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pies, be considered as most correct; and a tax laid, in case of selection, on the same articles in all the states, as was done in the direct tax of 1790, is recommended by its uniformity, and supported by respectable authority. It is nevertheless believed, that the systems of taxation respectively adopted by the several states, matured, modified, and improved, as they have been by long experience, will generally be found to be best adapted to the local situation and circumstances of each state; and they are certainly most congenial with the feelings and habits of the people. It is therefore proposed that the direct tax should be laid and assessed in each state, upon the same objects of taxation on which the direct taxes levied under the authority of the state, are laid and assessed.
The attempt made under the former direct tax of the United States to equalize the tax by authorizing a board of commissioners, in each slate, to correct the valuations made by the local assessors, was attended with considerable expense, and productive of great delay. In order to obviate this inconvenience, it is proposed that the quota assigned to each state, according to the rule prescribed by the constitution, should be apportioned by law amongst the several counties, towns, or other subdivisions of each state, adopting in each state, where a state tax is now levied, the apportionment of the state tax, whether that be an absolute quota fixed by a previous state law on the county or town, or whether it be only the amount which shall appear to have been last laid on such county by the operation of the general state laws imposing a direct tax; making the apportionment in the state where no state tax is now levied, according to the best information and materials which can be obtained; and authorizing the states respectively to alter the apportionment thus made by law, at any time previous to the day fixed by law for assessing the United States tax on individuals. The whole process of assessment will thereby be reduced to that of assessing the quota of each county town, or other subdivision on the lands and inhabitants of such subdivision. It will be as simple, and may be effected as promptly, and with as little expense, as the assessment of a county tax: and, the objects of taxation being the same, it may be still more facilitated by authorizing an adoption of the state assessment on individuals, whenever it can be obtained from the proper authority.
With respect to indirect taxes, it does not appear necessary to resort to any other than those which had been formerly levied by the United States. As they were in operation during several years, their defects, and the modifications and improvements of which they are susceptible, are better understood than new taxes could be. With some alterations, they may produce the amount now wanted; and it does not appear that any other equally productive could be substituted with any real advantage. The gross amount of those taxes in the year 1801, was nearly one million of dollars. They would, according to the increase of population, and without any augmentation in their rate, yield now near 1,400,000 dollars. An average increase of about 50 per cent, in the rate would produce the intended gross amount of two millions. But it is believed, that that increase ought not to be the same in all those taxes, and that some are susceptible of greater augmentation or extension than others.
1. Duties on domestic spirits distilled. There is not any more eligible object of taxation than ardent spirits; but the mode of taxation is liable to strong objections, particularly with respect to persons who arc not professional manufacturers, and who only occasionally distil the produce of their farms^ It is, therefore, proposed, that the duties on the quantity of spirits distilled, should be levied only on spirits distilled from foreign materials, at the rate of ten cents per gallon distilled: and on other distilleries employing stills, the aggregate of which shall contain more than four hundred gallons, at the rate of three cents per gallon distilled; and that, instead of a duty on the spirits, or of licenses in proportion to the time employed, other distillers should only pay an annual tax of five dollars for each still solely employed in the distillation of fruit, and of fifteen dollars for each still otherwise employed. This tax may also, without reference to time, be made to vary according to the size of the stills. At those rates, this class of duties is estimated to produce at most 400,000 dollars; and it is intended in that case, that another duty should be levied on the same article, in the shape of licenses to retailers. By the adoption of that mode the expenses of collection will be considerably diminished, penalties for not entering stills will be unnecessary, and they will be confined, with respect to country stills, to the case of clandestine distilling without paying the tax.
2. Duties on refined sugar. A duty double of that heretofore laid, viz. at the rate of four cents per pound, is estimated to produce 200,000 dollars. The drawback both of that duty, and of that on the importation of the raw material, to be allowed.
3. Licenses to retailers. These are believed to be susceptible of considerable and very proper augmentation and extension. The following rates are estimated to produce 700,000 dollars:
For a license to retail wines, . dolls. 20
do do spirits generally, £0
do do domestic spirits only, 15
do do any other species of foreign merchandise, 10
Tavern keepers, licensed under the authority of any state, and not living in any city, town, village, or within five miles thereof, to be excepted. Every other person who sells wines, foreign spirits or foreign merchandise, otherwise than in the vessel or package of importation; or in the case of dry goods, otherwise than by the piece; and every person who sells domestic spirits in less quantity than thirty gallons, to be considered as a retailer. Vol. III. Arr. t R
IV. Duties on sales at auction. These confined to the sales of articles of foreign produce or manufacture, and at the same rate as heretofore, may produce about 50,000 dollars.
V. Duties upon carriages for the conveyance of persons.- Those duties, adding at the rate of fifty per cent, on the duties formerly raised, are estimated to produce 150,000 dollars.
VI. Stamp Duties. An association of ideas, which connects those duties with the attempt of Great Britain to tax America, and which might, with equal propriety, attach odium to the duty on the importation of tea, has rendered their name in some degree unpopular. The great extension of post roads, and the facility of distribution, have however, removed the most substantial objection to which they were liable. They do not appear to be more inconvenient than any other internal tax, and the expenses of collection are less than on any other, being only a commission on the sale and the cost of paper and stamping. At the same rate as heretofore, with the exception of bank notes, on which an increase appears proper (with an option to the banks to pay l-20thpartof their dividends in lieu thereof) they are estimated to produce 500,000 dollars.
RECAPITULATION. Direct tax, gross amount, .... 83,000,000 Duties on spirits, and licenses to distillers,
gross amount g400,000
Refined sugar, gross amount, - - 200,000
Total gross amount, 5,000,000 Deduct expenses of assessment, and collection and loses, estimated at 15 per cent. 750,000
Net amount estimated for 1814, 84.250,000 But are not estimated to yield in 1813, more than 3,600,000
Most of the internal taxes have been estimated at their maximum; but it is hoped that any defalcation from the estimated amount, will be compensated by a diminution in the expenses of collection, which have also been computed at the highest rate.
For the superintendence of those taxes, both direct and indirect, it appears indispensable that the office of commissioner of the revenue should be re-established. For their collection, the former offices of supervisor and inspector, are believed to have been unnecessary and injurious links in the system, and that the expense will be diminished, and the collection and accountability better secured, by the division of the states into convenient collection dis-tricts, and by the appointment of a collector to each district, who will pay into the treasury, and be immediately accountable to that department in the same manner as the collectors of customs. This arrangement, the greater amount to be collected, and the simplification in the objects and mode of taxation, will, it is hoped, reduce in a short time the expenses of collection of the indirect taxes to 7\ instead of 13 per cent. which they formerly cost, when brought to their highest degree of improvement. In estimating the charges on the direct tax at 15 per cent., 5 per cent, have been allowed for the assessment, 5 per cent, for the collection, and 5 per cent, for losses. This last item is principally on account of losses on unseated lands, and on some remote districts of country, and is not susceptible of much reduction. That for assessment may be lessened in those states where the objects of taxation do not require an annual valuation, or where the state or county assessment may be used. The expense of collection proper may be also in some degree lessened in cities and populous districts, and by uniting it with that of the internal taxes. It is, however, necessary that the compensation of the collectors be sufficient to command the services of men properly qualified, and in every respect worthy of the trust.
In performing the ungracious task of pointing out new objects of taxation, those have been submitted which appeared sufficiently productive and least oppressive. The objections to which each, including the increase of duties on importations, is liable, have not been stated; not because I was insensible of them, but because no substitute of any importance was perceived, which was not still more objectionable. Every tax being in some degree an evil, fs therefore liable to some objection; and every one taken singly, may, for that reason, be easily combattccl. But if the necessity of an additional revenue be admitted, the objections afford no argument why the tax proposed, should be rejected, unless another less inconvenient be substituted. The necessity of such an addition to the revenue has, in the course of this letter, been strongly urged, because it was strongly felt. But with respect to the taxes proposed, the selection is submitted with diffidence; and it will be highlygratifying that some more eligible may be devised.
The last inquiry of the committee relates principally to the terms on which loans, amounting to at least ten millions of dollars per annum, may be obtained, and to the plan proper to be adopted for the reimbursement of such loans.
The terms on which annual loans to that amount may be obtained, can be ascertained only by experiment. Government haanevtfV since its organization, obtained considerable loans within the United States, at the rate of six per cent. a year, except from the bank of the United States; and these, on a capital often millions, never amounted to seven millions in the whole. In proportion to the amount wanted for the service of the year, and to the increase of stock of the public debt at market, the terms must naturally become less favourable. It mtrstahrabt recollected, that in additi<m to the sum wanted to defray the extraordinary expenses of the war, an annual loan equal to the annual reimbursement of the six per cent. and deferred stocks prescribed by law, will also be required. This, together with the reimbursement of the residue of the converted stock, amounting to 565,000 dollars, will for this year amount, as has been stated in the annual report, to 2,135,000 dollars. As the interest on the existing debt is included in the " current expenses," the loan necessary for the reimbursement of the six per cent- and deferred stocks will, for each subsequent year, amount only to 1,570,000 dollars. The loans for those sums wUl indeed create no addition to the amount of the debt, but will neverthelcss increase the total sum to be annually borrowed. It must also be observed, that if the price of stocks should sink below par, the commissioners of the sinking fund are bound by existing laws to apply the residue of the annual appropriation of eight millions a year to the purchase of stock; and that residue will, this year, amount to 3,640,000 dollars, which in that case must also be borrowed. It is a view of those several considerations, which has created an apprehension that loans to such large amount might not perhaps be obtained on as favourable terms as under other circumstances, and with the powerful assistance of a national bank, had been formerly anticipated. The same view of the subject has most forcibly impressed a conviction of the necessity of an additional revenue. For if further loans be also resorted to for defraying the ordinary expenses and the interest, they must, if at all practicable, be obtained on the most ruinous terms. Excluding that idea, and embracing only the loans which are absolutely necessary, it appears to me more prudent not to limit the rate of interest by law. A discretionary power in that respect is, so far as relates to the executive, altogether ineligible; but is preferable to the risk of leaving the public service unprovided for. It is also for the same reason, requisite that the loans may be made irredeemable for a term not less than ten years.
In a former communication to the committee of ways and means, it was suggested that " treasury notes " bearing interest, might to a certain extent be issued, and to that extent diminish the amount to be directly borrowed. The advantage they would have would result from their becoming a part of the circulating medium, and taking, to a certain degree, the place of bank notes. It is evident, however, that for the same reason the issue must be moderate and never exceed the amount which may circulate without depreciation.
The loans necessary for the present year are: 1st, A sum equal to that which may, during the year, be reimbursed on account of the principal of the debt. 2dly, The amount of expenses which have been or may be authorized by congress and are not included in the annual estimates.
The first sum will certainly amount to 2,135,000 dollars) am! may be greater if the stock should sink below par.