294 



FINANCES OF THE UNITED STATES. 



and consumption, and consequently of wealth, a 

 restriction of exportations and of foreign com- 

 merce, and a large increase in the machinery 

 and expense of collection. The duplication of 

 taxes threatened the very existence, even with 

 the protection of inflated prices and a high 

 tariff, of many branches of industry, and, under 

 a normal condition of the trade and currency 

 of the country, would become extremely disas- 

 trous. Its tendency to sustain prices was illus- 

 trated very forcibly in the manufacture of um- 

 brellas and parasols. The sticks, when of wood, 

 were made in Philadelphia, and in some parts 

 of Connecticut ; part of native and part of for- 

 eign wood, on which last a duty may have 

 been paid. If the supporting rod was of iron 

 or steel it was the product of another establish- 

 ment. In like manner the handles of carved 

 wood, bone, or ivory ; the brass runners, the 

 tips, the elastic band, the .rubber of which the 

 jband is composed, the silk tassels, the buttons, 

 and the cover of silk, gingham, or alpaca, were 

 all distinct products of manufacture, and each 

 of these constituents, if of domestic production, 

 paid a tax, when sold, of six per cent, ad va- 

 lorem, or its equivalent. The umbrella manu- 

 facturer then aggregated all these constituent 

 parts previously taxed, into a finished product, 

 and then paid six per cent, on the whole. Thus 

 all the parts of the umbrella were taxed at least 

 twice, and in some instances three times thus 

 adding from twelve to fifteen per cent to the 

 direct cost, while each separate manufacturer 

 doubtless made the payment of the six per 

 cent, tax on his special product an occasion for 

 adding from one to three or more per centum 

 additional to its cost price. Similar illustra- 

 tions existed in other branches of compound 

 manufactures, showing the sustaining influence 

 on prices, and making the taxes neither definite 

 in amount, equal in application, nor convenient 

 in collection. 



Another serious defect of the internal rev- 

 enue system in its bearing upon the industry 

 of the country was the lack of equalization or 

 adjustment between it and the tariff. Thus the 

 cover of the umbrella or parasol, as a constit- 

 uent element of construction, represents from 

 one-half to two-thirds of the entire cost of the 

 finished article. The silk, the alpaca, and the 

 Scotch gingham, of which the covers were 

 made, were all imported at a duty of sixty per 

 cent, for the former, and fifty per cent, ad 

 valorem for the two latter. But the manu- 

 factured umbrella, covered with the same ma- 

 terial, whose constituent parts were not taxed, 

 either, on the material used in their fabrication 

 or in the sale, were imported under a duty of 

 thirty-five per cent, ad valorem; or at a dis- 

 criminating duty against the American, and 

 in favor of the foreign producer of from fifteen 

 to twenty-five per cent. Imported umbrellas 

 were sold in New York and Boston with the 

 original cost, duty, freight, and charges, paid 

 in gold, for a less price than the American arti- 

 cle could be manufactured. Other illustrations 



of the lack of adjustment between the exciso 

 and the tariff existed in other branches of do- 

 mestic manufactures. 



Notwithstanding these and other imperfec- 

 tions in this system so hastily prepared, it very 

 successfully attained the end designed of rais- 

 ing a revenue greater than was necessary for its 

 legitimate expenditures, and, near the close of 

 the war, Congress, on March 3, 1865, took im- 

 mediate steps for its revision, by authorizing the 

 appointment of a commission to report upon 

 the subject of raising revenue by taxation. In 

 June, Messrs. David A. Wells, Stephen Col well, 

 and Samuel S. Hayes, were organized as sucl. 

 commission, and their first report was made 

 to Congress in January, 1866. In this report 

 they take the ground that the increase of the 

 country in population and wealth is without a 

 parallel among nations, being from 1840 to 

 1850 thirty-five per cent, in population, and 

 eighty-nine per cent, in wealth ; and from 1850 

 to 1860 thirty-five and five-tenths per cent, in 

 population, and one hundred and twenty-six 

 per cent, in wealth. 



If the development in any approximate de- 

 gree can be maintained and continued, the ex- 

 tinguishment of the national debt ha a compara- 

 tively brief period becomes certain. To secure 

 this development, both by removing the shackles 

 from industry, and by facilitating the means 

 of rapid and cheap communication, they re- 

 garded as effecting a solution of all the finan- 

 cial difficulties pressing upon the country. The 

 future revenue policy of the country, they 

 therefore recommended to be, the abolition or 

 speedy reduction of all taxes which tend to 

 check development, and the retention of all 

 those which, like the income tax, fall chiefly 

 npon realized wealth. Asserting this principle 

 as a suitable policy for the Government, it be- 

 came necessary to inquire into the nature and 

 capacity of the sources of revenue available to 

 the Government, in order to determine the 

 manner and extent to which this policy could 

 be carried out, and insure adequate revenue. 

 Briefly stating the extent of revenue derived 

 from duties on foreign imports, the attention of 

 this commission was chiefly devoted to the ca- 

 pacity of the country to bear internal taxation. 

 The facts brought forward in this connection 

 are too important in the history of the country 

 to be passed over. 



The aggregate receipts of internal revenue 

 for the fiscal years 1863 (ten months), 1864, 

 1865, and 1866, were as follows: 



1863 (ten months) : $41,003,192 93 



1864. . 116,850,672 44 



1865 211,129,529 17 



1866 309,226,813 42 



The following table shows the amount de- 

 rived from the principal specific sources of 

 internal revenue in the years 1863, 1864, 1865, 

 and 1866, the aggregate annual amounts, and 

 the percentage ratio of the amount derived 

 from each specific source to tho whole for the 

 same periods : 



