PRINCIPLES OF TAXATION. 309 



increase in the rate of taxes imposed upon the remaining sources 

 after 1872. 



Of many other curious and instructive economic experiences, 

 consequent upon the rapid and radical changes in the fiscal policy 

 of the United States during the period under consideration, the 

 following seem especially worthy of notice : The first abatement or 

 repeal of internal taxation on various articles after the war to the 

 extent of about fifty millions in 1866 was not attended with any 

 general and immediate reduction in the prices of the articles re- 

 lieved, corresponding to the reduction of taxation, but with rather 

 an increase of prices. The explanation of this circumstance was, 

 that the continuance of the heavy war taxation, for a period after 

 the extensive war demands of the Government for various com- 

 modities had ceased, had diminished their production to a point 

 below what would have been the normal consumption of the 

 country ; and that, therefore, prices increased concurrently with 

 the abatement of taxes and a renewal of demand. Such a result 

 was, however, but temporary, and the condition of affairs was 

 soon reversed. The supply of manufactured products quickly be- 

 came equal to or exceeded demand. The price of products fell 

 faster than the price of either labor or capital, and taxation, which 

 formerly had been paid wholly from profit, now fell mainly upon 

 capital. The general result was a year (1867) of great industrial 

 and commercial depression. 



The enlarged use of stamps as machinery for the collection of 

 taxes, and their novel application to fermented liquors and dis- 

 tilled spirits, were attended with very striking results. In the 

 case of fermented liquors (beer), it was established almost beyond 

 doubt by the Revenue Commission that previous to 1866 the Gov- 

 ernment was defrauded of its legitimate revenue to an extent of 

 forty per cent, involving an absolute annual loss of about $6,400,000. 

 The adoption, with no little hesitation by Congress in 1866, of the 

 principle, that the payment of the tax on this commodity should be 

 effected by the purchase and affixing a stamp to each barrel sold 

 and removed from the place of manufacture, with the additional 

 requirement that the stamp should be canceled by the retailer or 

 consumer at once, increased the revenue from $3,657,000 in 1865 to 

 $5,115,000 in 1866 the year of first application and to $5,819,000 

 in 1867 ; and ever since has proved most effective and satisfactory. 



A recommendation to make use of stamps for the collection of 

 taxes on tobacco was acceded to by Congress in respect to smoking 

 tobacco and snuff, but was refused in respect to chewing tobacco, 

 cigarettes, and cigars ; in the latter case on the assumption that 

 it was impracticable to affix an adhesive paper stamp on the body 

 of a cigar, while the " trade," not long afterward, and at its own 

 volition, demonstrated its entire feasibility. Had the recommen- 



