168 



CONGRESS. (THE WAR REVENUE LAW.) 



the existing loans of the Government are payable in 

 such wav that, even if we could place 5-20 3-per- 

 cent bonds instead of ten-twenties, the latter would 

 be equal lv favorable for the Government for the 

 reason that in 1904, six years from the present time, 

 there will become due $100,000,000 of 5-per-cent. 



* Now, obviously all we shall be able to do at the 

 rnd of the live years will be to redeem the $100,000,- 

 000 of 5-per-cent. bonds ; and, as they bear 5 per 

 cent, interest, the Government, of course would 

 choose to call them in and pay them off rather than 

 the H-per-eeiit. bonds. In 1907 there comes due 

 $559641.500 of 4-per-cent, bonds, coming right 

 along after we have completed the payment of the 

 5-per-cents. Of course the Government will call 

 them in and pay them off before paying the 3-per- 

 cents. 



- And having over five hundred millions of them, 

 they will be all we can take care of, until the ten 

 Tears' bonds falling due in 1908, when these new 

 bonds will be redeemable at the pleasure of the 

 Government 



Mr. Chairman, from the point of view of the 

 Government's interest it is better that these bonds 

 should bear the minimum time limit of ten years 

 rather than the shorter term of five. And on the 

 point of securing their being taken by the people 

 at 3 per cent,, it is evidently better that they should 

 have a longer term to run. 



" Having made provision for a permanent loan 

 for an amount not exceeding $500,000,000, then it 

 became important to make provision for the obtain- 

 ing of money temporarily immediately, before the 

 permanent loan can be placed, before additional 

 revenue can be secured, and also for any contingen- 

 cies that may come in the future. Hence, we have 

 provided fora temporary issue of certificates of in- 

 debtedness, bearing interest at 3 per cent., payable 

 in not exceeding one year, and providing that the 

 amount that may be outstanding at any time shall 

 not exceed $100,000,000." 



This clear statement gives the scope of the meas- 

 ure as reported from the Committee on. Ways and 

 Means and as it passed the House. There was no 

 opposition meant to thwart the purpose of the bill, 

 as there was a thorough agreement on the necessity 

 of providing funds to meet the war expenditure ; 

 but there was a sharp difference of opinion as to the 

 methods to be adopted for raising revenue. Various 

 schemes were proposed by members of the minority 

 in tin- Ilmi^r; and the levying of an income tax, 

 the coinage of the seigniorage silver in the Treasury, 

 the issue of a limited amount of greenbacks, and 

 the taxation of corporations were among the favor- 

 able devices. The bitterest criticism was made on 

 the scheme for a great bond issue, as designed to 

 M-rve other purposes than those professed. Mr. 

 MeDowell, ot Ohio, stated the position clearly : 



' We rc heartily in favor of providing sufficient 

 funds for equipping the army and navy thoroughly, 

 to fenl them well, to furnish them with everything 

 that will contribute to their comfort and safety as 

 far as possible. We do not want them to lack for 

 anything that will enable them to prosecute the 

 war vigorously and successfully. Since war has 

 come, the American people want prompt, energetic 

 action, and no party will respond more heartily and 

 promptly to the country's call and needs than the 

 Democratic party. 



" It must lie admitted that there is urgent neces- 

 sity for providing means to bring this war to a vic- 

 torious termination. No one is more desirous of 

 accomplishing this than 1 am. Some provisions in 

 the bfll under consideration meet my approval. 

 The proposition to authorize the Secretary of the 

 Treasury to issue $500.000.000 of 10-20 bonds does 



not meet my approval. I do not believe that the 

 present emergency demands the amount of money 

 $700,000,000 for which this bill makes almost 

 immediate provision. 



" We should studiously avoid an increase of the 

 interest-bearing indebtedness of our Government. 

 The issuing of bonds should come only when an 

 emergency makes it an absolute necessity. Let us 

 see what amount of money can be used for war pur- 

 poses without issuing bonds now. According to 

 the statement given out by the Secretary of the 

 Treasury to-day there is in the United States 

 Treasury an available cash balance, excluding the 

 gold reserve, of $118,000,000, in round numbers. 



" But according to the statements of the gentle- 

 man from Maine, we have only about $60,000,000 

 available for all purposes of the Treasury. It 

 therefore appears that the system of bookkeeping 

 of the Treasury Department is misleading. It may 

 be safe to take $60,000,000 as the amount. For 

 $42,000,000 silver seigniorage silver certificates could 

 be issued. By the internal-revenue tax provision of 

 this bill we are told $100,000,000 will be produced. 



" By the provision for a temporary issue of cer- 

 tificates of indebtedness another $100,000,000 can 

 be produced. This would give us $302,000,000 to 

 carry on the war until Congress would again be in 

 session next December a sum, in my judgment, 

 greater than we shall need to drive Spain off tho 

 Western Hemisphere. Suppose we have doubts 

 about this amount of money being sufficient. There 

 are other well-tried and most satisfactory methods 

 of raising war revenue. 



"This bill should start off, first, with an incomo 

 tax that would produce $100,000,000 or more an- 

 nually. The ablest statesmen, lawyers, and econo- 

 mists have pronounced an income tax the most fair 

 and just of all systems of taxation. Dr. Francis 

 Wayland (Political Economy, page 257) says, speak- 

 ing of income tax : ' This is the most equitable of 

 all taxes, since it touches men exactly according to 

 their abilities.' An income tax is not an untried 

 thing. In time of the civil war we laid such tax, 

 and no court of that time ever intimated that it was 

 unconstitutional. During the existence of thig law 

 we collected $346,000,000. It is a notable fact that 

 the law was repealed by a systematic and deter- 

 mined effort of certain politicians who sought to 

 institute high-tariff taxes. 



" In 1842 Sir Robert Peel, Premier of England, 

 obtained from Parliament authority to levy an in- 

 come tax for three years to meet a temporary defi- 

 ciency in the revenues which then existed. 



" This was not in time of war, but when England 

 was at peace. The tax was effectual and satisfac- 

 tory. In 1845, when the income tax was about to 

 expire by limitation, Sir Robert Peel had come to 

 the conclusion that it was a just tax, and, though 

 himself a protectionist at that time, he considered 

 it more fair than a custom tax. Although he had 

 secured the tax as an expedient, on account of its 

 satisfactory results he determined to keep it on 

 principle. 



" Our present system of taxation falls too heavily 

 upon those least able to bear it. The wealthy classes 

 are not bearing their share of the burdens of tho 

 Government. By enacting this bill into a law we 

 will make taxes more onerous on the poor. The 

 internal revenue produced by this bill would come 

 in a much larger proportion from the poor and 

 moderately well-to-do classes than from the very 

 wealthy. In other words, those possessing the 

 greater part of the wealth of the country would 

 not pay their share of the taxes. 



" This is certainly an opportune time to enact an 

 income-tax law. The masses of the people would 

 approve of such a measure, because it is right. The 



