The House went into a Committee of the Whole on the bill for imposing
stamp duties, when the clause of Mr. GALLATIN yesterday proposed to the
committee, on the subject of bank notes, being under consideration,
Mr. OTIS supposed that at least two-thirds of the whole amount of paper
issued by the banks, returned and were re-issued every year, and thus
the banks must pay tax upon two-thirds of their capital in the first
year after the law passed, and which, according to a rough calculation,
relation being had to the different denominations of notes, amount to
nearly one per cent. on their capital. The tax ought to be levied upon
such new notes only as should be issued hereafter; all that were now in
existence were protected by the charter, and any law relating to them
would be retrospective; and as one-fifth of the whole number of notes
would be renewed every year, a tax upon them would be found to bear as
hard as upon other notes and bills, which seldom comprised more than the
fifth part of the transactions of an individual. It ought also to be
considered, that the paper issued by the bank generally became worn and
dirty, and incapable of receiving a stamp, so that in less than two
years the whole amount of paper must be re-issued, and the entire tax
assessed in the same period. This plan would also be inconsistent with
that of a commutation, which had been proposed.
Mr. DAYTON (the Speaker) did not think that this proposition precluded
the provision of a commutation. He was in favor of taxing bank notes,
but he wished also to hold out a commutation, and such a one as should
induce all the banks to embrace it; for, if this were not the case, they
would not be taxed equally, as the notes of banks did not bear a just
proportion to the amount of their dividends. This clause would not,
therefore, preclude the commutation, but render it proper, and a clause
could be brought in excusing such banks from the duty as came into the
proposed plan.
Mr. GALLATIN said, his ideas corresponded exactly with those of the
gentleman who had just spoken. The scheme suggested by the gentleman
from Massachusetts, of not taxing the notes at present in circulation,
would excuse bank notes from all tax, as, according to his own account,
only about one-fifth of the notes issued came in in the course of a
year, so that it would be five years before a new tax could operate upon
all their notes, and it was probable the bill might not pass for more
than three or four. That gentleman supposed that bankers' notes ought
not to be charged more than others; if this were the case, they might be
reckoned to run for four or five years, while those of individuals were
at six and twelve months. The note of an individual, for fifty dollars,
was to pay ten cents; he calculated a bank note, therefore, for a like
sum, which he supposed, upon an average, to run four years, thirty
cents.
With respect to the notes at present in circulation, Mr. G. said, they
ought all to be called in before a certain time, and after that day no
note should be negotiable which was not stamped.
The gentleman from Massachusetts was not correct when he said that this
tax would amount to one per cent. upon the capital employed in banks.
The calculation of the amount of the tax upon a bank which he had made,
would amount to $10,000 a year, whereas one per cent. upon the capital
of the Bank of the United States would amount to $200,000; but he said
(as he had before stated) that the notes issued by a bank were not equal
to its capital, or any thing like it. He could not, indeed, say what the
amount of the notes of the Bank of the United States might be which were
received for duty, from one end of the United States to the other; but
he knew banks in general, in large cities, did not employ more than
two-fifths of their capital in this way. He knew it to be a fact with
respect to a bank of the largest property in the United States, except
the Bank of the United States. He thought of proposing the commutation
to be one per cent. upon the amount of the dividend paid by each bank,
which he supposed would be deemed a reasonable sum.
Mr. OTIS explained.
Mr. SEWALL thought the observation of the gentleman from Connecticut
yesterday, as to the nature of bank notes, had weight. He agreed with
him that they were very different from the notes of individuals, as they
were always obliged to keep cash in readiness to take up their notes,
while individuals, knowing exactly the time when the money for theirs
would be wanted, could make use of it in the mean time. Therefore, if
they taxed bank notes, they ought not to tax them in the same proportion
with those of individuals at a certain date. Notes of individuals, under
twenty dollars, were to be exempt from duty, while every note issued by
a bank was proposed to be taxed.
Every banker's note of fifty dollars was to be charged with thirty
cents, while those of individuals, which might run for two or three
years, were charged only with ten cents. Every three or four years they
would have to pay this sum. If a fair commutation were to be made, they
should first fix the tax upon just principles.
Mr. NICHOLAS thought if there was no objection to the commutation, there
could not reasonably be any made to the tax, because if the commutation
were reasonable they would not choose to pay the tax; but, if they
should choose to pay the tax, instead of the commutation, it would be
evidence that the tax was too low.
Mr. W. SMITH did not see the force of the argument of the gentleman last
up. As the commutation was to bear some proportion to the rates of
duty, it became necessary to fix the rates upon a fair basis. If the
rates were fixed too high, they ought to reduce them. He did not see the
propriety of selecting moneyed corporations for the purpose of laying a
high duty upon them. He moved to strike out the three cents for every
five dollars, and leave it a blank.
Mr. DAYTON hoped this proposition would be agreed to, as by a vote upon
the question in blank they would fix the principle whether or not bank
notes were to be taxed, and the scale could be afterwards fixed. If
there was the difference alleged between bank notes and the notes of
individuals, it would be sufficiently considered in the commutation. He
should not, indeed, be willing to agree to any scale without a
commutation, for the reason he had before mentioned. For, said he, take
the Bank of the United States and the Bank of North America, and the
notes issued by them bear no sort of proportion to their respective
capitals. If the tax were to be laid upon the notes issued, the Bank of
the United States would pay a much larger sum than the other in duty.
Mr. GALLATIN observed that the gentleman from South Carolina had said
they were about to select moneyed corporations as objects on which to
lay a high duty. He had made a calculation to show that this was not the
case, but that what was proposed was no more than just and reasonable,
and that instead of the tax being one per cent. upon their capital, it
was not more than one twentieth or one twenty-fifth part of one per
cent.
He would state the facts, and beg gentlemen to correct him where he was
mistaken. In the first place he would state the capital of all the banks
of the United States at $20,000,000; the whole amount of bank notes at
less than $8,000,000. He would divide these $8,000,000, one-half into
notes under fifty dollars, and one-half above that sum as follows:
$4,000,000 in notes under fifty dollars,
which would give about
eighty thousand notes, (for though
they would be of different sizes
they paid in the same proportion,)
at thirty cents, $24,000
$2,000,000 of one hundred dollars
and upwards, at fifty cents, 10,000
$2,000,000 of three hundred dollars
and upwards, 4,000
-------
$38,000
Allow for mistakes, 2,000
-------
Which includes all the notes in circulation
in the United States, $40,000
As to the principle of taxation itself, that bank notes of fifty dollars
should pay thirty cents when notes of individuals only pay ten cents,
justice requires the difference, on the same principle that notes of
sixty days had been charged with only two-fifths of the duty charged
upon others.
Mr. G. stated the following account of a bank in Philadelphia, whose
capital was $2,000,000, and to which Government owed nothing; which, he
said, would apply to every other bank in the same circumstances, with
little variation:
To the original fund, $2,000,000
To deposits, about 900,000
To bank notes, 600,000
----------
Total debts, $3,500,000
----------
By notes discounted, $3,000,000[20]
By cash in vault, 500,000
----------
Total credits, $3,500,000
----------
As banks were thus able to transact business to the amount of three
millions of dollars, though their original fund was only two millions,
he accounted for their sharing dividends of nine per cent. on their
stock. It would be observed that the two millions capital were not
touched for notes, and yet they were charged with selecting these bodies
of men upon whom to lay a heavy tax.
Mr. G. concluded by saying he had no prejudice against banks. He knew
they were liable to abuse, but, upon the whole, he believed them to be
useful. He believed the scale he had formed was correct, but should
withdraw it for the present, in order to give an opportunity of trying
the principle.
FRIDAY, June 30.
_Duties on Stamps._
The proposition of Mr. GALLATIN for admitting of a composition from the
banks in lieu of the tax, came next under consideration--the blank in
which was moved to be filled with one per cent.; when
Mr. W. SMITH said, if the gentleman from Pennsylvania was right in his
calculation yesterday, the whole amount of duties arising from the banks
would be $8,000 a year, and therefore they ought not to go farther in
fixing the composition, whereas one per cent., according to the same
statement, will produce more than double that sum; for, if the whole
capital of the banks in the United States be twenty millions, and their
average dividend ten per cent., that will produce two millions, which at
one per cent. will give $20,000. He therefore moved, in order to bring
the matter nearer to a fair equivalent, to strike out one per cent. and
insert one-half per cent.
Mr. NICHOLAS said what the duty would produce was uncertain; they could
with more correctness say, that one per cent. was a reasonable
composition on the dividends, than what might be produced by the duty.
He knew of no tax laid upon property that could be made for less than
five per cent. to clear the expense of making it.
Mr. W. SMITH thought they should first fix the rates to be paid on bank
notes before they determined upon the composition.
Mr. GALLATIN said, when the rates were before under consideration, the
gentleman from South Carolina objected to it, because, if fixed too
high, he said it would influence the composition. He therefore moved to
have it struck out; but now, when a composition was under consideration,
he turns round and says it would be better first to fix the rates. He
thought one per cent. a reasonable composition, and that it would be
best first to fix that.
Mr. SMITH denied that he wanted first to fix the composition; it was his
wish to strike out the rates, to reduce them, that he moved to leave the
sum blank.
The question was put and carried, there being 54 votes in favor of it.
Mr. GALLATIN then renewed his motion for fixing the scale of duty to be
paid on bank notes. It was, on notes not exceeding fifty dollars, three
cents for every five dollars; those not exceeding one hundred dollars,
fifty cents; those above one hundred dollars, and not exceeding five
hundred dollars, one dollar; for all above five hundred dollars, two
dollars.
Mr. DAYTON said there were many notes under five dollars, for which
there was no provision.
Mr. GALLATIN thought "the rate of" would have included the small ones;
and, to dissipate every doubt on the subject, he moved to replace "three
cents for every five dollars," with "three-fifths of a cent for every
dollar."