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: