country at present required it, and it would be safe, prudent. and discreet, to do so. The Secretary of the Treasury had estimated the internal revenue at 337,255 dollars, while those gentlemen made it 469,579. This they stated from the revenue of last year, which it was probable would be considerably more than this. He thought there was as much reason for taking one as the other statement; and the Government would be exposed to hazard and danger, unless allowances were made for deficiencies. [FEBRUARY, 1797. provided considerable revenue, was also laid aside. They had agreed to lay low duties upon distilled domestic spirits; no increase could therefore be expected from that quarter. They could, then, only resort to such articles of impost as would be likely, from their general demand and other circumstances, to produce additional revenue. As, therefore, no prospect appeared of getting other revenue than by the articles before them, he should be compelled to agree, though with reluctance, to the advance of the duty on sugar. With respect to their lands, they had authorized public stock to be received in payment; and, though he thought this a very valuable regulation, both for facilitating the sale of the land, and for paying off the debt, the lands, on this account, would not produce much cash into the Treasury. Mr. S. SMITH said, very early in the present session, he read, with some attention, the report of the Secretary of the Treasury on the subject of direct taxes. He cast his eye upon certain articles which he thought proper subjects upon which to raise further sums from indirect sources, among which were salt, sugar, tea, and the whole of the 10 per cent. class of goods; he communicated his sentiments to other gentlemen, and they had been brought forward. He supposed the House would have gone into a system of direct taxes. This he had always considered as a difficult subject, and he never could, himself, form a plan adequate to effect it; but he was desirous that the subject should have been taken up, that in case of extremity it might be called into operation. He did not think any immediate wants of the revenue required this The deficiency, according to his calculation, was 1,012.969 dollars, and after deducting from that sum 200,000 for the additional duties in the bill before them, there would remain a balance of 812,969 dollars. Admitting the gentleman's own statement to be true, there would still be a deficiency of 100,000 dollars, and this without making any allowance whatever for accidents and occurrences which will always happen, without making any provision for the purchase of the public debt, which might at this time be purchased to great advantage. If there had been money in the Treasury for the purpose, instead of paying the debt at par, it might have been bought up at 16 or 17s. in the pound. And he was of opinion, from the present situation of things, the Public Debt would remain low, and that a surplus in the Treasury might be well employed in purchasing it. So much for the revenue and expenses of the present year. With respect to 1798, there was no necessity to go much into that subject. The gentleman from Pennsylvania had estimated the instalment of the Dutch debt, payable in this year, at 160,000 dollars only; but he asked whether it would be wise to pay only that sum? And whe-tax to be put into execution, but he wished to take ther it had not been in the contemplation of that gentleman, as well as others, to pay as much as they could yearly? He knew they should not be obliged to pay more; but he believed it would be a wise policy to pay an equal sum every year. That gentleman made another deduction of 280,000 dollars, which had been granted to the Dey and Regency of Algiers this year; but might they not expect items which they did not contemplate, to this amount? Contingencies, he said, occurred, which always swelled the expenses greater than were contemplated. There was always something of an extraordinary nature occurring to call for money; either an Indian war, or insurrection, depredations of foreign Powers, or attacks by the Algerines. There was no guarding with certainty against them. The next deduction was 100,000 dollars for the frigates. Whether this would be saved or not, was uncertain. The next House might agree to go on with the frigates. Upon the whole, Mr. S. said, it would be prudent to provide a sufficiency of revenue, and there was no prospect of getting it from any other than the objects contained in the bill before them. A land tax was agreed to be laid aside for the present. as gentlemen from the Eastward seemed wholly against it, and those of the middle States seemed to have grown lukewarm upon the subject. The duty on stamps, which would have it into consideration, to see what could be done with it. He had still his doubts whether it could be carried into execution; if it could it would doubtless form a valuable source of revenue, which could not be injured. He had no doubt, however, of the present revenue being equal to our present wants. The gentleman from South Carolina [Mr. W. SMITH] had taken his calculations from the report of the Secretary of the Treasury; but the Secretary went into a permanent calculation for a period of 18 years, in the course of which he calculated the sinking of the whole debt. The trade of 1796, Mr. S. said, would give nearly a million of dollars; of course there could be no apprehensions upon the minds of gentlemen that the receipts of 1797 would not be equal to the wants of Government. The tax upon sugar would produce 300,000 dollars. The gentleman from Pennsylvania [Mr. GALLATIN] was correct on this subject. The gentleman from South Carolina [Mr. W. SMITH] had said, it was not wise to calculate upon the highest returns; but Mr. S. SMITH said it was right to calculate upon a preceding year, and when they knew that there would be received in this year from 700,000 dollars to one million, there could be no doubt of the year 1798 falling far short of that sum. For he was not one of those who thought the revenue arising from this year would be much inferior to that arising from the last. The gentleman from South Carolina [Mr. HARPER] had supposed that the British spoliations had not affected our revenue, but that those of the French would be severely felt. He saw no difference between them, and believed they would be felt alike in proportion to their extent. [Mr. HARPER explained.] He believed the United States would only consume a certain portion of the goods imported; the rest would be reexported, and the drawback received upon them; and, as he did not believe the consumption of the United States had been lessened, it would follow that it had been the re-exportation which had been diminished, and, of course, that it would not be the duties which would be decreased, but the drawbacks. This being the case, little was to be apprehended from a defalcation of the revenue this year. Indeed, he was of opinion, that the revenue arising from the present year, would be equal to any preceding year. The expenses of 1797 would be as follow: year 1797. Estimate for the Instalment due on part of the Dutch debt, with interest on the whole debt, together about $ 992,000 Annual 8 per cent. and 6 per cent. stock 2,324,175 Annual interest on 3 per cent. do. Ditto on 5 per cent. do. Naval Department Balance due on Algerine business Internal expenses of 1797 [H. OF R. $ 190,000 376,505 2,255,255 The expenses of the Quartermaster's Department would in future be considerably lessened; for, said Mr. S., heretofore great expense had been incurred by land carriage, which in future would be avoided, as the forage would all be conveyed by water. Indeed it had not been an unusual thing for the horses employed in conveying forage from one post to another, to eat the whole of it in their journey to and from their destination, and some horses had been known to die from want on the road. The conveyance being now by water, a great destruction of horses would be prevented, and he doubted not that one hundred thousand dollars would be saved under this head. Mr. S. said, with respect to the internal revenue, he would call back the recollection of the gentleman from South Carolina [Mr. W. SMITH] to the time when the excise system was under consideration: $400,000, at that time, was the sum estimated to be raised from that source. Besides this, there had been a new duty on carriages; 587,926 yet they were now told that $337,255 only could be expected from this quarter. Did not the gen101,689 tleman know that till lately some parts of the 7,920 78,261 State of Pennsylvania had scarcely paid any duty 372,200 at all, but that now the duty was generally collected? and, so far from its being lessened by the 4,463,971 law lately passed, he trusted it would be very 2,255,255 considerably increased. It might be a pleasant thing, Mr. S. said, for $6,719,226 gentlemen unconnected with commerce to talk about the embarrassments of commerce, but he did not believe commercial men would feel them Civil List, Mint, and Diplomatic, (agreeably to the Secretary's report, estimated on the session of six months) 564,753 Deduct savings arising on the session of four months only 52,800 511,953 $ 609,600 selves much obliged by such lamentable views of $256,450 had always honorably paid their duties--they had 25,000 merchants had suffered much from commercial embarrassments, but they had now nearly got 40,000 clear of them; they were doubtless inconvenient 1,450 to the merchant, but he did not believe they would 150,000 at all injure the revenue. The law said, a mer60,000 chant who once failed in the payment of his duties would have no credit in future; therefore, 15,000 whatever else went unpaid, a merchant would 20,000 take care that his duties were paid. 90,000 93,350 Much of the embarrassments which had arisen had been owing to derangements of a temporary $1,079, 150 nature, and mostly from what had happened in H. OF R.] Indirect Taxes. [FEBRUARY, 1797. the Deferred Stock, they would have acted wisely. He wished the gentlemen's calculations who opposed the raising of more revenue to come out right, but he doubted it. It was well known that our expenditures overran calculation. A few days since they were called on for $201,312 for the defence of the frontiers; it was also said that this city; but it was now found that the Banks could again discount as much as they ought to discount. Bank Stock had risen 3 per cent., 6 per cents were at 16s. 4d., and this day had sold for 17s., which did not bear an appearance so very distressing as had been too frequently painted; and he thought gentlemen should be better informed before they dwelt so largely on the embar-upwards of $100,000 more would be called for to rassments of the merchants. complete the payments for services of the like naThe gentleman from South Carolina [Mr. W. ture; $24,000 was appropriated for fortifications, SMITH had stated an expense of $50,000 as an ex- and other necessary claims were before them, pense for premiums, remittances, &c., in the pay- which were not taken notice of in the gentleman's ment of the Dutch Debt. This was estimated by calculations. If the Post Office bill was passed as the Secretary of the Treasury when he was tak- it went from that House, there would be a great ing into account his eighteen years' plan, in the diminution of the sum from that quarter-percourse of which various losses, &c., might be ex-haps not a dollar would be raised by it. But, said pected. He knew the Secretary of the Treasury could not remit at par, and he would not be charged 5 per cent. for doing business which he or any other merchant could have done for onehalf per cent. Nothing which had been said upon this subject had convinced him they stood in need of additional revenue for this year; but he would consent to the taxes in the bill before the House, but to go farther he believed would be impolitic and improper. Mr. WILLIAMS observed, that were we calculating for our revenue to amount to a certain sum, and that any overplus would be lost to Government, it would be worth while to enter upon the subject with all the accuracy the nature of the case would admit of; but should the revenue amount to more than was necessary for our present exigencies, it was by law to be applied towards the reduction of our debt-a thing so desirable. Mr. W., the objection to raising money by indirect taxation was in consequence of the wishes of gentlemen for direct taxes. He wished that system to be kept out of sight, until indirect taxes were found insufficient. He hoped, therefore, the motion would be adopted, which would bring in $110,000, and not be felt by the consumer. Mr. THATCHER wished to say a word in answer to what had fallen from the gentleman last up, with respect to the revenue arising from the Post Office. That gentleman believed a single dollar would not arise from that source if the present bill passed; on the contrary, he was of opinion that $40,000, if not $50,000, would be received from thence if the bill passed. Mr. SWANWICK said it was a most extraordinary thing, in the present scarcity of that article. that sugar should have been fixed upon as the fittest object from which to increase our revenue. It was well known that most of the sugar brought into the United States came from British islands He had read a book published by the gentleman in the West Indies, and that the French were from Pennsylvania, [Mr. GALLATIN,] who was op- now constantly intercepting our vessels employed posed to the motion, in which that gentleman en- in that trade. The communication with the Hadeavored to show that our debt had been constant-vanna was at present almost destroyed, and no ly increasing under the present Government; the same gentleman had also said that, in case of any defalcation in our revenue, the Commissioners could sell more Bank Stock. Mr. W. said, he would ask if this was a proper mode of finance if it corresponded with that gentleman's observations heretofore on the National Debt? Were we to bring our Bank Stock into market for sale, especially when stock is so low, we should not only injure the public, but individuals? The gentleman from Maryland [Mr. S. SMITH] had said that 6 per cent. stock was at 17s. The papers say 16s. 4d.; some had been sold at 16s. 6d. The low price of stock must operate much to the disadvantage of this country, and if difficulties did not exist in Europe, by which money was in great demand there, our stock would be purchased by foreigners, and a loss of whatever is sold below par Government would have to pay for it at par. By the act of the 3d March, 1795, the public faith was pledged for the reimbursment of the debt, we ought, therefore, not only to prevent stock being sent to market, but use our endeavors to keep up its price. Indeed, had Congress two years ago laid on more duties, and purchased up a part of vessels were going there. But the gentleman from Maryland [Mr. S. SMITH] seemed to be of opinion that there would always be sugar enough imported for home consumption; but, in forming this opinion, gentlemen referred to the situation of last year, which had nothing to do with the present. It had also been estimated, that because $600,000 were produced by the present revenue, the duty being increased one-third, it would produce $200,000 more. This was by no means certain. In the first place, from the great augmentation of price, owing to the distressed situation of the West Indies, he apprehended so much would not be consumed; since, when the incomes of persons were diminished, they would endeavor to limit their expenses. And that the frequent losses of merchants of $30,000 here and $20,000 there, would not affect their own circumstances and others, could not be believed. It had been observed, that, by speaking of the embarrassments of our merchants, their credit might be hurt in England. He did not think it would have that effect. The English were in great want of a market for their manufactures, so much so that if a dealer in dry goods gave an or FEBRUARY, 1797.] Indirect Taxes. [H. OF R. wholly paid from indirect taxes, persons never knew what they paid towards the public expenses, and therefore they felt easy about public expenditures. der to the value of one thousand pounds, the English merchant would send him to the amount of two, on his own risk; not so much from a wish to credit the American merchant as from a desire to find a market for his goods. No embarrassments With respect to the proposed additional half in the commerce of this country, therefore, would cent on sugar, it was very immaterial. He did make the British merchant ship less, except an- not think it would produce anything into the Treaother market should open to him. But was not sury. If the quantity of revenue raised upon suthere some danger, he asked, even in this trade be-gar last year could be continued, it would be as ing intercepted? There certainly was; since the much as could be raised. He doubted whether, if greater interest the British had in sending their | the advance were made, so much duty would be manufactures to America, the greater inducement raised as heretofore. there would be for the French to prevent this trade, and this might not arise from any desire to injure us, but to affect their enemy. Whether a peace should take place in Europe or the war should continue, our revenue, Mr. S. said, would be likely to suffer. If a peace were to take place, England would find other markets for her goods, and the price of produce and all kinds of property falling in value, people would be able to consume less of foreign productions. He therefore thought those gentlemen right who calculated upon the necessity of an increase of revenue. Much, Mr. S. observed, had been said about the embarrassments of commerce. They had been called temporary, that they were now mostly passed over, and were said to have chiefly arisen from derangements in this city. He did not believe this was wholly the case, or that they were at an end; and he thought when money was loaned at 2 1-2 and 3 per cent. per month on good security, it could not be said that the banks were able to give sufficient discounts. It was said, if there was any deficiency of revenue, the remainder of the Bank Stock might be sold. It was to be regretted, he observed, that it had not been sold some years ago, or at the time when the last was sold at 25 per cent. above par. Gentlemen had mentioned a considerable rise in our stocks; if that were the case, he supposed it arose from a prospect of peace in Europe. Such an event might have that effect, and he was inclined to think the probability had produced the change which they had been told had taken place. Mr. HARPER said, he desired no better arguments than those of gentlemen themselves to prove the propriety of his observations, and of adopting the amendment. The propriety of this measure rested upon the uncertainty of the present revenue. Some gentlemen, who would justly lay claim to accuracy in their statements, tell us that the revenue arising from importations, &c., of the present year, would be sufficient to the necessities of the next; while some, equally well informed, tell us there will be a deficiency of $800,000. While such a great difference exhibited itself, he would ask, was the House to depend upon mere opinion for the support of the American Government? If so, said he, and we should come short of enough, to whom are we to resort? Mr. SWANWICK was certain that the exorbitant Shall we apply to the gentleman from Pennsylprice of money was a strong proof of the embar- vania? It is his opinion that others are quite rassments of commerce; it showed that things wrong and he is quite right, but this is not a founwere not sound, and that they must undergo a re-dation on which to build the financial credit of volution. The banks, it was true, would discount to a certain amount; but they sometimes used very curious arguments about the claims which different persons had upon them, and were by no means certain sources for cash. Mr. S. SMITH said, the money for which 2 and 3 per cent. per month had been paid had nothing to do with fair commerce; that kind of business would always go on, though the banks discounted ever so liberally. It was necessary, therefore, sometimes to have recourse to brokers, and when that was the case, however good might be your security, the price was paid which he had above stated. Much stress had been laid upon the expenses of Government being less in the next year than in this. the country. According to some, we shall have money enough, but this, he said, was a mere conjecture-quite an uncertainty. Mr. H. could not think any gentleman would wish to let the finances and credit of the country remain exposed to a deficiency, and not have any funds provided to replace it. When the question was on the different mode of raising taxes, he said, then it must be left to rest on every man's opinion; but when on the quantity to be obtained, then gentlemen ought to doubt, every one his own opinion, and respect He did not believe this would be the case; the report of the Secretary of the Treasury, who, he believed the expense of Government would in- from his examination of the subject, can best crease every year, notwithstanding all the econo-judge. Suppose, he said, gentlemen should not my of that House; for, though some gentlemen be right; no foreign or domestic loans; the Bank might be inclined to be economical in one article, already strained enough, we should then be rethey seemed to have no objection to be lavish on duced to great embarrassments; but if we are another; for every expense introduced failed not wrong in our idea, and the money is not wanted, to find its advocates. He did not believe any- it might go to reduce the Public Debt, and no inthing would tend so much to introduce economy jury be sustained; otherwise, the public faith into our Government as a direct tax; because a might be violated, which he hoped would never man would then know what he paid for the ex-be the misfortune of this country. penses of Government; but whilst the revenue was He would observe, that the gentleman from H. or. R.J Indirect Taxes. [FEBRUARY, 1797. lay under from this heavy duty. The Committee of Commerce and Manufactures were of opinion that this additional duty, by depressing the manufacture of chocolate, and encouraging the re-exportation of cocoa, upon which a drawback was consequently received, raised very little more duty than when at two cents. After some few remarks by Messrs. Corr, S. SMITH, and SWANWICK, in its favor, and Mr. GALLATIN against it, the question was carried without a division. Pennsylvania was not, as he supposed, exclusively alluded to; he did not know that gentleman was the only person who, after having preached a long time in favor of a direct tax and the deficiency of the revenue, should quietly give it up at last, and say, we now want no money! As to the abandonment of the system of direct taxation, Mr. H. thought it was impossible to carry it into effect; he thought the difficulties insuperable, and therefore it would always remain so. Some gentlemen said, that before they went to decide upon the abstract principle, they ought to know upon what principles it should be founded; but no, it was thought proper to decide upon it without "And be it further enacted, That the money arising looking into the detail. The very moment the from these duties shall be solely appropriated for the bill made its appearance in the House, after hav-following purposes, viz: for the payment of the principal ing been examined by the Secretary of the Trea- of the Foreign Debt of the United States, and for the sury, and the Committee of Ways and Means had principal of the Debt now due to the Bank of the United spent a fortnight, those who before were its warm-States." est friends abandoned it as radically bad; they saw the impracticability of it. What, then, he would ask, does this teach us? Why, that we cannot look to this, because it cannot be effected; consequently, we must apply to other means. Mr. H. hoped that what the gentleman from Maryland [Mr. S. SMITH] said was truth, viz: that our merchants are not much embarrassed; he could sincerely wish no embarrassments did exist, but when he was so informed by at least a dozen of the greatest merchants in this city, he must beg leave to differ from him. Mr. H. thought there was much embarrassment attending commerce, but he also thought the country would soon get over it, although much revenue must be lost by it. With respect to spoliation, and detention in foreign ports, he should not enter into a detail, as that gentleman was a mercantile man, and doubtless understood it best; but this he knew, that, if merchandise which ought to arrive in our ports were carried into a foreign capital, it must produce a bad effect on our revenue; and though you may raise a revenue from domestic sources, yet the ruin of commerce will have a serious effect on that internal source. Mr. GALLATIN moved an additional section, to the following effect: The section was agreed to. Mr. HENDERSON moved to strike out the words relative to white cotton goods, and to insert, “all that class of goods which pays 10 per cent. ad valorem." He thought that the whole of this class of goods would bear an addition of 24 per cent. equally with the white cotton goods, and would, at the same time, bring a very considerable sum into the Treasury. Mr. S. SMITH agreed with the gentleman from New Jersey, that if they increased the duty upon all the 10 per cent. class of goods, it would be more productive to the revenue, and be no more objec tionable than the duty on white cotton goods. He would, however, rather not go into these duties at all, as nothing was more deceptious than the idea of these duties being cheaply collected. It was generally thought that the duty on imposts was collected for 2 per cent.; but, was this the fact? If it were, he would acknowledge it was the best mode of collecting revenue. Before the formation of the present Government, he said, individual States were in the habit of collecting direct and indirect taxes; but there was not a solitary instance where, when indirect taxes amounted to 5 per cent., As he did not believe this deficiency of revenue they had not resort to direct taxes. He called would be permanent, Mr. H. said he only wanted gentlemen's recollection to the fact, that the oriaid to it until a return of more prosperous days.ginal plan of the General Government was caused He would even, notwithstanding very great objec-by a five per cent. duty being laid, which different tions to the system, agree to a land tax, rather than fall short of the present wants from the impost system, as it was so very precarious. As to the article of brown sugar, the Committee had fixed on it as a proper object for extension, and, by a proper advance, he thought there would be no necessity to attempt to encounter the difficulties attending a direct system. The question was then put and negatived-there being only 25 in favor of it. States were averse to, and which caused gentlemen to turn their attention to the origin of this Government. If individual States did not think it right to pay 5 per cent. upon their imposts, it ought to caution us against attempting to raise all our revenue from that source. Mr. S. said he had already observed that persons generally believed that an impost duty only cost 24 per cent. in the collecting. He had made a calculation upon the subject, and found it to be Mr. Corr said, there had been a report from the the most expensive of all other taxes in the colCommittee of Commerce and Manufactures which lection. It would be found, from the various hands was referred to this Committee, recommending through which it went, that every £133 collected the duty on cocoa to be lowered from four cents to from an impost of 123 per cent. duty, only £95 two cents per pound. He wished the report to be found its way into the Treasury. This would show read. [It was read accordingly.] This report was the impolicy of raising all our revenue from this grounded upon the petition of some chocolate man-source; for though, said he, the people do not know ufacturers who complained of the hardships they I that they pay the tax at so dear a rate, we know it, |