry into the state. of the tobacco trade should reveal the following anomalous results: Smoking tobacco, marked as properly inspected, is reported as being extensively sold at from sixteen to twenty cents per pound, when the elements of its cost are as follows: Raw material, seven to eight cents per pound; cost in manufacturing, one and a half to two cents; tax, fifteen cents; making a total net cost of about twenty-four cents. Fine-cut chewing tobacco is also largely sold at much less than its proper net cost, supposing the taxes to have been paid upon it. The result of such transactions is that legitimate manufacturers are struggling to do business in the face of a ruinous competition, while the unscrupulous are rapidly accumulating large fortunes. Respectable dealers also gradually yield to the apparent necessities of the case, and purchase their tobacco, without question, where it is offered the cheapest. OF THE REVENUE. 37 A letter, addressed to the Commissioner by one of the leading tobacco manufacturers of the west, says: " It is a fact that frauds on the revenue, in respect to tobacco, are becoming so common that it is regarded by a large portion of the community as a venial offence, and it may be taken for granted that manufacturers of tobacco pay only a portion of the tax. It is no sure evidence, moreover, because a house reports a large tax, that it is strictly honest; for if a portion of the tax is evaded they can undersell others, And thus greatly increase their business. We also find through the country new and unknown men in the business, who by their low.prices are taking the trade." The Commissioner would also state that the books of some of the largest tobacco manufacturers in this country show that their aggregate sales of smoking tobacco for the whole of the last year have not been in excess of the average of sales which, before the imposition of the tax, were effected in a single week. The interests of the government require, and the people expect, that a large revenue should be collected from tobacco; but by what method of law and procedure the difficulties which attend the collection of the taxes imposed on this article can be best overcome, it is not easy to say. In truth the subject has never yet received from any officer of the government that thorough investigation and study which its importance demands, and which have been given to other specialties of taxation. A very slight investigation, however, would seem to establish the fact that in this, as in nearly every other department of the revenue, the main cause of the present discreditable condition of affairs may be referred back directly to the imperfect administration of the law, growing out of the manner in which the inspectors are selected and appointed. Remedy this, and the difficulties which now attend the enforcing of the law and the collection of the taxes will in a great degree be removed. In addition to such reform, the "trade" very generally, as the result of their experience during the past few years under the internal revenue, have united in a recommendation that the taxes on tobacco of all kinds be collected and -paid by means of stamps elaborately engraved, and representing specific quantities. The exact method in which the stamps shall be used is, however, to some extent a matter of disagreement among the advocates of the proposed new system. By some it is proposed that there shall be no restriction upon the method of packing tobacco, but that stamps shall by requirement of law be affixed to every package, including foil and roll; and that all packages in excess of three pounds in weight shall have, in addition to the stamp, the brand of an inspector. The portion of the trade referred to also recommend: First, That the tax be reduced from forty to twenty cents on chewing, and from fifteen to ten cents per pound on smoking tobacco; and that in such case the prepayment of stamps be made compulsory: or, that in case the tax be not reduced, the bonds of all manufacturers of chewing and smoking tobacco be largely increased, and the issue of stamps on credit by the collector be limited to fifty or seventy-five per cent. of the amount of the bond. Other representatives of the tobacco trade, not less influential and intelligent than the former, recommend that the law be so amended as to require the sale of all chewing and smoking tobacco to be made in packages to which a stamp is affixed; that the maximum weight of package shall not exceed one pound; that all smaller packages shall be some multiple of a pound in ounces; that, for convenience and simplicity in calculation, the taxes be fixed at sixteen cents per pound (or one cent per ounce) for smoking tobacco; and thirty-two cents per pound (or two cents per ounce) on chewing tobacco, in place of the present rates of fifteen and forty cents; that prepayment of the taxes be made in all cases obligatory; and that all packages of tobacco offered or held in possession for sale, without the requisite stamp affixed and cancelled thereon, be forfeited. The taxed production of tobacco for the fiscal year 1867 was 45,635,000 pounds.- With the adoption of the stamp system, and the requirement of sale 38 REPORT OF THE SPECIAL COMMISSIONER in packages, the Commissioner, from data furnished to him by the trade, is of the opinion that taxes, as a minimum, could be collected from sixty million pounds of chewing tobacco, and from thirty to forty million pounds of smoking tobacco-thus greatly increasing the revenue at present derived from this article. Furthermore, the trade all unite in recommending that-the use of hand machines for cutting tobacco for family use, or other purposes, be strictly prohibited, or made subject to a heavy special tax or license; that all brands now in use by inspectors be cancelled and destroyed, and that new ones, of uniform and elaborate design, be prepared and issued to inspectors by the Treasury Department at Washington; and that the return of the same to the Commissioner of Internal Revenue, when worn out or broken, or at the expiration of office, be made obligatory. it is also recommended, that it be made hereafter a penal offence for any ct:.-:l-cutter, or other person, unless employed by the Department of the Treasury, to cut or make any plate for the branding of tobacco. In these recommendations and suggestions of the trade the Commissioner generaily concurs; and is further of the opinion, that the adoption of the stamp system, coupled with the requirement as to the sale of chewing and smoking tobacco in packages with prepayment of tax, will be found most to the interest of the revenue. The details of the plan, which does not propose any restriction as respects the sale in packages, drawn up by a committee of the trade in the form of a law, will be found in an appendix to this report, marked D. T'he plan of collecting the tax from cigars, by means of a small stamp of thin paper attached to the " cut" or " light" end, has been often proposed, and would seem to be not impracticable. If such a plan could be adopted and carried out, and the tax fixed at one cent on each cigar, a very large additional revenue might be derived from this article, and at a very small expense for collection. As the present consumption of cigars, domestic and foreign, in the United States is estimated at from one thousand to twelve hundred millions per annum, a tax of one cent for each cigar on this consumption would, theoretically, afford an annual revenue of from ten to twelve millions of dollars; while the receipts fiom this source during the last fiscal year were less than three and two-thirds millions. The total revenue derived during the fiscal year ending June 30, 1867, from the internal taxes on cigars and tobacco, was $19,705,827. From tthis source during the next fiscal year, with the present method of collection remaining unchanged, a receipt of twenty millions may be reasonably anticipated; but with reform in administration, and the use of stamps upon tabacco, as indicated, this revenue might probably be increased to thirty millions of dollars as a minimum. INCOME TAX. A considerable falling off in the revenue to be derived from the income tax, for the present and succeeding fiscal years, may be expected, both from the reduction of the tax under the act of March 2, 1867; and also from the losses recently experienced through the shrinkage in the value of commodities. The amount, in the opinion of the Commissioner, which may be anticipated fiom this source for the next fiscal year, will be about thirty-five millions of dollars. Under the present law imposing an income tax, the exemption of $1,000 from taxation is allowed unqualifiedly to all persons returning an income. The allowance of an exemption of this character in the original framing of the law was undoubtedly founded upon an English precedent, which exempts from taxation incomes of less than X100; allows an abatement of 660 on all incomes of.100 a year and under X200, but does not allow any deduction from incomes in excess of e200; the object being not to favor the recipient of large or ample revenues, but only those whose incomes are sufficient to meet the most moderate expenditures. In the United States the same good purpose has been recognized, OF THE REVENUE. 39 and its attainment secured by an income exemption of double the amount allowed in Great Britain; but the original object of the exemption would appear to have been entirely lost sight of in making the exemption absolute and unqualified; for what in the one case is an allowance to necessity, becomes in the other a mere increase of abundance. The Commissioner therefore recommends that the law be so amended, that the exemption shall apply only to incomes which are not in excess of $1,500 or $2,000. r'here would also appear to be another curious anomaly in the law imposing an income tax, which allows, on the one hand, an unqualified deduction from income of the amount paid for rent, and, on the other hand, does not consider as income, in any degree, the rental value of property held and enjoyed by its possessor. In this there is no little of iuconsistency, for, while in all other departments of the revenue, it is accepted as a fundamental principle that luxuries especially should be taxed, in this they are specially exempted. Thus, under ordinary circumstances, a house and a portion of land is regarded as a necessity; but it may be made a luxury-so much so that the term palace or palatial, as applied to a residence, is used figuratively to express the highest degree of luxury. There would seem, therefore, no good reason, when a sufficient and proper sum is exempted in the first instance from an income tax, why this exemption should be further increased by the addition of rentals or rental values; and, in any event, it seems right that if an individual chooses to employ his wealth by occupying tenements and ornamental lands, whose rental value is the representative of large property, all such rental, in excess of a certain amount, should be considered as a luxury, and taxed accordingly. STAMPS. The revenue from stamps, during the last fiscal year, was $16,094,718, and as the receipts from this source are likely to increase, under almost any circumstances, an estimate of $17,000,000 for the next fiscal year 1868-'69 must be considered as moderate. The present legitimate revenue from stamps ought to be at least $25,000,000, and wvould be, were not the tax evaded by an omission to use stamps in accordance with the requirements of the law, and by a noncancellation and re-use of them. These two methods of fraud may be greatly checked by providing for a closer and more effective inspection,* and by requiring that henceforth all revenue stamps shall be printed in fugitive inks, (water colors,) as is the general practice in Europe, and that some common and effective method of cancellation be made obligatory for all stamps exceeding twentyfive cents in value, at least as regards brokers, bankers, lawyers, notaries, and commercial men having a fixed place of business. Recognizing the necessities of the department in this latter particular, several most ingenious inventions and devices, mechanical and chemical, have been submitted, and it seems probable *In order to provide for such more efficient stamp inspection, the Commissioner would recommend that the provisions of law relative to stamps be amended by the addition, after section 5 of the act of March 2, 1867, of the following new section: That each and every assistant assessor is hereby required to visit every part of his division during the last ten days of each and every month, and make particular examination as to the sale of goods liable to stamp taxes, and shall serve upon every person engaged in the sale of such goods a printed form of return, headed with the 169th section of the act of June 30, 1864, and the amendments thereto, and shall have said returns filled up with statement that the law has been complied with in the sale of such goods, and sworn to; and shall, with an alphabetical list thereof, deliver them to the assessor of the district with his regular monthly list. And where any person engaged in such sales cannot make oath to having fully complied with all the requirements of the excise laws pertaining thereto, a statement shall be made on the return setting forth the. facts, and the assessor shall assess the taxes which may be due for the non-use of stamps, and return the assessment to the collector, and shall, at the same time, report all such cases to the Commissioner of Internal Revenue for his decision as to civil penalties. 40 ROPORT OF THE SPECIAL COMMISSIONER that, at no distant day, some plan can be adopted by the treasury which will render the successful re-use of a stamp. once cancalled all but impossible. As the law now stands, receipts for the payment of any sum of money or debt exceeding twenty dollars in amount are liable to a stamp of the value of two cents, but the law does not prescribe definitely whether the stamp shall be affixed or cancelled by the maker or receiver of the receipt. It is believed that if the obligation was made definite and imperative upon the maker some increase of revenue would accrue, and some cause of misunderstanding be obviated. As a tax of this character, moreover, is not onerous, does not, in any degree, impede industrial production. and yields considerable revenue, the Commissioner, with a view of increasing the revenue, would recommend that the law be so amended as to make all receipts in excess of ten dollars, in place of twenty dollars, liable to stamp duty. And in recommending these several augmentations of taxes, the Commissioner would take occasion to say that his object in so doing is not a desire to absolutely increase the internal revenue, but to insure to the government such an amount of revenue from a few unobjectionable sources as will allow of the removal of those taxes which are unquestionably impediments in the development of the co'untry. LEGACIES AND SUCCESSIONS. The receipts of revenue from taxes on legacies and successions ($1,861,429) have increased during the past year about'$700,000, but it is clear that the government does not, as yet, collect from these sources more than one-half of the amount to which it is rightfully entitled. With a view of insuring a more perfect collection of these taxes, the appointment of special officers charged with the execution of this portion of the internal revenue act would seem to be desirable, as an intelligent and careful supervision of the transactions on which these taxes are based is necessary to secure a legitimate revenue. For the next fiscal year, a revenue of two millions of dollars may be safely counted uDon from these sources. TAXES ON GROSS RECEIPTS, BANKS, SALARIES AND MISCELLANEOUS. The revenue derived during the last fiscal year from the above several sources was as follows: From taxes on gross receipts (under which head are included the receipts of telegraph, express, and insurance companies, the passenger receipts of railroads, steamboats, and stages, of lotteries and theatres, and formerly of advertisements)........ $7, 444, 719 From bank dividends, circulation, and deposits................ 9, 990, 358 From tax on salaries..................................... 1, 029, 992 From miscellaneous taxes, viz: from billiard tables, carriages, watches, &c., also from passports......................... 2, 033, 369 From fines, penalties, and forfeitures.................... 1, 459, 171 21, 957, 609 Making an allowance for the repeal of the tax on advertisements, and some other possible deficiencies, it will not be unreasonable to expect that substantially the same amount will continue to be drawn from these sources in theimmediate future. The whole amount collected from theatres, museums, opera and concert halls, on account of the special tax of $100 imposed on the same, during the last fiscal year, was $18,146, which amount would indicate the existence of about OF THE REVENUE. 41 one hundred and eighty establishments of this character in the United States. The amount received from the tax of two pei cent. on the gross receipts of such establishments was $194,039. By substituting in place of this latter tax a fixed sum for each performance, to be paid by means of permits sold by the collectors of the several districts, under proper restrictions, or by increasing the tax on gross receipts to four per cent., the annual revenue from this source could, it is believed, be considerably increased. TAX UPON RAW COTTON. As the cotton tax and the reasons in favor of its repeal have been considered in a recent special report, any further detailed reference to this subject is here omitted. If the Commissioner, however, in now advocating the repeal of a tax, for the imposition of which he was formerly earnest, should seem to have exposed himself to the charge of inconsistency, he would say in reply, first, that it is of much greater importance that he should be ultimately right than that he should have'been consistent; and, secondly, that the argument which was legitimate in favor of the tax when cotton was from thirty to fifty cents per pound, and the tax constituted but a fraction of the planter's profit, entirely fails of application when the price of cotton has become so greatly reduced that the tax necessarily falls upon capital. RECAPITULATION OF INTERNAL REVENUE RECEIPTS AS ESTIMATED. It will be remembered that, according to the estimates heretofore presented of expenditures and receipts from customs, there remained to be provided for from internal revenue sources the sum of $170,000,000. Of this amount, it is believed that the sources above referred to in detail may be relied on to furnish one hundred and fifty-two millions of dollars ($152,000,000) under almost any contingency, without the necessity of the further continuance of a single one of the so-called industrial taxes. The receipts from these several sources may be recapitulated as follows, viz: From distilled spirits (new system)............... $50,000,000 From fermented liquors............................... 6,000,000 From tobacco and its manufactures...................20,000,000 From income............................................ 35,000,000 From stamps.......................................... 17,000,000 From legacies and successions.............................. 2,000,000 From banks, railroads, &c.......................... 10,000,000 From salaries.......................................... 1,000,000 From gross receipts.................... 7,440,000 From miscellaneous, (schedule A., &c.)...2,100,000 From fines, penalties, &c...1,460,000 152,000,000 Accepting the above estimates as correct, there then remains to be provided for from some other sources a deficiency of eighteen millions ($18,000,000) necessary to make up the required sum of one hundred and seventy millions, with such additional amount as may be provisionally required to meet unexpected or extraordinary contingencies. SPECIAL OR LICENSE TAXES. To meet such deficiency, the so-called "special" or "license" taxes, and' the taxes on sales, which have not been included in the above estimates, may be relied on; and if it should be thought desirable, they may be modified, with little 42 REPORT OF THE SPECIAL COMMISSIONER trouble and inconvenience to the business interests of the country, in such a way as to afford a large additional revenue.. In fact, this class of taxes are so readily manageable, and admit of such an indefinite expansion without directly impeding industry or production, that they may be considered in the light of a revenue reserve. The amount derived from the special taxes (license) for the last fiscal year was $18,186,446 50; and from sales, auctioneers, and brokers, including sales by wholesale dealers in excess of $50,000, $4,114,075 47; making a total of $22,300,520 97. Deducting from this aggregate the receipts fiom the special taxes on distillers, rectifiers, and wholesale and retail dealers in liquors-which it is proposed to make hev eafter a part of the new system for collecting a revenue from distilled spirits- there remains the sum of $18,156,518. It is, however, recommended, in the event of the entire removal of the so-called industrial taxes, to place the manufacturers and the wholesale dealers on a corresponding basis, and impose upon them a special tax of $100, when the value of their annual sales is not in excess of $50,000, and an additional tax of $2 for every additional $1,000 in excess of $50,000. This modification of the law will, it is believed, be generally acceptable to the industrial interests of the country, and will produce an additional revenue, over what is now obtained from the taxes on wholesale dealers, of about $11,000,000, By recasting, furthermore, the whole present schedule of special taxes or licenses, and increasing the amount charged to the different trades and professions in a moderate degree-grading them at the same time in such a way as to render them but little burdensome or oppressive-an aggregate revenue from all these sources may be expected to the extent of about fifteen millions of dollars ($15,000,000) in excess of the receipts obtained from the special taxes during the fiscal year ending June 30, 1867. In discussing the expediency of the proposed changes, it should be clearly borne in mind that all our revenue experience during the past five years has conclusively shown that, with the exception of stamps, there is no class of taxes which are paid so readily and promptly; are collected with so little trouble and expense by the government officials; and impede to so small a degree the industrly and development of the countiry, as the so-called license taxes; and the Commissioner would also ask from Congress the serious consideration of the question, whether it would not be for the gain of the revenue and the contentment of the people to make the proposed change in the license taxes to the full extent suggested, and to apply the surplus revenue derivable therefrom to an immediate reduction of a number of taxes which are regarded as especially buraensome and oppressive; such, for example, as the tonnage tax on ships and steamers; the tax of one and a half of one per cent. on the gross receipts of insurance companies; the tax'on merchandise brokers, selling dry goods; or the income tax, which is excessive when compared with the income tax levied in, otber countries. The following table shows the amount of certain'pecial or license taxes imposed under the present law; the amount of revenue received from the same; and the increase of revenue which it is estimated will result from the modifications proposed by the Commissioner. Table siouwing the present and proposed special or iicense taxes, the taxes on sales, and the present and prospective receipts therefrom. Receipts in Denomination, fiscal year Present rates. Proposed rates. Prosecitive 1867.re ips Special taxes: Anctioneers-................... $98, 085 Not over $10, 000 annual sales $10, over $10,000 $20. Above $25,000 annual sales $50 - - —.......... $125, 000 Apothecaries..-................. 55, 447 $10 —---------------------- Above $10,000 annual-sales 20- -76, 000 Bankers-...................... 1, 433,716 Capital over $50,000 $2 per $1,000 -......... $4 for every $1,000 --—............... 2, 800, 000 Brokers, stock-................... 75, 951 $50 -- --------------------— 100 —1....................... 151, 000 Brokers, pawn-2.................. 3, 640 50-........................100 -........................... 46, 000 Circuses-...................... 13, 751 100- 200.......................... 27, 000 Claim agents-................... 84, 627 10-........................ 20.......................... 169, 000 Confectioners.-9,...............066.., 10 —Above —-----— $10,000 —---— annual bov $0salesnal $2020 ------— 4, —-00000 Dealers, retail-................... 2, 047, 861 10-........................Above $10,000, and not above $25,000, annual sales 2, 730, 000 o $20. Eating oues....o...ses....53,....157.53, 10 —Above —----— $10,000 —---— annual boe $0receiptsrecips $25....83,....00000 Horse dealers-................... 25, 635 10................I........ Above $10,000 annual sales $2 for every $1, 000 -. 50, 000 Hotels-...................... 637, 585 5 for every $100 of rental-............$10 for every $100 of rental above $1,060-....... 938, 000 IIn racnranc se.....agents.....1-25,... 25228 10..10...Above.....$2,000......annualboe 2,receiptsecept $$20....188,....00000 Lawyers........357,.....648....10.. 35764Above......$3...000....annual.......receipts00anualr $20...20....463,.....00000 Livery stable keepers-............... 100, 856 10-........................Above $1,000 rental $10 for every $100 -........ 15(1,000 Lottery cetdalrs...ticket..........dealers —---------— 77, —--— 686 —--- 100......$200........155,.......000, 0 Pedlers, 1st class..................... 15, 812 50-........................ 100-........................ 31, 000 - Pedlers, 2d class-.................. 212, 477 25......................... 50-.............. ~ —-------- 425, 000 Pedlers of jewelry, liquors, and dry-goods in pack- 24, 755 50 ------------------------ 100-........................ 49, 000 ages. Pbysicians, surgeons, and dentists -.......... 608. 829 10-........................Above $3,000 annual receipts $20-.......... 850, 000 Plumbers and gas-fitters-............... 1-2, 856 10 —.......................Above $10,000 annual receipts $20-......... 18, 000 Real estate agents................-5-2, 910 10 —........................$10 on every $1,000 above $2,000-.......... 100, 000 Stallions and jacks..-................ 381, 032 10-........................$20-........................ 76-2,0100 Theatres, museums, and concert balls-........ 18, 147 100-........................Concert balls. &c., $200; tbeatres $500-....... 45, 000 Tobacco tnists...........59.I,..321... 1031-Above......$10,000........annual..Abvereceiptsul rcept $20....90,....00000 Sales: Auction.........240,.....249.....1-10,29 - ofofI 1 rceper....cent......1-5.... of f 1pr per.....cent.. -480,........00000 Whoeo aeesa lrse...dealers......6,... 249,,49,746 -1 1-10 pr eof...11...per....cent.... 1-55 oof er1 enper....cent....12,...500,.. 125 0000 Present receipts..............14,392, 560 Prospective receipts............ 29, 515, 000 Present receipts-.............. 14, 392, 560 Proposed net increase-............ 15,122, 440 44 REPORT OF THE SPECIAL COMMISSIONER COMPARATIVE RECEIPTS AND EXPENDITURES UNDER THE PROPOSED SYSTEM. The main object thus far in this report has been to gather together and clearly present all the information which Congress may desire in deciding the question whether it is practicable to at once repeal all that class of taxes which impede production and retard the development of the country, without at the same time too greatly impairing the revenues necessary to meet the expenses of the government. The opinion of the Commissioner, as heretofore incidentally expressed, is that such a result is entirely practicable; but for the purpose of showing the same more clearly, the figures and estimates illustrative of the proposed relations between expenditures and receipts, before exhibited in detail, are here briefly recapitulated: ESTIMATED RECEIPTS. EXPENI)ITUJRES NOT REDUCED. Proposed system. On the basis of 1867. Millions Millions. From customs.......... 150 For interest of debt..............i 130 Internal revenue, viz: Millions. Millions. For civil service.........51. 1t From spirituous liquors........ 50 For war.................. 83. 84 From fermented liquors........ 6 For navy................ 31.03 From tobacco................. 20 For pensions............. 20.93 From income and salaries...... 36 For Indians.............. 4.64 From gross receipts............ 7.4 - 191.5 From stamps................. 17 For redemption of debt t........... 0. 0 From special taxes and sales.... 29.5 Balance.......................... 9.9 From legacies, &c............ 2 From banks, &c., &c.,......... 13. 5 -— 181. 4 From miscellaneous sources*....... 000. 0 Total................. 331.4 331.4 ESTIMATED RECEIPTS. EXPENDITURES AS REDUCED. Proposed system. For fiscal year 1868-'69. Millions. Millions. From customs.................... 150 For interest of debt................ 130 Internal revenue, viz: Millions. Millions. For civil service.............. 40 From spirituous liquors........ 50 For war.................... 53 From fermented liquors........ 6 For navy................... 21 From tobacco.............20 For pensions................ 21 From income and salaries;..... 36 For Indians................. 5 From gross receipts........... 7.4 -- 140 From stamps................. 17 For redemption of debtt............ 50 From special taxes and sales... 29.5 Balance........................... 11.4 From legacies, &c........ 2 From banks, &c., &c......... 13.5 -181.4 From miscellaneous sources.. 000.0 Total........................ 331.4 331.4 In this estimate nothing is carried to the credit of "miscellaneous," the receipts from which are estimated by the Secretary of the Treasury for the fiscal year 1868-'69 at thirty millions; neither has anything been charged to expenditures for bounties or for extraordinary appropriations, it being assumed that for the next fiscal year the one will balance the other. t As the reduction of expenditures to the decree estimated may not be found practicable, the sum of fifty miliions of dollars, omitted in the first estimate of expenditures, is added to the second, in order to insure against any possible deficiency of revenue. If such deficiency should occur, through unexpected falling off in receipts, the sum necessary to make good the OF THE REVENUE. 45 REFORM IN REYENUE ADMINISTRATION. We come next to the consideration of a subject which is daily becoming one of increasing importance, so much so that if it does not soon receive voluntarily the practical attention of the legislative department of the government it will of itself ultimately, and at no distant day, compel that attention to the exclusion of every other subject, inasmuch as the necessity involved imperils not only the revenue, and consequently the public credit, but even the very existence and maintenance of republican institutions. We refer'to the pressing necessity which exists for a complete reform and reorganization of the administrative part of the national revenue system. What a spectacle is to-day presented to the country of the law in repeated instances breaking down and demanding for itself additional safeguards in the nature of mechanical expedients; of a large proportion of the assessed internal revenue taxes remaining uncollected, or collected for the benefit of some other recipient than the national treasury; and of fraud and incompetency in official position becoming daily more apparent and disastrous in their consequences. But in this exhibit, painful as it is, the case is only half stated. The demoralizing influence of successful evasion of the revenue, and the accumulation of profit thereby, has penetrated deeply into the community, and public sentiment has become influenced to such au extent that no serious disgrace attaches to transactions in which government is a party, which, if committed against individuals, would be universally branded as infamous. The extent of the revenue frauds and of the manner, in part, in which they are effected, have been already, referred to in this and previous reports; but notwithstanding the illustrations thus afforded, and the further fact that the whole subject has for some time past formed a theme of general discussion, it is not probable that the public as yet fully appreciate the magnitude of the frauds or the degree to which "cheating the government" has been reduced to a science. Thus, for example, the fraudulent transactions involved in the manufacture and sale of distilled spirits are popularly supposed to transcend all others; and yet, if the whole truth could be revealed, it would, in the opinion of the Commissioner, be found that the frauds in tobacco and cigars have been comparatively greater than in whiskey, and that those in coal oil, in proportion to the amount invested, have not been much inferior to those in either whiskey or tobacco. For the continuance of this state of things there is, in the first place, no necessity, and secondly, an efficient remedy. It does not exist in Great Britain, France, Belgium, Holland, and the German states; and what does not exist there ought not to be recognized as a necessity here. The response made to a question put by the Commissioner during the past summer to a leading official of one of the states above referred to, as to the extent to which the revenues of his government suffered through the frauds or incompetency of officials, was, "that he doubted whether the losses experienced from such causes during the previous ten years had been equal, in the aggregate, to the sum of fifty francs per annum " Now this same high tribute of praise might also, it is believed, be awarded to the officers of the regular army and navy of the United States, as a class, in respect to their financial transactions with the government; and if the assumption be true, then the remedy for the evils referred to is most obviously to be found in placing the officers who are to manage the revenues on substansame may be drawn from this source. If, on the other hand, the receipts should -be equal to or in excess of the estimates, the principal of the debt can be further reduced by this amount. The fifty millions, therefore, becomes a revenue reserve, which under any circumstances will prevent the treasury from experiencing any embarrassment. 46 REPORT OF THE SPECIAL COMMISSIONER tially the same basis, as regards selection, education, tenure of office, and promotion, as the officers of the army and navy; and this, in a few words, is the system which secures efficiency and honesty in the civil service of Europe. The report on the civil service of the United States presented to the thirtyninth Congress by the Hon. Thomas A. Jenckes, firom the Joint Committee on Retrenchment, and the last report of the Commissioner of Interal Revenue, discuss so fully the leading features of the machinery of civil administration which has been found effective in different countries, that any further detailed reference to the subject is here unnecessary. As, however, some objection to the enactment of a civil service bill of the character referred to may arise from an apprehension that the test of examination, as a condition precedent for appointment to and promotion in office, will greatly interfere with, or entirely destroy the power of political patronage, the Commissioner would call attention to the fact that the experience of Great Britain in this matter does not confirm any such anticipation. In that country, as in the United States, the use of political patronage for the support of an administration is considered as entirely legitimate, and the distribution of offices required to fill vacancies is substantially placed at the disposal of members of Parliament belonging to the dominant party. The method of procedure, however, is as follows: The member of Parliament applies, in the first instance, to the parliamentary Secretary of the Treasury, who has the distribution of patronage, or to the political head of some department. If the official in question is willing and able to accede to the member's request, he presents the applicant with what is called a "nomination" to one of the offices in his gift. The person nominated does not, however, as a matter of course, enter the public service; for no intereqt, however powerful, can confirm an appointment unless the nominee is able to obtain a certificate of fitness from the commissioners of the civil service, appointed by the Crown. In order to obtain this certificate the applicant for office is required, in the first instance, to execute an affidavit respecting his age, physical capacity, moral character, and exemption firom debt. If this affidavit is approved, he is next subjected to an examination, the satisfactory result of which is followed by an appointment to office. Experience now has shown that a large proportion of the applicants for office not only fail to sustain the examination, but even do not press their application for office so far as to submit themselves to the required test; the result of which is that the number of persons whom a member of Parliament is able to gratify or compliment by nomination to office is rendered much greater than it would be were the nomination in the first instance made entirely absolute. But, irrespective of the merits of any particular plan for reforming the civil service, one thing ought clearly to be understood, and that is, that the present system of political patronage is for the people of the United States a most expensive national luxury. That the Commissioner may not expose himself to the charge of indulging in mere generalities in making such statements, he submits an actual case, drawn from the records of the department, merely suppressing the names of persons and localities. There were established at the inauguration of the internal revenue system two collection districts (which may be designated respectively as A and B) remarkably similar as respects population, wealth, and the character of their business transactions-more so, perhaps, than any other two districts in the whole country. In both of these districts the principal revenue officers, from 1862 to 1S66, were men of unusual capacity and energy, who manifested a pride as well as an interest in the discharge of their duties, and so closely did the revenue receipts in the two districts approximate, that those of A differed firom those of B in the first three years of the internal revenue system, to the extent of only $13,308 in an aggregate of over four millions; the OF THE REVENUE. 47 receipts from A, from 1862 to 1865, having been $4,098,643 02, and from B $4.085,334 56. In 1866, a partial public bt political sentiment in A demanded a change in the revenue office; the member of Congress froni the district acquiesced, as did also the Executive and Secretary of the Treasury; while the Senate ultimately confirmed a new appointment. In district B the official was left undisturbed, although great efforts were also made to effect his removal. Since the removal in question was effected, the result of inquiry on the part of the Commissioner has shown, that there has been but little change, either as regards the business transacted, or the taxes removed or abated, in the one district, which has not apparently affected the other in a nearly equal degree; and yet the receipts of district A, as compared with district B, fell off during the year succeeding the removal in question, about $300,000 more than the difference between the receipts of the two districts for the preceding year-a result mainly attributable to the inexperience of the new official in district A, and the new subordinates which e appointed. In this case, therefore, we have the data for approximately estimatin what it cost the treasry, and consequently the people of the country, for the privilege of makig a removal of' one efficient revenue officer, for political reasons, and substituting in his place a person entirely inexperienced. In default of any reform in the administration of the revenue through the passage of a civil service bill," regulating the selection, appointment, and promotion of officers, the Commissioner would suggest the expediency of detailing by act of Congress, to the, adminisration of the revenue-as revenue agents, assessors, collectors or inspectors-officers of the regular army and navy, who through a redction of the active forces, and the necessity of keeping up a large skeleton organization," may hereafter be unemployed. Thile fidelity, education, and practical intelligence of these officers hais already been tested; and in case of any dereliction of duty, or violation of trust, the rules of their respective organizations provide a means for prompt inquiry and speedy punishment. rTbe Commissioner is also of the opinion, that even with continuance of the present system, a great gain would accrue to the revenue, if the large, cities of the country could be consolidated into single collection districts, and placed under the charge of one assessor and one collector, in place of the numerous divisions of a limited territory, and consequent multiplicity of officers, which are now recog, — nized. rihe experience of every State in which the existence of a heavy debt and the requirements for large expenditures necessitate the raising of large revenues, is to the effect that there is no department in which it is more essential that a nation should he wisely as well as honestly served as in that of the department of finance; and that the rel ations of this department are, moreover, so closely interwoven with every form of the. industry and capital of a country, that good management on the part of the one is a prerequisite to prosperity onl the part of the other. A reform of the civil service by which a greater degree of faithfulness and efficiency is secured in officers whose duties are purely administrative, essential as this may be, will not, therefore, of itself be sufficient to insure for our revenue system all that may be desired for the future; but it would seem to be desirable that there should be Drovided for the department, as a whole, some better form of machinery for organizing, inquiring, directing, and adjudicating, than is now in existence. Important and responsible as are the two offices of Secretary of the Treasury and Commissioner of Internal Revenue, the duties of their incumbents at the present time are necessarily, to a great degree, clerical, and the mere routine work which daily accumulates upon them is sufficient to almost entirely engross their whole time and attention. In fact, with the exception of the Special Commissioner of the Revenue, whose office is a temporary one, there is no responsible officer attached to the Treasury Department but is so completely occupied with a routine 48 REPORT OF THE SPECIAL COMMISSIONER of daily administrative duty, as to preclude the possibility of his instituting and prosecuting any original inquiry whatever, in respect to the industry and developments of the country, or the influence which the adoption of any given line of policy may exercise upon them. The tendency, therefore, of the country, so far as the financial department of the government is concerned, is rather to drift with the current of events instead of controlling it. Profiting by the experience of Great Britain in such matters, the most efficient remedy for this state of things will, in the opinion of the Commissioner, be found in the creation of a board of commissioners of the revenue, and in transferring to the same the whole business of collecting the revenue, both customs and internal, subject only to the general supervision of the Secretary of the Treasury. The Commissioner would further propose that the board be constituted of five members-a chairman, who might be at the same time a Deputy or Assistant Secretary of the Treasury, a Commissioner of Internal Revenue, a Commissioner of Customs, and two solicitors-and that sufficient inducements, in respect to salary and permanence in office, should be offered to secure for these positions the very best talent in the country. To this board might be referred the determination of all rules and regulations relating to the collection of the revenue; the expenditures to be incurred in respect to the same; the management of all revenue processes at law; and the distribution of all moieties received from forfeitures and penalties, in reward for good service and for valuable information. It should also be an essential feature of this new system, that no officer of the revenue should receive a commission, or be promoted, until his qualifications for the proper discharge of his duties had been examined into and approved of by the board of commissioners. This plan, which is merely presented in outline, and is essentially the same as that recommended two years ago by the revenue commission, seems susceptible of being carried out in a manner which would remedy nearly all the imperfections of the present system, and greatly conduce to the best interests of the country. A strong argument, furthermore, in favor of such a board is to be found in the fact, that no revenue system. in its details, can or ought to be permanent. As resources develop, as forms of industry and commerce modify or change, and as revenue receipts from particular sources increase or diminish, the rate of taxes and the method of assessing them will need to be correspondingly modified. To prepare the basis for such changes by legislation would seem to require that the industry, the commerce, and the revenue of the country should be made the subject of special and continued study and investigation by some competent persons. The discharge of such service, furthermore, does not seem to properly devolve upon congressional committees, to whom should be assigned the duty of examining and passing judgment, rather than of preparing material and digesting statistics. If a board of revenue, as recommended, should be organized and a proper selection be made of its members. the Commissioner feels certain that the result of its labors during the first year of its existence would save to the nation a sum very far in excess of what would be necessary to meet its expenditures for a lengthened period. CONCLUSION. It was originally the intention of the Commissioner to discuss, in connection with this report, the relations of the present tariff to revenue and domestic in- dustry; the practicability of converting duties now ad valorem into specific, and the results of a comparison of the prices of labor and of raw material; and OF THE REVENUE. 49 of the conditions of production in the United States, and in Europe. So much space has, however, been occupied by the topics already presented, that he has thought it expedient to make the subjects now passed over the basis of a subLsequent report; especially as some further time is necessary to render their exhibit more complete and satisfactory. A review of the revenue systems of Great Britain, France, and Prussia will, however, be found in the appendix to this report marked E. Withthis explanation, I have the honor to be, yours, very respectfully, DAVID A. WELLS, Special Commissioner of the Revenue. H. Ex. Doc. 81 —4 APPENDIX A. Table showng the aggregate receipts of internal revenue for the several fical years 1864, 1865, 1866, and 1867; the amount derived from the princpal speciic sources; and the percentage of the amount derived from eah specc souce to the whole, for each of the above-named periods. [PREPARED FOR THE SPECIAL COMMISSIONER OF THE REVENUE BY EDWVARD YOUNG.] Articles and occupations.' ~ _ _ _ _ _ _ _ _ _ _ ~'1 ~ _ _ _ _ _ ~ _ _ ~. ~. -a no *- n... n o MANUFACTURES AND PRO- DUCTIONS. Boots and shoes..........................$.... 3, 280, 627 1. 553 $6, 516, 814 2. 096 $2,943,420 1.06 Brandy made from grapes................ 10, 546. 005 44, 741.014 13, 070.005 Bullon-................379, 518.. 8 488, 337.157 441,340.166 Candles —- - $186, 228. 16 326, 583. 15 392, 822. 126 290, 502 109 Carriages, railroad cars, &c.. 320, 076.27 880, 021.. 4161.... 1, 576,662. 507 1. 606, 762 604 Chemical productions................. 317, 383.15 534, 780.172 279, 892.105 Chocolteandcocoa.............. 17, 980 08 36,467.011 34,453.013 Cigrscigarettesand cheroots. 1, 2554241.07 3,087,421 1. 462 3, 476, 2:37 1.118 3,661,984 1.377 Clocks, clock movements, &c 39,166. 03 93 838. 44 153, 697. 049 80, 963 030 Cloth, other than cotton or 20, 007 376, 672.178 595, 728.191 1, 517, 683.5711 wool. Cloth, painted,..................... 1,2.. 0 29. 53 4.1090 Clothing..................... 350, 486.30 6, 820, 937 3. 230 12, 027, (97 3. 868 3,195 742 1. 202 Coal.............. 572, 436. 40 8:35,!94. 395 1, 70, ( 6. 398. Cofe, roasted and ground, -..... 284, 070.134 22, 588 071 272, 665. 1021 and substitutes. Coufectiouery............... 465, 793. 39 569, 474.4269 995, 795 320 764, 825.287 Cotton fabrics, yarns, thread, 3, 548,173 3. 03 7, 331, 148 3. 47 12,421, 934 4. 00 9, 229, 468 3. 471 Cotton raw 1, 268, 412 1. 09 1, 772,983. 839 18, 409, 655 5.921 23,769,079 8.938 Cutlery....................................... 84, 188. 039 150, 762. 048 158, 849.060 Furniture, and manufactures 1, 679, 940 1. 43 2, 733, 248 1. 29 4, 540, 140 1. 46 2, 150, 480. 809 of wood. Furs.. 113 827 09 2-22, 559.105 356,553..115 415, 023.1 56 Gas, illuminating. —---------- 714, 740 61 1, 348,325 0638 1, 842, 643 592 1, 834, 676. 690 Glass, manufactures of ------- 303, 268.26 585 410 277 922, 318 296 479, 12.,180 Gold manufactures, jewelry, 7 218, 914.19 543, 430 26 640, 62.20 375, 6520.141 diamonds, &c. Glue.............25, 629. 02 44, 517 021 78,147 025 55, 49 021 Gunpowder.......... 155, 31)2. 13 248, 376. 117 250, 669. 088 180, 934.069 India-rubber, manufactures of 233, 783. 20 635, 976.391 555, 842. 1781 391, 003. 150 *Iron, blooms, &c. —---- ------ --- 52, 158.024 52, 258.01i6. —-------- *lron, advanced beyond.......... 457, 622. 216 665, 102. 213 526, 344. 200 blooms, &c. Iron, band, hoop, and sheet, 435,911.33 319, 142. 151 566, 861). 182 454, 344. 171'Iron, bar, rod, &c. —-— 30, 475. 014 55, 388. 017. —-------- *Iron, plate. —-------- 86, 535. 07 150, 292. 071 234, 916. 075 150, 992. 057 *Iron, railroad. —------ 175, 838. 15 284, 783. 134 399, 669. 128. —-------- *Iron, railroad, rerolled.... 119, 226. 10 376, 265.1378 668, 988.215 ---—. --- *Iron, pig........ —----------- 1, 484, 383. 703 2, 555, 893.725. —-------- *dr0 castings.......;.... 242, 737.20 798, 202.378 1, 367,8215.44(1 1, 061, 414.400 *lron castings, (stoves and 123, 489. 10 211, 849. 101 297, 632. 095 304, 475. 114 hollow waxe.)I *Iron, mauatrso..., 9, 02-1.6 3, 944, 380 1.869 5,410,181 1.740 2, 584, 764.972 *Iron, cut nails and spikes... 184, 500. 16 382, 940. l55' 725, 146. 233 741, 265. 279 *Iron, rivets, iutsc —-- 43,729.0:37 56, 498.02 6 1.01, 401,. 0:132. —-------- Lead, sheet, lead pipes, and 110, 5271.09 125, 006'. 059 22 7, 61 1,. 073 165, 437. 062 shot. Lend, white.......... 48, 561~.04 5-2067.024 102, 413. 033. —-------- Leather of all descriptiou-,3.. 4, 004, 0471 - 343 4, 3:37, 2661 2: 05 5, 384, 813 1.72 3, 445, 107' 1. 300 Liquors, distilled. —---— 28,4'31, 79824.33 15, 995, 702~ 7.58 29, 198, 578 9.39 29. 15 1. 34 tt 6 Liquors, fermented.... 2, 2213', 7'20 1. 90 3, 657, 181 1. 73 -5,115, 140 1. 64 5, 819, 34051 2. 19 5Total iron and manufactures. 3, 303, 027]' 2. 82 8, 494, 989] 4. 02 12, 801, 2591 4. 111] 5, 823, 598' 2. 190 OF THE REVENUE. 49 of the conditions of production in the United States, and in Europe. So much space has, however, been occupied by the topics already presented, that he has thought it expedient to make the subjects now passed over the basis of a subsequent report; especially as some further time is necessary to render their exhibit more complete and satisfactory. A review of the revenue systems of Great Britain, France, and Prussia will, however, e found in the appendix to this report marked E. Withthis explanation, I have the honor to be, yours, very respectfully, DAVID A. WELLS, Special Commissioner of the Revenue. HI. Ex. Doc. 81-. —4 IREPORT OF SPECIAL COMMISSIONER OF THE REVENUE. 51 A.- Table sh-owing the aggregate receipts of internal revenue, fc. —Continued. Cc le c- Cc r1 I o'~ I In, I' 00 ~~~~o0l OD c~I ~0ui I ~I 00uu 10.~~~ 1. [,~-4; [.,. Articles and occupations. C)) C C )) Machinery, steam engines, &c................-.. $772, 360. 366 $1, 189, 485. 383 $2, 104. 6~5. 791 Marble monuments, &c-......................... 170, 419. 080 329, 217. 105 121, 702. 046 Molasses - - —.................................... 54, 972 ~ 626 99, 851. 029 98, 759 037 Mitsical instruments ---------- ------------ ---- - - 259 384.1~22 418, 144. 134 425, 594. 160 Oil, coal, retined petroleum, &c $2, 255,329 1. 93 3, 047, 213 1. 441 5, 317, 396 1. 71 4,904, 762 1. 844 Oil, lard, linseed, &c......... 217, 291.02 414, 547. 196 607, 225. 195 -.. Paper of all descriptions 917, 141. 80 1, 082, 476. 512 1, 172,1155.376 743,077.280 Pickles, preserved fruits, &c. 110; 791.09 172, 314.081 193, 860.062.................. Pins —....................... 22, 010.02 24,802.011 37,993.012 31,391.012 Pottery ware, &c —........... 47, 425.04 93, 221. 044 164, 857. 053 88, 307. 0.3 Salt —....................... 298, 912 25 335, 349. 158 456. 101. 147 253, 306 ~ 095 Screws, wood-................ 62, 943.05 122, 693. 058 226, 590 ~ 072 172, 523. 065 Ships and other vessels. - ------ 167, 514. 14 347, 218. 164 355, 478. 114 - ------------..... Silk, manufactures of........ 97, 653. 08 216,189. 102 445, 766. 143 274, 890. 103 Silverware-.................. 36, 950. 03 59, 768. 028 128, 522. 041 88, 616. 033 Snuff..-..................... 240, 934. 20 283, 352. 134 698, 174. 224 798, 365. 300 Soap-........................ 449,001.38 791,416.37 1,326,025.426 727,164.273 SStarch -...................... 36, 261t 03 61,233.06 112,230.036 - ------------ ----- S teel -------------— 91, 768 -08 174, 052. 08 212, 662 068 17, 406. 006 Steel, manufactures of - 299, 373 -25 549, 767.26 714, 211/.229 - ------------ ----- SuC arI brown( orIraw - 1,267, 616 1. 09 323, 790. 153 567, 531 ~ 182 500, 296.190 Sugar, refined -............... 873, 140. 79 1, 720, 613 - 82 2 53,37, 405. 75 2, 065,165. 776 Tobacco, manufactured -...... 7, 086, 685 6. 32 8, 017, 021 3 80 102,399,922 3. 97 15, 245, 478 5. 733 Turpentine, spirits of --------- ------------------ 8, 462. — 248, 178.079 423, 593[.160 Umibrellas and parasols....... 68, 770 -06 111,147.052 229,491.073 - -........... Varnish-..................... 9-2, 356 08 149, 981 ~ 071 251, 227. 080 151, 450. 057 Wine-....................... 28, 303.02 43, 216.020 66 1.18 021 2, 761.001 7, 947' 094/3 764/ 8, 814,101/. 834/,40,461.3 Woollen manufactures-.... 3, 65.5, 132 3. 01 7,97,74 8 1;11 84 5, 405, 426 1. 933 Miscellaneous article - 7, 386, 801 6. 32-211, 381, 800 5, 395 17, 692, 357 5. 6112, 741, 396 4. 792 Total-..........75, 403, 386 64. 53 104, 379, 609 49. 4:38 178, 356, 661 o7. 366 146, 223, 674 54. 987 GROSS RECEIPTS. Advertisements - -....... 133, 315 -11 227, 530 _ 107 290, 605 093 288, 010 - 108 Bridges and toll roads..... 36, 354 -03 75, 26~ 035 108, 136 035 115, 401 -043. Canals --------- 11 —---- --- - 92, 423 043 99, 268 032 45, 283 -017 Express companies - -...... 267, 773 -2-2 529, 276 -250 645, 769 208 558, 359 -210 Ferries —..........I' 60, 074 - 05 126, 133 -060 48 764 015 137,'240 -052 Insurance companies ---------- - — a —-- o0, 992.382 1, 169, 722.37 1, 326, 014.500 Lotteries, and lottery-ticket ------ -- - - 29. 249 -014 78, 072.025 74, 48.1 0- 08 dealers. Railroads-........... 2, 127, 250.1. 82 5, 917, 293 2. 802 7, 614, 448 2. 449 4, 128, 255 1. 552 Ships, barges, &c ----------------- 431, 210. 204 9, 322. t3 4, 877. 002 Stage coaches —----. —----------- 469, 188.222 72,519. 1N~ 241')97.090 Steamboats-.... —---- 278, 097 - 24 63,82.302 84,846 - 027 9,' ~' 035 Telegraph companies -------------- 215, 050 - 202 308, 438 - 099'_909 59.5.090 Theatres, operas, circuses, &c - -------— 140,442 - 066 202, 521 - 0651 N-94, 039.073 Total-..........*2, 895,1)999 ~2. 48 9, 697, 866 4. 593 11,262,430 3. 622 7 4,792 0 SALES. Auction —................... 410, 176 - 19 503, 252. 162 240, 249 - 089 Brokers, ccLtOle --------------- --------- ------------ 67, 674 - 029 Brokers, gold, &c. - ---------------- 852,801 40 1,704,7040 -28 336 -0 15 Brokers, merchandise-..... 138,082 - 12 590, 474 - 28 87,00 -20 4510 16 Brokers, stock ------------------ 2, 202, 793 1. 04 1, 582, 247 - 509 -------- - --—. Dealers, in excess of $50,000-............................ 2, 484, 383 - 933 Miscellaneous --------------------------------------- 906,599 - 340 Total-.......... 138, 082 - 12 4, 06-2, 244 1. 924 4, 002, 283 1. 287 4,114, 075 1. 547 SPECIAL TAXES, (LICENSES.) Apothecaries. —------- 29,792.026 32,872.015 43, 713. 014 55,447.021 Arlchitects and civil engineers. 9, 373 - 008 10, 411 - 005 12, 136 - 004 15, 805 - 006 Auctioneers —-------- 58,147 - 049 80, 545 - 038 89, 724 - 029 98,1)85 - 037 Bankers. —---------- 74, 449 - 064 846, 687 - 40 1, 26-2,649 - 406 3, 433, 71-6 - 539 Billiard-roomis —------- 33, 188 - 029 54, 025 - 026 103, 929 - 033 124, 711 - 047 Bowling alleys —------- 7, 781 - 006 13, 490 - 007 19, 749 - 006 20, 35:3.00(8 Brewero. —--------- 66, 289.057 77,747.037 -115, 412.033 238, 155.090 Brokers-........... 410, 114 - 351 581L, 450 - 276 6713, 260 - 217 598, 853 - 225 liailder-s-........... 73,:384 - 063 82, 27:3. 039, 1.31, 178. 042 117,531..045 *Net amount after refunding $6,864. 5 2 REPORT OF SPECIAL COMMISSIONER OF THE REVENUE. A.- Table showing the aggregate receipts of internal revenue, 4.-Conied.?,P~~~~~~~~~~~~~~~~0 Articles and occupations. 4 _ L - Butchers.................... $88,450.075 $152,421 07 $224,65 070 $217,394.08 Claim agents.................0 572 27, 521. 023. 5627.032 Conveyancers and real estate......3,50.1 844.2..... 9 33.037 agents. Dealers, wholesale............ 12 3, 543,105 1. 78 5,428,345 1. 0745 3,,281 1.460 Dealers, retail............... 1, 336, 346 1.143 1, 606,778.761 1,949,17.626 2,047. 861.770 Dealers, wholesale liquor..... 176, 765.151 400, 693.190 801,531.257 982, 135. 370 Dealers, retail liquor......... 1, 612, 736 1.380 2, 205,866 1.044 2,807 226.903 2,96,684 1.115 Dentists27,248.023 34,475................... 2,43 022 Distillers.................... 49, 022.042 59,898.029 101,534.038 253,587.095 Eating-houses................ 29, 395.025 36,538.017 50,603.016 53,157.020 Hotels.252,610.......216 415,279...........20 580,022.186 663,6560.2506 Horse dealers................ 29, 038.025 40,160.019 27,566.009 25,635.009 Insurance agents.............0 8, 20810. 033 48,648.0547 21 Lawyers.................... 129,186. 110 190,377.090 264,837.085 357,648.134 Livery stable keepers....... 50, 996.043 65,211.031 90,180.029 100,856.040 Lottery-ticket dealers........ 3, 091.003 43,480.020 54,427. 017 77,686.030 Manufactures............... 471,091.403 635,115.300 1,043,031.335 1,296,487.487 Peddlers.................... 264,111.226 459,299.217 679,014.218 708,113.266 Photographers............... 52, 536.045 74608.035 93,186.030 79,170.030 Physicians and surgeons...... 235, 583.201 302,847.143 425,597.137 549,369.207 Rectifiers..................... 58, 828. 020 80,5470.0304 Stallions and jacks........... 219, 578.188 277,166.131 36,854.098 381,032.14:3 Theatres, museums, and exhi- 17, 462.015 26,143 012 1662 010 31,893.012 bitions. Tobaconists................. 9, 055.008 13,579 006 316,675.005 59,321.022 Miscellaneous.......... 4, 229 004. 043 252,180. 081 279,020.105 Total................... 7,145,389 6.115 12,613,479 5.974 18,038,098 5.801 18,186,446 6.840 INCOME. From individuals.......14, 919, 280 12. 77 20, 570, 596 9. 742 60, 547, 882 19. 474 57, 040, 641 21. 450 From other sources.169,855.031 524, 050.169 —------- From banks, railroad com-................................. 7, 943, 796 2. 987 panies, &c. Total...........14, 919, 280 12. 77 20, 740, 451 9. 823 61, 071, 932 19. 643 64, 984, 437 24. 437 ARTICLES IN SCHEDULE A. Billiard tables......... 68, 000.05 67, 754. 032 17, 353. 005 20, 761.008 Carriages............ 320, 076.28 322, 720. 153 624, 458. 200 183, 856.070 Piano-fortes................... 7, 752. 004 403, 572 -..130.......... Plate, of gold......... -i 66 ---- 126.... 84.... 163 —Plate, of silver........ 130d,'02 4. 1 1 117, 987. 056 216, 490. 070 287, 679. 108 Watche-s....................... 9,139. 005 426, 527. 117 619, 0631. 232 Other articles.......... 2,673 ---- 254, 788. 120 4, 609. 002 1, 005,1521.378 Total........... *520, 28:3 - 44 780, 266. 370 1, 693, 123 - 544 2,116, 674. 796 TOTAL RECEIPTS. From manufactures and pro- 75, 403, 386 64. 53 104, 3i9, 609 49. 438 178, 356, 661 57. 366 146, 223, 674 54. 987 duictions. Slsughtered animals...... 695, 202. 60 1, 261, 357. 597 1, 291. 570. 415 26-2. 211. 099 Gross receipts......... 2, 895, 999 2. 48 9, 697, 866 4. 593 11, 262, 430 3. 622 7, 444, 719 2. 809I Sales -------....... 138, 082. 12 4, 062, 244 1. 924 4, 002, 28:3 1,'287 4, 114, 0~5, 1. 547 Special taxes, 2~~L 7,145,389 6. 11 12,613,478 5.974 18, 038,6098 5,81)1 18, 1864, 447! 6.84 Income............14, 919, 2811 12. 77 20, 740, 451 9. 823 61, 071, 9:32 19, 643 64, 984, 437 24. 4:37 Salaries............ 1, 705, 125 1. 45 2, 826, 333 1. 34:3, 717, 39 1, 195 1, 029, 992.. 387 Legacies and successions... - _. 310, 836.27 546, 703.259 1,170,979.376 1, 865,:315~.701 Articles in schedule A..... 520, 283. 44 780, 266. 370 1, 69:3, 123 - 544 2, 116, 674 ~.796 Passports, &c. —------- 101,998. 01 29, 538. 013 31, 759. 000 28, 217i. Oil Banks, railroad companies, &c. 7, 017, 547 6. 00 13, 579, 594 6. 43 12, 109, 420 3. 90 2, 046, 562. 770 Penalties, &c........... 193, 600. 17 520, 385. 2.5 932, 619. 3)1 1, 459, 1719. 549 Sale of stamps. —------ 5, 894, 945 5. 05 11,1562, 39-2 5. 287 15, 044, 37:3 4. 838 16, 094, 718~ 6. 052 Special income tax.................28, 929, 312'03. 702................ —Collectors of customs and..................... 1, 974, 108 - 635 64, 202;. 024 special treasury agents. United States marshals.......................... 210, 2:34. 068.......... Aggregate.........116, 850, 672 100. 211, 129, 529 100. 310, 916, 984 I100. 265,920, 474 100. * Nest amount after refunding $556. APPENDIX B. Expenditures of the United States government at different periods, 1821-'67, (46 years.) PREPARED FOR THE SPECIAL COMMISSIONER OF THE REVENUE BYE. B. ELLIOTT. TABLE I. POPULATION OF UNITED STATES AT DIFFERENT PERIODSACTUAL AND ESTIMATED. II. POPULATION AND AVERAGE ANNUAL EXPENDITURES. III. AVERAGE ANNUAL EXPENDITURES PER CAPITA, IN CURRENCY AND IN GOLD. IV. INCREASE AND DECREASE PER CENT. OF EXPENDITURES PER CAPITA. I.- Table showing the population of the United States at djfJerent periods, official and estimated. Estimated avePeriods of years, each end- rage popula ~Years. Population. ing Jun 30. of the respective periods. ]1820, (official returns).... 9,638,133 1830 -— do............ 12,866,020 1821-31, (10 years)... 11,529,600 1840...do............ 17,069,453 1831-41, (10 years)........ 15,331,390 1850......do......... 23,191,876 1841-51, (10 years).... 20,649,000 1860......do.... 31,443,322 1851-61, (10 years)..... 28,017,000 t~61, (estimated).. 32, 386,000 1861-66, (5 years)......... 33, 829, 000 1862....do.............. 32,935,000 1863...do... 33, 505 000 1866-67, (1 year)..........'35, 672, 000 1864.... do... 34,097,000 1867-68, (1 year).......... 36, 510,000 1865..do...... 34,710,000 1866.. do... 35,344,000 1861-62, (1 year)....... 32,660,000 1867...do. 36,000,000 1862-63, (1 year).......... 33, 220,000 1858....do. 37,021,000 1863-64, (1 year).......... 33,801,000 1869....do. 38,062.000 1864-65, (1 year).......... 34,403,000 1870....do.... 39, 122, 000 1865-66, (1 year).......... 35,027,000 I1.- Table showing the avera~ge annua' expenditures of, the United estates government at different specified periods during the forty six 2 years from the middle of the year 1821 to that of 1867; with the estimated average population of the respective periods. Average annual expenditures. Periods, each ending June 30. ~ ~ ~~- Cvl e- Pensions. Indians. Navy. War. s n'1 vice. W Million Million Million -Million Million Million Million Million 1821-31, (ten yeara)...................... 11, 529, 600 *3, I8 1, 29 0, 62 3,.31 3, 99 12, 39 3, 78 16, 17 1831-41, (ten years)...................... 15, 331, 300 5, 76 2, 63 2, 65 5, 14 8, 56 24, 74 0, 29 25, 03 H 1841:51, (ten years)...................... 20, 649, 080 9, 09 1, 69 1, 40 7, 82 1L3, 76 33, 76 1, 98 35 74 1851-61, (ten years)...................... 28, 017, 400 23, 92 1, 35 3, 33 12, 34 16, 93 57, 87 21, 81 60, 68 1861-62, (nyer....................... 32, 660, 000 21, 41 0, 88 2, 22 42, 67 394, 37 461, 55 13, 19 474, 74 1862-63, (one year)....................... 33, 220, 000 23, 25 3,14 1, 08 63, 21 599, 30 689, 98 24, 73 714, 71 1863-64, (one year)....................... 33, 801, 000 27, 51 4, 98 2, 54 85, 73 690,79 811, 55 53, 68 865 23 1864-65, (one year)......................... 34, 403, 000 44, 76 9, 29 4, 97 122, 57 1, 031, 32 1, 212 91 77, 40 1, 290, 31 0 1865-66, (one year)...................... 35,027, 000 41, 06 15, 60 3, 25 43, 32 284, 45 387, 68 133, 07 520, 75. 1861-66, (five years)...................... 33, 829, 000 31,59 6, 78 2, 81 71, 50 600, 04 712, 72 60, 41 773, 13 1866-67, (one year)...................... 35,672, 000 51, 11 20, 94 4, 64 31, 04 t8,951922 437 73353 +95, 22 202,95 14,7 346 73 *Million) * Excluding expenditures for bounties. $. denotes $3, 180, 000. 3,18 ) Including $11,382,859, expenditures for bounties. III.- Table showing the average annual expenditures per capita to population, of the United States Government, at di/crent periods; both in currency and gold. Average annual expenditures per capita. c 1 " Ordinary expenditures. ______ _ -._.........._- Interest on the public Aggregate exclusive ~ ~ po |dInteresbdbt, of redemption of r.^ as o e. public debt.. > Civil service. Pensions. Indians. Navy. War. Total. Decennial. $ c... $ c$ M. $ ce.. $ C.ff. $. $ c.. $ c.m. $ c.m. 1821-31.......... 0 27 6' 0 11 2 0 05 4 0 28 7 0 34 6 07 5 0 32 8 1 40 3 1831-41-....... 0 376 0 172 0 173 0 335 0 559 1 6i15 0 019 1 634 1841 51......... 0 44 0 0 08 2 0 06 8 0 37 9 0 66 6 1 635 0 09 6 1 731 1851-61 1.......... 0 85 4 0 04 8 0 119 0 44 0 0 60 4 2 06 5 0 10 0 2 16 5 Currency.' Gold. Currency. Gold. Currency. Gold. Currency. Gold. Currency. Gold. Currency. Gold. Currency. Gold. Currency. Gold.. M Quinquen C. nial. $ c.m. $ c.m $ c.m. $ c.m. $ c.m. $ c.m. $ c.m. $ C.m. $ C.t. $ C.M. $ C. m. $ C.m. $ c. m. $ C. mt. $ c. m. $ c. m 1861-6-... 147.1 0 93 4 0 63 5 0 20 0 0 13 6 0 08 3 0 05 6 2 11 4 1 43 7 17 73 7 12 05 8 21 06 8 14 32 2 1 78 6 1 21 4 22 85 4 15 53 6 Annual. 1861-2... $101.6 0 656 0 645 0027 0026 0 06 8 0 06 7 1 306 128 6 12 075 1188 5 14 132 13 90 9 0 404 - 0 39 7 14 536 14 30 6 1862-3... 135.2 0 70 0 0 51 8 0 09 4 0 07 0 0 03 3 0 02 4 1.90 3 1 40 7 18 04 0 13 34 3 20 77 0 15 36 2 0 74 4 0 55 1 21 51 4 15 91 3 1863-4... 157. 9 0 814 " 0 51 5 0 14 7 0 09 3 0 07 5 0 04 8 2 53 6 1 606 20 43 7 12 94 3 24 00 9 15 20 5 1 58 8 1 00 6 25 59 7 16 21 1 1864-5... 200. 3 1 30 1 0 65 0 0 27 0 0 13 5 0 14-4 0 07 2 3 56 3 1 77 9 29 97 8 14 96 6 3.5 25 6 17 60 2 2 25 0 1 12 3 37 50 6 18 72 5 1865-6. - 140. 4 1 17 2 0 83 5 0 44 5 0 31 7 0 09 3 0 06 6 1 23 7 0 88 1 8 12 1 5 78 4 11 06 8 788 3 3 79 9 2 70 6 14 86 7 10 58 9 1866-7., —- 141 a 1 43 3 1 0107 0 58 7 0 41 6 1 0 13 0 0 09 23 0 87 9 4 61 7 *2 35 0 0 66 7 *5 37 3 803 9 4 03 0 2 5 81'9'10 6 66 7 6t*2 66 9' l 8 3 t5 687 9 40 03 5 0 9 719 b6 89 3 * Excluding bounties. fIncluding bounties. IV.- Table showing the rates per cent. of increase and decrease oJ the average annual expendituresper capita (actuaK and estimated) C3 11 of the United States government,for d~fterent specified periods during the forty-si years from the middle of the year 1821 to that of 1867. Increase and decrease per capita. Rates per cent. 0 Periods of years compared. - H Ordinary expenditures. Aggregate, exclun. Earlier pe- ~~~~~~~~~~~~~~~~~~~~~~~~Interest on the pub- sive of paid for It niod. Later period. Civil service. Pensions. Indians. Navy. War. Total ordinary. Inte debt.redemption of the public debt. Decennial. Decenniel. Per cent. Per cent. Per cent. Per cent. Per cent. Per cent. Per cent. Per cent. 1821-'31.. 18:31-'41 - 36 in..-. 53 in.......... 221 in..-... 17 in.... 61 in.... 50in.94d6in 0 1841-'51.9...in........ 41de............. 75in......... 161in.......... 9de............. 26in............ 4 in............ 25 in............ 9 Quinquennia Cur. Gold. Cur. Gold. Cur. Gold. Cur. Gold. Cur. Gold. Cur. Gold. Cur. Gold. Cur. Gold. 1851-'61... 1861-'66. 9 in. 26 de. 317 in. 183 in. 30 do. 55 de. 380 in. 226 in. 2, 836 in. 1, 896 in. 920 in. 593 in. 1, 686 in. 1, 114 in. 955 in. 617 in. Annual. 0 1851-'61.L. 1866-'67..... 68 in. 19 in. 1, 223 in. 768 in. 9 in. 23 do. 98 in. 40 in. *289 in. *176 in. *160 in. *84 in. 3, 930 in. 2, 758 in. *334 in. *208 in. Z 1851-161 1... 1866-667.1342 in. t213 in. 1175 in. 9 in.1349 in. t218 in. d 1851-'61 —. 1861-'62. 23 de. 24 de. 44 de. 45 do. 43 do. 44 de. 197 in. 192 in. 1, 898 in. 1, 867 in. 584 in. 574 in. 304 in. 297 in. 571 in. 561 in.. Annual. 0 1861-'62.. 1862-63. 7 in. 20 de. 2 11 in. 169 in..52 de. 64 de. 46 in 9 in. 49 in. 12 in. 47 in. 1 in. 84 in. 39 in. 48 in. 11 in. t 1862-'63. 1.. 1863-'64. 16 in. 1 do. 56 in. 33 in. 127 in. 100 in. 33 in. 14 in. 13 in. 3 do. 16 in. 1 de. 113 in. 83 in. 19 in. 2 in. 1863-'64.... 1864-'65. 60 in. 26 in. 84 in. 44 in. 91 in. 50 in. 41 in. 11 in. 47 in. 16 in. 46 in. 16 in. 42 in. 11 in. 47 in. 16 in. H 1864-'65.. 1865-'66. 10 de. 29 in. 65 in. 135 in. 36 de. 8 de. 65 de. 50 de. 73 do. 61 do. 69 do. 55 de. 69 in. 141 in. 60 do. 43 de. 0 1865-'66.... 1866-'67. 22 in. 22 in. 32 in. 31 iu. 40 in. 39 in. 30 de. 19 de. *71 do. *71 le. *51 de. *52 de. 6 in. 6 in. *37 de. *37 do. M 1865-'66.... 1866-'67.......................... 167 d. 67 d. 49 d. 9 d..... 35 d. 35 d. * Excluding bounties. i Including bounties. APPENDIX C. A statement of the indebtedness of the several States; before the war, (1861); at its close, (1865); and at this time, (December, 1867). The following summary exhibits the financial condition of the several States immediately before and after the war, and at the close of the year 1867: From official sources: MAINE. State debt, December 31, 1860........................ $699, 500 00 State debt, December 31, 1865......................... 5, 164, 500 00 State debt, December 31, 1867.........,........... 5, 090, 500 00 Showing a reduction in two years of............... 74, 000 00 Amount of reduction provided for in the year 1868. 37, 000 00 NEW HAMPSHIRE. State debt, June 1, 1861.............................. $31, 668 93 State debt, June 1, 1866.............................. 4, 002,070 13 State debt, June 1, 1867............................... 3,747, 776 95 Showing a reduction in one year of 6 35 per cent., or.. 254, 293 18 Estimated reduction in 1868...................... 250,000 00 VERMONT. State debt, 1860, 1861.......................................... None. State debt, 1865................................... $1,650, 000 00 State debt, November 1, 1867.................... 1,395, 000 00 Showing a reduction in two yearsof 15.45 per cent., or. 255,000 00 MASSACHUSETTS. The debt of this State in 1861 consisted mainly of scrip issued to railroad corporations, and amply secured by bonds and mortgages paying interest. In addition, the State, at that time, possessed securities and property exceeding by more than one million of dollars in value all other obligations. Massachusetts, therefore, in 1861, had substantially no indebtedness. The following table exhibits the apparent debt and resources of Mlassachusetts at the specified periods: Date. Aggregate debt. Resources. Debt uIprovided for. January 1, 1861..................... $7, 132, 627 56 $8, 273, 055 83 None. Jauary 1, 186.....................23, 047, 873 36 14,793, 008 65 $8, 254, 864 71 January 1, 1867...-........ 25, 520, 095 92 14, 4~7,586 24 11, 092, 5b9 68 November 1, 1867................... 27,638, 918 29 16, 926, 587 9'2 10,712, 330 37 58 REPORT OF THE SPECIAL COMMISSIONER RHODE ISLAND. State debt in 1S60, 1861................ None. State debt in 1865................................... $4, 000, 000 00 State debt in November, 1867......................... 3,538, 500 00 Showing a redulction in two years of 11 per cent., or 461, 500 00 Estimated reduction for the year 1868............. 200, 000 00 CONNECTICUT. State debt in 1860, 1861................. None. State debt in July, 1865.................. $10, 400, 000 00 State debt, December 1, 1867.8, 022, 400 00 Reduction in two years 22.8 per cent., or. 2, 377, 600 00 NEW YORK. The following table shows the amount and character of the debt of this State at the periods specified: Sept. 30, 1860. Sept. 30, 1865. Sept. 30, 1867. Canal debt.......... $27,107,321 48 $19,424,585 49 $15,733,060 00 General fund debt. 6, 505, 654 37 6, 050, 954 37 5,642, 622 22 Contingent debt-.. 570,000 00 224,000 00 130,000 00 Bounty debt.-.. —-...... —--.... ——. — 23, 989. 000 00 26, 862, 000 00 Total............. 34, 182, 975 85 49, 688,539 86 48, 367, 62 22 Deducting the balances of the sinking funds in the treasury on the 30th September, 1867, the aggregate debt is reduced to.......*$44, 114, 592 35 During the State fiscal year ending 30th September, 1867, the debt was reduced; by redemption and purchase of stock, in the sum of.......................... 3,385, 400 00 NEW JERSEY. State debt, December 30, 1860........................ $104, 000 00 State debt, November 30, 1865........................ 3, 018, 800 00 State debt, November 30, 1867...................... 2, 253, 547 00 Reduction in two years 25.34 per cent., or......... 765, 253 00 PENNSYLVANIA. The debt of this State on the 30th of November, 1860, was $37, 964, 602 02 which, during the first year of the war, increased to.... 40, 575, 420 60 This amount, gradually reduced, wasApril, 1865 39, 368, 044 49 f In reference to this debt the State comptroller observes: " This is but little in excess of the value of the public works of the State, as their net revenues for the past ten years would about pay the interest on- that sum at six per cent." OF THE REVENUE. 59 November 30, 1865............................... 37, 471, 663 36 November 30, 866................... 35,617, 484 11 Thus showing a decrease from the close of the war in April, 1 65, to November 30, 1866, one and a half year, of over 9. per cent., or... 3 750,560 38 Estimated reduction of indebtedness during 1868.. 2, 535, 888 02 DELAWARE. This State, which had no debt in 1860, reports an aggregate indebtedness in December, 1867, of............................ $1,242,000 00 MARYLAND. State debt September 30, 1867................. $10, 891, 802 00 Against this indebtedness, the State is reported to hold productive property to the extent of $8,059 487, and a sinking fund of $1,529,379-the two nearly covering the entire amount of the State debt. The valuation for taxation made in 1867 exhibits the total property of the State subject to assessment at $492,563,472. The assessment of 1852, according to which the taxation was levied up to 1866, was $280,501,474. Increase of valuation in fifteen years, $212,061,998, or 75.6 per cent. OHIO. State debt, November 15, 1860....................... $14, 250, 173 00 State debt, November 15, 1865....................... 13, 060,582 00 State debt, November 15, 1867................... 11,031,945 00 Reduction in two years 15.53 per cent., or.. 2,028,637 00 INDIANA. State debt, October 31, 1861...................... $7, 770, 233 55 State debt, October 31, 1864....................... 8,687,960 55 State debt, October 31, 1867.............. 4, 344, 236 33 Reduction in three years 50 per cent., or........ 4, 343, 724 22 MICHIGAN. State debt, January 1, 1861.... $2, 388, 842 79 State debt, November 30, 1866........... 3, 979,921 25 State debt, November 30, 1867....................... 3,903, 242 70 Estimated reduction during the year 1868......... 211,000 00 ILLINOIS. State debt, November 30, 1860..............$... $10,277,161 36 State debt, December 16, 1864........................ 11, 178, 564 45 State debt, November 87, 1867........................ 7, 581, 315 63 Reduction in three years 32 per cent., or. 3, 597, 248 82 Estimated reduction during the year 1868 over 16 per cent., or............................... 1,250, 000 00 60 REPORT OF THE SPECIAL COMMISSIONER WISCONSIN. State debt, January 1, 1861............................ $100, 00C State debt, January 1, 1866.............................. 2, 692, 467 State debt, November, 1867.......................... 2, 279, 057 Reduction in two years 15 per cent., or................ 413, 410 Of the remaining debt the greater portion is held by the school fund of the State. MINNE SOTA. The debt of this State in 1860 was $250,000; and in 1866, $350,000; which last amount was increased in 1867 by the contraction of a loan of $100,000 for the purpose of erecting publicbuildings. This aggregate of $450,000 has, however, been recently reduced to $325,000, through the redemption of $125,000 by the State sinking fund. IOWA. State debt in 1860........ $200,000 State debt in 1865.................................... 500,000 State debt, December 31, 1867............................ 300,000 Reduction in two years 40 per cent., or................ 200,000 In addition to the above reduction, a claim of the State against the general government of $243,000 has recently been allowed. MISSOURI. State debt in 1860...................................... $24, 734, 000 State debt in January, 1865 7...................... 37, 000, 000 State debt, December 31, 1867............................ 26, 000, 000 Reduction in three years 29.7 per cent., or............ 11, 000, 000 Besides this reduction, an addition of $1,000,000, invested in five-twenty United States bonds, has been made since 1865 to the school fund of the State. KENTUCKY. The debt, and resources of this State at the specified periods were reported as follows: Debt October 10, 1861...................... $4, 729, 234 Less school fund*........................... 1, 381, 832 $3, 347, 402 October 10, 1865......................... 5, 254, 346 Less school fund*....................... 1,602, 944 _____ —--- 3, 651,402 October 10, 1867........ 4, 611, 199 Less school fund*................ 1, 632, 297 2, 978, 902 Resources: amount in treasury October 10, 1867.. $1, 475, 029 Other resources of sinking fund.......... 6, 547, 315 8,022,344 $ The school fund is composed of bonds, the principal of which is not to be redeemed. OF THE REVENUE. 61 The State has, therefore, practically, no debt, and in reference to any outstanding obligations the State treasurer, in a report to the special commissioner under date of December 21, 1868, remarks:" The debt can be paid off in twenty-four hours; and would be rapidly extinguished but for the difficulty of having the bonds presented." KANSAS. This State had a debt in 1860 of $150,000; in 1865, of $452,975; and in 1867, of $819,975. In addition to this the legislature of 1867 made provision for the payment of claims arising from the Price raid, and the Indian expedition of 1864, amounting to about $300,000. CALIFORN IA. State debt in 1864, $5,290,640; expended since then for war and other extraordinary purposes,* $2,807,363; total funded debt December 2, 1867, $5,126,500. FROM UNOFFICIAL SOURCES. States. Indebtedness Indebtedness in 1860. in 1866. Alabama.................................................. $5,048, 000 $6,304,972 Arkansas..-.......................- 3, 092, 622 3,252, 401 Florida.....-......... —------- -.................. 383, 000 638, 863 Georgia.-........ —-. ——..-..... 2,670,750 5,706,500 Louisiana.........-.........-.......-.-...... 10, 023, 903 13, 357,999 Mississippi. —--.. —------------------..-............................. North Carolina -.. —-.......-..-...... —----—..... —-—. 9, 129,505 11,433, 000 Oregon. ——..-.......-.....-.......... ——. —--—..... 55, 372 218, 574 South Carolina... —.......-.-.........-................ 3, 691,574 5,205, 227 Tennessee.. —......-..... -. 16,643,666 25,277,347 Texas -.. —-...... ----—.- --—.. —-—.... -........ —-. 2,320,360 Virginia, including West Virginia-.......................... 33,248, 141 45,119, 741 * In his late message the governor remarks: "As a large proportion of these extraordinary demands upon the treasury grew out of the late civil war, no provision need be made for such claims in the future. The resources applicable to the payment of interest, and the creation of sinking funds, will fully liquidate the entire debt of the State within the next ten years." APPENDIX D. Draught of a proposed law for the inspection and collection of the revene.e from manufactured tobacco and snuf'; submitted to the Special Commissioner ef the Revenue by the chairman of the convention of tobacco manufacturers held at Cleveland, Ohio, September 17, 18, and 19, 1867. 1. Inspectors' brands or stencils shall be prepared by the government at Washington, and shall be of uniform style and size, and of some intricate design, not easily counterfeited. They shall indicate the name and office of the inspector, the number of the collection district, the name of the State, the kind of tobacco contained in the package, and the date of inspection. They shall be furnished to the inspectors through the collectors of the districts wherein they act, and shall in all cases be returned to the collector when, from any cause, the inspector ceases to act as such. 2. The government, in addition to furnishing the inspector's brands or stencils, shall have engraved in the highest degree of art, and printed on bank-note paper, a stamp or stamps to be known as the United States Tobacco Stamp; said stamps to indicate upon their face the following weights, viz: 1 and 2 oz.; 1 quarter pound; 1 half pound; 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 20, 30, 40, 50, 60, 70, 80, 90 and 100 pounds. 3. The stamps indicating weights shall have blank spaces on them for the number of the factory using them, and for the date of placing them on the package. They shall'be issued in counted numbers, and charged to the collectors of the districts wherein tobacco is manufactured. 4. Inspectors shall weigh, or cause to be weighed, all tobacco and snuff manufactured in their districts, (save such as may be put up in quantities of one pound land less,) and shall place upon the side, and in no case upon the head of the package, a distinct impression of his official brand or stencil; said brand or stencil to indicate the kind of tobacco contained in the package, the net weight thereof the date of weighing, the name of the State, and number of the collection district. 5. The inspector shall receive from the manufacturer, and shall place on the opposite side from his inspection brand on each package, a stamp, the date and weight of which must correspond with that of his inspection, and must also have the factory number thereon. The stamp shall in all cases be put on with a paste that will not allow of its being removed by the use of water, (kind and quality to be designated by the government,) and shall be cancelled by sinking the letters U. S. through them into the package with a steel die. 6. All foil and papered goods and all descriptions of manufactured tobacco and snuff shall be put up in quantities of not less than one (1) ounce. All packages of one pound and less shall in no case contain a fractional part of an ounce, and all packages of the weight of one pound and upward shall in no case contain the fractional part of a pound. 7. All manufactured tobacco and snuff put up in packages of one pound and less quantities, shall, when offered for sale, have upon each package the government stamp denoting their net weight. 8. The bond given by the manufacturers of tobacco and snuff shall in no case be less than ten thousand (10,000) dollars, and shall be as much more than, this sum as the collector and assessor of the district may deem necessary for the safety of the government. They shall be signed by not less than two persons as sureties, each of whom shall be worth, free of all incumbrance, the amount of the bond. 9. Tobacco stamps shall be issued to manufacturers, on application to collectors, in such quantities as they may desire, to within twenty-five (25) per cent. of the amount of their bond, but when that limit is reached they shall either REPORT OF SPECIAL COMMISSIONER OF THE REVENUE. 63 give an additional bond or make a deposit, to consist of cash or government bonds, with the collector,in an amount equal t6 the amount of stamps drawn.* 10. The manufacturer shall furnish the inspector with such stamps as will be required to go on all tobacco inspected by him, and shall cause to be placedsubject to the examination of the inspector-on all packages of one pound and less, including foil and papered goods, the stamp indicating net weight of same. 11. Factories for the manufacture of tobacco and snuff shall be numbered, beginning with one, and running up to the whole number in any one collection district, in order that the product of any one factory can be easily traced to place of manufacture, and also to prevent the reworking of one factory in tobacco manufactured by another, which practice hereafter shall be discontinued, and not allowed under any circumstances whatever, a manufacturer only being allowed to rework the tobacco of his own manufacture. 12. When a manufacturer shall have returned to him goods of his own production, he shall report the same to the inspector. If, upon examination, the inspector is satisfied that the goods are the product of the manufacturer, he shall give him a certificate to that effect, stating number of packages, date of inspection, and weight of contents. This certificate shall be presented to the assessor, who shall send an assistant to examine the tobacco, and erase from the packages the inspector's brand and the government stamp. A sworn statement, signed by the manufacturer, inspector, and assessor, shall be made in duplicate and given to the collector, showing the number of stamps and weights of each so destroyed.'The manufacturer shall then receive credit on the assessor's and collector's books for the number of pounds so returned, and the amount shall be deducted from his assessment from the next month following. The tobacco shall go back into the manufacturer's stock, and when sold or sent out again shall go as other tobacco, subject to the tax. 13. Any person or persons who shall cut or prepare a brand or stencil which shall be a counterfeit, or intended to be used by a manufacturer or inspector in lieu of the genuine inspection brand or stencil prepared by the government, shall, upon conviction, be imprisoned for the term of not less than three years; the same penalty to apply to the person or persons using the same, and also to the owner or owners of the factory wherein or on whose tobacco the brand or stencil is'used. 14. Dealers, when they have emptied a package that has contained manu-,factured tobacco or snuff, shall at once destroy the inspection brand or stencil, and the government stamp that is thereon, and shall be subject to a fine of $50 for failure to comply with this provision; and any person or persons who shall sell or give away any empty packages that have contained manufactured tobacco and snuff, without first removing the inspector's brand and the government stamp, shall, upon conviction, be subject to a fine in the sum of $100 for each package so sold or given away; and any manufacturer who shall use any package or part of a package that has contained manufactured tobacco or snuff, without the inspection brand and the government stamp first being removed from such package or part of a package, shall, upon conviction, be fined in the sum of not less than $100 for each package or part of package so used, and shall be imprisoned for not less than three years. 15. It shall be the duty of the officers of' the government to seize all tobacco found on the market for sale that has not been properly inspected and stamped as before stated. 16. All common carriers shall be prohibited from transporting manufactured tobacco and snuff, unless the same shall be properly inspected and stamped, or is shipped in bond under treasury regulations. 17. The bond of the inspector shall not be less than $10,000, and shall be signed by two good and sufficient sureties, each of whom shall be worth, over all indebtedness, the amount of the bond. * In case of the reduction of the tax to a uniform standard of fifteen cents per pound, the stamps shall be paid for in cash by the manufacturer when received from the collector. APPENDIX E. Revenue' systems of Great Britain, France and northern Germany. The following summary exhibits the leading characteristics of the revenue systems of Great Britain, France, and Northern Germany: REVENUE SYSTEM OF GREAT BRITAIN. The close of the great European war, in 1815, found Great Britain with a complex system of taxation, the growth of her necessities at a period when vast military and naval expenditures, and the burden of an increasing debt, had tasked the ingenuity of ministers to devise new sources of revenue. " The love of imposts was omniscient; it seized on every article which by any possibility an Englishman could want." More than a thousand different kinds of foreign produce paid tribute at the custom-house, while the heavy hand of the exciseman was laid on many articles of home production and of indispensable domestic use. Navigation laws-long before adopted to control the carrying trade between Great Britain and her colonies and the rest of the world-had operated to repel foreign commerce; and corn laws, enacted in the interest of the landed aristocracy, had carried the food of the people to starvation prices. The law of 1815, wholly prohibited the importation of foreign wheat till the home price reached eighty shillings a quarter, or about $2 50 a bushel. Under the operation of this law, the price of wheat rose from sixty-four shillings a quarter in 1815 to an average of ninety-four shillings in 1817, and in June of that year reached the frightful figure of one hundred and twelve shillings and eightpence, or $3 50 a bushel. Trade languished, the people were starving, and bread riots disturbed the peace and menaced the safety of the kingdom. This state of things gave birth to the struggle between the landed proprietors and the manufacturers, which ended thirty years afterward in the repeal of the corn laws and the triumph of free trade. The workmnen clamored for cheaper food, while their employers petitioned Parliament to extend their markets. The war, with its restrictions on foreign intercourse, had made England the chief manufacturer of the world. A dense population, colonies planted in every clime, a great mercantile marine, and the possession of abundant coal and iron, and of much private capital, supplied conditions to cheap production and a wide diffusion of products such as set the competition of other nations at defiance. These natural and acquired advantages were, however, in a measure, neutralized by unwise commercial restrictions and burdensome taxes, but with the restoration of peace these burdens began gradually to be removed. The commerce of the east had been set free from the monopoly of the East India Companyin 1814. The treaty of reciprocity with the United States in 1815, which was followed by similar treaties with the European powers, and alterations made in the navigation laws in 1822, opened the British islands more freely to foreign commerce, and at the same time enlarged the carrying trade of British ships. Heavy duties on raw materials, and materials- partly wrought, entering into domestic manufactures, were repealed or greatly lessened; and though the duties on foreign fabrics were also lowered, the importation of some of them seriously interfered with the home manufacturer. In silks alone the French were superior, and against that superiority the British manufacturer was protected by restrictive duties, down to the ratification of the treaty with France in 1860, when, for the sake of advantages to be gained in the export to France of coal, iron, machinery, and other British products, the silk duties were repealed. REPORT OF SPECIAL COMMISSIONER OF THE REVENUE. 65 From 1815 to 1840, the condition of the manufacturer was steadily improving; but great ameliorations were still needed before the productive capacity of the country could obtain its full development. Foreign competition in the home market had long ceased to be feared, and the only hindrances now lay in domestic restrictions. A parliamentary report in 1840 showed that out of a customs revenue of X22,000,000, X20,000,000 was derived from duties on raw materials and on food; and it disclosed the still more remarkable fact that ninety-four and a half per cent. of this revenue was levied on seventeen articles, while more than eleven hundred articles contributed to make up the residue of five and a half per cent., being the insignificant sum of X1,250,000. In the more numerous category were included all foreign manufactures except silk. It thus appeared that the duties on the foreign imports.of Great Britain were a direct tax on the home producer; the high price both of raw materials and of food helping to swell the cost of manufactures, and thus benefiting the foreign competitor. "A nation of manufacturers can only subsist as they sell their produce, and they can sell their produce only as they sell it cheap. But the ability to sell their produce cheaply implies a cheap command of the raw material and of'the workman's food; to tax these is to decree the nation's ruin and involve all clases alike in bankruptcy and pauperism." This was the argument of the Manchester party in 1840, and it speedily came to be the creed of the nation. The policy of protection to agriculture yielded at last, and the revenue system was subordinated to the more important end of creating national wealth. All duties burdensome to the manufacturer were repealed, both in the nature of the customs and excise, the policy being to enable the British producer to apply the largest amount of home labor to the smallest value in foreign staples, under conditions which enabled him to put his product into foreign markets at the lowest possible cost. This principle is the key to British free trade, and it is claimed to be of universal applicability; but it may be gravely questioned whether it is not protection in a more subtle form. Such is the opinion of NI. Block, a modern French economist of eminence, who classes under protective measures the freeing of raw materials and of food from customs duties. Having described the influences which have determined the present revenue system of Great Britain, we proceed to give the details of the modern budget. The gross revenues of the united kingdom for the year ending March 31, 1867, were as follows: Customs........................................ $111, 515, 000 Excise......................................... 103, 350, 000 Stamps.............................................. 47, 100, 000 Land and assessed taxes................ 17, 340, 000 Income and property taxes.............................. 28, 500, 000 Post office................................. 22, 350, 000 Crown lands................................... 1, 650, 000 Miscellaneous.................................... 15, 367, 840 Total.................................... 347, 172, 840 Customs. —The receipts from customs, after deducting repayments and drawbacks, may be specifically classified as follows: Tobacco and snuff.......................... $32, 275, 055 Sugar and molasses..................................... 28, 238, 935 Spirits..................................... 20,865, 135 Tea................................................... 13, 293, 580 Wine................................................. 6,955, 960 Corn-meal and flour....................... 3, 988, 195 H. Ex. Doc. 81 5 66 REPORT OF THE SPECIAL COMMIESIONER Coffeeun r s..,...............p.........................., 98., 930 Currants, raisins, and other imported articles................ 2, 888, 330 Miscellaneous receipts.............1................. 1, 004, 190 111, 495, 330 Excise. —Of the excise ($103,350,000) the sum of $99,882,760 was derived from the taxes on spirits, malt, and from licenses; the receipts from these several sources being as follows: Spirits............................................ $54, 279, 245 Malt.................................................. 34, 081, 925 Licenses.............................................. 11,521,590 99, 882, 760 The balance of revenue which accrued under this head was derived from taxes on hackney carriages, railways, stages, race horses, chiccory, and a fewv other articles. Stamps.-Of the stamp duties ($47,100,000) the greater portion was collected under the following heads: Deeds and other instruments -.......................... $8, 169, 615 Probates of wills....................................... 7, 903, 880 Legacies and successions................................. 13, 021, 660 ire insurances.......................................... 5, 891, 925 Marine insurances......................................... 2, 362, 810 IPills of exchange, bankers' notes, &c.................... 4, 503, 525 Receipts and drafts...................................... 2, 656, 620 Patents and other receipts................................ 2, 589, 965 47, 100, 000 Land and assessed taxes.-The land tax is probably the oldest tax in England, as it was originally imposed in 1695, in which year a general valuation of all estates and real property was made, which valuation has continued to be the basis of assessment up to the present time.. The tax was imposed permanently by Mr. Pitt, not with a view of obtaining a permanent income, so much as to have an immediate command of money, which he proposed to obtain by offering to land owners the privilege of redeeming the tax on advantageous terms. It was his expectation that a sufficient number of persons would redeem it at eighteen or twenty years' purchase to afford a sum at once of from thirtysix to forty millions of pounds sterling; but the total amount redeemed during the period of nearly seventy years which has since elapsed, has been under eight hundred thousand pounds a year, which redemption has been applied to the reduction of the public debt. The assessed taxes are mainly levied under the ibllowing heads: Inhabited houses, servants, carriages, riding horses, other horses and mules, dogs, and armorial bearings. The following are the per centages yielded by each leading item of the revenue of Great Britain, collected for the year ending March 31, 1867: Customs, 32.12; excise, 29.77; stamps, 13.56; land and assessed taxes, 5.0; income and property taxes, 8.21; post-office, 6.43; crown lands, 0.44; miscellaneous, 4.42. Of the customs revenue, ninety-one per cent. was derived from five articlesspirits, sugar, tea, tobacco, and wine. Of the eacise, ninety-six per cent. was derived from licenses, malt, and domestic spirits. OF THE REVENUE. 67 Intoxicatirig beverages and tobacco yielded over forty-two per cent. of the total revenue. The most productive stamp duties were those on the conveyance and transmission of property, deeds, probate of wills, and legacies and successions. Next to these are stamps on policies of insurance. The direct tax on land is very small, being only. about one and a half per cent. of the total revenue; but estates and interest in land are reached through the income tax, of which nearly sixty per cent. (under schedules A and B) is assessed on real property and the profits of occupying it. The income tax for the fiscal year ending March 31, 1867, was four pence in the pound; but this rate has recently been increased to f/le pence, to meet the expenses of the Abyssinian war. Incomes less than one hundred pounds (I 100) a year are exempt from taxation, and an abatement of 660 is made on all incomes of X100 and under X200 per year. The British income tax, originally created by Mr. Pitt, in 1798, as a war tax, was repealed in 1815, when it yielded $75,000,000. It was reimposed by Sir Robert Peel in 1842, to enable him to make his reductions of the tariff. It has varied from four pence to one shilling and four pence, (during the Crimean war,) and, though long treated by the Chancellor of the Exchequer as a temporary expedient, has been found too useful to be dispensed With, and it is likely in future to have a permanent place in the budget. Such are the leading features of the British revenue system. Having always a regard to the exemption of home industry from burdens, Great. Britain thus raises her taxes: 1. From articles of necessary and large consumption, as tea, sugar, and coffee. 2. From articles of indulgence, as spirits, beer, (malt,) tobacco, and wine. 3. From licenses and other taxes on occupations. 4. From stamps on legal documents, the conveyance and descent of property, and instruments of business. 5. From occupied houses, and the luxuries of living, servants, horses, dogs, and carriages. 6. From incomes derived from realized property and professional and other earnings. 7. From the post office. LOCAL OR MUNICIPAL TAXES IN GREAT BRITAIN. In the local or municipal taxation of Great Britain, the same exemption from all direct taxation of capital employed in industrial and commercial pursuits, in banking, and in investments, which characterizes the national system of revenue, is also carefully recognized and adhered to. Thus, the expenditures for local and municipal purposes are provided for by a system which makes the rental value of real estate the basis of taxation; the assessed taxes on this basis varying, according to locality and exigencies, from 10 to 25 per cent. on the rental valuation. The rental taxes, moreover, are in all cases paid by the'" occupier as owner or tenant." As showing the working of this system of taxation, we present, herewith, the local taxes actually levied for the year 1866 in St. Marylebone, one of the largest of the parishes of the metropolitan district of London: X s. d. Poor rate.....0.................. 0 2 24. on the pound of rental value. General rate, (street lighting, watering, paving, &c.)......... 0 0 11 on the pound of rental value. Sewer rate....,.............. 0 0 4 on the pound of rental value. Church rate...................... 0 0 1 on the pound of rental value. Metropolitan main draining rate...... 0 0 4 on the pound of rental value. 3 101 68 REPORT OF THE SPECIAL COMMISSIONER These rates, which are probably among the highest levied in Great Britain for municipal or local purposes, would, in the aggregate, be equivalent to nearly twenty per cent. (19 37) of the annual rental value of the real estate liable to taxation. It will be observed that the highest single item in this account is that known as the " poor rate." It should also be stated that in this system of rental taxation the rate is levied only on real estate occupied and having a rental'valuation; and that government property also of certain descriptions does not enjoy the privilege of exemption, as in the United States, from local taxation. ADMINISTRATION OF THE BRITISH DEPARTMENT OF FINANCE. The principal and responsible supervision of the Department of Finance in the British Government was formerly intrusted to an officer who was known as the " Lord High Treasurer;" but at the present time this duty is delegated to a board of commissioners appointed by the Crown, whenever there is a change of ministry. The first or chief of these commissioners is called the i" First Lord of the Treasury;" and this officer is generally, though not necessarily, the prime minister. The financial duties of the ministry are, however, always performed by another of the commissioners, who is called the 1" Chancellor of the Exchequer," whose peculiar business it is to attend to the general financial arrangements of the country, and especially to see that as much money is provided as will be sufficient (according to the opinions of the'ministry) to meet the expenditures of the financial year. In order to ascertain what money will be required, it is made the duty of the Chancellor of the Exchequer, in the first instance, to call for estimates from all those departments of the government which are intrusted with expenditures. These estimates are next carefully considered, and those which relate to the army and navy are generally referred to the consideration of the whole cabinet. When the estimates have been approved or sanctioned as far as necessary by the cabinet, the chancellor of the exchequer has then to collect them together in one total, and to consider in what way they can be provided for. If the revenue of the past year is considered a fair estimate for the ensuing year, he has then to consider whether he will propose to Parliament to make any change in the financial scheme of taxation. If the expenditures are likely to exceed the revenue anticipated from existing taxation, the question for consideration is, how shall the additional revenue requisite be raised? but if, on the contrary, the revenue is likely to be more than sufficient to meet the expenditures, the question which then presents itself is, what taxes can be best repealed or abated? All these matters having been considered, and the general scheme for the year of the chancellor of the exchequer approved by his colleagues, it then becomes the duty of this officer to present it to Parliament in what is usually called a " budget speech." The introduction of the budget has been thus described: "Before, or soon after the close of each financial year, the chancellor of the exchequer submits to the House of Commons a general statement of the results of the financial measures of the preceding session, and gives a general view of the expected income and expenditure of the ensuing; he intimates at the same time whether the government intends to propose the repeal of any taxes, or the raising of money by the imposition of taxes, or by loan, or otherwise. This exposition of the state of the finances for the past and the ensuing years gives the House of Commons all the necessary information to enable them to exercise an important check upon the minister, by limiting his means of raising money to the sums actually required for the public expenditure. If his statement shows a larger surplus revenue than the House of Commons considers it prudent to leave as a margin to the government, pressure is OF THE REVENUE. 69 immediately brought to bear upon it to procure a reduction of taxation. If, on the other hand, the minister shows that the revenue will be insufficient to meet the expenditure, it rests exclusively with the House of Commons to grant or refuse the demands which may be submitted to them for meeting that deficiency. The-intention of this budget statement is, not only to lay before the House of Comlmons the scheme of taxation for the ensuing year, but to satisfy them that the public income to be raised in the year will be sufficient, and no more than sufficient, to meet the expenditure which the government proposes to incur within the year."* After the chancellor of the exchequer has concluded his financial statement, it is customary for members to rise and put questions to the finance minister with respect to any point which may require further explanation. When the scheme of the chancellor of the exchequer has been sanctioned by Parliament, the duties of this officer, so far as Parliament is concerned, may be said to be theoretically at an end; for the head of each department, such as the army, navy, &c., ask Parliament to sanction their own estimates; and when there is no special representative of a department in the House of Commons, the duty then devolves on an officer known as the " Secretary of the Treasury," and not on the chancellor of the exchequer. The secretary of the treasury is, furthermore, the generally recognized authority respecting the expenditure of the country in all departments except those of the army and navy. The estimates having been laid before Parliament for some weeks previous to their being taken into consideration, are then put to vote in the House of Commons. When the estimates are thus voted the first step has been taken, but only the first step; for no money can really be obtained till an act of Parliament has been formally passed for a transfer of money from the exchequer account at the Bank of England or of Ireland. Such an act is commonly called a "consolidation fund," or "ways and means" act, and directs the controller of the exchequer to follow the orders of the royal warrant, which is granted by the Crown to the lords of the treasury. It is in virtue only of this warrant, furthermore, that the lords of the treasury are enabled to direct a transfer of money from the account of the exchequer to such other accounts as require money for the services of the country —which services have been specified in the votes of the House of Commons. " By constitutional practice, the speaker of the House of Commons, as the guardian of its privileges, is required to take oversight of the financial proceedings of the House during the session, and it is his duty to ascertain that every bill for giving ways and means to the treasury is kept within the amount of the votes on supply already granted. At the close of the session he checks the final balance between the full amount of the votes on supply and the ways and means previously authorized, and limits the final grant of ways and means in the appropriation act to that amount." The general government account is kept at the treasury, and is presented, from time to time, in detail, in order to satisfy Parliament that the money voted by the House of Commons has been applied to the special purpose intended. All the money received on account of the government is considered as belonging to what is called the "consolidated fund," and is paid in, as received, to the Bank of England or Ireland. It is there placed to an account called an exchequer account, and cannot be touched without the sanction of an act of Parliament, either passed at the time, or which has been already passed and is then in force. In former days a much larger proportion of the expenditure than at present was sanctioned by previous acts of Parliament, and consequently a much smaller amount was voted in committees of supply, thus requiring new acts of Parliament to enable the treasury to obtain the money. Now, however, " Report on Public Moneys, Commons Papers, 1857; Financial Control, by Sir G. C. Lewis. 70 REPORT OF THE SPECIAL COMMISSIONER nearly two-thirds of the whole expenditure is sanctioned by special act of Parliament, after votes in the annual committees of supply. Towards the close of every session, when all the money required by government has been voted, a bill is brought in, called the appropriation bill. This bill appropriates every separate vote which has passed the House of Commons during the session, and completes the "ways and means" necessary to meet these votes. "When an appropriation act is once passed, and the specific purpose of each vote designated, no other use of the money can be made, except by breaking an act of Parliament, which is the method now adopted for using the money generally during the session, the money credited to the consolidated fund being used, after the passage of the supply bills, on account. But the final appropriation act enables Parliament to ascertain, in subsequent years, when the annual financial accounts are presented, that the money voted has been expended in conformity with law." Attached to the treasury department is an officer appointed by the Crownin the same way as the judges-called the controller of the exchequer, whose duty it is to see that parliamentary authority has been obtained before any money is taken from the exchequer account at the Bank of England or Ireland, either by acts of a permanent nature or by those annually passed. "This office is supposed to afford valuable security against misapplication of money by the treasury; but, practically, the only security is the general regularity and the efficient system adopted and carried out by the treasury itself, the check of public opinion, as well as the knowledge that any misapplication of money granted for public purposes is certain to be soon discovered " As already stated, the revenue of the year is paid in, as soon as received, to the account of the exchequer, at the Bank of England or Ireland. It frequently happens, however, that though the revenue for the year is ample for all required payments, yet on the day on which the large quarterly payments are required for the interest on the national debt, there may not be sufficient money to the exchequer account for that purpose. To obviate any inconvenience that may arise uzJder such circumstances, an act has been passed authorizing the treasury to borrow from the bank a sufficient sum to meet the required payments for interest; and the bank (otherwise forbidden to lend money to the treasury) is thereby permitted to do so for this purpose; and the government is by law required to repay the bank outof the first receipts for ordinary revenue. When the treasury so borrows, it issues what it calls' deficiency bills." This power of borrowing money by the treasury from the Bank of England, in anticipation of forthcoming revenue, is never likely to lead to any undue dependence on the bank, as the loan cannot be continued beyond the times specified by the acts of Parliament; that is, it must be invariably repaid before the termination of the quarter in which the money is lent. It may also be noted that the Bank of England pays annually to the British treasury about one hundred and thirty thousand pounds ($650,000) for the privileg;e it enjoys of issuing bank notes to the extent of fourteen million pounds, ($70,000,000,) which payment, it is estimated, leaves a net profit to the bank of about one hundred thousand pounds ($500,000) per annum. The funded debt of England is simply a book debt; that is, an entry in the book or ledger in the national debt office or at the Bank of England that a given sum has been received from a particular individual, in return for which sum of money the nation agrees, under an act of Parliament, to pay an annual sum, either in perpetuity or for a limited number of years; and this individual thereby becomes a fundholder or stockholder to that amount, and he is at liberty to sell his right to receive such interest or annuity, either altogether or in any fractional parts, as he may please. When money is borrowed by the government for a short period only, a species OF THE REVENUE. 71 of promissory note, bearing interest, is generally given in exchange, which notes are generally known as " exchequer bills" or " exchequer bonds," and constitute the unfunded, in contradistinction to the funded or book debt.* Loans, to a limited extent, are from time to time made by the British treasury, at certain rates of interest, in furtherance of works of public utility, but which are not of a nature to induce the public to readily appropriate money therefor; such as building and repairing churches, jails, county lunatic asylums, union work-houses, and in some cases, as in Ireland, in aid of railways, and in making harbors of refilge, and also, within the last few years, for public works, in the alleviation of distress in the manufacturing districts. These loans are made through a b6ard of unpaid commissioners, who are termed the 1" commissioners of public works loans," at whose disposal a certain sum is placed by act of Parliament. The money lent in this way is generally punctually repaid, with the stipulated interest; and a duty'which otherwise might be entailed on the government is performed in an efficient and economical manner through the gratuitous services of the commissioners. As bearing upon the matter of economy in appropriations, it is also important to note the restrictions which Parliament imposes on itself in all matters of money supplies. "According, to ancient constitutional doctrine and practice. no moneys can be voted by Parliament for any'purpose whatsoever, except at the demand and upon the responsibility of ministers of the Crown. " In former times, when any aids and supplies wererequired for the public service, the Crown made known its wants to the House of Commons by message: this message was taken into consideration by the Commons, and the necessary supplies were voted by the House, according to its discretion. This method of procedure in obtaining grants of money admitted of no exception; it therefore left no opportunity for any private member to introduce any scheme of his own, whereby any charges would be made upon the people. " But in the beginning of the last century a specious evasion of this constitutional rule crept in. The wholesale system of exchequer control in the custody of public moneys-which afforded protection alike to the Crown and to the Parliament against illegal appropriations-was made the occasion of attempts to induce the Crown, by the exercise of parliamentary influence, to sanction expenditures that were extravagant and unjustifiable. Finding that there was generally a balance of public money remaining in the exchequer, as yet unappropriated to any specific service, there was a growing disposition on the part of private, members to regard this money as available for any purpose they migltt be disposed to favor. Petitions were presented to the House from various'persons claiming pecuniary assistance or relief, which, being often promoted by members who were friends to the parties, and carrying with them the appearance of justice or of charity, indticed the House to approve or, at utmost, to be indifferent to their success. By this means large sums were granted to private persons improvidently; and sometimes upon insufficient grounds. In the year 1705 this abuse became so notorious that early in the next session, on December 11, 1706, before any petitions of this sort could be again offered, the House resolved "that they would receive no petition for any sum of money relating to public service but what is recommended from the Crown." This resolution was made a standing order on June 11, 1713, and amended June 25, 1852, to bring it into conformity with existing practice, by the substitution of a new order, to declare "that this House will receive no petition for any sum of money relating to public service, or proceed upon any motion for granting any money, but what is' "Taxes and Expenditures," by Thompson Hankey, esq., M. P., late Governor Bank of England. 72 REPORT OF THE SPECIAL COMMISSIONER recommended from the Crown.* The uniform practice of the House has construed this rule to extend to any motion which involves the expenditure of public money, even though it may not directly propose a grant. It has even been held to preclude a select committee from recommending that public compensation should be given to individuals for losses incurred, unless the same had been previously sanctioned by the Crown. This is a striking proof of the strictness with which this rule is enforced, as the mere report of a committee, though entitled to respectful consideration, does not bind the House to anything, unless it be formally agreed to by the House itself.t REVENUE SYSTEM OF FRANCE. The ordinary revenue of France, according to the budget of 1865, was derivable from the following sources: Direct taxes.......................................... $63, 072, 280 Registration, stamps, and public domains -................. 81, 537, 883 Royal forests..................................... 8,051,300 Custom duties and salt -.................. 29, 485, 000 Indirect taxes.......................................... 115,600, 400 Post office............................................ 14, 482, 000 Sundrv revenues........................................ 26, 441, 989 Produce of miscellaneous taxes........................... 11, 736, 360 Total........ 350, 407, 212 To understand the foregoing table it will be necessary to analyze the several items, and finally to rearrange them, arbitrarily, with a view to a more intelligible classification. The direct taxes are made up as follows: Land tax........................... $33, 660, 000 Tax on persons and on tenant occupancy.................. 9, 687, 600 Doors and windows................................. 7, 272, 240 Licenses (" patentes ").................................. 11, 801, 440 * One of the beneficial results flowing from the observance by Parliament of this rule is that there is rarely any material difference between the estimates of expenditure presented by the chancellor of the exchequer for a given year and the sum which the financial returns at the end of that year show to have been actual ly expended. Thus, the following table shows the difference between the amount of expenditures estimated by the chancellor of the exchequer and the amount actually paid out from the treasury on account of expenditures, for several years subsequent to 1853: Estimated in the Actual payments More (+) or Years ending- budgets. out of the ex- less (-) than chequer. budget. April 5, 1853...................... 51,164,000 ~50,782,476 - ~381,524 April 5, 1854......... 52,083, 000 51,250, 120 832, 880 March 31, 1856.... —------- 86, 034,000 88, 428, 345 + 2,394,345 March 31, 1860... —... —.. —. —--- 69,207,000 69,502, 289 + 295,289 March 31, 1862............. — ---- 71,487,000 71,116,485 - 370,515 March 31, 1863..... 70,108,000 69,302,008 - 805, 992 March 31, 1865................ 67,249,000 66,462,207 - 786,793 March 31, 1866................... 67,349, 000 65,914,357 - 1,434,643 March 31, 1867............ 67,031,000 66,780,396 - 250,604 t On Parliamentary Government in England. Alpheus Todd, Longman & Co., London,'867. OF THE REVENUE. 73 Pleasure horses and carriages......................$540, 000 First warning to newspapers............1............. 111, 000 Total...I.................... 63,072, 2S0 The land tax is assessed, not on the real value of the land, but on the net rental or income; receipts and expenditures being estimated on an average of ten years. If there are buildings they are separately assessed on the same principle; the land on which they stand being valued as if for cultivation. The tax on persons is in the nature of a poll-tax, and is estimated at the value of three days' labor, according to the average price paid in the commune. The tax on tenant occupancy (1" contribution mobiliere ") is imposed on all occupants of rented dwellings, and is usual)y nine or ten per cent. of the rental. The tax on doors and windows is according to a fixed scale; it is levied only on occupied houses, and is usually paid by the tenant. The license tax (" patente ") is a tax on trades and occupations, and on certain of the liberal professions. The amount of it is regulated by the nature of the occupation, having regard to the population of the city or town where it is exercised, and by the rental of the premises in which it is carried on. So indispensable is this license that without it the person of whom it is required cannot sue in a court of justice, have the benefit of any judicial decision, or receive any magisterial certificate. The revenue from registration, stamps, and public domains is thus distributed: Registration, mortgages, &c.............................. $63, 844, 400 Stamps...................................... 15,255,600 Sales from and income of public domains, &c.............. 2, 437, 883 Total.......................................... 81, F537, 883 Registration is the necessary mode of authenticating various private acts and events; and it is imposed chiefly with a view to revenue. All judicial and magisterial acts are required to be recorded for this purpose as well as for perpetuating evidence. Stamps are of two sorts: the one impressions stamped by government officers on paper, which is required to be used for certain classes of documents; and the other movable stamps, like the revenue stamps of the United States, which are used and cancelled in the same manner. The receipts for sale of property and other income from the public domains are of a miscellaneous character and of small amount, and need not be specified. The chief produce of the royal forests is wood and timber, the sale of which yielded the considerable sum of eight million of dollars. Customs duties and salt.-This head of the revenue is divided into import duties onMiscellaneous merchandise.............................. $14, 439, 200 Colonial sugar......................................... 7, 058, 600 Foreign sugars.....2.............................., 285, 000 23, 782, 800 Export duties........................................ 82, 000 Navigation dues................................... 832, 600 Sundry customs duties.................................. 278, 000 Duty on consumption of salt collected through custom-house — 4, 509, 600 Total................................. 29,485,000 74 REPORT OF THE SPECIAL COMMISSIONER Indirect taxes are thus distributed: Duties on beverages.................................... $42, 685, 400 Duties on consumption of salt not collected at the custom-house 1, 683, 000 Duties on domestic sugar................................ 11, 786, 000 Produce of government sale of tobacco.................... 45, 295, 600 Produce of government sale of gunpowder.............. 2, 550, 800 Sundry and miscellaneous duties........................ 11, 599, 600 Total. 115, 600, 400 Under the head of sundry revenues are the following: Revenue from the universities...........$......... $571, 700 Revenue from Algeria................................ 3, 850, 000 Sums reserved and saved from civil pensions................ 2, 915, 740 Increase of sinking fund................................ 19, 104, 549 Total.................................... 26, 441,989 Among the miscellaneous taxes ($11,736,360) are taxes on estates in mortmain; on patents for inventions; on telegraphs; profits in new issue of bronze currency; revenues from prisons and houses of correction, &c., &c. The following classification seems to present the sources of revenue more clearly than that adopted in the French budget: Direct taxes, ownership and use of land and buildings, poll taxes, licenses, &c............................... $63, 072, 280 Registration, stamps, &c............................ 81, 537, 883 Poyal forests (wood and timber sold)................... 8, 051, 300 Customs duties on foreign merchandise.......14, 439, 200 Exports, navigation, and other miscellaneous customs duties... 1, 192, 600 Sugar, import duties on colonial............... $7, 058, 000 import duties on foreign................ 2, 285, 000 excise duties on domestic... 11, 786, 000 21, 129, 600 Salt, collected through custom-honse........ 4, 509, 600 collected elsewhere than custom-house...... 1, 683, 000 -- 6, 192, 600 Beverages........................... 42, 685, 400 Tobacco, sale of..... 45, 295, 400 Gunpowder, sale of................................... 2, 550, 800 Sundry indirect taxes, (not,enumerated).................. 11, 599, 600 Post office.............................. 14, 482, 000 Revenue from Algeria............................... 3, 850, 000 Income of sinking fund........................ 19, 104, 549 Miscellaneous.................................... 15, 223, 800 Total........................................ 350, 407, 212 It will be seen by *the foregoing analysis that direct taxes, registration, stamps, customs duties, sugar, beverages, and tobacco, yielded more than seventy-six per cent. of the whole revenue, in the following proportions: direct taxes, eighteen per cent.; registration and stamps, twenty-three per cent.; customs duties, (excluding sugar,) four and a half per cent.; sugar, six per cent.; beverages, twelve per cent.; and tobacco thirteen per cent. Compwaring tshe Frelnch w;th thQ En,.;glAh rtetnunc )yatcmyn wea, ov0c-ve the same exemption from taxation of home industry, especially of those mnunfac OF THE REVENUE. 75 tures which find a market in foreign countries. Land is subjected to heavier burdens in France than in England, and the freedom of occupation and action is restrained by heavier exactions in the way of licenses, stamps, and registrations. The revenue derived from foreign imports is trifling in- comparison with the customs revenue of Great Britain. The appetites and indulgences of the people are reached alike in both countries by heavy taxes on sugar, beverages, and tobacco, and in both the post office is made to contribute a large revenue. LOCAL TAXES OF FRANCE. The local taxes of France, or the " budget of the communes," as it is termed, is also of sufficient importance to claim some particular notice, and we therefore submit the following statement, prepared by Hon. H. S. Sanford, minister resident of the United States in Belgium: The expenses of the French communes are divided by law into two classes, obligatory and facultative. Obligatory expenses.-The expenses declared obligatory by the law are as follows: 1st. The keeping in repair of the hotel de ville (town house) and mayoralty. 2d. The office expenses of printing for the service of the commune. 3d. The salaries of its agents, the tax gatherers, overseers, police commissioners, keepers, &c. 4th. The repairs of the communal edifices. 5th. The closing and keeping in repair of the burying grounds. 6th. The opening and keeping in repair of the roads of the commune. To the above must be added the expense of taking the census of the population, which occurs every five years; a subscription to the Bulletin des Lois, or the Moniteur des Communes; the expenses for the maintenance of the national guard; for public instruction, and the payment of all debts contracted by the communes, and several others, which, however, do not exist in every commune. Facultative expenses.-The facultative expenses form also a heavy charge upon the commune, because there exists scarcely a single one which is not under the necessity of incurring some of them. In fact, the only difference between the obligatory and facultative consists in the prefect's having the right to inscribe the former in the budget of the commune, if they have been omitted, whereas he cannot do so in the latter case. Resources of the communes.-The resources of the communes, or means by which they provide to cover these expenses, are of two kinds —th: ordinary and the extraordinary receipts. Ordinary receipts.-These consist of1st. The revenues of all the property of which the inhabitants have not the use in kind. 2d. The assessment imposed yearly upon those who gather the fruits and produce in kind. 3d. The produce of the ordinary additional centimes imposed upon the cormmune by the laws of revenue. 4th. The revenue of the portion which is granted to them from the tax upon patents. 5th. The produce of the municipal dues.* 6th. The product of the amount of stalls or authorized places in the different markets, fairs, and slaughter-houses. 7th. The product derived from stands and lettings on the public road, on the quays and rivers, and other public places. * The octrois, or duties, consist of certain taxes on articles of consumption levied it the entrance of every town or city. For the city of Paris it is near forty millions of francs. Before 1852 one-tenth of the produce was paid into the treasury of the state. 76 REPORT OF THE SPECIAL COMMISSIONER 8th. The amount received from the tolls of the commune; the dues for weighing, measuring, and gauging, (applied to the tonnage of vessels;) the amount of road dues, and other taxes legally established. 9th. The amount paid for grants of land in the burial grounds. 10th. The amount of contracts for water, and removing the mud and clearings from the public roads and streets, and all other contracts of the same nature. 11th. The produce of taking copies of the acts of the administration, and of births, deaths, and marriages. 12th. The portion which the law allows to the communes from the amount of fines pronounced by the police courts and correctional police, and the councils of discipline of the national guards, &c., &c. It is evident that these receipts, although they are entitled as ordinary receipts, do not exist in every commune. They are called ordinary because where they are levied it is regularly or annually. It is not, however, the same with the greater portion of the extraordinary receipts, of which the following is an outline: Extraordinary receipts.-1-lst. Extraordinary taxes duly authorized to be levied. 2d. The amount derived from the sale of communal property. 3d. Gifts and legacies. 4th. The reimbursement of capital not fallen due and the purchase of government securities. 5th. The amount produced by extra cuttings of wood. 6th. The produce of loans, &c. The draft of the budget is drawn by the mayor, who submits it to the municipal council, by whom it is discussed and amended or modified; and after being finally closed and voted, it is afterwards sent to the prefect, who approves it, in communes having a revenue of less than one hundred thousand fiancs, but in communes whose revenue surpasses that sum the approval of the head of the state is required. Assessors Qf taxes.-The taxes of France are assessed by means of committees of officers termed repartiteurs, or assessors of taxes, whose duty is to divide among all the inhabitants, to each his share or contingent of the tax assigned to the commune. The members of these committees are named by the prefects, and for one year. They are seven in number, namely: the mayor and his deputy, in communes having less than 5,000 inliabitants, (where they exceed that number these officers may be replaced by two municipal councillors,) and five landed proprietors, of which two, at least, non-resident in the commune, if they can be found. It is expected that the sub-prefects will avoid reappointing the same individuals to this office, it being thought just that the divers inhabitants be called, each in his turn, to determine the assessment, provided they possess the talent and integrity necessary to enable them to sit on the committee for that purpose. No one can refuse the duties of assessor, except for a legitimate cause of exemption; for instance, grave and acknowledged infirmities, having entered the sixtieth year, or being about to undertake a long voyage, &c. The time for the meeting of the assessors is determined beforehand, and the mayor informs the rate-payers thereof by a public notice in the usual form. They are convoked under the presidency of the mayor, or, in his absence, by the deputy mayor, or one of the municipal councillors appointed for that purpose. The operation is performed with the concurrence of the agents of the direct taxes. They deliberate in common, and decide by a majority of votes, and they cannot deliberate unless there be at least five of their number present. The assessors are forbidden to dispense with performing the duties required of them by the law, under penalty of being personally responsible, and even OF THE REVENUE. 77 liable to be summoned for the taxes unpaid, within the specified time, by reason of the non-execution of their duties within the time allotted. The deliberations of the commission of assessors require no approval by the higher authorities, but can be put in force as soon as terminated. ADMINISTRATION OF THE FRENCH DEPARTMENT OF FINANCE. The following report on the organization and administration of the French department of finance, by honorable H. S. Sanford, minister of the United States for Belgium, is also submitted: Organization. —The minister of finance is surrounded by a central administration, comprising the secretariat, or secretary general's office, charged with the personnel and expenses of the ministry; a division for disputed matters in France, appointed to uphold the interests of the treasury; a direction for the general circulation of the funds; another for the public debt; a direction for the general accounts of the finances; a special service for the cash payments, and of the central paymaster of the treasury, and a general comptrolling division. All these directions or divisions are composed of several offices, under the direction of a head clerk, (chef,) and comprising a second head clerk, and several under clerks. In the above consists the central service of the department, properly speaking, to which, however, must be added the division of general inspection, which includes several offices in Paris: eleven inspectors general, twelve inspectors of the first class, twelve inspectors of the second class, and fourteen inspectors of the third class, with eleven sub-inspectors, who are sent periodically or unexpectedly to visit or inspect the accounts of all the receivers or accountants of the government. But independently of these duties, which relate more particularly to the circulation of the finances in general, there are various administrations, equally central, which are dependent upon them, but which, however, are only employed on one specific branch of the public revenue. Of this description are the general post office, the administration of direct taxes, the administration of the registry office and of the domains, the administration of the customs and indirect taxes, (which previous to 1848 formed two distinct administrations,) the administration of the woods and forests, and the commissioners of the mint. The other agents of the finance department are: Eighty-six directors and eighty-six inspectors of the direct taxes, (one in each department.) Eighty-five receivers general, and as many particular receivers as there are arrondissements, independently of which there are collectors in the greater part of the communes. Eighty-six paymasters, and a certain number of collecting clerks under their orders. Eighty-six directors, as many inspectors and comptrollers, several hundred receivers, and thousands of clerks employed in collecting the indirect taxes, without including the directors, inspectors, receivers of customs, and from twentysix to twenty-seven thousand custom-house officers appointed to protect and watch the frontiers. Independently of these there are numerous agents belonging to the administration of the post office, the woods and forests, &c. Financial system.-Before pointing out the mode of proceeding pursued by this complicated machinery, it is necessary to mention the various taxes, which united, form the financial system of France. All the taxes levied in France may be divided into two great categories-the direct and the indirect contributions or taxes. There are four direct taxes: 1st. The land tax. 2ud. The personal tax. 78 REPORT OF THE SPECIAL COMMISSIONER 3d. The property tax, and 4th. The tax on patents or licenses. DIRECT TAXES.-Ist. The land tax, which is levied in equal proportions upon all landed property, whether built upon or not, in proportion to their net taxable revenue, and each is taxed in the commune in which it is situated. No individual property is exempt from this tax, so that if a commune possess a piece of land not capable of being farmed out, but from which the inhabitants reap an advantage, this land is taxed, and the amount paid by the commune. The land tax, as well as all the direct taxes, is subdivided into principal or capital, and additional centimes. The principal forms the basis of the tax; it is the assessment or quota of the revenue of every citizen, fixed by the law. The additional centimes are likewise authorized by the law, but their number varies. By additional centimes is understood a supplementary sum proportioled to the capital or principal of the tax, and which is expressed in so many centimes per franc, or so much per cent. The general additional centimes, devoted to the expenses of the state, are voted by the legislative body, whose vote is also necessary to levy extraordinary centimes itl the departments and communes. But the law allows the councils general and the commutnes the power of voting each to the amount of five additional centimes, not including certain centimes appropriated to special purposes. r'The land tax, as well as the other direct taxes, is divided among the departments by a finance law —that is to say, its assessment is voted by the legislative power. The contingent of a department is divi led among the arrondissements by the general council, (elected by universal suffrage.) The quota of the arrondissement is divided among the communes by the arrondissement council (elected also,) and in the communes, a number of assessors, chosen from among the principal inhabitants, establish the assessment to be divided among the tax-payers in proportion to their property. The list of tax-payers, thus drawn up, is called the rent-roll. 2d. The personal and property tax. —The personal tax is always composed of the value of three days' labor. In each department the council general determines, every year, the average price of, a day's labor; it cannot, however, be fixed under fifty centimes, or above one franc fifty centimes. In other words, the tax varies from one franc fifty centimes, the lowest, and four francs fifty centimes, the highest rates. This tax is due by every inhabitant, whether French or foreign, both male and female, enjoying their rights, and not reputed indigent. It is the only tax levied upon the individual personally. The property tax, which is always united with the personal tax, is fixed at one-twentieth part of the rent paid by each resident, but only for the portion which serves as a residence. It has regard to the rent really paid, and if the individual resides in his own house, he pays the amount which would be payable if the apartment he occupies were let to a tenant. All warehouses, shops, inns, manufactories, and workshop3, for which the occupiers pay a patent or license, are exempted from this tax, as well as the offices of public functionaries, the buildings destined for lodging the pupils in all kinds of schools, and those serving for agricultural purposes, &c. Every inhabitant, French or foreign, not reputed indigent, pays this tax. But in many towns and cities, in Paris, for example, the municipal council, in order to come in aid to those paying rents below a certain sum, by a sort of contract or subscription with the government, pay a certain fixed sum instead from the revenues of the city or town. 3d. The door and window tax.-By the law of the 4th Frimaire, an. VII, this tax is levied on all doors and windows opening or looking on the streets, courts, and gardens of all buildings and manufactories. Doors opening on a staircase, and those in the interior of the apartments, as well as all openings OF THE REVENUE. 79 without doors or windows, and windows serving to give light into barns, sthbl ls, sheepfolds, &c, are not included in this tax. The scale by which the tax is levied is combined from the nature, number, and position of the open igs; it increases also in proportion to the population-that is to say, itis highe in the towns and cities than in the country villages, &c. 4th. The tax for a patent or license is levied on every person, French or foreign, carrying on a trade or business of any kind. The patent is subjec; to a fixed and a proportional tax. The fixed tax is levied according to a scale \vhich enumerates the different occupations to be taxed, with the (fixed) amount of the tax opposite to each. Another table indicates the various modifications to which this fixed tax is liable, in proportion to the population. The' greater the population the more the patent is increased; and, in certain cases, in the interior of particular cities, the patent is modified according to the rent. Previous to the year 1850 the following professions were exempted f om paying for a patent: public officers or officers and clerks under government; notaries, attorneys, bailiffs, and auctioneers; barristers, physicians, surgeons, midwives, &c.; Veterinary surgeons; Painters, sculptors, architects, and other artists; Professors, schoolmasters, editors of newspapers, public writers, &c.; Persons receiving wages, or working by the piece or by the day; And several other professions. Since the passing of the finance law of the 15th May, 1850, the following are subject to a proportionate tax (for license) amounting to one-fifteenth of the rent paid by them: Architects, (but not painters, &c.;) Barristers, attorneys, notaries, bailiffs, lawyers' clerks, auctioneers, and attorneys, and others attached to the tribunals of commerce; Physicians, surgeons, health officers, dentists; Veterinary surgeons; Referendaries to the seals of office; Schoolmasters and masters of boarding schools. (The premises used for lodging the scholars, and the school rooms, are not included in the estimates of the premises paying rent.) Independently of the four contributions above mentioned, the following ten unimportant taxes are often included in the direct taxation: Ist. The fixed and proportionate dues levied on the mines; 2d. The annual tax paid by schoolmasters and keepers of boarding schools; 3d. The dues levied in the faculties of law, medicine, &c.; 4th. The remunerations for the verifications of weights and measures; 5th. Contributions for keeping up the scholarships (bourses) and for the chambers of commerce; 6th. The special and local contributions for works for the keeping in repair and reconstruction of the dikes, for cleansing the canals, &c.; 7th. Taxes for the works of draining of the marshes; 8th. The amount paid for the expenses of visiting the chemists' shops, pharmacies, and grocers' shops, &c., (to verify that the drugs, &c., are not adulterated;) 9th. The dues paid by the proprietors and manufacturers of natural and artificial mineral waters; 10th. The value of the payments in materials or money for keeping up and repairing the local roads. INDIRECT TAXES.-lst. The registry duties and duties on succession. The registry is a tax to which all public documents and a great number of private ones are subject, (the sale and purchase of estates, for instance,) which are required to be produced before the tribunals. This tax serves, on the one 80 REPORT OF THE SPECIAL COMMISSIONER hand, to produce a certain revenue to the State, and on the other it gives more authenticity and more value to the acts themselves, and, what is often of great importance, a certain date. The tax is fixed or proportionate, according to the nature of the acts, and is higher or lower according to their importance. It is levied by particular receivers, dependent upon the administration of the registry office at the department of finance, and who are also charged to levy the duties on successions. The tariff of the legacy duties or rights of succession, which naturally vary according to the degree of parentage, have often been modified. The law of finance of the 15th of May, 1850, likewise modified the rights of mutation. Changes caused by deaths, and gratuitous transmissions between living persons of inscriptions on the great books of the public debt, as well as all kinds of shares and actions, are now liable to the same tax as for successions. The smallest registry duty is two francs. 2d. The timbre (stamps) were introduced into France in 1673, under the name of formula, and received that of timbre by the law of the 12th of December, 1790. The stamp duty is fixed according to the dimensions of the paper, or to the amount in money. The duty on the dimensions of the paper is fixed as follows: The largest size sheets.......................... 2 francs. Large paper...................................... 1 franc, 50 cent. Middling paper..................1 franc, 25 " Small paper.... 70 " Half sheets, small paper.............................. 35 " The stamp duty according to the sums is regulated as follows: All bills of exchange, notes, or to order, of 300 francs and under. —.15 cent. 500 francs and under...................25 cent. 1,000 francs and under.....................................50 cent. And 50 centimes per thousand francs above that sum. Only commercial bills and letters of exchange are liable to this scale; all other acts are charged according to the preceding tariff on the dimensions of the paper. All acts and writings relative to the military, petitions, and certificates of indigence, &c., are exempted from the stamp. 3d. The customs. It is well known that France continues to be governed by a protective or rather prohibitive system. Latterly there have been a few, but important, modifications, except that since 1850 all Algeria has been tssimilated to France, so that its productions, with few exceptions, can enter free of duty. 4th. The tax on salt, which has always been 30 francs the quintal of 100 kilograms, (or 200 pounds,) has been reduced to 10 francs since 1848. 5th. The tax upon potable liquors, which has been established in France for upwards of five centuries, is one which has been the most frequently attacked. The constituent assembly of 1848 had even suppressed it, but as it brings a hundred million of francs yearly into the treasury, it was re-established in the course of the same year. This tax, laid upon wine, cider,. mead, and perry, is subdivided into the tax on circulation, on the sale by retail, and entrance duty into towns of 4,000 souls and upwards. The departments are divided into four classes, according to the quality of the wines they produce, in respect to the tariff for the tax on circulation. The tax on selling wine by retail is one-tenth of the sale. The entrance duty differs according to the importance of the town or city. Spirits of wine, brandy, and liquors are not subject to the above-named taxes, but pay a heavy duty on consumption. OF THIE REVENUE. 81 As to beer, it pays an excise duty, as it is made, of two francs forty centimes the 1 00 litres (hectolitre) of common beer, and sixty centimes for small beer. All these potable liquors are also liable to an entrance duty (octroi) in favor of the different communes. 6th. The cultivation of tobacco in France and the monopoly of its sale is another considerable source of revenue to the treasury. The following is the mode in which the tax on its cultivation is levied: The cultivation of tobacco is forbidden in France, except in five or six departments so privileged by the nature of the soil.' In these departments the cultivator who wishes to plant tobacco must make a formal demand to that effect. About six thousand hectares* of land are devoted to the culture of tobacco, and these are divided among the departments so authorized. When a demand for permission is received, the agent of the government appointed for that purpose proceeds to verify whether it exceeds the extent allowed, and gives or refuses the permission solicited, as the case may be. A very severe superintendence is exercised by the agents of thje treasury over the cultivation, whose duty it is to count the number of plants and the number of leaves on each plant. The governmenrralso fixes the price of the tobacco it purchases; but which is, no doubt, remunerative, since every year it is obliged to refuse permissions to cultivate the plant. The government itself prepares for sale, in the manufactories of the administration of indirect taxes, both French and foreign tobacco into snuff, tobacco for smoking, cigars, &c. The tobacco, which in its rough state is worth about one franc fifty centimes, is sold to the dealers at seven francs the kilogram, (two pounds,) who sell it retail at eight francs.t The difference between the cost of manufacturing and sale to the dealers constitutes the tax or profit to the state. The administration itself appoints the retail dealers in tobacco and snuff. These places are generally bestowed on old soldiers, or the families of persons who have rendered some service to the state. The tax on tobacco is thus concealed under the plea of a service rendered or of an object sold. 7th. The same is the case with respect to the post office. In France the transport of individuals can be undertaken by private persons, but that of letters is reserved to the government. Formerly the tax or postage of letters varied according to the distance. Letters are franked iu France, as in all other countries in the present day, by stamps. 8th. The woods and forests produce likewise a considerable revenue to the state, but their legislation has not varied for many years. The civil courts decide on all cases arising out of indirect taxation. AccouNTS. —It has been already stated that the legislative body, after having voted the taxes, distributes the direct taxes throughout the departments; that the council general of the departments assesses the arrondissements; that the arrondissement council assesses the commune, and that the commission of assessors draws up the individual list. This list, or reit roll, after having been approved by the prefect, is forwarded by the director of the direct taxes to the tax gatherer charged to collect the taxes. Ten days after having collected the taxes he is obliged to remit the amount to the particular receiver, (of which there is one in every arrondissement.) He is required to keep his books in the best order. Every ten days he must forward a copy of his day-book to the receiver of the arrondissement and to the *The hectare is equal to about two acres, one rood, thirty-five perches. t Tobacco is sold to the military and navy at one franc fiity centimes, but only ten grams (about one-third of an ounce) per day is allowed at this rate; (decree of July, 1853.) H. Ex. Doce 81 G b82 REPORT OF THE SPECIAL COMMISSIONER receiver general, of which there is one in each department, and independently of which he sends in a monthly and a yearly statement of his accounts. The receivers of the arrondissement are bound to verify at certain periods, on the spot, the state of the cash accounts and the writings-duties which they take good care not to omit, being responsible for the acts of their subordinates, and obliged to replace or indemnify the treasury in case of a defaulter. The particular receivers (those of the arrondissements) likewise hand over their receipts within a given term to the receiver general; every ten days, also, they are bound to forward him a copy of their day-book or journal, and to forward another copy to the minister of finance. They also send in monthly and yearly statements, and their cash accounts and writings are also inspected and verified at certain periods, the same as the tax-gatherers. The accounts given in by the collectors and forwarded in duplicate to the receiver general, and certain other documents, serve to control the management of the particular receivers, and the accounts forwarded by the latter to the minister control the registers of the receiver general.'The latter is also responsible for the management of his subordinates. In a word, to prevent all delay, tile receiver general pays interest to the treasury for all sums in arrears, whilst, on the other hand, he receives an allowance when he is in advance. The receiver general sends in his accounts to the minister, and to the cour des comptes, (court of accounts.) Besides the receivers, there are paymasters in each departrient. Consequently, it is an established principle that he who orders an expenditure cannot directly pay it himself; fiom whence it results, for example, that when any work has been execute&d for the state, the creditor presents himself provided with his justificative documents. His demand is in general verified by the person who superintends the works, and who afterwards issues an order forits payment. (He declares that it may be paid.) With these documents and the order for payment he repairs to the paymaster, who, after another verification, delivers the amount. As the funds furnished to the paymaster are provided by the receiver, lio payment can be made without having been inspected by three persons: 1st, the person who orders the payment; 2d, the receiver; 3d, the paymaster. In general, a number of inferior officers participate at the same time in the payments, so that no embezzlement can take place, since too many persons would be -wvare of the fact to insure the secrecy. The organization of the public accounts in France, so admirable for its simrplicity and the skilful combination of the whole machinery, is developed in their fullest detail in the royal ordinance of the 31st May, 1S38, in which is found also the latest rules and regulations of the cour des coriptes. THE COUR DES COMPTrES, (Coutrt of Accounts.)-The court of accounts is appointed to judge and control the public receipts and expenditures handed in every year by the receivers general, the paymasters of the public treasury, the receivers of the registry dues, the customs, and of the indirect taxes, &c; in a word, by all who have the management of the funds of the state. T'he court is divided into three chambers, each composed of a president, six principal accountants, and several referendary magistrates, for examining the accounts; the xwhole under the direction of the first president. Formerly the magistrates of this court were not only irremovable, but were named for life; but the decree of the 19th March, 1852, has applied to them also the regulations of the decree of the 1st March, 1852, with regard to retiring on pensions. The first president distributes the accounts to be verified among the referendaries, and appoints the chamber to whqch a report is to be made. A referendary cannot be appointed twice successively to verify the accounts of the same accountant. When the referendary has presented his report to the chamber, the president appoints a principal councillor to verify: 1st. Whether the referendary OF THE REVENUE. 83 himself has performed the work; 2d. Whether the difficulties raised by him are founded; and 3d. To examine himself some part of the account, to ascertain whether the referendary has verified it carefullyI. No principal accountant can be appointed twice consecutively to report on the account of the same agent. The accountant presents his report to the chamber, with his remarks, and when each has given his opinion the president pronounces a decree of judgment. By its final decree the court decides whether the accounts of the various responsible agents are balanced, or in advance, or in arrears. In the first two cases it gives a final discharge, and withdraws the oppositions and mortgages entered against their property by reason of the management or duties to which the account refers. In the latter case they are condemned to liquidate the balance within a given delay fixed by the law. Every year the general result of the labors of the court of accounts, accompanied by their remrks respecting reforms or ameliorations in the different divisions of the accounts, are laid before the chief of the state. REVENUE SYSTEM OF PRUSSIA AND NORTH GERMANY. The following review of the revenue system of Prussia and North Germany has been prepared for the Special Commissioner of the Revenue, by Hon. W. W. Murphy, consul general of the United States at Frankfort, Prussia. The direct taxes in several of the states of North Germany differ entirely from those levied in Prussia; while in others they have accommodated themselves to the Prussian system, without, however, wholly adopting it. Even the province of Hohenzollern, and the territory which was incorporated into Prussia after 1848, have a different constitution. The eight provinces which, in the year 1848, belonged to Prussia, pay a yearly ground tax of ten million thalers; which amount is liable to alteration only when particular portions of real estate are passing over into the state of redemption from paying, or from the liability to pay taxes; or when such real estate is undergoing some essential change as respects use or cultivation. The direct taxes are1st. The land tax: The average ground rent on farm land in Prussia, per acre..... 4.2 sgr. Ditto on garden land in Prussia, per acre.................. 9.57 sgr. Ditto on meadow land in Prussia, per acre.................. 4.27 sgr. Ditto on pasture land in Prussia, per acre.................. 1.36 sgr. Ditto on wood land in Prussia, per acre.................... 1.05 sgr. Ditto on water land in Prussia, per acre.....................46 sgr. Ditto on waste land in Prussia, per acre....................22 sgr. A silver groschein (sgr.) is equal to 29 cents gold. The net proceeds, lawfully ascertained by estimation, are taxed 9.574 per cent. In the neighborhood of Frankfort-on-the-Main the tax on land varies according to quality thereof, the medium tax being 15 sgt. (35 cents gold) for the Prussian morgen of 25,920 square feet. 2d. The house tax.-All buildings used for purely agricultural purposes are free. All buildings used for manufacturing and mercantile purposes are subjected to a tax of 2 per cent. on rent; all buildings used for dwellings, 4 per cent. on rent. 3d. The income tax. —This is divided into two parts.-The first is called "classtax," to which all are subject whose incomes are less thaQ one thousand rix dolars per year. It consists of twelve divisions, beginning with the menials, who pay annually half a rix dollar, (about 36 cents gold,) and from this point it rises to twenty-four rix dollars.-The second part embraces those whose annual incomes are above one thousand rix dollars. This class embraces thirty divisions, the lowest annual tax being thirty rix dollars, and the highest seventy-two hundred 84 REPORT OF THE SPECIAL COMMISSIONER rix dollars. These classes are calculated on a presumed income of three per cent. In Prussia there are thirteen divisions of the first class, the lowest amount paid being one thaler per annum, (71 cents gold.) In some places throughout Prussia and northern Germany there exists, in lieu of the first class, a tax levied on meat and flour —meat paying 1~ cents, and flour two-thirds of a cent per pound. On slaughtered animals the tax isOn oxen, per head....... $4 60 On cows, per head.......................................... 2 64 On calves, per head..................................... 35 On sheep, per head............................ 30 On pigs, per head........................83.............. 83 To indemnify those of the second class who have to pay the income of three per cent., an indemnification of twenty nix dollars (about $14 gold) is annually deducted from their tax, as the equivalent amount they have paid in the form of a tax on meat and flour. The tax on killing cattle and grinding corn (schacht and mahlstauer) is principally operative in small places, where its collection can be more closely watched. The changing of' this latter into classtax is progressing slowly, but without intermission. 4th. The tax on all business except agriculture. —The lowest rate paid per annum is one thaler, varying and augmenting according to business' pursued. file four above enumerated taxes must be paid in monthly instalments, with the privilege of paying a year or a number of months in advance.'The city or village municipal receivers are the collectors, receiving therefor a commission of about two per cent. They have to pay the amount monthly into the-circuit treasury. Whenever a city or village requires funds for their purposes, and have not otherwise a sufficient income, they are permitted to collect the necessary amount by levying an additional percentage on the government taxes. When the percentage exceeds a certain amount, the consent of the government must be obtained before it can be collected. In those places where the meat and flour tax exists, one-third of the gross receipts derived from the flour tax only goes into the municipal treasury; where the class tax on the other hand exists, the municipal authorities may retain for their own purposes from three to four per cent. of the gross collections. The assessment of taxes takes place yearly by assessors elected by the taxpayers, and by the municipal authorities, whose deliberations are presided over by a government commissioner, who has, however, power to vote only in case of a tie. Besides these direct taxes there are taxes on distilleries and breweries. The tax on spirits, as originally imposed, was 1 9- silver groschens per quart of 500, Tralles, (about 14 cents gold per gallon;) but some modifications of the mash tax, and some improvements in the managements of distilleries, have materially affected this rate. The tax now existing upon an imperfect management is l~ sgr. per quart, and upon an excellent management only five-sixths sgr. per quart of brandy of 50~ Tralles. This is not collected on the spirit, but is levied on the vats used for fermentation. These vats (of which none are to be of less capacity than three hundred quarts of mash measure) have, as often as they are filled, to p;y three swr. (about 7 3T, cents gold) for every twenty quarts of the measurement of such a vat. The filling of these vats with mash can only take place from six o'clock in the morning till ten o'clock in the evening. The product is presumed to be distilled on the third day. The work of distilling can only be conducted from five o'clock in the morning until seven o'clock in the eve(ning. Differing fiom the general rate of the mash tax of three groschens for mashing a "room" of twenty quarts, agricultural distilleries pay only 24 sgr., provided they are only in operation from the 1st of November till the 16th of May; are mashing only self-grown produce, and do not mash more than nine hundred quarts per day. OF THE REVENUE. 85 Whenever any one wishes to establish a distillery, application is first made to the excise commission, which application must be accompanied by an exact description of the building, the vats and still. The distillery, before the commencement of operations, must also be inspected and approved. Whenever a distiller ceases or intends to cease distilling, he must give notice to the excise commissioner, who will then seal up the vats and still, and send the head thereof to the office of the excise commission. Every evasion of the law is punished by confiscation of property and heavy fines. A brewer is required to send a written notification to the excise commission at what hour he intends to begin brewing, how much malt he will require, and when the same is to be delivered to him. The tax on malt is twenty sgr. (about 47 cents gold) per one hundred pounds. Both distillers and brewers are under the control of the police, who are allowed free access to the buildings. They are, however, not often compelled to interfere, as the revenue officers proper are very numerously distributed over the country. The tax commissioner also often enters into agreements with owners of breweries, according to which they pay a fined annual tax, and are not disturbed by visits and examinations of revenue officers. .APPENDIX F. O SALES OF MERCHANDISE. PREPARED FOR TIlE SPECIAL COMMISSIONER OF THE REVENUE BY EDWARD YOUNG. Table slhowing thle aggregate sales of merchandise (including liquors) by?wholesale and retail dealers, also by auctioneers and commercial brokers, in the several States and Territories of the Union during the fiscal year ending -June 30, 1867, as deduced from the receipts of internal revenue. Sales of merchandise. States and Territories.Wholesale Wholesale Retail dealers. Retail liquor Total sales. Wholersale Whoesalers R etal sliqu or dealers. liquor dealers. dealers. By auctioneers. By comercial By commercial brokers. 1 New York —------------------—..-$2, 709, 078, 590 $138, 104, 950 $429, 775, 980 $246,615,520 $81,922,880 $511,483,200 $4,116,981,120 1 2 Massachusetts..................................... 787, 487, 480 33, 771, 080 164,195, 532 27, 979, 575 24,693,980 135, 870, 000 1,173,797,647 2 3 Pennsylvania. —--------------— A... 563, 027, 950 27, 421, 305 294, 522, 696 152, 663, 495 29, 376, 070 62, 014, 760 1,129, 026, 276 3 4 Illinois............................................... 333, 999, 180 27,704,170 187, 441, 032 109, 9:33, 945 8,559,890 4,198,140 671,836,357 4 5 Ohio.-...-..-. —................................ 213, 373, 810 34, 683, 955 188, 060, 364 151,734, 875 13,042,100 8, 046,060 608, 941, 164 5 6 Louisiana-.- - -.....-...,-..................... 372, 752,120, 38, 607, 085 66, 380, 364 48,021,730 12, 224,990 12, 879, 120 550,865,409 6 7 Maryland.. —------------------- 200, 115, 620 28,168, 060 63, 283, 404 40, 564, 620 3, 605, 070 22, 126, 860 357, 863, 634 7 8 Missouri.-................ - -..-........... -........ 138, 047, 390 36, 699,160 88, 097, 988 54,627, 455 7,478,350 3, 525,100 328,475,443 8 N 9 Indiana....................................... 76, 793, 450 10, 535, 410 116, 369, 172 61,418, 890 2, 764, 600 400, 500 268, 282, 022 9 6 10 California.....-...........-. -....................... 97, 585, 170 21,126, 455 44, 464, 404 59, 924, 090 14, 299,790 7,236,180 244,636,089 10 11 Kentucky...........-................................ 74,468, 240 31, 048, 470 64, 599, 276 50, 222,115 10,916, 800 1, 487,780 232, 742, 68L 11 12 Wisconsin...................-..-............. 95, 394, 80CO 9, 087, 080 52,412,256 43, 815, 845 1, 205,690 197, 780 202,113,451 12 13 Michigan —---- -- -—.. -------- 63,820,120 7,880,255 65,776,128 52, 784, 170 1, 230,.340 840, 600 192, 331, 613 13 14 Iowa................................ 45, 908, 560 7, 386, 070 77, 445. 588 35 695, 615, 25067, 984 183 14 15) Connecticut —----------------—.. —--------- - 54, 354, 800 6,280, 460 44, 608, 968 35, 001, 230 567, 240 67l, 380 141,484, 078 15 16 Tennessee —-------------------- 54, 708,100 27,115, 245 26, 825, 640 20, 283, 635 2,172, 220 5, 135, 640 136, 240, 480 16 17 New Jersey.........-........................-.... 31, 484, 860 3, 869, 220 50, 449, 810 42, 448, 740 3, 621, 350 373, 480 132,247,460 17 18 Maine.............................................. 48, 241,440 1,276, 995 69, 133, 680 8, 257, 015 846,890 455, 980 128, 212,000 18 19 Georgia.............................................. 37, 605, 360 16, 665, 130 31,378, 680 25, 328,465 1,470,360 10, 190, 720 122,638,715 19 20 Virginia........................................... 19, 749, 320 6, 3:38, 540 56, 533, 776 26, 132, 905 4,152,500 2, 854, 000 115,761,041 20 21 Alabama. — --—............................... 47,671,300 18,491,870 18,182,556 23,025,385 1,235,740 3,360,640 111,967,491 21 22 Rhode Island.............................. 39,620,620 2,912,995 21, 93,420 10,234,240 1,525, 940 16, 68:3, 360 92,070,575 2 23 Texas...................... 10,297,750 10, 292,125 15, 912, 876 21, 751, 250 1,653,670 9,412,760 69,320,431 23 b 24 South Carolina.. —------------- 22, 522, 500 6, 049, 410 14, 458, 392 10, 610, 625 2, 077, 930 33, 020 55, 751, 877 24 l 25 North Carolina.................... 10, 542, 330 3, 213, 630 24,158, 292 13, 224, 340 472, 706 895, 700 52,506,992 25 26 New Hampshire —---- ----—..- --—. 10, 881, 820 1,575, 665 25,190, 088 12, 629, 175 2, 052, 870 61, 560 52, 391,178 26 27 Minnesota........................................... 14, 043, 600 2, 863, 095 19, 971, 144 14, 391, 970 365,920 242, 440 51,878,169 27 28 West Virginia;- - -..- -..-...................11..........,512,700 2,960,110 25, 235, 976 8,806,2:35 314, 220 59,300 48, 888, 541 28 29 District of Columbia................................. 8, 635, 020 4, 744, 945 19, 473, 348 10, 376, 450 1,001,490 2,799, 380 47,030,633 29 30 Vermont............................................. 12, 707, 830 422, 915 24, 918, 012 6, 786, 065 733, 440..45,568,262 30 31 Kansas......................................... 13, 796, 520 4, 367, 255 13, 776, 240 8, 503, 850 945, 00 558, 020 41, 946, 905 31 32 Arkansas.................................I........ 910, 220 5, 331,105 5, 826, 588 7, 858, 320 141, 670 88, 60 20, 155,963 32 33 Delaware..4,464,250 569 000 9, 371, 460 3, 770, 855 598 310.18, 773, 875 33 34 Mississippi........................................ 3, 299, 620 1, 208, 640 9, 062, 544 4, 493,305 76300 383, 720 18,524,129 34 35 Oregon.............................. 3, 038,160 2, 566, 950 4, 335, 966 4,261,240 281, 720 1,236, 820 15, 720,856 35 36 Nevada -................................. 4,115, 500 2, 405, 750 3, 093, 012 4, 338, 735 128, 050 841, 260 14, 922, 307 36 37 Montana.-.......-.......................... 724, 990 4, 693, 460 4, 215, 804 4, 007, 490 I 190, 590o 802, 820 14, 635, 064 37 38 Colorado........................................ 2, 541,160 3,190,170 2 779, 020 3, 745, 245 321, 800 1, 310, 840 13, 888, 235 38 39 Nebraska --------------------- - 3, 660, 820 1, 996,150 4, 661, 976 3, 290, 515 125, 420 i 145, 020 13, 879, 901 39 40 Florida -...................................... 1, 873, 720 1, 362, 980 2, 963, 016 3, 883, 645 115, 990 1, 260, 860 11,460, 211 40 41 Idaho............................................... 886, 110 6, 211, 890 1, 220, 376 2, 938, 920 - -11, 257, 296 41 42 New Mexico -................................... 858, 330 4, 309, 515 957, 012 4, 426, 475 66, 280 10, 617, 612 42 43 Washington -............................... 1,044, 000 2, 141, 170 2, 145, 036 1, 811, 835 44, 880............... 7,186, 921 43 44 Utah............1................................ 1,975, 609 333, 330 2, 497, 008 534,370 12, 410 131, 063 5,483,778 44 45 Arizona........................................... 75, 000 1,149, 330 130, 992 232, 610 -—... 1, 587, 932 45 46 Dakota —--....................................... 50, 000 145, 500 48, 000 217, 710..........- -..-..461, 210 46 Aggregate -......................... 6, 249, 745, 839 609, 278, 050 2, 457, 432, 892 1,483, 491,865 240, 248, 630 830, 339, 940 11, 870, 337, 207 Table shLowing the agglregate sales of merchandise (including liq'ors) by wholesale and retail'dealers, also by auctioneers and commnercial brokers, in the principal commercial cities of the United States during the fiscal year ending June 30, 1867, as deduced from the receipts of internal revenue. SALES OF MERCHANDISE. Cities. By wholesale By wholesale Total sales. dwholesalers. i r dhesaler By retail deal- By retail liquor By commercial dealers. liquor dealers. ers. dealers. By auctioneers, brokers. 1 New York............................... $2, 394,279, 350 $107, 970,115 $166,135, 518 $68, 506,155 $69, 580, 920 $517,146, 000 $3, 313, 618, 058 1 2 Boston............................................ 686, 265, 020 30, 580, 920 47, 060, 604 9, 945, 255 19, 288, 240 135, 032, 980 928,173, 020 2 3 Philadelphia -........................... 44:3, 446, 560 15, 979,155 94,141,224 43, 635, 840 18, 011,970 46, 882, 440 662, 097,190 3 4 New Orleans -.. ——.........................- - -. 370, 368, 990 33, 551,470 60, 655, 968 37, 588, 582 12, 034,150 12, 596, 240 526: 795, 400 4 5 Chicago -...................................... 250, 607, 830 17, 564, 960 38, 830, 968 30, 462, 920 2, 164, 930 2, 551, 100 342, 182, 708 5 6 Baltimore -.................................... 197, 000, 780 26, 250, 810 48, 264, 876 28, 950, 367 2, 442, 710 22, 056, 760 324, 966, 30:3 6 7 Cincinnati...................................... 99,129, 540 19, 464,450 38, 197, 404 44, 720, 437 6, 515, 880 5,195, 340 213, 253, 051 7 8 St. Louis -...................................... 114, 999, 110 29, 015, 750 34, 286, 706 24,989,062 6, 273, 320 3, 470, 420 213, 034, 368 8 9 San Francisco.................................. 82, 165, 430 16, 165,190 20, 727, 918 10, 991,332 14, 081,670 7, 236, 180 151,367, 7-20 9 10 Louisville 60, 596,170 18, 836, 305 14,228, 532 13, 633, 335 7, 519, 340 1, 402, 969 116, 216, 642 10 11 Milwaukee........................................ 72, 382, 070 6, 354, 980 17, 056, 044 14, 221, 870 631,870 28, 220 110, 675, 054 11 12 Providence -.................................. 39,;20, 620 2, 912, 995 21, 093, 426 10, 234, 245 1,331, 950 1 16, 683, 360 91,876,596 12 13' Buffalo -------------------- - 52, 275, 800 5, 170, 865 10, 313, 010 13, 085, 820 408, 540 96, 080 81,350, 115 13 14 Pittsburg -.......................... - 35, 859, 330 2,113, 420 20, 807, 643 7, 434, 645 658, 240 14, 066, 320 80; 939, 595 14 15 Mobile -...................................... 45, 599, 350 10, 879, 875 8, 121, 582 11,797, 590 505, 910 479, 280 77, 383, 587 15 16 Brooklyn.-............................... 24, 257, 51.0 1,336, 125 26, 539, 092 13, 509, 675 3, 689, 800 344, 650 69, 676, 852 16 17 Detroit -................................... 32,145, 490 2, 995, 585 12, 371, 814 14,308, 290 237, 210 698, 820 62, 757, 210 17 18 Cleveland......................................... 24,032, 630 2,708,330 12, 415, 972 13, 344,780 377, 010 2, 364, 160 55, 302, 882 18 19 Charleston........................................ 21,641,660 5, 856, 400 8, 824, 374 8,553,975 1,887, 650 5,160 46, 769, 220 19 20 Newark........................................... 9, 270, 770 1, 061,250 11,214,198 13, 994, 917 562, 780 324, 280 36, 428, 195 20 APPENDIX G. REPORT OF THE SPECIAL COMMISSIONER OF THE REVENUE ON THE SUBJECT OF COTTON. TREASURY DEPARTMENT, OFFICE OF SPECIAL COMMISSIONER OF THE REVENUE, lVashington, November 21, 1SG67. SIR: As the question of the repeal of the internal revenue tax now levied upon raw cotton is likely to be brought to the attention of Congress at an early day, I have thought it expedient to anticipate so much of my annual report as relates to this subject, and accordingly herewith submit to you the accompanying statement, with the request that the same, if approved, be transmitted to Congress. To this statement there is appended the report of the committee of the commissioners of the United States to the Paris Exposition, to whom was referred the consideration and examination of the samples of cotton there exhibited; a document which it has seemed desirable should be made public at the present time rather than allow the same to be delayed until the complete publication of the reports of the commissioners. When the internal revenue tax of three cents per pound was imposed upon raw cotton by the act of July 13, 1866, the average price of "middling " cotton in New York for the preceding twelve months had been in excess of forty cents per pound, and for the twelve months next succeeding was in excess of twentyfive cents per pound; at which range of prices the tax in question was undoubtedly less burdensome than the taxes imposed and still maintained on other forms of domestic industry. At the same time it has been generally assumed in almost all previous reports and debates on the subject, that the tax on cotton was a temporary measure, called for and only to be defended on the ground of the necessities of the nation, and to be repealed at the earliest moment when its continuance seemed likely to prove a serious impediment to domestic production, or an undesirable stimulus to the foreign cultivator. That these contingencies are now imminent, and that the time has arrived when the policy of raising revenue from a tax upon cotton should no longer be adhered to, will, it is believed, appear evident from the following facts and statistics: The principal competitor to the United States in the production of cotton is India, and the price of India cotton has been materially advanced during the past five years through two agencies; first, by improvements in machinery for its manufacture; and secondly, in consequence of an improvement in its quality, due to increased care in handling; to the use of exotic seed, and to the transfer of native seed from districts which have heretofore yielded the best staple to those where the production has been inferior. It is to this latter agency that the recent marked improvement in India cotton is, perhaps, more especially to be attributed than to any other. But be the causes what they may, it may be affirmed, that where India cotton formerly bore the relation of one-half to twothirds the value of American, it now bears the relation of two-thirds to threequarters, while a portion of the crop is fully equal to middling uplands for the manufacture of heavy fabrics. Evidence exists tending to show that the present tax of two and a half cents per pound on American cotton is equal to a premium of at least fifty per cent. upon the cost of raising cotton in India, and by some authorities it is alleged to be even greater. The tax, therefore, could with propriety be imposed only REPORT OF SPECIAL COMMISSIONER OF THE REVENUE. 89 while the aggregate supply of cotton was less than the demand, and the price consequently far above the normal rate. The largest consumption of cotton in Europe in any one! year was in 1860, when it amounted to 4,321,000 bales, equal to 1,844,700,000 pounds. Of this amount the United States furnished eighty-five per cent., and there can be but little doubt that a surplus of cotton goods was produced in that year, even with the stimulus which the low cost of the staple then prevailing undoubtedly afforded to consumption. In the year 1866 Europe obtained a supply of 4,513,023 bales, averaging 362 pounds each, equal to 1,633,714,326 pounds, of which less than forty per cent. was from the United States. But this quantity, although somewhat less in pounds than tile supply of 1860, was too great for the demand for consumption at the prices ruling, and about 300,000 bales were added to the stock on hand in European markets; which stock, on the first of January, 1867, the close of the European cotton year, was as follows: in Great Britain, 581,570 bales; on the continent, 160,000 bales; total, 741,570 bales. If we estimate cotton at 400 pounds to the bale, (as has been the custom in the United States in the returns of the census,) the comparative supply will appear as follows, subject to a slight variation, from the fact that the cotton year of Europe is made up to the 1st of January, and that of the United States to the 1st of September: IN BALES OF FOUR HUNDRED POUNDS EACH. Consumption of Europe in 1860. American, about......................................... 3, 911, 750 Other varieties.70................................... 700, 000 4, 611, 750 Sup)ply of Europe in 1866. American, about................................... 1, 600, 000 Other varieties.................. 2, 484, 285 4, 084, 285 The consumption of Europe in 1862, the year of smallest supply and of highest prices, was 750,500,000 pounds, or in bales of 400 pounds, 1,876,250. The proportion of American cotton in this year was somewhat larger than at a later date; but in 1864 it was less than S per cent. of a total of over 2,500,000 bales. The crop of 1866 in the United States for the year ending September 1, 1867, is estimated to have been from 1,600,000 to 1,800,000 bales, out of a total delivery of over 2,000,000 bales, the surplus being old cotton; but while this product was far more than could have been anticipated by the most sanguine friends of'ree labor, the crop in question was in reality a failure, it having been cut short by a season more unfavorable than almost any heretofore experienced. The season of 1867 has, however, proved most propitious, and the amount to come forward is estimated by few conlrlercial authorities at less than 2,500,000 bales of 460 pounds each, and may even reach an aggregate of 3,000,000 bales. In considering the subject of the production of cotton in the United States, with reference to the influence of the tax, it is desirable to take a large rather than a small estimate of the present crop; and we assume, therefore, the product of the year to be 2,750,000 bales, of 460 pounds each. If from this we deduct 1,000,000 bal'es for home consumption and for an addition to the small domestic stock to be held over, we have 1,750,000 bales available for export, or 2,125,000 bales, estimated at 400 pounds each. If, now, other countries shall 90 REPORT OF THE SPECIAL COMMISSIONER produce as much cotton as in 1866, (and there is no evidence as yet of appreciable decrease,) the quantity from other countries than the United States, estimated in bales of 400 pounds each, will be 2,485,000; making a total available cotton supply to Europe of 4,610,000 bales. Such a supply will be equal to that of the year 1860, when there was, undoubtedly, a surplus; bhut of this quantity the United States will now furnish less than 47 per cent., in place of 85 per cent. in the year referred to. In short, under the stimulus of high prices, the world has produced more cotton than it can consume at the pr'ices of the day. To cheapen prices may greatly extend the consumption after recovery from the first shock of so great a change. BRut, in this fall of prices, the profit of the producer-resting upon the higher prices which invited his outlay-has, to a very great extent, arid for the time, been lost. When the American crop was in its supremacy, the average prices, of Surat cotton in Liverpool for the twenty years, 1841 to 1860, ranged from 3d. to 5-4d. per pound. When it was 3d., ill 1845, the import to Great Britain was only 155,000 bales; when it was 517d., in 1857, the import was 680,000 bales. Thus it appears that price regulated the quantity imported; and neither the import to Europe, nor the export from India, was any measure of the production of that mysterious country. Though its export in annual average had been only about 500,000 bales, and much of that to China, when the American war made its sudden call for cotton in 1861-'62, India contributed more than 1,000,000 bales that season. There is no evidence that there was any larger or more successful planting that year than previously; only that price called it out, and the stock left for home use was by so much the less. Doubtless, in the succeeding years, cotton-planting in India was increased, as elsewhere, by the stimulus of wonderfully remunerative prices to the producers and forwarders. It is, however, safe to assume that there has always (at least in modern days) been a latent capacity in that country to throw upon the market an extra, and perhaps unexpected, half million of bales of cotton in any year, when the price should offer sufficient inducement; and an equal capacity to consume at home the whole production, when at so low prices that it could not be exported to Europe or China. Since the recent completion of many hundred'miles of railways in India. that power of adding promptly to the world's supply of cotton has been greatly increased. It therefore becomes evident that low prices for cotton must be anticipated for a considerable period, during which the domestic production should not be diseduraged by the continued imposition of a direct tax. But with the relief that will be afforded by the prompt removal of the existing tax, the Commissioner fully believes that the United States will speedily regain the control of the cotton market, and again supply by far the larger portion of the total demand of Europe for consumption. In this opinion, moreover, he finds himself sustained by what may be regarded as the best authorities on cotton in this country, and particularly by the late commissioner of the United States to the Paris Exposition, Hon. E. R. Mudge, of Massachusetts, to whom, as chairman of a committee, the subject of the future supply of cotton was especially referred for investigation, by his colleagues on the commission. The conclusions of the report of this committee, not heretofore made public, are as follows: " Having carefully observed what has been done and is doing by other nations, the committee present the following conclusions: "First. That cotton-growing in the southern States, if untaxed, can be conducted profitably and successfully, as against all competition elsewhere. "Second. That if burdened by a tax sufficient to be worth to the treasury the cost of its collection, it cannot at present, if ever, be successfully prosecuted.' Third. That already familiar to our people, in all its details, it is the only industry immediately available and practicable to the great body of the laboring OF THE REVENUE. 91 population of the South for the profitable employment of surplus labor, that is, beyond the necessities of crops for subsistence, in the production of something salable and exchangeable, whereby wealth can be regained; and ",Fourth. That the importance of a large production of cotton, as the chief export of the country, in adjusting balances of trade and exchanges, and especially in its bearing upon the future position of the public debt, so largely held and to be held abroad, cannot well be overstated; and so far transcends the value of the present tax that to preserve the latter at the cost of losing the former would be a' ha'penny'orth of wisdom to a pound of folly."' The whole amount of internal revenue derived from the tax on raw cotton for the fiscal year ending June 30, 1867, was $23,769,078 SO; and although this sum comprises nearly all the revenue derived from the southern section of the country, and constitutes an amount that can ill be spared from the treasury, yet, under all the circumstances, the Commissioner has no hesitation in recommending the immediate passage by Congress of an act repealing the eltire tax upon raw cotton, and the corresponding existing duty on imported cotton-the same to take effect on its passage. As yet but a small quantity of the new crop of cotton has been marketed, but if the repealing act be delayed to a later period, it will evidently work injustice to those producers who may be forced to send their crop forward immediately, unless the removal of the tax should be deferred to take effect at the close of the present cotton year, September 1, 1868. If a repeal of the tax, to take effect immediately, should be enacted by Congress, it is important that one contingency should be effectually provided against. Contracts, it is understood, are proposed, and possibly already made, for the purchase of cotton, tax unpaid, to be held in store until the repealing legislation of Congress has taken effect-thus insuring to the speculator, or exporting buyer, a gain equivalent to the amount of the tax. It seems desirable, therefore, that the act of repeal should be so worded as to relieve from the payment of the tax only so much cotton as, at the date named in the act, remained unsold by the producer; all cotton having passed out of the hands of the producer to pay the tax, if it has not already done so. Only in this way can the relief go where it is intended, viz: to the impoverished cultivator. It may be interesting in this connection to mention that the committee of the Commissioners of the Paris Exposition, assisted by B. F. Nourse, esq., of Boston, have collected, and caused to be suitably arranged, a series of samples of -cotton from nearly all the cotton-growing districts of the world; which collection they proffer to the government, with the suggestion that it be placed, for preservation and reference, in one of the public offices at Washington; in which suggestion the Special Commissioner cordially concurs. I am, sir, yours, mostirespectfully, DAVID A WELLS, Special Commissioners of the Revenue. Hon. HUGH MCCULLOCH, Secretary of the Treasury. Report of the committee of the commissioners of the United States to the Universal Exposition at Paris, in 1867, to whom was referred the subject of cotton. The few samples of cotton exhibited from the United States were not worthy of special mention as representing this great staple. The " Cotton Supply Association" of Manchester, England, had, however, prepared and sent to the Exposition some cases, in which were arranged suitably for comparison and contrast, samples of all the cotton of the world —that is to say, samples from every 92 REPORT' OF THE SPECIAL COMMISSIONER country, and of every kind from each country, whence was produced the cotton which made up the commercial supply of the world for the past year. The committee regarded this as in itself a literal and truthful exhibition of the cotton " of all nations," and, therefore, a better and more convincing report than anything descriptive that could be written to show the present position of our country in relation to others in cotton-growing. By the aid and courtesy of the secretary of the Manc'hester Cotton Supply Association, a similar collection of samples, but more full and complete, was prepared at Manchester, by request of the committee, and is herewith submitted in connection with this report, and with the suggestion that the two cases containing the collectior be placed for preservation and reference in one of the public offices at Washington. In the two cases are one hundred and fifty-four samples, from more than forty different countries or localities. During the progress of our civil war, the scarcity of cotton carried prices very high, reaching in Liverpool to 31d. per pound for middling Orleans, and 24d. for fair Surats. The high prices and extraordinary demand thus created caused and extended the cultivation of cotton throughout the world, wherever the proper physical conditions existed. In 1860 the cotton product of the United States supplied home consumption and eighty-five per cent. of that of Europe. In 1864 the United States imported cotton from Liverpool, and from some producing countries, and of the consumption of Europe less than ten per cent. was of the growth of the United States. Two remarkable effects resulted during this period: first, the improvement and adaptation of machinery for spinning the sh6rt staples of India, China, Japan, &c.; secondly, an improvement still more important, as fav6ring their use in the place of American cotton, obtained in the characters of their staple by the use, annually, of American or Egyptian seed. This change of seed has produced, in the east, cotton which approaches closely our upland cotton in spinning value. A further change for the better has been made in the preparation for market of the great bulk of India cotton, which formerly was so badly charged with field-waste and other dirt that the classifications of American cotton could not be applied to it. This adulteration has been very materially lessened. Thus it appears that the improved character of the cotton in staple and cleanliness concurs with the improved machinery and methods of' use to make India cotton approximate much nearer the value of American cotton, for all coarse and medium work, than before the war. British India is our chief competitor in supplying the world with cotton. We have noticed their relative improvement during our disability. It should be noted here, that our country offers a higher price for labor than any other. The cotton-growing States cannot be an exception; other countries that produce cotton to any considerable extent, such as Egypt and India, have labor at the lowest price-that of a cheap subsistence. The position of the planter in America should be contrasted with that of the planter in India, both hiring labor: the one at the practical cost of $25 per month, the other at a cost of $25 per year. A like contrast should be made between the ryot of India and the farmer of America, such as it is hoped and believed will be most of our southern citizens, both white and black, who have no labor but their own and that of their families, when the only salable product of their few acires shall no longer be taxed. The annual cotton statistics of the United States are made up to September 1. It is the point of time between the old crop just gone, and the new crop just coming in. fit is a fair time at which to take the annual average price. OF THE REVENUE 93 Middling cotton was worth in New York1861. 1862. 1863. 1864. 1865. 1866. 1st September........................ 22 52 67 1 87 45 35 Average of the year ending 1st September. 18 431 76 1 17 60 38~ Owing to the great fluctuations in the value for sterling exchange, or gold, the price at New York varied fiom that in Liverpool, where cotton statistics are made at the end of thile year, when the price was for middling Orleans: 1861. 1862. 1863. 1864. 1865. 1866. 31st December.......... 12 22 27~ 27 21 15 Average of year...................... 7. 16 231 26-a 19 15i, For the five years, 1856-'60, the average consumption of cotton in the world was, per annumIn Europe.................... 3,755,000 bales, or 1,574,700,000 pounds. In United States.............. 720,000 bales, or 331,300,000 pounds. Annual totals........... 4,475,000 bales, or 1,906,000,000 pounds. Of which was grown in the United States...................... 3,585,000 bales, or 1,606,000,000 pounds. Equal to 84.26 per cent. of the whole. In 1864 the whole import of cotton into Great Britain was 2,587,000 bales, of which only 197,000 bales, or less than eight per cent., (7.62,) was of United States growth, while other countries supplied 92.38 per cent., or 2,390,000 bales, so rapid was the increase in their production. So in 1865 and 1866, countries other than the United States supplied 83.28 and 69 per cent. respectively, or 2,293,000 bales out of an import of 2,755;000 bales, and 2,587,000 bales out of an import of 3,750,000 bales, notwithstanding that 50 per cent. had been lost from the highest price, or from 31d. per pound in 1864, to 20d. in 1865, and 151d. in 1866. At this time (August, 1867) the value of cotton is still declining. In England the decline encountered already since the close of our war has been most disastrous to importers and others dealing in cotton, and it is believed that prices will fall to or below 7d. per pound for fair Dhollera, (Surats,) and 9d per pound for middling New Orleans, which last price would be equivalent to 20 cents in New York, or 19 cents per pound in New Orleans. The import to Europe (prircipally to Great Britain) from India is already large, and will probably exceed 1,500,000 bales for this year, or nearly the same as last year, while the crop of the United States for 1866-'67, including the stock remaining 1st September, 1866, will hardly exceed 2,000,000 bales, from which 700,000 must be taken for home use, leaving for export only/1,300,000 bales, or less than the supply' to Great Britain from India alone. Thus it appears that while prices have fallen so far, and are yet falling from year to year, the production of cotton in -other countries is continued on a scale so large that a large surplus remains over at the end of each year, and the United States crop supplies only about 35 per cent of this European consumption. It is'estimated that our crop this year will be more than 2,500,000 bales, if the picking season be favorable, and that other countries will produce as much as the average of the last three years, if not more, which may be shipped to Europe in greater or less quantities, as the prices shall be higher or lower. Should these estimates be sustained by the fact, it seems to follow, as a necessity of the bad state of trade, that prices shall decline to a range below a just value in view of the probable-future supply, and far below the cost to the planter, who has hired labor to make his crops. For the moment, the effect of so great cheapening of prices is to lessen the demand, instead of increasing it, because 94 REPORT OF THE SPECIAL COMMISSIONER the business of manufacturers, which is the source of demand for consumption, is itself suffering and unprofitable under a great decline in the value of their products, and the trade insists upon further concession in view of the present and impending decline in the raw material. Suppose cotton shall decline to twenty cents per pound for middling in New York. This would return to the planter only sixteen cents on his plantation; and the planter who has been able to make his crop with hired labor at a cost not exceeding sixteen cents must have had very favorable conditions. If the price shall be only sixteen cents in New York —which should not be regarded as impossible, in view of the possible supply, and the fact that the average price before the war whs for many years below ten cents-if the price shall be only sixteen cents in Neew York, or twelve cents to the planter, he cannot pay his hired laborers with the entire net proceeds. A tax of two and a half cents per pound on sixteen cents, if the planter shall get so much, is equal to fifteen and five-eighths per cent., and oil twelve cents is twenty and five-sixths per- cent.* When the first excise tax of three cents per pound Was laid upon cotton, middling American was worth fifty cents per pound. At such a price there would have been great profit in cotton-growing, if fair crops were obtained, and the tax would have been lightly felt. The price fell to thirty-five cents the following year, notwithstanding such a failure of the crop as left that price unremunerative, and) at the close of the last session, Congress reduced the tax to two and a half cents per pound. When Congress again assembles the price of the new crop will be known, and the proportion which two and a half cents per pound bears to it. During many years the English manufacturers have sought to extend and improve cotton-planting in various countries. In promoting this object the Manchester Cotton Supply Association has been the chief as it has been the most able and efficient agency. Its thorough organization for gathering and transmitting information to and from all parts of the world prepared it for the emergency occasioned by our war, when it was necessary, by prompt diffusion of information, encouragement, seeds, machinery, &c., to avert the threatened exhaustion of the supply of this important material and mitigate the evils of its scarcity. All the energy and perseverance of this association, guided by wise counsels and unceasing experiments, supported by the wealth it could combine With the favor and assistance of the British government, had failed to achieve success in introducing the culture of cotton anywhere, or to extend it where previously existing, as in British India, so as to compete, in any appreciable degree, with the cotton product of the United States. It had been demonstrated that no advantage of cheapness of labor elsewhere could counterbalance our advantages of soil and climate for cotton-growing, so long as we had labor well organized at low cost. We lost our position. It remains to be seen if we can regain it. Short as was the time, (1861 to 1865,) it sufficed to work out wonderful'results, by the extraordinary power of price, in forcing cotton-growing. Excessive production and supply must so reduce price as to lessen production and enlarge consumption. Shall the cotton product of the United States be reduced as in other countries, or shall our natural advantages be improved to restore this great industry to its proper pre-eminence? This, it is believed, depends almost entirely upon the legislation by Congress. Should an excise tax be continued, it is very eviIn proof that this industry cannot bear this tax, it is only necessary to call attention to the samples of India cotton, which, when selling in Liverpool at 5d. per pound, return to the ryot producer in India only 2d. Upon this price 2~ cents per pound is equal (at 135 for sterling) to Id. or 50 per cent., and that advantage or premium is offered to the Indian producer by our tax system. OF THE REVENUE. 95 dent that production in the United States, being unprofitable and burdened, must fall away until scarcity shall again cause high prices; whereas without the tax, the southern people can successfully compete with the world, and more than recover the old monopoly of supply. HEaving carefully observed what has been done and is doing by other nations, the committee present the following conclusions: 1. That cotton-growing in our southern States, if untaxed, can be conducted profitably and successfully, as against all competition elsewhere. 2. That if burdened by a tax sufficient to be worth to the treasury the cost of its collection, it cannot at present, if ever, be successfully prosecuted. 3. That, already familiar to our people in all its details, it is the only industry immediately available and practicable to the great body of the laboring population of the South for the profitable employment of surplus labor-that is, yond the necessities of crops for subsistence-in the production of something salable and exchangeable, whereby wealth can be regained. And, 4. That the importance of a large production of cotton, as the chief export of the country, in adjusting balances of trade and exchanges, and especially in its bearing upon the future position of the public debt, so largely held and to be held abroad, cannot well be overstated, and so far transcends the value of the present tax, that to preserve the latter at the cost of losing the former, would be a "ha'penny'orth of wisdom to a pound of folly." In conclusion, the committee desire to acknowledge their indebtedness to B. F. Nourse, esq., of Boston, for the very valuable statistics furnished by him, and which fthey have adopted, as coming fiom a source entitled to the highest consideration, his long acquaintance and connection with the cotton trade of the United States having given him unsurpassed opportunities for obtaining correct information. Respectfully submitted: E. R. MUDGE, For the Committee. PARIS, August 2, 1867. List of cotton samples in the collection prepared for presentation to the United States government, and for deposit at Washington. South Paciic. —Fejee islands, Navigator islands, Polynesian islands, Raratonga islands, Friendly islands, Tahiti (Society) islands, Oahu (Sandwich) islands, New Caledonia islands. * Australia.-Wooloomoloo, New South Wales; Sidney, New South Wales; South Australia, North Australia, West Australia, Wide Bay, Queensland. Eastern Asia. — Java, (American seed,) Java, (native'seed,) Phillipine islands, Shanghai, Pegee, Rangoon, Siam. British India.-Tenasserim, Assam, Indore, Palghaut, Dhollera, Brouch, Oomrawutee, Hinghenghaut, Saw-ginned Dharwar, Dharwar, (New Orleanls seed,) Comptah, Ferozepore, Chandah, Salem-Madras, (Bou-bon seed,) Tinnivilly, (Madras,) Madras, Chingleput, (New Orleans seed,) Berar, (Egyptian seed,) Nagpore, Delhi, Shorapore, (New Orleans seed,) Shorapore, Hyderabad, Khandeish, (Berar seed,) Khandeish, (Egyptian seed,) Khandeish, (Oomrawutee seed,) Kurrachee, India, (New Orleans seed,) Ceylon. Africa.-Sondan, Natal, Algoa bay, (Cape of Good Hope,) Fort Beaufort, (Cape of Good Hope,) Kaffraria, Loanda, Cape coast, Gold coast, Bonny river, Onitsha, Fernando Po. Indian Ocean.-Mauritius. Western Asia.-Georgia, Circassia, Caucasus, Bagdad, Mossul, Kashan, (Persia,) Jaffa, Tarsus, Smyrna, Smyrna, (New Orleans seed,) Latakia, (Syria.) 96 REPORT OF SPECIAL COMMISSIONER OF THIE REVENUE. Eastern Europe.-Constantinople, Moldavia, Trebizond, Salonica, (New Orleans seed,) Volo, Serres, Mytilene, Aleppo, Enos, Larnaca. S.outhern Europe. —Laconia, (Greece,) Patras, (Sea island seed,) Patras, (Egyptian seed,) Patras, (New Orleans seed,) Sassard, Italy, (Sea island seed,) Terra di Ortanto, (Siamese seed,) Marcerato, Italy, (New Orleans seed,) Catania, Sicily, (Nunkeen,) Naples, Valencia, Malta. Xorthern Africa. —Egypt, Egypt, (New Orleans seed,) Algiers, Bene, Algiers; Rabat, Morocco; Mazagan, Morocco; Madeira. Soutit America. Lima, Peru; Payta, Peru; Callao, Peru; Tacna, Peru; Bahia, Paragnuassu valley, Bahia; Maranham, Maceio, Pernambuco, Soracaba, Brazil; Rio Grande do Sal, Ceara, Suo Paulo, Brazil; Ecuador, San Luis, Estardo, Bolivia; Berbice, Demerara, Venezuela, Costa Rica, Guatemala, New Granada, Raraguay, Rosario, (Argentine confederation,) Catamania, (Argentine confederation,) Buenos Ayres, Salto, Maracaibo, Salvador, Honduras, Yucatan, Mexico. ttWest Indies. —Jamaica, Cuban Vine, (Jamaica,) Jamaica, (Sea island seed,) St. Kitts, Trinidad, St. Thomas, Tortola, St. Bartholomew, Dominica, Tobago, Porto Rico, Bahamas, Antigua, Turk's island, St. Domingo. United States of America —Sea Island, New Orleans, Mobile, Uplands. Also, samples of twelve kinds of cotton seeds.