Financial History of the Revolution.
With the opening of the Revolution a new debt began to roll up. £60,000 in bills of credit (lawful money) were emitted in 1775 and £80,000 in the following year. A meeting of commissioners from the New England states, in Providence, December 1776, recommended that Rhode Island issue no more bills of credit, except of fractional denominations, but depend upon loans and taxes. The State complied with the suggestion and the only other issue of bills, before 1780, was in May 1777, when £4,500 in fractional currency was emitted. These bills of credit, as well as the continental bills, were declared a legal tender. They seem to have kept their value fairly well until the beginning of the year 1777, when a rapid depreciation set in. In accordance with the recommendation of Congress they were called in by Act of May 1778, and their circulation forbidden after July first of that year. After this date continental money, probably, formed the main circulating medium, until depreciation had gone so far that in 1780 the tender laws were repealed and a return made to a gold and silver basis. Up to June, 1779, the colony seems to have borrowed £162,756. In addition there were, all through the war, issues of certificates in payment of various obligations. It is impossible even to approximate to their amount. They were in many cases made receivable for taxes and were redeemed in this way. Taxation was resumed in March 1777, and vigorously applied, but so heavy were the burdens which fell upon the State in its weakened condition that in the summer of 1780 the treasury was empty.
This led to the issue of £20,000 more in bills of credit. This was the last issue of paper money by the State during the War. A considerable portion of the debt had been redeemed by taxation. That part of the debt incurred during the paper money period, which still remained outstanding, was called in by several Acts of 1782 and scaled down to the basis of the special value at the time the obligation was incurred, for which amount the treasurer issued his notes, payable in lawful money (silver), in from three to six years, bearing interest at six per cent. The want of accurate accounts leaves us in doubt as to just what was the effect of this consolidation and reduction. A committee reporting in October 1783 places the state debt at £123,892-15-11, in addition to £19,922-2-0 of the state's proportion of the new continental emission (March 1780) outstanding.
The greater part of this latter sum, however, had never left the treasury. A report of a committee in March 1787 placed the debt at £153,047-15-7. In the mean time steps had already been taken for its extinguishment.
In the years succeeding the war the colony was in a wretched economic condition. It was exhausted by the heavy financial and other burdens, the disturbance to industry, and the loss that had resulted from a long continued and destructive occupation of the commercial centres or the state by the British, as well as by the presence of the American army which had to be clothed and fed. Trade was interrupted, a large portion of the able bodied men had entered the army, and even those who remained at home were liable to be called upon at any moment for temporary service, or to have their property taken at an appraised valuation. Services rendered to the state were paid for only by promises of constantly decreasing value. As a result of all these causes economic society was disorganized. In the midst of such conditions the state was called upon to face a heavy debt. The treasury was completely exhausted and the people seemed unwilling to submit to further taxation. The legislature again turned to paper money for relief, and in May 1786 ordered the issue of the tenth bank. The amount was £100,000 and it was to be loaned, as were the others, on double mortgage security. The rate of interest was four per cent., and repayment to be completed within fourteen years. Depreciation was immediate and rapid, but the paper money party was firmly seated in power and the legislature passed acts of the most extreme character to enforce the circulation of the bills. The ordinary legal procedure, including trial by jury, was suspended in the case of offenders against the paper money laws. These "forcing acts", as they were called, came to naught, however, as the supreme court refused to exercise jurisdiction. Balked in their effort to force the circulation of the bills, the legislature turned to the easier task of paying off the state debt in the depreciated currency. By a series of acts, ranging from December 1786 to March 1789, the holders of the state debt were ordered to bring in their claims and receive payment in the paper bills, under penalty of forfeiture of the whole amount. As a result of this threat about one half of the debt seems to have been presented and paid, the smaller holders as a rule yielding to necessity, the larger holders standing out in the hope of a more profitable adjustment. The paper money party was now nearing the end of its power. An act of October 1789 made the bills of 1786 receivable at fifteen to one for coin, and authorized those to whom the money had been loaned by the state to make repayment upon the same basis.
In May 1790 the state entered the Union, and the possibility of such schemes in the future ceased. Those who had been able to resist the attempt of the state to pay their claims in a depreciated currency now reaped the benefit of their foresight. By act of August 4, 1790 Congress provided for the assumption of $21,500,000. of state debts, of which $200,000. was allowed to Rhode Island. Seeing the injustice which would accrue to those who had been compelled to accept their payment in paper money, the assembly in June 1791 passed an act repealing the various acts which had declared null and void the securities which had not been brought in in accordance with the acts of 1786-1789. Where payments had been made on securities in paper money the treasurer was authorized to reduce the amount so paid to specie value and deduct it from the face value of the security, the remainder to be presented with other securities for subscription to the United States loan. The United States commissioner, however, refused to receive these certificates, as the law under which the assumption took place provided that only those notes and certificates which had been issued prior to January 1, 1790 would be received. Thus the whole of this assumption enured to the benefit of those who had not brought in their securities for payment, as ordered by the state. On the day following the assumption of the state debts, just referred to, Congress provided for a settlement of accounts between the United States and the individual states. The latter were to be debited with all advances made by the general government and credited with all disbursements made for "the general or particular defence during the war, and on the evidence thereof according to the principles of general equity (although such claims may not be sanctioned by the resolves of Congress, or supported by regular vouchers)." The settlement of these accounts showed Rhode Island to be a creditor of the United States to the amount of $299,611. The final settlement between the state and its creditors is shown in the report of the general treasurer in Feb. 1797. The whole amount of the debt recognized by the state was $503,594.76. $419,662.30 of this was paid by the transfer of United States stock in the possession of the state and $83,932.46 by the issue of 4% state certificates. This last formed what was known as the registered state debt. It was added to, from time to time, by the recognition of new claims for Revolutionary service and was diminished by occasional purchases by the state at a rate below the par value, but the state was always loth to recognize its full responsibility for the debt and ended by practical repudiation.
The above is an outline of the financial history of the state during the Revolution. We now turn back for a moment to obtain a more detailed idea of taxation. Perhaps this can best be done, as in the case of the French and Indian war, by means of a table. (The date given is that of the passage of the act assessing the tax. The first column contains the nominal amount of the tax as stated in said act. The second column contains the nominal amount of the tax actually assessed, certain deductions being necessary on account of the occupation of portions of the state by the enemy and for other reasons. The third column contains the same reduced to specie value, and the fourth column contains the same expressed in our present dollars. The taxes marked with a star are for continental purposes)[[109]].
| Date. | Nominal value in pounds. | Nominal value assessed. | Specie value assessed. | Value in dollars. | |
|---|---|---|---|---|---|
| March, 1777. | 16,000 | 12,658 | 11,613 | 42,387. | |
| Aug. 1777. | 32,000 | 25,316 | 16,877 | 61,601. | |
| Dec. 1777. | 48,000 | 37,115 | 11,973 | 43,701. | |
| 147,689. | |||||
| Feb. 1778. | 32,000 | 24,365 | 6,962 | 25,411. | |
| June 1778. | 32,000 | 24,289 | 6,072 | 22,163. | |
| Oct. 1778. | 32,000 | After | 6,000 | 21,900. | |
| 69,474. | |||||
| Feb. 1779. | 60,000 | June, | 6,912 | 25,229. | |
| x Feb. 1779. | 90,000 | 1778, | 10,369 | 37,847. | |
| June 1779. | 60,000 | the | 4,471 | 16,319. | |
| x June 1779. | 225,000 | first | 16,766 | 61,196. | |
| x Dec. 1779. | 120,000 | and | 4,628 | 16,892 | |
| 157,483. | |||||
| x Feb. 1780. | 180,000 | second | 5,418 | 19,776. | |
| x May 1780. | 180,000 | columns | 3,913 | 14,282 | |
| May 1780. | 180,000 | are the | 3,913 | 14,282. | |
| July 1780. | 10,000 | same. | 10,000 | 36,500. | |
| July 1780. | 400,000 | 5,797 | 21,159 | ||
| Nov. 1780. | 1,000,000 | 13,514 | 49,326. | ||
| Nov. 1780. | 16,000 | 16,000 | 58,400. | ||
| 213,725. | |||||
| May, 1781. | 20,000 | 20,000 | 73,000 | ||
| May, 1781. | 6,000 | 6,000 | 21,900 | ||
| 94,900 | |||||
| x Jan. 1782. | 6,000 | 6,000 | 21,900 | ||
| Jan. 1782. | 12,000 | 12,000 | 43,800 | ||
| x Feb. 1782. | 6,000 | 6,000 | 21,900 | ||
| x June 1782. | 12,000 | 12,000 | 43,800 | ||
| 131,400. | |||||
| June 1783. | 20,000 | 20,000 | 73,000 | ||
| 73,000. | |||||
| June 1784. | 20,000 | 20,000 | 73,000 | ||
| 73,000 | |||||
| Aug. 1785. | 20,000 | 20,000 | 73,000 | ||
| 73,000. | |||||
| June 1786. | 20,000 | 13,333 | 48,665. | ||
| 48,665 | |||||
| March 1787. | 20,000 | 3,534 | 12,899 | ||
| Sept. 1787. | 30,000 | 5,000 | 18,250. | ||
| 31,149. | |||||
| June 1788. | 30,000 | 4,000 | 14,600 | ||
| 14,600 | |||||
| March 1789. | 20,000 | 1,667 | 6,085 | ||
| 6,085. |
In addition to these money taxes there were various other burdens which took the form of more or less arbitrary contributions. Enactments were early passed regulating the prices of all articles, and, in case they could not be otherwise procured, authorizing their seizure at these stated prices to meet various expenditures. It became customary, when troops were to be raised, to require each town to raise a certain number, often a cause of considerable expense, and, as the war went on and paper money and loans failed as sources of state revenue, it was common to hold each town responsible for a certain quantity of clothing or provisions. Payment of some kind was generally provided for, but, owing to the wretched financial conditions of the time, these requirements must have operated to a certain extent as a tax.
The long continued presence of the enemy necessitated in addition to the maintenance of an army as large or larger than the states proportion of the continental levies, an almost constant militia service which, though nominally paid for, must have been a severe burden and interfered seriously with industry. Again, in any attempt to estimate the burden of taxation during the Revolution, we must take into consideration not only the impositions above mentioned, which partake more or less of the character of taxation itself, but also the general condition of the colony. The British held possession of the island towns from December, 1776, to October, 1779. These towns were in great part deserted by the sympathizers with the American cause, who, having lost almost all their property, became a burden upon the rest of the state. All the towns situated upon the sea coast or upon the shore of the bay were subject to the incursions of the enemy and were kept in a constant state of alarm, while on one occasion at least arrangements were made for the evacuation of Providence. Commerce was practically destroyed and economic life apparently to a great extent disorganized, giving rise to wide spread suffering from poverty.
If we assume the population of the taxable portion of the state for the years 1777-8-9, to be 46,000, the per capita rate of taxation for the period was about $2.71 per annum, and the rate for the years 1780-1-2, on the basis of the population in 1782, was $2.80. The highest rate during the period was in 1780, when it reached $4.08. With the close of the war taxation diminished. In 1783-4-5, it was about $1.35 per capita, and after the issue of paper money in 1786, it gradually sank until in 1789, it amounted to only about 9 cents.
Estimating the rateable property in this state, exclusive of the towns in possession of the British, at $10,165,048, the rate of taxation for the three years 1777-1779, would have been 1.22 per cent per annum.
On a ratable basis if $10,903,312, the rate in the years 1780-82, was 1.34 per cent, the highest rate during the period was 1.96 per cent in 1780. On the basis of the valuation computed in 1783, the rate for the years 1783-1785, was only .6 per cent and had fallen to .05 per cent in 1789.
When we remember that this taxation was for both state and continental purposes, it does not seem excessive, judged by the figures of today. Taking into consideration however the general and special economic conditions of the period, it is safe to say that it was a heavy burden.[[110]] Any comparison with recent times must necessarily be unsatisfactory, for finance was an art but little developed in the United States one hundred years ago, and the burdens of the Revolution were felt much more in the shape of a constantly depreciating currency, forced seizures of property, service without recompense, unpaid debts, and general economic disturbance, than in excessive taxation.