Twenty Years of Congress, Vol. 1 / From Lincoln to Garfield, with a Review of the Events Which Led to the Political Revolution of 1860

by James Gillespie Blaine

THE INTERNAL-REVENUE SYSTEM.

The excise was from the first unpopular. The men who insisted that "black quart-bottles" should be admitted free of duty when the first tariff bill was passed, did not relish the levying of a heavy tax on the whiskey that was to fill them. The exciseman was to their view precisely what Dr. Johnson had defined him in his dictionary: "an odious wretch, employed to collect an unjust tax." Revolutionary proceedings had been inaugurated by resistance to a tax on tea. But tea at that day was looked upon as a luxury in which only a few could indulge, while whiskey was regarded as a necessity, of universal consumption. Resistance went so far as to organize an insurrection in Western Pennsylvania against the official authority which attempted to collect the tax. The outbreak was promptly suppressed by the power of the General Government but the result of the agitation was a deep-seated prejudice against the Federal party. Pennsylvania sympathized with the more liberal views of Jefferson, and in the Presidential election of 1796 gave him fourteen of her fifteen electoral votes. John Adams received the other vote, and as he was chosen by a majority of one, his Pennsylvania support, small as it was, proved timely and valuable.

Resistance to internal duties was tried by legal methods. A heavy duty had been laid on carriages—two dollars per year for those of simplest form and fifteen dollars for the most costly. The tax applied to all carriages for the conveyance of persons, whether kept for private use or for public hire. One Daniel Lawrence Hylton of Virginia resisted the payment of the tax and the case was ultimately heard before the Supreme Court in the February term of 1796. Mr. Hamilton who had resigned from the Treasury Department the preceding year, argued the case for the Government in conjunction with the Attorney-General, Charles Lee. Mr. Campbell, Attorney for the Virginia District and Mr. Ingersoll, the Attorney-General of Pennsylvania, appeared for the plaintiff. The case turned wholly upon the point whether the tax, on carriages kept for private use, was a direct tax. If not a direct tax, it was admitted to be properly levied according to that clause in the Constitution which declares that "all duties, imposts, and excises shall be uniform throughout the United States." If a direct tax it was wrongfully levied because the Constitution declares that "no capitation or other direct tax shall be laid unless in proportion to the census or enumeration of the inhabitants of the United States."

The well-known decision of the court, delivered by Judge Samuel Chase, pronounced the tax to be constitutional. Justice James Wilson who concurred in the decision had taken a very prominent part as a delegate from Pennsylvania in the convention which framed the Constitution, and ranked at that time as one of the ablest lawyers in the Union. The opinion of the judges seemed to be, though no formal decision was rendered to that effect, that a tax on land, and a capitation or poll tax, are the only levies which within the terms of the Constitution are to be considered direct taxes. The decision was one of extraordinary interest to the Government, as, had it been the other way, one great resource for the raising of money, indeed the greatest resource, would have been taken from the Federal Government. The appearance of Mr. Hamilton was an indication of the dignity and importance which were attached to the case by Washington's Administration.

A singular feature of the proceedings was the allegation by Mr. Hylton that he "owned, possessed, and kept one hundred and twenty- five chariots for the conveyance of persons—exclusively for his own separate use and not to let out to hire, or for the conveyance of persons for hire." What particular necessity a Virginia gentleman of the last century had for that number of chariots "for his own separate use" is nowhere explained. It may have been the mere filling of the blanks in a legal declaration in which the declarant was permitted a free use of figures, but as it stands in the reports of Supreme Court decisions, it seems to be one of the odd incidents that make up the humor of the Law.

The system of internal duties and excises continued in various forms for thirty years, practically disappearing at last in 1821. But for the financial demands precipitated by the war of 1812 and the period of depression which ensued, the system would have been abolished at an earlier date. During the period of their existence, from 1790 to 1820, the internal taxes had yielded to the Government the gross sum of $22,000,000, an average of a little more than $700,000 per annum. It thus proved a very valuable resource to the Republic in the period of its early financial troubles.

COMPREHENSIVE SYSTEM OF TAXES.

Congress now determined under the recommendation of Secretary Chase to use this great source of revenue to the fullest practicable extent. Immediately after the passage of the Legal-tender Act the subject of internal revenue was taken up, elaborately investigated by committees, exhaustively discussed in both Senate and House. The final result was the enactment of a bill "to provide internal revenue to support the Government and to pay interest on the public debt," which received the President's approval on the first day of July (1862). It was one of the most searching, thorough, comprehensive systems of taxation ever devised by any Government. Spiritous and malt liquors and tobacco were relied upon for a very large share of revenue; a considerable sum was expected from stamps; and three per cent. was exacted from all annual incomes over six hundred dollars and less than ten thousand, and five per cent.—afterwards increased to ten per cent.—on all incomes exceeding ten thousand dollars. Manufactures of cotton, wool, flax, hemp, iron, steel, wood, stone, earth, and every other material were taxed three per cent. Banks, insurance and railroad companies, telegraph companies, and all other corporations were made to pay tribute. The butcher paid thirty cents for every beef slaughtered, ten cents for every hog, five cents for every sheep. Carriages, billiard-tables, yachts, gold and silver place, and all other articles of luxury were levied on heavily. Every profession and every calling, except the ministry of religion, was included within the far-reaching provisions of the law and subjected to tax for license. Bankers and pawnbrokers, lawyers and horse-dealers, physicians and confectioners, commercial brokers and peddlers, proprietors of theatres and jugglers on the street, were indiscriminately summoned to aid the National Treasury. The law was so extended and so minute that it required thirty printed pages of royal octavo and more than twenty thousand words to express its provisions.

Sydney Smith's striking summary of English taxation was originally included in a warning to the United States after the war of 1812 against indulging a marital spirit or being inflamed with a desire for naval renown. "Taxes," said the witty essayist in the Edinburgh Review, "are the inevitable consequences of being too fond of glory." He bade us beware of Essex, Porter, and Stephen Decatur. Even in the second year of the civil war in which we were struggling for life rather than for glory, we had come to realize every exaction ascribed to the British system. We were levying "taxes upon every article which enters into the mouth or covers the back or is placed under the foot; taxes on every thing which it is pleasant to see, hear, feel, smell, or taste; taxes upon warmth, light, and locomotion; taxes on every thing on earth and the waters under the earth; taxes on every thing that comes from abroad or is grown at home; on the sauce which pampers man's appetite and on the drug that restores him to health; on the ermine which decorates the judge and the rope which hangs the criminal; on the poor man's salt and the rich man's spice; on the brass nails of the coffin and the ribbons of the bride."

The system of internal revenue of which the foregoing is no exaggeration proved in all respects effective. Congress rendered the taxes more palatable and less oppressive to the producers by largely increasing the duties on imports by the Tariff Act of July 14, 1862, thus shutting out still more conclusively all competition from foreign fabrics. The increased cost was charged to the consumer, and taxes of fabulous amount were paid promptly and with apparent cheerfulness by the people. The internal revenue was bounteous from the first, and in a short period increased to a million of dollars per day for every secular day of the year. The amount paid on incomes for a single year reached seventy-three millions of dollars, the leading merchant of New York paying in one check a tax of four hundred thousand dollars on an income of four millions. Mr. Webster said that "Hamilton smote the rock of the National resources and abundant streams of revenue gushed forth." But Hamilton's Funding Bill was not more powerful in establishing the credit of the young Republic after the Revolution than was the Internal-revenue Act in imparting strength to the finances of the matured Nation in the throes and agonies of civil war. It was the crowning glory of Secretary Chase's policy, and its scope and boldness entitle him to rank with the great financiers of the world.