already mentioned, have stated in their Memorial, that both policy and
justice require a solid provision for funding the public debts. It is
with pleasure, Sir, that I see this numerous, meritorious, and
oppressed, body of men who are creditors of the public, beginning to
exert themselves for the obtaining of justice. I hope they may
succeed, not only because I wish well to so righteous a pursuit, but
because their success will be the great ground work of a credit, that
will carry us safely through the present just, important, and
necessary war; which will combine us closely together on the
conclusion of a peace, which will always give to the supreme
representative of America, a means of acting for the general defence
on sudden emergencies, and which will of consequence procure the third
of these great objects, for which we contend, _peace, liberty, and
safety_.
Such, Sir, are the cogent principles, by which we are called to
provide solid funds for the national debt. Already Congress have
adopted a plan for liquidating all past accounts, and if the States
shall make the necessary grants of revenue, what remains will be a
simple executive operation, which will presently be explained. But
however powerful the reasons in favor of such grants, over and above
those principles of moral justice, which none, however exalted, can
part from with impunity, still there are men, who, influenced by
penurious selfishness, will complain of the expense, and who will
assert the impossibility of sustaining it. On this occasion the
sensations with respect to borrowing are reversed. All would be
content to relieve themselves by loan from the weight of taxes, but
many are unwilling to take up as they ought the weight of debt. Yet
this must be done before the other can happen; and it is not so great
but that we should find immediate relief by assuming it, even if _it
were a foreign debt_. I say if it were a _foreign_ debt, because I
shall attempt to show, first, that being a _domestic debt_, to fund it
will cost the community nothing, and secondly, that it will produce,
on the contrary, a considerable advantage.
And as to the first point, one observation will suffice. The
expenditure has been made, and a part of the community have sustained
it. If the debt were to be paid by a single effort of taxation, it
could only create a transfer of property from one individual to
another, and the aggregate wealth of the whole community would be
precisely the same. But since nothing more is attempted than merely
to fund the debt, by providing for the interest at six per cent, the
question of ability is resolved to the single point, whether it is
easier for a _part of the people_ to pay one hundred dollars, than for
the _whole people_ to pay six dollars. It is equally clear, though not
equally evident, that a considerable advantage would be produced by
funding our debts, over and above what has been already mentioned as
the consequence of national credit.
The advantage is threefold. First, many persons by being creditors of
the public are deprived of those funds, which are necessary to the
full exercise of their skill and industry. Consequently the community
are deprived of the benefits, which would result from that exercise,
whereas if these debts, which are in a manner dead, were brought back
to existence, monied men would purchase them up, though perhaps at a
considerable discount, and thereby restore to the public many useful
members, who are now entirely lost, and extend the operations of many
more to considerable advantage. For although not one additional
shilling would be by this means brought in, yet by distributing
property into those hands, which could render it most productive, the
revenues would be increased, while the original stock continued the
same. Secondly, many foreigners who make speculations to this country,
would, instead of ordering back remittances, direct much of the
proceeds of their cargoes to be invested in our public funds, which,
according to principles already established, would produce a clear
advantage, with the addition, from peculiar circumstances, that it
would supply the want of credit to the mercantile part of society. The
last but not least advantage is, that in restoring ease, harmony, and
confidence, not only the government (being more respectable) would be
more respected, and consequently better obeyed, but the mutual
dealings among men on private credit would be facilitated. The horrors
which agitate people's minds, from an apprehension of depreciating
paper would be done away. The secret hoards would be unlocked. In the
same moment the necessity of money would be lessened, and the quantity
increased. By these means the collection of taxes would be
facilitated, and thus instead of being obliged to give valuable
produce for useless minerals, that produce would purchase the things
we stand in need of, and we should obtain a sufficient circulating
medium, by giving the people what they have always a right to demand,
solid assurance in the integrity of their rulers.
The next consideration, which offers is the amount of public debt, and
every good American must lament that confusion in public affairs,
which renders an accurate state of it unattainable. But it must
continue to be so until accounts at home and abroad be fully adjusted.
The enclosed is an estimate, furnished by the Controller of the
Treasury; from which it appears, that there is, already an
acknowledged debt bearing interest, to the amount of more than twelve
millions of dollars. On a part of this also there is a large arrearage
of interest, and there is a very considerable debt unsettled, the
evidence of which exists in various certificates, given for property
applied to the public service. This service, including pay due to the
army previous to the present year, cannot be estimated at less than
between seven and eight millions. Our debt to his Most Christian
Majesty, is above five millions. The nearest guess, therefore, which
can be made at the sum total, is from twentyfive to twentyseven
millions of dollars; and if to this we add what it may be necessary to
borrow for the year 1783, the amount will be, with interest, by the
time proper revenues are obtained, considerably above thirty millions.
Of course the interest will be between eighteen hundred thousand and
two millions of dollars.
And here, previous to the consideration of proper revenues for that
amount, it may not be amiss to make a few general observations; the
first of which is, that it would be injurious to the United States to
obtain money in loans, without providing beforehand the necessary
funds. For if those who are now so deeply engaged to support war, will
not grant such funds to procure immediate relief, certainly those who
come after them will not do it to pay a former debt. Remote objects,
dependent on abstract reasoning, never influence the mind like
immediate sensibility. It is, therefore, the province of wisdom to
direct towards proper objects that sensibility, which is the only
motive to action among the mass of mankind. Should we be able to get
money from the Dutch, without first providing funds, which is more
than doubtful; and should the several States neglect afterwards making
provision to perform the engagements of Congress, which is more than
probable, the credit of the United States abroad would be ruined
forever. Very serious discussions also might be raised among foreign
powers, and our creditors might have recourse to arms, we might
dishonorably be compelled to do what dishonestly we had left undone.
Secondly, the idea, which many entertain, of soliciting loans abroad
to pay the interest of domestic debts, is pregnant with its own
destruction. If the States were to grant revenues sufficient only to
pay the interest of present debts, we might, perhaps, obtain new
credit upon a general opinion of our justice, though that is far from
certain. But when we omit paying by taxes the interest of debts
already contracted, and ask to borrow for the purpose, making the same
promises to obtain the new loans, which had already been made to
obtain the old, we shall surely be disappointed.
Thirdly, it will be necessary, not only that revenues be granted, but
that those revenues be amply sufficient for the purpose, because (as
will presently appear) a deficiency would be highly pernicious, while
an excess would be not only unprejudicial, but very advantageous. To
perceive this with all necessary clearness, it must be remembered that
the revenues asked for on this occasion must be appropriated to the
purposes for which they are asked, and in like manner the sums
required for current expenditures must be appropriated to the current
service. If then the former be deficient the latter cannot be brought
in to supply the deficiencies, and of course the public credit would
be impaired; but should there be an excess of revenue it could be
applied in payment of a part of the debt immediately, and in such
case, if the credits should have depreciated they would be raised to
par, the offer of payment would induce creditors to lower the
interest. Thus in either case, the means of making new loans on good
terms would be extended, and the necessity of asking more revenues
obviated.
Lastly, the revenues ought to be of such a nature, as naturally and
necessarily to increase, for creditors will have a greater confidence
when they have a clear prospect of being repaid, and the people will
always be desirous to see a like prospect of relief from the taxes.
Besides which, it will be necessary to incur some considerable expense
after the war, in making necessary establishments for a permanent
naval force, and it will always be least objectionable to borrow for
that purpose on funds already established.
The requisition of a five per cent impost, made on the 3d of February,
1781, has not yet been complied with by the State of Rhode Island; but
as there is reason to believe that their compliance is not far off,
this revenue may be considered as being already granted. It will,
however, be very inadequate to the purposes intended. If goods be
imported and prizes introduced to the amount of twelve millions
annually, the five per cent would be six hundred thousand, from which
at least one sixth must be deducted, as well for the cost of
collection as for the various defalcations which will necessarily
happen, and which it is unnecessary to enumerate. It is not safe,
therefore, to estimate this revenue at more than half a million of
dollars, for, though it may produce more, yet probably it will not
produce so much. It was in consequence of this, that on the 27th day
of last February, I took the liberty to submit the propriety of asking
the States for a land tax of one dollar for every hundred acres of
land, a poll tax of one dollar on all freemen and all male slaves
between sixteen and sixty, (excepting such as are in the federal army,
and such as are by wounds or otherwise rendered unfit for service) and
an excise of one eighth of a dollar per gallon, on all distilled
spirituous liquors. Each of these may be estimated at half a million,
and should the product be equal to the estimation, the sum total of
revenues for funding the public debts, would be equal to two millions.
What has been the fate of these propositions I know not, but I will
beg leave, on this occasion, not only to renew them, but also to state
some reasons in their favor, and answer some objections against them.
And first, as to a land tax. The advantages of it are, that it can be
reduced to a certainty as to the amount and time. That no
extraordinary means are necessary to ascertain it, and that land being
the ultimate object of human avarice, and that species of permanent
property, which peculiarly belongs to a country as neither to be
removed or concealed, it stands foremost for the object of taxation,
and ought most particularly to be burdened with those debts, which
have been incurred by defending the freedom of its inhabitants. But
besides these general reasons, there are some which are in a manner
peculiar to this country. The land of America may, as to the
proprietors be divided into two kinds; that which belongs to the great
landholders, and that which is owned and occupied by the industrious
cultivators. This latter class of citizens, is, generally speaking,
the most numerous and most valuable part of a community. The artisan
may, under any government, minister to the luxuries of the rich, and
the rich may, under any government, obtain the luxuries they covet.
But the free husbandman is the natural guardian of his country's
freedom. A land tax will probably, at the first mention, startle this
order of men; but it can only be from the want of reflection, or the
delusion must be kept up by the artifice of others. To him who
cultivates from one to five hundred acres, a dollar per hundred is a
trifling object, but to him who owns a hundred thousand it is
important. Yet a large proportion of America is the property of great
landholders, they monopolise it without cultivation; they are, for the
most part, at no expense either of money or personal service to defend
it, and keeping the price higher by monopoly than otherwise it would
be, they impede the settlement and culture of the country. A land tax,
therefore, would have the salutary operation of an agrarian law
without the iniquity. It would relieve the indigent, and aggrandize
the State by bringing property into the hands of those who would use
it for the benefit of society.
The objections against such a tax are twofold; first, that it is
unequal, and secondly, that it is high. To obviate the inequality,
some have proposed an estimate of the value of different kinds of
lands. But this would be improper; because, first, it would be
attended with great delay, expense, and inconvenience. Secondly, it
would be uncertain, and therefore improper, particularly when
considered as a fund for public debts. Thirdly, there is no reason to
believe, that any estimate would be just, and even if it were, it must
be annually varied, or else come within the force of the objection as
strongly as ever; the former would cost more than the tax, and the
latter would not afford the remedy asked for. Lastly, such valuations
would operate as a tax upon industry, and promote that land monopoly,
which every wise government will study to repress. But further, the
true remedy for any inequality will be obtained in the apportioning
other taxes, of which there will always be enough to equalize this;
besides, the tax being permanent and fixed, it is considered in the
price of land on every transfer of property, and that produces a
degree of equality, which no valuation could possibly arrive at.
In a word, if exact numerical proportion be sought after in taxes,
there would be no end to the search. Not only might a poll tax be
objected to, as too heavy on the poor and too light on the rich, but
when that objection was obviated the physical differences in the human
frame would alone be as endless a source of contention, as the
different qualities of land. The second objection, that the tax is too
high, is equally futile with the former. Land which is so little
worth, that the owner will not pay annually one penny per acre for the
defence of it, ought to belong to the society by whom the expense of
defending it is defrayed. But the truth is, that this objection arises
from and is enforced by those men who can very well bear the expense,
but who wish to shift it from themselves to others. I shall close this
subject by adding, that as such a tax would, besides the benefits to
be derived from the object of it, have the farther advantage of
encouraging settlements and population, this would redound not only to
the national good, but even to the particular good of the landholders
themselves.
With respect to the poll tax, there are many objections against it,
but in some of the States a more considerable poll tax already exists
without inconvenience. The objections are principally drawn from
Europe, by men who do not consider that a difference of circumstances
makes a material difference in the nature of political operations. In
some parts of Europe, where nine tenths of the people are exhausted by
continual labor, to procure bad clothing and worse food, this tax
would be extremely oppressive; but in America, where three days of
labor produce sustenance for a week, it is not unreasonable to ask two
days out of a year as a contribution to the payment of public debts.
Such a tax will, on the rich, be next to nothing; on the middling
ranks it will be of very little consequence; and it cannot affect the
poor, because such of them as are unable to labor will fall within the
exception proposed. In fact the situation of America differs so widely
from that of Europe as to the matter now under consideration, that
hardly any maxim which applies to one will be alike applicable to the
other. Labor is in such demand among us, that the tax will fall on the
consumer. An able bodied man who demands one hundred dollars to go
into military service for three years, cannot be oppressed by the
annual payment of one dollar while not in that service. This tax,
also, will have the good effect of placing before the eyes of Congress
the numbers of men in the several States; an information always
important to government.
The excise proposed is liable to no other objection than what may be
made against the mode of collection, but it is conceived that this may
be such as can produce no ill consequences. Excise laws exist and have
long existed in the several States. Of all taxes, those on the
consumption of articles are most agreeable, because being mingled with
the price, they are less sensible to the people; and without entering
into a discussion with which speculative men have amused themselves,
on the advantages and disadvantages of this species of taxation, it
may be boldly affirmed, that no inconvenience can arise from laying a
heavy tax on the use of ardent spirits. These have always been equally
prejudicial to the constitutions and morals of the people. The tax
will be a means of compelling vice to support the cause of virtue, and
like the poll tax, will draw from the idle and dissolute, that
contribution to the public service which they will not otherwise make.
Having said thus much on the propriety of these taxes, I shall pray
leave to assure you of my ready acquiescence in the choice of any
others, which may be more agreeable to the United States in Congress,
praying them nevertheless to consider, that as the situation of the
respective States is widely different, it will be wise to adopt a
variety of taxes, because by that means the consent of all will be
more readily obtained, than if such are chosen as will fall heavy only
on particular States.
The next object is the collection, which, for the most obvious reasons
ought to be by authority derived from the United States. The
collection of a land tax, as has been above observed, will be very
simple. That of the poll may be equally so, because certificates of
the payment may annually be issued to the collectors, and they be
bound to return the certificates or the money, and empowered to compel
a payment by every man not possessed of a certificate. If in addition
to this, those who travel from one State to another be obliged to take
out and pay for a new certificate in each State, that would operate a
useful regulation of police; and a slight distinction between those
and the common certificates would still preserve their utility in
numbering the people.
It is not necessary to dwell on the mode of collecting these branches
of revenue, because in reason, a determination on the propriety of the
taxes should precede it. I will only take the liberty to drop one idea
with respect to the impost already required. It is conceived that laws
should be so formed, as to leave little or nothing to the discretion
of those by whom they are executed; that revenue laws, in particular,
should be guarded in this respect from odium; being, as they are,
sufficiently odious in themselves; and therefore it would have been
well to have stipulated the precise sum payable on different species
of commodities. The objection is, that the list to be accurate must be
numerous. But as this accuracy is necessary, the description ought to
be very short and general, so as to comprise many commodities under
one head; and the duty ought to be fixed according to their average
value. The objection against this regulation, is, that the tax on fine
commodities would be trivial, and on coarse commodities great. This
indeed is true; but it is desirable for two reasons. First, that
coarse and bulky commodities could not be smuggled to evade the heavy
duty; and that fine commodities would not be smuggled to evade the
light duty. Secondly, that coarse commodities, generally speaking,
minister to the demands of necessity or convenience, and fine
commodities to those of luxury. The heavy duty on the former would
operate an encouragement to produce them at home, and by that means a
stoppage of our commerce in time of war would be most felt by the
wealthy, who have always the most abundant means of procuring relief.
I shall now, Sir, take the liberty to suppose, that the revenues I
have mentioned, or some others, to the amount of at least two
millions net annual produce, were asked for and obtained, as a pledge
to the public creditors, to continue until the principal and interest
of the debts contracted or to be contracted, shall be finally paid.
This supposition is made, that I may have an opportunity, thus early,
to express my sentiments on the mode of appropriation. It would be as
follows; any one of the revenues being estimated, a loan should be
opened on the credit of it, by subscription to a certain amount, and
public debts of a particular description, or specie, be received in
payment of the subscriptions. This funded debt should be transferable
under particular forms, calculated for the prevention of fraudulent,
and facilitating of honest negotiations. In like manner on each of
these revenues should subscriptions be opened, proceeding by degrees
so as to prevent any sudden revolutions in money matters, such
revolutions being always more or less injurious.
I should further propose, that the surplus of each of these revenues,
(and care should be taken that there would be a surplus,) should be
carried to a sinking fund; on the credit of which, and of the general
promises of government, new loans should be opened when necessary. The
interest should be paid half yearly, which would be convenient to the
creditors and to the government, as well as useful to the people at
large; because by this means, if four different loans were opened at
different times, the interest would be payable eight times in the
year; and thus the money would be paid out of the treasury as fast as
it came in; which would require four officers to manage the business,
keep them in more constant and regular employment, dispense the
interest so as to command the confidence and facilitate the views of
the creditors, and return speedily the wealth obtained by taxes into
the common stock.
I know it will be objected, that such a mode of administration would
enable speculators to perform their operations. A general answer to
this would be, that any other mode would be more favorable to them.
But further, I conceive, first, that it is much beneath the dignity of
government to intermeddle in such consideration. Secondly, that
speculators always do least mischief where they are left most at
liberty. Thirdly, that it is not in human prudence to counteract their
operations by laws; whereas, when left alone, they invariably
counteract each other; and fourthly, that even if it were possible to
prevent speculation, it is precisely the thing which ought not to be
prevented; because he who wants money to commence, pursue, or extend
his business, is more benefited by selling stock of any kind, even, at
a considerable discount, than he could be by the rise of it at a
future period; every man being able to judge better of his own
business and situation than the government can for him.