TAX ON BANK NOTES: MR. BENTON'S SPEECH: EXTRACTS:
Mr. Benton brought forward his promised motion for leave to bring
in a bill to tax the circulation of banks and bankers, and of all
corporations, companies or individuals which issued paper currency.
He said nothing was more reasonable than to require the moneyed
interest which was employed in banking, and especially in that
branch of banking which was dedicated to the profitable business
of converting lampblack and rags into money, to contribute to the
support of the government. It was a large interest, very able,
and very proper, to pay taxes, and which paid nothing on their
profitable issues--profitable to them--injurious to the country. It
was an interest which possessed many privileges over the rest of the
community by law; which usurped many others which the laws did not
grant; which, in fact, set the laws and the government at defiance
whenever it pleased; and which, in addition to all these privileges
and advantages, was entirely exempt from federal taxation. While
the producing and laboring classes were all taxed; while these
meritorious classes, with their small incomes, were taxed in their
comforts and necessaries--in their salt, iron, sugar, blankets,
hats, coats and shoes, and so many other articles--the banking
interest, which dealt in hundreds of millions, which manufactured
and monopolized money, which put up and put down prices, and held
the whole country subject to its power, and tributary to its wealth,
paid nothing. This was wrong in itself, and unjust to the rest of
the community. It was an error or mistake in government which he had
long intended to bring to the notice of the Senate and the country;
and he judged the present conjuncture to be a proper time for doing
it. Revenue is wanted. A general revision of the tariff is about to
take place. An adjustment of the taxes for a long period is about to
be made. This is the time to bring forward the banking interest to
bear their share of the public burdens, and the more so, as they are
now in the fact of proving themselves to be a great burden on the
public, and the public mind is beginning to consider whether there
is any way to make them amenable to law and government.
In other countries, Mr. B. said, the banking interest was subject
to taxation. He knew of no country in which banking was tolerated,
except our own, in which it was not taxed. In Great Britain--that
country from which we borrow the banking system--the banking
interest pays its fair and full proportion of the public taxes: it
pays at present near four millions of dollars. It paid in 1836 the
sum of $3,725,400: in 1837 it paid $3,594,300. These were the last
years for which he had seen the details of the British taxation,
and the amounts he had stated comprehended the bank tax upon the
whole united kingdom: upon Scotland and Ireland, as well as upon
England and Wales. It was a handsome item in the budget of British
taxation, and was levied on two branches of the banking business:
on the circulation, and on bills of exchange. In the bill which he
intended to bring forward, the circulation alone was proposed to be
taxed; and, in that respect, the paper system would still remain
more favored here than it was in Great Britain.
In our own country, Mr. B. said, the banking interest had formerly
been taxed, and that in all its branches; in its circulation, its
discounts, and its bills of exchange. This was during the late
war with Great Britain; and though the banking business was then
small compared to what it is now, yet the product of the tax was
considerable, and well worth the gathering: it was about $500,000
per annum. At the end of the war this tax was abolished; while most
of the war taxes, laid at the same time, for the same purpose, and
for the same period, were continued in force; among them the tax
on salt, and other necessaries of life. By a perversion of every
principle of righteous taxation, the tax on banks was abolished,
and that on salt was continued. This has remained the case for
twenty-five years, and it is time to reverse the proceeding. It is
time to make the banks pay and to let salt go free.
Mr. B. next stated the manner of levying the bank tax at present
in Great Britain, which he said was done with great facility and
simplicity. It was a levy of a fixed sum on the average circulation
of the year, which the bank was required to give in for taxation
like any other property, and the amount collected by a distress
warrant if not paid. This simple and obvious method of making the
levy, had been adopted in 1815, and had been followed ever since.
Before that time it was effected through the instrumentality of
a stamp duty; a stamp being required for each note, but with the
privilege of compounding for a gross sum. In 1815 the option of
compounding was dropped: a gross amount was fixed by law as the tax
upon every million of the circulation; and this change in the mode
of collection has operated so beneficially that, though temporary at
first, it has been made permanent. The amount fixed was at the rate
of £3,500 for every million. This was for the circulation only: a
separate, and much heavier tax was laid upon bills of exchange, to
be collected by a stamp duty, without the privilege of composition.
Mr. B. here read, from a recent history of the Bank of England, a
brief account of the taxation of the circulation of that institution
for the last fifty years--from 1790 to the present time. It was at
that time that her circulation began to be taxed, because at that
time only did she begin to have a circulation which displaced the
specie of the country. She then began to issue notes under ten
pounds, having been first chartered with the privilege of issuing
none less than one hundred pounds. It was a century--from 1694 to
1790--before she got down to £5, and afterwards to £2, and to £1;
and from that time the specie basis was displaced, the currency
convulsed, and the banks suspending and breaking. The government
indemnified itself, in a small degree, for the mischiefs of the
pestiferous currency which it had authorized; and the extract which
he was about to read was the history of the taxation on the Bank
of England notes which, commencing at the small composition of
£12,000 per annum, now amounts to a large proportion of the near
four millions of dollars which the paper system pays annually to the
British Treasury. He read:
"The Bank, till lately, has always been particularly favored
in the composition which they paid for stamp duties. In 1791,
they paid composition of £12,000 per annum, in lieu of all
stamps, either on bill or notes. In 1799, on an increase of
the stamp duty, their composition was advanced to £20,000; and
an addition of £4,000 for notes issued under £5, raised the
whole to £24,000. In 1804, an addition of not less than fifty
per cent. was made to the stamp duty; but, although the Bank
circulation of notes under £5 had increased from one and a half
to four and a half millions, the whole composition was only
raised from £24,000 to £32,000. In 1808, there was a further
increase of thirty-three per cent. to the stamp duty, at which
time the composition was raised from £32,000 to £42,000. In both
these instances, the increase was not in proportion even to the
increase of duty; and no allowance whatever was made for the
increase in the amount of the bank circulation. It was not till
the session of 1815, on a further increase of the stamp duty,
that the new principle was established, and the Bank compelled
to pay a composition in some proportion to the amount of their
circulation. The composition is now fixed as follows: Upon the
average circulation of the preceding year, the Bank is to pay at
the rate of £3,500 per million, on their aggregate circulation,
without reference to the different classes and value of their
notes. The establishment of this principle, it is calculated,
caused a saving to the public, in the years 1815 and 1816, of
£70,000. By the neglect of this principle, which ought to have
been adopted in 1799, Mr. Ricardo estimated the public to have
been _losers_, and the Bank consequently _gainers_, of no less a
sum than _half a million_."
Mr. B. remarked briefly upon the equity of this tax, the simplicity
of its levy since 1815, and its large product. He deemed it the
proper model to be followed in the United States, unless we should
go on the principle of copying all that was evil, and rejecting all
that was good in the British paper system. We borrowed the banking
system from the English, with all its foreign vices, and then added
others of our own to it. England has suppressed the pestilence of
notes under £5 (near $25); we retain small notes down to a dollar,
and thence to the fractional parts of a dollar. She has taxed all
notes; and those under £5 she taxed highest while she had them;
we, on the contrary, tax none. The additional tax of £4,000 on the
notes under £5 rested on the fair principle of taxing highest that
which was most profitable to the owner, and most injurious to the
country. The small notes fell within that category, and therefore
paid highest.
Having thus shown that bank circulation was now taxed in Great
Britain, and had been for fifty years, he proceeded to show that
it had also been taxed in the United States. This was in the year
1813. In the month of August of that year, a stamp-act was passed,
applicable to banks and to bankers, and taxing them in the three
great branches of their business, to wit: the circulation, the
discounts, and the bills of exchange. On the circulation, the tax
commenced at one cent on a one dollar note, and rose gradually to
fifty dollars on notes exceeding one thousand dollars; with the
privilege of compounding for a gross sum in lieu of the duty. On
the discounts, the tax began at five cents on notes discounted for
one hundred dollars, and rose gradually to five dollars on notes of
eight thousand dollars and upwards. On bills of exchange, it began
at five cents on bills of fifty dollars, and rose to five dollars on
those of eight thousand dollars and upwards.
Such was the tax, continued Mr. B., which the moneyed interest,
employed in banking, was required to pay in 1813, and which it
continued to pay until 1817. In that year the banks were released
from taxation, while taxes were continued upon all the comforts
and necessaries of life. Taxes are now continued upon articles of
prime necessity--upon salt even--and the question will now go before
the Senate and country, whether the banking interest, which has
now grown so rich and powerful--which monopolizes the money of the
country--beards the government--makes distress or prosperity when
it pleases--the question is now come whether this interest shall
continue to be exempt from tax, while every thing else has to pay.
Mr. B. said he did not know how the banking interest of the present
day would relish a proposition to make them contribute to the
support of the government. He did not know how they would take it;
but he did know how a banker of the old school--one who paid on
sight, according to his promise, and never broke a promise to the
holder of his notes--he did know how _such_ a banker viewed the act
of 1813; and he would exhibit his behavior to the Senate; he spoke
of the late Stephen Girard of Philadelphia; and he would let him
speak for himself by reading some passages from a petition which he
presented to Congress the year after the tax on bank notes was laid.
Mr. B. read:
"That your memorialist has established a bank in the city
of Philadelphia, upon the foundation of his own individual
fortune and credit, and for his own exclusive emolument, and
that he is willing most cheerfully to contribute, in common
with his fellow-citizens throughout the United States, a full
proportion of the taxes which have been imposed for the support
of the national government, according to the profits of his
occupation and the value of his estate; but a construction has
been given to the acts of Congress laying duties on notes of
banks, &c., from which great difficulties have occurred, and
great inequalities daily produced to the disadvantage of his
bank, that were not, it is confidently believed, within the
contemplation of the legislature. And your memorialist having
submitted these considerations to the wisdom of Congress,
respectfully prays, that the act of Congress may be so amended
as to permit the Secretary of the Treasury to enter into a
composition for the stamp duty, in the case of private bankers,
as well as in the case of corporations and companies, or so
as to render the duty equal in its operations upon every
denomination of bankers."
Mr. B. had read these passages from Mr. Girard's petition to
Congress in 1814, _first_, for the purpose of showing the readiness
with which a banker of the old school paid the taxes which the
government imposed upon his business; and, next, to show the very
considerable amount of that tax, which on the circulation alone
amounted to ten thousand dollars on the million. All this, with
the additional tax on the discounts, and on the bills of exchange,
Mr. Girard was entirely willing to pay, provided all paid alike.
All he asked was equality of taxation, and that he might have the
benefit of the same composition which was allowed to incorporated
banks. This was a reasonable request, and was immediately granted by
Congress.
Mr. B. said revenue was one object of his bill: the regulation of
the currency by the suppression of small notes and the consequent
protection of the constitutional currency, was another: and for that
purpose the tax was proposed to be heaviest on notes under twenty
dollars, and to be augmented annually until it accomplished its
object.