FEDERAL FINANCE.
'AIR. LINCOLN in his last annual message spoke of the 1.11. resources of the North as not only unexhausted but 44 inexhaustible." It is not necessary for us to point out that this is a term applicable to no human resources, and though we ourselves estimate the wealth of that great country as highly as it is possible for any intelligent observer to esti- mate it, we fear that the habit of looking at these resources as practically unlimited is a very serious injury to the Federal financiers, and is bringing them every day much nearer than they need approach to a time when the burden of taxation will become almost intolerable. As we have now for the first time before us the actual report of the Secretary to the Treasury, and its accompanying documents,—the earlier reports in the New York papers, transferred thence to the English journals, our own included, were exceedingly inaccurate,—it seems the proper moment to show both the strength and weakness of the Federal system,—to show how serious and hitherto how successful are the efforts to raise a great revenue by taxation, and how very much more might be raised at far less cost to the country by the aid of a tittle more of that economical science which for some myste- rious reason all American financiers appear to despise. And first there is no manner of question about the fact that the Federal financiers have increased very rapidly indeed the taxation of the country. Let us place side by side the revenue derived for the years ending June 30, 1863 and 1864, and estimated by Mr. Fessenden on the basis of a quarter's actual receipts for the year ended June 30, 1865, and it will be seen at a glance how great that increase is. For convenience' sake we translate the dollars into pounds at the rate of five dollars to a pound sterling.
REVENUE WITHOUT Los. Year, ended June 30.
1863. 1864. 1865.
Basis of a guar- ter's receipts.
Customs . £13,811,900 ... £20,463,000 ... £14,054,000 Public Lands 33,000 ... 117,000 ... 128,000 Direct Tax 297,000 ... 95,000 3,000 Internal Revenue 7,528,000 ... 21,918,000 ... 49,912,000 Miscellaneous . 609,000 ... 9,502,000 .. 4,804,000 22,278,000 ... 52,125,000 ... 68,901,000 Loans 155,336,000 ... 123,622,000 ... 106,474,000 Total Revenue 177,614,000 ... 175,747,000 ,.. 175,375,000 Mr. Fessenden, however, is not content with the hope of rais- ing this last sum, and proposes changes which will swell the re- ceipts from "Internal Revenue" to no less than 60,000,000/., and raise the total yield of the taxation of the loyal States to about 80,000,000/.
On the other hand, while the Federal Government is greatly increasing its taxation, it is diminishing, as nearly as possible by an exactly equal amount, its borrowings. In the year ended 30th June, 1863, the receipts from loans (funded and un- funded) were 155,336,000/., in the year ended 30th June, 1864, they were 123,622,000/., and in the year ended 30th June next they will be 106,474,000/. if Mr. Fessenden's proposals for increasing the revenue are not carried, and 96,474,000/. if they are and answer his expectations. The yield of the Federal taxation was only one-eighth part of its whole revenue in 1863 ; it was about three-tenths of the whole revenue in 1864; and in the year to be ended with next June it will be about two-fifths if Mr. Fessenden does not in- crease his revenue as he purposes, and rather more than three- sevenths if he does. When we consider that in the worst year (financially) of the great French war, the year after the peace of 1816, we raised about the same sum by taxation as Mr. Fessenden proposes to raise in the current year, namely, 80,000,000/., but that in that same year we raised only 39,000,000/. by loans,—the greatest sum raised in one year by loans during the whole war,—while Mr. Fessenden pro- poses to raise at least 96,000,000/. by loans this year,--it will be seen that the financial situation in America is by no means bright. We do not deny their means to be far greater than ours in 1816, when our population was only 16,000,000, and our commercial resources quite undeveloped,—still the burden of the North is increasing so much more rapidly, even if it be not as heavy already, and their taxation as yet is so much less heavy in proportion to their great means and vast expenditure than ours was in the worst year of war, that it is impossible to think the people and their financial advisers really equal to the occasion. In 1863 the interest paid on the public debt was 4,945,0001., last year, 10,737,0001., and for the current year it will be 18,362,000/. if Mr. Fessenden does not increase his revenue, and perhaps nearly three millions less if he does. This is a truly alarming rate of increase, and though it is impossible to deny that the financial sacrifices which the North are willing to undergo seem far greater now than was supposed a year or two ago, the great question for them and their statesmen is, whether or not an equal sacrifice might not be made to produce a far greater result.
There is one very remarkable feature about the comparative table of taxation we have given above. The Customs' revenue, which had been raised by the former high tariff—as bad, one would think, as a tariff could be—from about 14,000,0001., in 1863 to 20,000,0001. and upwards in 1864, has been now de- pressed again by the excessive duties put on in June last to its old level, so that while the citizens of the North profit far less by their foreign trade than they did, the Government profits less also, and that to the very important amount of six millions sterling. Yet the only remark Mr. Fessenden makes on this disastrous state of things is this :—" The increase of duties on imports under the Act of June 30, 1864, has already had the effect to decrease importations to a considerable extent, and the same effect will be likely to continue. . . . In the judg- ment of the Secretary this disadvantage in a financial point of view is more than counterbalanced by the stimulus afforded to domestic industry, and the consequently increased revenue from that source." And so Mr. Fessenden, who must obviously be in the grossest depths of ignorance as to the simplest principles of political economy, excuses the Customs' duty for falling off on the plea that what is lost in import duties will be more than gained in Excise duties on native industry. Let us refer, then, to the report of the Head of the internal revenue, and hear what he has to say on this subject. It is to him that Mr. Fessenden looks to justify the policy which will deprive the Customs' revenue of no less than six millions sterling during the present current year. What, then, does his coadjutor at the Office of Internal Revenue say ? "The Act approved on the 30th June last has not thus far proved more productive than the laws which it repealed and supplied. This is owing to several causes The increase of taxe,s has also had the usual effect of such a measure to check produc- tion, at least temporarily, and to abate the activity of inland trade till business should become accommodated to the new circumstances." Thus the yield of the Inland Department, in spite of a heavy increase in the rate of internal taxation, from 30th June was as follows :— June... .. £2,999,000 under the old rate. July.. 3,314,000 August 3,142,000 under the higher rate. ; September 3,164000 October 2,725,000 Clearly there is the strongest refutation here of a policy which has struck off 500,000/. per month from the receipts of the Customs under the notion that it would increase the returns of the Excise. We see indeed a falling off of revenue in the face of a greatly increased taxation. And even if the somewhat sanguine expectations of the internal revenue department should be verified,—if the income it yields this year should be much more than double that of last year without the additional alterations, and nearly three times that income with them,—a result that. is probably I mere expectation,—we may be very sure there will be no equivalent for the loss incurred by too high Customs duties. It is not in the nature of things that a production forced into artificial existence by protection should ever supply the place of the natural importation ; and even if it did, it must stand in the place of some more natural and more economical sort of production, which would go on with greater benefit to the country if the artificial production had not been fostered. Mr. Fessenden dreams that by bribing Americans to do some- thing for which their climate or their soil or their natural powers less qualifies them instead of what they do now, he shall so much increase the productiveness of his country as to compensate for the loss of imports. Wilder ideas have inspired financiers to make unfortunate experiments before this ; but none more demonstrably false at the time at which it was put forth, has ever yet imposed upon a great nation.
Again, it will be seen that the North now depends for almost its whole taxation on what is called the "Internal Revenue." If the Customs' duties pay the gold interest on the debt, it is as much as and rather more than Mr. Fessenden expects. For almost all the rest of the money received by way of taxation he looks to what we should call income-tax, stamp and excise duties. There are some elements in Mr. Fessenden's calculation which we may well believe may be realized. By the five per cent. income tax he hopes to get next year 7,000,000/., which he very likely may if the protection policy does not too much injure the springs of all healthy pro- duction. By a spirit tax during part of the year of only half-a- crown a gallon, during seven months of it raised to two dollars, Mr. Fessenden hopes to procure above 8,000,000/. in the year, and here, again, his estimate need not be too high, if he were only sufficiently careful not to cripple the energies of the people by his general protectionist policy, for our own duty, which is still higher (10s. per gallon), so far from check- ing consumption, yields us a much larger revenue. But the real doubt hanging over these high estimates, so entirely falsi- fied as yet by the experience of Mr. Fessenden's first four months, is that Congress has so contrived to cripple all the energies of the country by the multitude and complexity of its interferences, both with importation and production, that it has diminished the spring of commercial elasticity in the North. It is difficult to give our readers even an idea of the complexity of the taxation. They have probably some notion of the pressure of the Morrill tariff, which was increased heavily instead of diminished by the legislation of June last. But the tariff is only the half of the burden, though Mr. Fessenden, in his dense ignorance of economical laws, thinks the pressure on one shoulder will lighten the pressure on the other. The internal revenue is constructed on a sort of caricature of Sir Cornewall Lewis's principle that you should press lightly at many points rather than heavily at a few. In fact it presses so heavily at all points, that it has already squeezed the sponge too hard to admit of its filling out annually to its old dimensions. There are between seventy and eighty different licence taxes,—licences on apothecaries, architects, auctioneers, bankers, brewers, brokers, butchers, and so on through all the letters of the alphabet ; there are above eighty articles on which internal ad valorem duties of about 5 per cent. are levied ; there are above 100 more on which internal specific duties are levied ;—and none, except the income-tax, the wholesale and retail licence taxes, spirits, and tobacco, yield what our Inland Revenue would call even a respectable sum. All the rest are taxes of small yield and much annoyance.
And then Mr. Fessenden's only suggestion in aid of the revenue thus embarrassed by the well-intentioned but ignorant burdensomeness of the legislation.of last year, is a tax of one-half per cent. on all sales, whether wholesale or retail,—a tax which could, we suppose, only be effected by requiring imposed stamps to the amount to make any receipt valid. By this tax he hopes to get 10,000,0001. Such a tax might answer, and answer well, if commerce were otherwise brisk and prosperous, but to make it eke out the shortcomings of a commerce already flag- ging for want of freedom, is precisely like the conduct of an invalid who, having injured his mental powers and conse- quently his income by undertaking too much, should ask for additional work to make up the deficiency.
If Mr. Fessenden were wise he would ask Congress to re- duce the Customs duties again, and to do it more even by simplifying, by striking off a number of small and irritating duties, than by reducing the duty on articles of general con- sumption; he would knock off a great number of the vexa- tious excises which yield little and vex much ; and -then he might keep or even increase the heavy taxes on incomes, spirits, tobacco, and a few other articles of large consumption, and, if he chose, his half per cent. tax on sales, with reason- able confidence in a large yield. As it is, we feel little doubt that Mr. Fessenden is encouraging delusions from which Con- gress will awaken in the summer to find a large deficit on the- estimates now submitted to them.
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