Treasury Department,
January 10, 1812.
Sir, - In answer to
the first inquiry of the Committee of Ways and Means, relative to the interest
arising on the proposed loan of 1,200,000 dollars, necessary to supply the
deficiency in the receipts of the year 1812, I beg leave to observe that that
item was not included amongst the expenses of that year, because, the estimate
being made with reference to the expenses alone, which had previously been
authorized by law, and a considerable proportion of those on account of the
public debt falling on the first day of the year, it would not have been
necessary, in that view of the subject, to borrow that sum previous to that
day, and the interest would not, therefore, have become a charge till the year
1813.
With respect to the
second inquiry of the committee, it was certainly contemplated, in conformity
with the recommendation of the President, whose expressions were adopted in the
report, to raise a revenue "sufficient at least to defray the ordinary expenses
of government and to pay the interest on the public debt, including that on new
loans which may be authorized." The sura of about nine millions of dollars
was assumed as answering that description for the present, and the expression
of " fixed revenue," which had been used in reference to existing
circumstances, was inadvertently applied to the case of war. It will
undoubtedly be proper, as remarked by the committee, to provide annually an
additional and gradually increasing revenue, sufficient to pay the interest on
loans required in the event of war. If, therefore, the loan for the present
year will, according to the suggestion of the committee, amount to ten millions
of dollars, the receipts into the Treasury to be provided for the year 1813
should, on those data, amount to about 9,600,000 dollars.
The committee ask,
in the next place, the best opinion which I am able to form of the probable
amount of receipts from duties on tonnage and merchandise in the event of war.
As that amount will
depend on the extent of the commerce between the United States and nations at
peace with them, and on the number of the captures respectively made by our
privateers and by the enemy, it is a matter of conjecture, and not a subject of
calculation ; for which reason it was stated in the report that the amount
could not at present be determined. Considering the rigorous restrictions laid
by France on the commerce of the United States with her own dominions and other
countries under her influence, the dangers to which our commerce with the
Baltic and with China will be exposed, the relations of England with Portugal
and with Spain, and also that no inconsiderable part of the captures made by
our privateers will be sent into foreign ports, a great defalcation in the
receipts on duties on imported merchandise must be expected. The amount, under
existing laws and circumstances, has, from correct data, been stated in the
annual report at six millions of dollars. It would in my opinion be unsafe, in
an estimate of ways and means intended to be relied on with certainty, to
calculate, in the event of a war, on more than 2,500,000 dollars at the present
rate of duties.
To the next inquiry
of the committee, respecting the increase of those duties which is thought
practicable and advisable, it is answered, without hesitation, that the rate of
duties may, in the event of war, be doubled without danger or inconvenience. There
will, in such an event, be less danger of smuggling at that rate than there is
now with the existing duties. With that increase, the duties will still be much
less on an average than those paid on importations in England, France, and most
other countries. And they will be collected with more ease to government and
less inconvenience to the people than could be devised to the same amount in
any other manner...
…In proportion as
the ability to borrow is diminished the necessity of resorting to taxation is
increased. It is therefore also proper to observe that at that time the subject
of the renewal of the charter of the Bank of the United States had been referred
by the Senate to the Secretary of the Treasury, nor had any symptom appeared
from which its absolute dissolution without any substitute could have then been
anticipated. The renewal in some shape, and on a more extensive scale, was
confidently relied on, and accordingly, in the report made during the same
session to the Senate, the propriety of increasing the capital of the bank to
$30,000,000 was submitted, with the condition that that institution should, if
required, be obliged to lend one-half of its capital to the United States. The
amount thus loaned might, without any inconvenience, have been increased to
twenty millions ; and with $20,000,000 in hand, and loans being secured for
$20,000,000 more, without any increase of the stock of the public debt at
market, internal taxation would have been unnecessary for at least four years
of war, nor any other resource been wanted than an additional annual loan of
five millions, - a sum sufficiently moderate to be obtained from individuals
and on favorable terms.
These observations
are made only in reference to the finances and resources of the general
government. Considerations of a different nature have on both these subjects
produced a different result, which makes a resort to internal taxes now
necessary, and will render loans more difficult to obtain, and their terms less
favorable. …
...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 are not professional
manufacturers, and who only occasionally distill 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, all 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, still, 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...
...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.
4. 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.
5. 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.
6. 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 -- part of their dividends in lieu
thereof), they are estimated to produce 500,000 dollars….
