Thursday, February 23.

Direct and Indirect Taxes.

INCOME AND EXPENDITURE.

Mr. Gallatin hoped that the motion would not prevail. He believed he was the only person who had said, that he was not desirous that the bill laying a direct tax should pass this session. For it was true, that, although he was a strong advocate for a direct tax—although he thought a sufficient permanent revenue could not be drawn from any other source, yet he did not wish the law to pass during the present session; and the reason was, because he had not a sufficient reliance upon his own opinion, to wish a subject of this sort to come into being against the opinion of so many members of this House as appeared to be opposed to it. When the United States shall think it necessary to go into the measure, he trusted it would pass with great unanimity. At present, he doubted whether a majority of the country was not against the measure, especially when he not only saw so great a division in that House, but apparently a local division, as he believed only four members East of Hudson's River, and but five South of Virginia had voted for the measure, by which it appeared to be a mode desired only by the Middle States. Until, therefore, gentlemen from those parts had returned home and consulted their constituents upon the subject; until he knew that the law could be carried into effect with more unanimity than at this time appeared, he did not wish to press it. He was willing, therefore, to take all the blame which was imputable to this circumstance upon himself. He never wished the powers of Congress to be exercised in a way which should not meet with pretty general concurrence. Yet, had he thought the situation of the United States had been such, that additional revenue was absolutely necessary to support the public credit, and it could not have been conveniently raised from any other source, every other consideration would have given way to that necessity. But he did not think that any thing which had been said by the gentleman from South Carolina showed that there would be any deficiency in the revenue for the present, which would require additional taxes to supply it.

He would just observe, that the great argument in favor of direct taxes—an argument which had almost wrought conviction upon the mind of the gentleman from South Carolina himself—was the uncertainty of a revenue derived from commerce; and yet, from this circumstance, the friends of indirect taxes wish to extend that plan to the utmost, and raise every thing from it. He should have drawn different conclusions; and from that uncertainty, he should have wished never to have gone beyond those bounds which they knew were safe.

As to the receipts of 1797, Mr. G. said, we had well ascertained them, because they arose from the importations of 1796, which they knew amounted to 6,200,000 dollars, and which sum, with the internal duties, would be fully adequate to the expenses of the Government for this year. Yet some gentlemen thought the calculation too close, and therefore the additional duties before them had been consented to, which he believed every one must acknowledge would be fully equal to any deficiency that could possibly arise. The arguments of the gentleman from South Carolina applied to the year 1798. He said we did not know what might be the amount of the importations of the present year; that it might be less than last year, and therefore, that revenue ought to be provided to supply the deficiency, if there should be any. The arguments would be good, if the gentleman's data were true; but he had forgotten that the expenses of 1798 would be less than those of the present year by 700,000 dollars, including not only the current expenses, but the instalment of the Dutch debts, which in that year would only be 100,000 dollars. The instalment this year is 400,000, so that in this item there will be a difference of 240,000 dollars; in the next place, the 280,000 dollars which this year has been agreed to be paid to the Dey and Regency of Algiers, will not occur again; and also, the 180,000 dollars appropriated for finishing the frigate, would not be to provide another year. These three items made the 700,000 dollars which he had mentioned. In addition he would add, that this year there had been a charge of 200,000 dollars for the defence of the frontier in 1795; but perhaps something might be wanted in that quarter another year, and therefore he would pass over that sum. But he thought there could be no danger of a want of revenue in the year 1798.

Mr. G. said, he would not pretend to say that it would not be desirable to increase the revenue, in order that they might pay a part of such instalments of the foreign debt as would become due after the year 1801. Certainly the sooner our debt could be paid, the better; but he meant only to show that there was no necessity for increasing the revenue for 1798. If it were necessary to raise additional revenue, it would be for two principal objects, the payment of the Dutch debt and the eight per cent. deferred stock; but as these did not become due till the year 1801, they were not under the necessity of providing the means for it at present.

During the next session, Mr. G. said, they should have time to compare the two systems of taxes together, and to discover which offered the best and most permanent sources of revenue. For the reasons he had given, he should be opposed to the motion.

Mr. W. Smith said, he should not adduce many arguments to show the propriety of advancing the duty upon this article any more than that upon any other; but he wished to bring before the committee a true statement of the receipts and expenditures of the United States, in order to show what sum of money would probably be wanted to answer the demands of the United States. As he differed considerably from the gentleman from Pennsylvania as to our real wants, he considered it as his duty to lay this statement before the committee. He had investigated the subject with as much accuracy as possible. He had attended to the documents which had been laid before them, to the laws which would probably pass this session, and to the probable increase of revenue. The result of this examination was, that there would be a deficiency of about a million of dollars. To what the additional imposts already agreed to would amount, he could not say, but he believed they would make 200,000 dollars, which would leave a deficiency of 800,000 dollars. He made the following statement:

Expenses of 1797.

Civil list,$634,322
Military and Naval Establishment and pensions,1,284,532
Deficiency of 1796,201,000
Algerine appropriation,376,500
Interest of Domestic Debt,3,471,972
Interest on Dutch debt,614,241
Instalments do do. 1797,400,000
Premium remitt. &c.50,000
Appropriations for frigate,171,000
————
7,213,567
=========

Revenues of 1797.

Impost,$5,588,961
Internal revenues,337,255
Post Office,35,000
Bank stock,150,000
Stock redeemed,88,636
Sundries,746
————
6,200,598
Additional imposts in 1797,200,000
————
6,400,598
Probable deficiency of revenue,812,969
————
7,213,567
=========

It would be observed, Mr. S. said, that the gentlemen from Pennsylvania and Maryland, had calculated the impost at 6,200,000 dollars, whilst he made it only at 5,588,961, which he took from the Secretary of the Treasury's statement, and he believed this was the safest calculation. He would not go into any very long argument on this subject, because it had frequently been under discussion.

Mr. Gallatin inquired from what document Mr. Smith took his calculations?

Mr. W. Smith answered, from the report of the Secretary of the Treasury, which was calculated upon a permanent plan. In calculations on the subject of revenue, the largest amounts should not be taken. It was not policy in gentlemen to adopt that plan; they should make allowances for deficiencies and accidents. The situation of this 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.

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 whether 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 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 article 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 tax to be put into execution, but he wished to take 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 re-exported, 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 follows:

ESTIMATE FOR THE YEAR 1797.

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.587,926
Ditto on 5-1/2 per cent. do.101,689
Ditto on 4-1/2 per cent. do.7,920
Ditto on supposed unfunded debt,78,261
Ditto on Bank loans,372,200
—————
4,463,971
Internal expenditures (as below)2,255,255
—————
$6,719,226
===========
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
Bill for foreign intercourse,40,000
Light-houses,45,647
Miscellaneous claims,12,000
—————
$609,600
===========

MILITARY DEPARTMENT.

Pay of four regiments and artillery corps,$256,450
Subsistence,236,900
Clothing,75,000
Bounties,16,000
Hospital Department,25,000
Ordnance40,000
—————
649,350
Amount brought forward,$649,350
Two instructors,1,450
Quartermaster's Department,150,000
Defensive protection,60,000
Indian Department,90,000
Contingencies of War Department,15,000
Repairing fortifications,20,000
Military Pensions,93,350
Naval Department,190,000
Balance due on Algerine business,376,505
—————
Internal expenses of 1797,$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.