Volume II Part 12 (2/2)

And here we are again brought to that general absence of state craft which has been the result of the American system of government. I am not aware that our Chancellors of the Exchequer have in late years always been great masters of finance; but they have at any rate been among money men and money matters, and have had financiers at their elbows if they have not deserved the name themselves. The very fact that a Chancellor of the Exchequer sits in the House of Commons and is forced in that House to answer all questions on the subject of finance, renders it impossible that he should be ignorant of the rudiments of the science. If you put a white cap on a man's head and place him in a kitchen, he will soon learn to be a cook. But he will never be made a cook by standing in the dining-room and seeing the dishes as they are brought up. The Chancellor of the Exchequer is our cook; and the House of Commons, not the Treasury chambers, is his kitchen. Let the Secretary of the United States Treasury sit in the House of Representatives. He would learn more there by contest with opposing members than he can do by any amount of study in his own chamber.

But the House of Representatives itself has not as yet learned its own lesson with reference to taxation. When I say that the United States are in want of a financier, I do not mean that the deficiency rests entirely with Mr. Chase. This necessity for taxation, and for taxation at so tremendous a rate, has come suddenly, and has found the representatives of the people unprepared for such work. To us, as I conceive, the science of taxation, in which we certainly ought to be great, has come gradually. We have learned by slow lessons what taxes will be productive, under what circ.u.mstances they will be most productive, and at what point they will be made unproductive by their own weight. We have learned what taxes may be levied so as to afford funds themselves, without injuring the proceeds of other taxes, and we know what taxes should be eschewed as being specially oppressive to the general industry and injurious to the well-being of the nation. This has come of much practice, and even we, with all our experience, have even got something to learn. But the public men in the States who are now devoting themselves to this matter of taxing the people have, as yet, no such experience. That they have inclination enough for the work is, I think, sufficiently demonstrated by the national tax bill, the wording of which is now before me, and which will have been pa.s.sed into law before this volume can be published. It contains a list of every taxable article on the earth or under the earth. A more sweeping catalogue of taxation was probably never put forth. The Americans, it has been said by some of us, have shown no disposition to tax themselves for this war; but before the war has as yet been well twelve months in operation, a bill has come out with a list of taxation so oppressive, that it must, as regards many of its items, act against itself and cut its own throat. It will produce terrible fraud in its evasion, and create an army of excise officers who will be as locusts over the face of the country. Taxes are to be laid on articles which I should have said that universal consent had declared to be unfit for taxation. Salt, soap, candles, oil, and other burning fluids, gas, pins, paper, ink, and leather, are to be taxed. It was at first proposed that wheat-flour should be taxed, but that item has, I believe, been struck out of the bill in its pa.s.sage through the House. All articles manufactured of cotton, wool, silk, worsted, flax, hemp, jute, india-rubber, gutta percha, wood (?), gla.s.s, pottery wares, leather, paper, iron, steel, lead, tin, copper, zinc, bra.s.s, gold and silver, horn, ivory, bone, bristles, wholly or in part, or of other materials, are to be taxed;--provided always that books, magazines, pamphlets, newspapers, and reviews shall not be regarded as manufactures. It will be said that the amount of taxation to be levied on the immense number of manufactured articles which must be included in this list will be light,--the tax itself being only 3 per cent. ad valorem. But with reference to every article, there will be the necessity of collecting this 3 per cent.! As regards each article that is manufactured, some government official must interfere to appraise its value and to levy the tax. Who shall declare the value of a barrel of wooden nutmegs; or how shall the Excise-officer get his tax from every cobbler's stall in the country? And then tradesmen are to pay licences for their trades,--a confectioner 2, a tallow-chandler 2, a horsedealer 2. Every man whose business it is to sell horses shall be a horsedealer. True. But who shall say whether or no it be a man's business to sell horses?

An apothecary 2, a photographer 2, a pedlar 4, 3, 2, or 1, according to his mode of travelling. But if the gross receipts of any of the confectioners, tallow-chandlers, horsedealers, apothecaries, photographers, pedlars, or the like do not exceed 200 a year, then such tradesmen shall not be required to pay for any licence at all.

Surely such a proviso can only have been inserted with the express view of creating fraud and ill blood! But the greatest audacity has, I think, been shown in the levying of personal taxes,--such taxes as have been held to be peculiarly disagreeable among us, and have specially brought down upon us the contempt of lightly-taxed people, who, like the Americans, have known nothing of domestic interference.

Carriages are to be taxed,--as they are with us. Pianos also are to be taxed, and plate. It is not signified by this clause that such articles shall pay a tax, once for all, while in the maker's hands, which tax would no doubt fall on the future owner of such piano or plate; in such case the owner would pay, but would pay without any personal contact with the tax-gatherer. But every owner of a piano or of plate is to pay annually according to the value of the articles he owns. But perhaps the most audacious of all the proposed taxes is that on watches. Every owner of a watch is to pay 4_s._ a year for a gold watch and 2_s._ a year for a silver watch! The American tax-gatherers will not like to be cheated. They will be very keen in searching for watches. But who can say whether they or the carriers of watches will have the best of it in such a hunt. The tax-gatherers will be as hounds ever at work on a cold scent. They will now be hot and angry, and then dull and disheartened. But the carriers of watches who do not choose to pay will generally, one may predict, be able to make their points good.

With such a tax bill,--which I believe came into action on the 1st of May, 1862,--the Americans are not fairly open to the charge of being unwilling to tax themselves. They have avoided none of the irritating annoyances of taxation, as also they have not avoided, or attempted to lighten for themselves, the dead weight of the burden. The dead weight they are right to endure without flinching; but their mode of laying it on their own backs justifies me, I think, in saying that they do not yet know how to obtain access to their own means. But this bill applies simply to matters of excise. As I have said before, Congress, which has. .h.i.therto supported the government by custom duties, has also the power of levying excise duties, and now, in its first session since the commencement of the war, has begun to use that power without much hesitation or bashfulness. As regards their taxes levied at the Custom House, the government of the United States has always been inclined to high duties, with the view of protecting the internal trade and manufactures of the country. The amount required for national expenses was easily obtained, and these duties were not regulated, as I think, so much with a view to the amount which might be collected, as to that of the effect which the tax might have in fostering native industry. That, if I understand it, was the meaning of Mr. Morrill's bill, which was pa.s.sed immediately on the secession of the southern members of Congress, and which instantly enhanced the price of all foreign manufactured goods in the States. But now the desire for protection, simply as protection, has been swallowed up in the acknowledged necessity for revenue; and the only object to be recognized in the arrangement of the custom duties is the collection of the greatest number of dollars. This is fair enough. If the country can at such a crisis raise a better revenue by claiming a s.h.i.+lling a pound on coffee than it can by claiming sixpence, the s.h.i.+lling may be wisely claimed, even though many may thus be prohibited from the use of coffee. But then comes the great question, What duty will really give the greatest product? At what rate shall we tax coffee so as to get at the people's money? If it be so taxed that people won't use it, the tax cuts its own throat. There is some point at which the tax will be most productive; and also there is a point up to which the tax will not operate to the serious injury of the trade. Without the knowledge which should indicate these points, a Chancellor of the Exchequer, with his myrmidons, would be groping in the dark. As far as we can yet see, there is not much of such knowledge either in the Treasury Chambers or the House of Representatives at Was.h.i.+ngton.

But the greatest difficulty which the States will feel in obtaining access to their own means of taxation, is that which is created by the const.i.tution itself, and to which I alluded when speaking of the taxing powers which the const.i.tution had given to Congress, and those which it had denied to Congress. As to custom duties and excise duties, Congress can do what it pleases, as can the House of Commons.

But Congress cannot levy direct taxation according to its own judgment. In those matters of customs and excise, Congress and the Secretary of the Treasury will probably make many blunders; but having the power they will blunder through, and the money will be collected. But direct taxation, in an available shape, is beyond the power of Congress under the existing rule of the const.i.tution. No income-tax, for instance, can be laid on the general incomes of the United States, that shall be universal throughout the States. An income-tax can be levied, but it must be levied in proportion to the representation. It is as though our Chancellor of the Exchequer, in collecting an income-tax, were obliged to demand the same amount of contribution from the town of Chester as from the town of Liverpool, because both Chester and Liverpool return two Members to Parliament.

In fitting his tax to the capacity of Chester, he would be forced to allow Liverpool to escape unscathed. No skill in money matters on the part of the Treasury Secretary, and no aptness for finance on the part of the Committee on Ways and Means, can avail here. The const.i.tution must apparently be altered before any serviceable resort can be had to direct taxation. And yet, at such an emergency as that now existing, direct taxation would probably give more ready a.s.sistance than can be afforded either by the Customs or the Excise.

It has been stated to me that this difficulty in the way of direct taxation can be overcome without any change in the const.i.tution.

Congress could only levy from Rhode Island the same amount of income-tax that it might levy from Iowa; but it will be competent to the legislature of Rhode Island itself to levy what income-tax it may please on itself; and to devote the proceeds to national or federal purposes. Rhode Island may do so; and so may Ma.s.sachusetts, New York, Connecticut, and the other rich Atlantic States. They may tax themselves according to their riches, while Iowa, Illinois, Wisconsin, and such-like States are taxing themselves according to their poverty. I cannot myself think that it would be well to trust to the generosity of the separate States for the finances needed by the national Government. We should not willingly trust to Yorks.h.i.+re or Suss.e.x to give us their contributions to the national income, especially if Yorks.h.i.+re and Suss.e.x had small Houses of Commons of their own, in which that question of giving might be debated. It may be very well for Rhode Island or New York to be patriotic! But what shall be done with any State that declines to evince such patriotism?

The legislatures of the different States may be invited to impose a tax of 5 per cent. on all incomes in each State; but what will be done if Pennsylvania, for instance, should decline, or Illinois should hesitate? What if the legislature of Ma.s.sachusetts should offer 6 per cent., or that of New Jersey decide that 4 per cent.

was sufficient? For a while the arrangement might possibly be made to answer the desired purpose. During the first ebullition of high feeling, the different States concerned might possibly vote the amount of taxes required for federal purposes. I fear it would not be so, but we may allow that the chance is on the card. But it is not conceivable that such an arrangement should be continued when, after a year or two, men came to talk over the war with calmer feelings and a more critical judgment. The State legislatures would become inquisitive, opinionative, and probably factious. They would be unwilling to act in so great a matter under the dictation of the federal Congress; and by degrees one, and then another, would decline to give its aid to the central government. However broadly the acknowledgment may have been made, that the levying of direct taxes was necessary for the nation, each State would be tempted to argue that a wrong mode and a wrong rate of levying had been adopted, and words would be forthcoming instead of money. A resort to such a mode of taxation would be a bad security for government Stock.

All matters of taxation, moreover, should be free from any taint of generosity. A man who should attempt to lessen the burdens of his country by gifts of money to its Exchequer would be laying his country under an obligation, for which his country would not thank him. The gifts here would be from States, and not from individuals; but the principle would be the same. I cannot imagine that the United States' Government would be willing to owe its revenue to the good will of different States, or its want of revenue to their caprice. If under such an arrangement the western States were to decline to vote the quota of income-tax or property-tax to which the eastern States had agreed,--and in all probability they would decline,--they would in fact be seceding. They would thus secede from the burdens of their general country; but in such event no one could accuse such States of unconst.i.tutional secession.

It is not easy to ascertain with precision what is the present amount of debt due by the United States; nor probably has any tolerably accurate guess been yet given of the amount to which it may be extended during the present war. A statement made in the House of Representatives, by Mr. Spaulding, a member of the Committee of Ways and Means, on the 29th of January last, may perhaps be taken as giving as trustworthy information as any that can be obtained. I have changed Mr. Spaulding's figures from dollars into pounds, that they may be more readily understood by English readers.

There was Due up to July 1,1861 18,173,566 ” Added in July and August 5,379,357 ” Borrowed in August 10,000,000 ” Borrowed in October 10,000,000 ” Borrowed in November 10,000,000 ” Amount of Treasury Demand Notes issued 7,800,000 ----------- 61,352,923

This was the amount of the debt due up to January 15th, 1862. Mr.

Spaulding then calculates that the sum required to carry on the Government up to July 1st, 1862, will be 68,647,077. And that a further sum of 110,000,000 will be wanted on or before the 1st of July, 1863. Thus the debt at that latter date would stand as follows:--

Amount of Debt up to January, 1862 61,352,923 Added by July 1st, 1862 68,647,077 Again added by July 1st, 1863 110,000,000 ------------ 240,000,000

The first of these items may no doubt be taken as accurate. The second has probably been founded on facts which leave little doubt as to its substantial truth. The third, which professes to give the proposed expense of the war for the forthcoming year, viz. from 1st July, 1862, to 30th June, 1863, must necessarily have been obtained by a very loose estimate. No one can say what may be the condition of the country during the next year,--whether the war may then be raging throughout the southern States, or whether the war may not have ceased altogether. The North knows little or nothing of the capacity of the South. How little it knows may be surmised from the fact that the whole southern army of Virginia retreated from their position at Mana.s.sas before the northern generals knew that they were moving; and that when they were gone no word whatever was left of their numbers.

I do not believe that the northern Government is even yet able to make any probable conjecture as to the number of troops which the southern confederacy is maintaining, and if this be so, they can certainly make no trustworthy estimates as to their own expenses for the ensuing year.

Two hundred and forty millions is, however, the sum named by a gentleman presumed to be conversant with the matter, as the amount of debt which may be expected by midsummer, 1863; and if the war be continued till then, it will probably be found that he has not exceeded the mark. It is right, however, to state that Mr. Chase in his estimate does not rate the figures so high. He has given it as his opinion that the debt will be about one hundred and four millions in July, 1862, and one hundred and eighty millions in July, 1863. As to the first amount, with reference to which a tolerably accurate calculation may probably be made, I am inclined to prefer the estimate as given by the member of the committee; and as to the other, which hardly, as I think, admits of any calculation, his calculation is at any rate as good as that made in the Treasury.

But it is the immediate want of funds, and not the prospective debt of the country, which is now doing the damage. In this opinion Mr.

Chase will probably agree with me; but readers on this side of the water will receive what I say with a smile. Such a state of affairs is certainly one that has not uncommonly been reached by financiers; it has also often been experienced by gentlemen in the management of their private affairs. It has been common in Ireland, and in London has created the wealth of the p.a.w.nbrokers. In the States at the present time the government is very much in this condition. The prospective wealth of the country is almost unbounded, but there is great difficulty in persuading any p.a.w.nbroker to advance money on the pledge. In February last Mr. Chase was driven to obtain the sanction of the legislature for paying the national creditors by bills drawn at twelve months' date, and bearing 6 per cent. interest. It is the old story of the tailor who calls with his little account, and draws on his insolvent debtor at ninety days. If the insolvent debtor be not utterly gone as regards solvency he will take up the bill when due, even though he may not be able to pay a simple debt. But then, if he be utterly insolvent, he can do neither the one nor the other!

The Secretary of the Treasury, when he asked for permission to accept these bills,--or to issue these certificates, as he calls them,--acknowledged to pressing debts of over five millions sterling which he could not pay; and to further debts of eight millions which he could not pay, but which he termed floating;--debts, if I understand him, which were not as yet quite pressing. Now I imagine that to be a lamentable condition for any Chancellor of an Exchequer,--especially as a confession is at the same time made that no advantageous borrowing is to be done under the existing circ.u.mstances. When a Chancellor of the Exchequer confesses that he cannot borrow on advantageous terms, the terms within his reach must be very bad indeed. This position is indeed a sad one, and at any rate justifies me in stating that the immediate want of funds is severely felt.

But the very arguments which have been used to prove that the country will be ultimately crushed by the debt, are those which I should use to prove that it will not be crushed. A comparison has more than once been made between the manner in which our debt was made, and that in which the debt of the United States is now being created; and the great point raised in our favour is, that while we were borrowing money we were also taxing ourselves, and that we raised as much by taxes as we did by loans. But it is too early in the day to deny to the Americans the credit which we thus take to ourselves. We were a tax-paying nation when we commenced those wars which made our great loans necessary, and only went on in that practice which was habitual to us. I do not think that the Americans could have taxed themselves with greater alacrity than they have shown. Let us wait, at any rate, till they shall have had time for the operation, before we blame them for not making it. It is then argued that we in England did not borrow nearly so fast as they have borrowed in the States. That is true. But it must be remembered that the dimensions and proportions of wars now are infinitely greater than they were when we began to borrow. Does any one imagine that we would not have borrowed faster, if by faster borrowing we could have closed the war more speedily?

Things go faster now than they did then. Borrowing for the sake of a war may be a bad thing to do,--as also it may be a good thing; but if it be done at all, it should be so done as to bring the war to the end with what greatest despatch may be possible.

The only fair comparison, as it seems to me, which can be drawn between the two countries with reference to their debts, and the condition of each under its debt, should be made to depend on the amount of the debt and probable ability of the country to bear that burden. The amount of the debt must be calculated by the interest payable on it, rather than by the figures representing the actual sum due. If we debit the United States Government with seven per cent.

on all the money borrowed by them, and presume that amount to have reached in July, 1863, the sum named by Mr. Spaulding, they will then have loaded themselves with an annual charge of 16,800,000 sterling.

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