The Civil War in America The Ways and Means ThereofThe Illustrated London News, vol. 39, no. 1099, p. 49.
July 20, 1861
President Lincoln having, in his Message to Congress, called for 400,000 men to enable him to restore the seceded States to the Union, Mr. Salmon P. Chase, of Ohio, the Secretary of the Treasury (an official whose functions correspond with those of the British Chancellor of the Exchequer), presented to Congress on the 5th inst. an interesting written report, or budget, the substance of which we proceed to give. We premise that the fiscal year of the United States commences on July 1 of each year. The total estimates for the current fiscal year (July 1, 1861, to June 30, 1862) are 318,519,582 dols. (omitting fractions of a dollar), or about 65,000,000. To meet this expenditure Mr. Chase thinks it advisable to raise 320,000,000 dols. "With great deference and no little distrust of his own judgment," he recommends that 80,000,000 dols. should be raised by taxation, and that 240,000,000 dols. should be sought through loans. The question, then, is how to raise this 80,000,000 dols. His choice is limited to duties on imports, direct taxes, and excise duties. The principal advantages of the system of direct taxes are found in the sensibility with which they are felt and observed in the motives thus arising for economy and fidelity in the administration and in the manifest equity of distributing burdens in proportion to means rather than in proportion to consumption. On the other hand, the advantages of indirect taxation by duties on imports are found in the economy of collection, in the facility of payment, in the adaptability to the encouragement of industry, and, above all, in the avoidance of Federal interference with the finances of the States, whose main reliance for revenue for all objects of State administration must necessarily be upon levies on property. These considerations have doubtless determined the preference which has always been evinced by the people of the United States for duties on imports as the chief source of national revenue. Only on occasions of special exigency has a resort been had to direct taxation or to internal duties or excise.
But the present "Morrill" tariff will not produce anything like the 80,000,000 dols. required. During the first quarter of the last fiscal year the receipts on imports were only 5,527,000 dols. The sources of revenue most promptly to be made available must be sought in the articles now exempt from duty or but lightly taxed. These articles have heretofore been taxed, and were only exempted when the debts contracted in former wars had been fully paid. Of the articles now lightly taxed, sugar, and of those wholly free, tea and coffee, are the most important. The Secretary proposes that a duty of 2 cents per pound be laid on brown sugar, 3 cents on clayed sugar, and 4 cents on loaf and refined sugars; corresponding duties on syrup, candy, and molasses; on coffee, 5 cents per pound; on black tea, 15 cents per pound; and on green tea, 20 cents (10d.). These duties will produce an additional revenue of 20,000,000 dols. By other minor reforms of the tariff he hopes to raise 7,000,000 dols. more, and that the whole customs revenue for the year will reach 57,000,000 dols. The sale of public lands and miscellaneous sources will be good for 3,000,000 dols.—making the total 60,000,000 dols. He still wants 20,000,000 dols. more from taxes. He must resort for this either to direct taxes or to excises. The Constitution requires that the former be apportioned among the States, in the ratio of the Federal population; the latter need only be uniform through the United States. The Secretary is willing to be guided by Congress as to which source of taxation he shall tap. The value of the real and personal property of the people of the United States, according to the Census of 1860, is, omitting fractions, sixteen thousand million of dols. The value of real property is estimated at 11,272,000,000 dols., and of personal at 4,831,000,000 dols. The proportion of property of both descriptions in the loyal States is—of real, 7,630,000,000, and of personal, 3,270,000,000. A rate of one fifth of one per cent on the real and personal property of the loyal States would produce 21,800,000 dols., and a rate of three tenths of one per cent on the real property alone in these States would produce 23,892,000 dolls., either sum being largely in excess of that required. The difficulty in the way of a direct tax is that in many of the States no State valuations and no State machinery for collecting direct taxes on property exist. In these States it would be necessary to create an extensive and complicated Federal machinery. The constitutional objection arising from the non-incidence of the tax on the insurrectionary States amounts to nothing. The tax will be levied in all States alike, and the difficulty of collection cannot vitiate the legality of the tax itself.
Excise duties have this to recommend them—they may be collected more cheaply than direct taxes, by fewer agents, and with less interference with the finances of the States. They may also be made to bear hard upon the luxurious classes. If Congress should prefer excise duties to direct taxes, or should like to combine the two systems, the Secretary recommends duties on stills and distilled liquors, on ale and beer, on tobacco, on bank notes, on spring carriages, on silver ware and jewellery, and on legacies.
One other source Mr. Chase indicates with delight. The property of "rebels" and "traitors" can be confiscated to the public treasury.
Congress may also retrench. Let 10 per cent be deducted from all salaries paid by the Federal Government, and let the members abolish the franking privilege and reduce the postal expenses.
Lastly, as to the 240,000,000 dols. which is to be raised by loan. The National Debt amounted on the 1st inst. to 90,867, 828 dols. The Secretary finds that the capitalists of the country will advance no more on terms which are satisfactory to him. As the war is a people's war he will appeal direct to the people. He proposes to open a national loan for 100,000,000 dollars, and for any amount beyond that, to be issued in the form of Treasury notes or Exchequer bills, bearing a yearly interest of 7 3-10ths per cent, to be paid half-yearly, and redeemable after three years from date. The interest will be equal to a cent a day on fifty dollars, and the loan will be issued in sums of 50 dols., and any multiple thereof. The amount of interest for specified periods will be endorsed on the back of each note. If anybody thinks the rate of interest too high, the Secretary can only say that the capitalists will not take his six per cent bonds at any figure which would make them more advantageous to the Treasury than the proposed national loan. Subscription offices are to be opened everywhere, and payment will be received in installments as low as ten dollars. But in case the National loan hangs fire, or does not produce enough, the Secretary has another arrow in his quiver. He will ask power to issue bonds, or certificates of debt, in dollars or pounds sterling. These bonds are to be redeemable after the expiration of thirty years, and bear interest at seven per cent, payable in London, or at the United States' Treasury. The Secretary is pretty confident that his own countrymen are too shrewd and too patriotic to allow many of these seven per cent bonds to go abroad, but if they should let a few slip through their fingers they will assuredly be eagerly snapped up in London. As an auxiliary measure, the Secretary returns to 10-dollar Treasury notes, payable one year from date, and bearing interest; and in all these ways he hopes to raise his 240,000,000 dols.
Having canvassed the different ways and means of raising 320,000,000 dols., the Secretary concludes by referring to the difficulty of collecting the revenue in the ports of the so-called Confederate States, and to the impediments to commerce raised by the Confederate tariff. He recommends that Congress pass a law for closing the said ports or providing for such collection on ship-board. Legislation is also required to enable the President to lay an inland embargo on goods going to the insurgent districts, and to remit the same at pleasure. For the furtherance of all these mixed financial and political purposes he respectfully submits a series of draught bills to the consideration of Congress. The energies of a great people will, as he firmly believes, surmount all the troubles and calamities of the present time, and, under the good hand of the God of our fathers, out of these very troubles and difficulties build a future which shall surpass the whole glorious past in the richness of its blessings and benefits.