REFINED SUGAR AND RUM DRAWBACKS: THEIR ABUSE UNDER THE
COMPROMISE ACT OF 1833: MR. BENTON'S SPEECH.
Mr. Benton rose to make the motion for which he had given notice on
Friday last, for leave to bring in a bill to reduce the drawbacks
allowed on the exportation of rum and refined sugars; and the
bounties and allowances to fishing vessels, in proportion to the
reduction which had been made, and should be made, in the duties
upon imported sugars, molasses and salt, upon which these bounties
and allowances were respectively granted.
Mr. B. said that the bill, for the bringing in of which he was about
to ask leave, proposed some material alteration in the act of 1833,
for the modification of the tariff, commonly called the compromise
act; and as that act was held by its friends to be sacred and
inviolable, and entitled to run its course untouched and unaltered,
it became his duty to justify his bill in advance; to give reasons
for it before he ventured to submit the question of leave for its
introduction; and to show, beforehand, that here was great and just
cause for the measure he proposed.
Mr. B. said it would be recollected, by those who were contemporary
with the event, and might be seen by all who should now look into
our legislative history of that day, that he was thoroughly opposed
to the passage of the act of 1833; that he preferred waiting the
progress of Mr. Verplanck's bill; that he opposed the compromise
act, from beginning to end; made speeches against it, which were
not answered; uttered predictions of it, which were disregarded;
proposed amendments to it, which were rejected; showed it to be an
adjournment, not a settlement, of the tariff question; and voted
against it, on its final passage, in a respectable minority of
eighteen. It was not his intention at this time to recapitulate all
the objections which he then made to the act; but to confine himself
to two of those objections, and to those two of them, the truth and
evils of which TIME had developed; and for which evils the public
good demands an immediate remedy to be applied. He spoke of the
drawbacks and allowances founded upon duties, which duties were to
undergo periodical reductions, while the drawbacks and allowances
remained undiminished; and of the vague and arbitrary tenor of the
act, which rendered it incapable of any regular, uniform, or safe
execution. He should confine himself to these two objections; and
proceed to examine them in the order in which they were mentioned.
At page 208 of the Senate journal, session of 1832-33, is seen this
motion: "Moved by Mr. Benton to add to the bill a section in the
following words: '_That all drawbacks allowed on the exportation of
articles manufactured in the United States from materials imported
from foreign countries, and subject to duty, shall be reduced in
proportion to the reduction of duties provided for in this act._'"
The particular application of this clause, as explained and enforced
at the time, was to sugar and molasses, and the refined sugar, and
the rum manufactured from them.
As the laws then stood, and according to the principle of all
drawbacks, the exporters of these refined sugars and rum were
allowed to draw back from the Treasury precisely as much money as
had been paid into the Treasury on the importation of the article
out of which the exported article was manufactured. This was the
principle, and this was the law; and so rigidly was this insisted
upon by the manufacturing and exporting interest, that only four
years before the compromise act, namely, in 1829, the drawback on
refined sugars exported was raised from four to five cents a pound
upon the motion of General Smith, a then senator from Maryland; and
this upon an argument and a calculation made by him to show that the
quantity of raw sugar contained in every pound of refined sugar,
had, in reality, paid five instead of four cents duty. My motion
appeared to me self-evidently just, as the new act, in abolishing
all specific duties, and reducing every thing to an ad valorem duty
of twenty per centum, would reduce the duties on sugar and molasses
eventually to the one-third or the one-fourth of their then amount;
and, unless the drawback should be proportionately reduced, the
exporter of refined sugars and rum, instead of drawing back the
exact amount he had paid into the Treasury, would in reality draw
back three or four times as much as had been paid in. This would be
unjust in itself; and, besides being unjust, would involve a breach
of the constitution, for, so much of the drawback as was not founded
upon the duty, would be a naked bounty paid for nothing out of the
Treasury. I expected my motion to be adopted by a unanimous vote; on
the contrary, it was rejected by a vote of 24 to 18;[2] and I had
to leave it to Time, that slow, but sure witness, to develope the
evils which my arguments had been unable to show, and to enforce
the remedies which the vote of the Senate had rejected. That
witness has come. Time, with his unerring testimony, has arrived.
The act of 1833 has run the greater part of its course, without
having reached its ultimate depression of duties, or developed its
greatest mischiefs; but it has gone far enough to show that it has
done immense injury to the Treasury, and must continue to do it if
a remedy is not applied. Always indifferent to my rhetoric, and
careful of my facts--always leaving oratory behind, and laboring
to establish a battery of facts in front--I have applied at the
fountain head of information--the Treasury Department--for all the
statistics connected with the subject; and the successive reports
which had been received from that department, on the salt duties and
the fishing bounties and allowances, and on the sugar and molasses
duties, and the drawbacks on exported rum and refined sugar, and
which had been printed by the order of the Senate, had supplied the
information which constituted the body of facts which must carry
conviction to the mind of every hearer.
[2] The following was the vote:
YEAS--Messrs. Benton, Buckner, Calhoun, Dallas, Dickerson, Dudley,
Forsyth, Johnston, Kane, King, Rives, Robinson, Seymour, Tomlinson,
Webster, White, Wilkins, and Wright--18.
NAYS--Messrs. Bell, Bibb, Black, Clay, Clayton, Ewing, Foot,
Grundy, Hendricks, Holmes, Knight, Mangum, Miller, Moore, Naudain,
Poindexter, Prentiss, Robbins, Silsbee, Smith, Sprague, Tipton,
Troup, Tyler--24.
Mr. B. said he would take up the sugar duties first, and show what
had been the operation of the act of 1833, in relation to the
revenue from that article, and the drawbacks founded upon it. In
document No. 275, laid upon our tables on Friday last, we find four
tables in relation to this point, and a letter from the Register of
the Treasury, Mr. T. L. Smith, describing their contents.
These tables are all valuable. The whole of the information
which they contain is useful, and is applicable to the business
of legislation, and goes to enlighten us on the subject under
consideration; but it is not in my power, continued Mr. B., to quote
them in detail. Results and prominent facts only can be selected;
and, proceeding on this plan, I here show to the Senate, from table
No. 1, that as early as the year 1837--being only four years after
the compromise act--the drawback paid on the exportation of refined
sugar actually exceeded the amount of revenue derived from imported
sugar, by the sum of $861 71. As the duties continued to diminish,
and the drawback remained the same, this excess was increased in
1838 to $12,690; and in 1839 it was increased to $20,154 37. Thus
far the results are mathematical; they are copied from the Treasury
books; they show the actual operation of the compromise act on this
article, down to the end of the last year. These are facts to pause
at, and think upon. They imply that the sugar refiners manufactured
more sugar than was imported into the United States for each of
these three years--that they not only manufactured, but exported,
in a refined state, more than was imported into the United States,
about 400,000 lbs. more the last of these years--that they paid
duty on these quantities, not leaving a pound of imported sugar
to have been used or duty paid on it by any other person--and not
leaving a pound of their own refined sugar to be used in the United
States. In other words, the whole amount of the revenue from brown
and clayed sugars was paid over to 29 sugar refiners from 1837: and
not only the whole amount, but the respective sums of $861 71, and
$12,690, and $20,154 37, in that and the two succeeding years, over
and above that amount. This is what the table shows as far as the
act has gone; and as we know that the refiners only consumed a small
part of the sugar imported, and only exported a part of what they
refined, and consequently only paid duty on a small part, it stands
to reason that a most enormous abuse has been committed--the fault
of the law allowing them to "draw back" out of the Treasury what
they had never put into it.
The table then goes on to show the prospective operation of the
act for the remainder of the time which it has to run, and which
will include the great reductions of duty which are to take place
in 1841 and 1842; and here the results become still more striking.
Assuming the importation of each succeeding year to be the same that
it was in 1839, and the excess of the drawback over the duties will
be, for 1840, $37,343 38; for 1841, the same; for 1842, $114,693
94; and for 1843, the sum of $140,477 45. That is to say, these
refiners will receive the whole of the revenue from the sugar tax,
and these amounts in addition, for these four years; when they would
not be entitled, under an honest law, to more than the one fortieth
part of the revenue--which, in fact, is more than they received
while the law was honest. These will be the bounties payable out
of the Treasury in the present, and in the three succeeding years,
provided the importation of sugars shall be the same that it was
in 1839; but will it be the same? To this question, both reason
and experience answer in the negative. They both reply that the
importation will increase in proportion to the increased profit
which the increasing difference between the duty and the drawback
will afford; and this reply is proved by the two first columns in
the table under consideration. These columns show that, under the
encouragement to importation already afforded by the compromise
act, the import of sugar increased in six years from 1,558,971
pounds, costing $72,336, to 11,308,561 pounds, costing $554,119.
Here was an enormous increase under a small inducement compared to
that which is to follow; so that we have reason to conclude that
the importations of the present and ensuing years, unless checked
by the passage of the bill which I propose to bring in, will not
only increase in the ratio of the past years, but far beyond it;
and will in reality be limited only by the capacity of the world to
supply the demand: so great will be the inducement to import raw
or clayed sugars, and export refined. The effect upon our Treasury
must be great. Several hundred thousand dollars per annum must be
taken from it for nothing; the whole extracted from the Secretary of
the Treasury in hard money; his reports having shown us that, while
paper money, and even depreciated paper, is systematically pressed
upon the government in payment of duties, nothing but gold and
silver will be received back in payment of drawbacks. But it is not
the Treasury only that would suffer: the consumers of sugar would
come in for their share of the burden: the drawback will keep up the
price; and the home consumer must pay the drawback as well as the
government; otherwise the refined sugar will seek a foreign market.
The consumers of brown sugar will suffer in the same manner; for
the manufacturers will monopolize it, and refine it, and have their
five cents drawback, either at home or abroad. Add to all this,
it will be well if enterprising dealers shall not impose domestic
sugars upon the manufacturers, and thus convert the home crop into
an article entitled to drawback.
Such are the mischiefs of the act of 1833 in relation to this
article; they are great already, and still greater are yet to
come. As early as 1837, the whole amount of the sugar revenue, and
$861,71 besides, was delivered over to some twenty odd manufacturers
of refined sugars! At this day, the whole amount of that revenue
goes to these few individuals, and $37,343,38 besides. This is the
case this year. Henceforth they are to receive the whole amount of
this revenue, with some hundreds of thousands of dollars besides,
to be drawn from other branches of revenue, unless this bill is
passed which I propose to bring in. This is the effect of the act,
dignified with the name of compromise, and hallowed by the imputed
character of sacred and inviolable! It turns over a tax levied from
seventeen millions of people on an article of essential comfort,
and almost a necessary; it turns over this whole tax to a few
individuals; and that not being enough to satisfy their demand,
they receive the remainder from the National Treasury! It violates
the constitution to the whole extent of the excess of the drawback
over the duty. It subjects the Treasury to an unforeseen amount of
undue demands. It deprives the people of the whole benefit of the
reduction of the sugar tax, provided for by the act itself; and
subjects them to the mercies of those who may choose to monopolize
the article for refinement and exportation. The whole number of
persons into whose hands all this money and power is thrown, is,
according to a statement derived from Gov. Wolf, the late collector
of the customs at Philadelphia, no more than own the 29 sugar
refineries; the whole of which, omitting some small ones in the
West, and three in New Orleans, are situate on the north side of
Mason and Dixon's line. Members from the South and West complain
of the unequal working of our revenue system--of the large amounts
expended in the northeast--the trifle expended South and West.
But, why complain? Their own improvident and negligent legislation
makes it so. This bill alone, in only one of its items--the sugar
item--will send millions, before 1842, to the north side of that
famous line: and this bill was the concoction, and that out of
doors, of one member from the South and one more from the West.
Mr. Benton would proceed to the next article to the effect upon
which, of the compromise act, he would wish to call their attention;
and that article was imported molasses, and its manufacture, in
the shape of exported rum. On this article, and its manufacture,
the operation of the act was of the same character, though not to
the same degree, that it was on sugars; the duties were reduced,
while the drawback remained the same. This was constantly giving
drawback where no duty had been paid; and in 1842 the whole of the
molasses tax will go to these rum distillers--giving the legal
implication that they had imported all the molasses that came into
the United States, and paid duty on it--and then exported it all
in the shape of rum--leaving not a gallon to have been consumed by
the rest of the community, nor even a gallon of their own rum to
have been drank in the United States. All this is clear from the
regular operation of the compromise act, in reducing duties without
making a corresponding reduction in the drawbacks founded upon
them. But is there not to be cheating in addition to the regular
operation of the act? If not, we shall be more fortunate than we
have been heretofore, and that under the circumstances of greater
temptation. It is well known that whiskey can be converted into New
England rum, and exported as such, and receive the drawback of the
molasses duty; and that this has been done just as often as the
price of whiskey (and the meanest would answer the purpose) was
less than the cost of molasses. The process was this. Purchase base
whiskey at a low rate--filtrate it through charcoal, to deprive
it of smell and taste--then pass it through a rum distillery, in
company with a little real rum--and the whiskey would come out rum,
very fit to be sold as such at home, or exported as such, with the
benefit of drawback. All this has been done, and has been proved to
be done; and, therefore, may be done again, and certainly will be
done, under the increased temptation which the compromise act now
affords, and will continue to afford, if not amended as proposed by
the bill I propose to bring in. It was proved before a committee
of the House of Representatives in the session of 1827-8. Mr.
Jeromus Johnson, then a member of Congress from the city of New
York, now a custom-house officer in that city, testified directly
to the fact. To the question: "_Are there not large quantities of
whiskey used with molasses in the distillation of what is called New
England rum?_" He answered: "_There are:_" and that when mixed at
the rate of only four gallons to one, and the mixture run through
a rum distillery--the whiskey previously deprived of its taste
and smell by filtration through charcoal--the best practised rum
drinker could not tell the difference--even if appealed to by a
custom-house officer. That whiskey is now used for that purpose, is
clearly established by the table marked B. That table shows that
the importation of foreign molasses for the year 1839 was 392,368
gallons; and the exportation of distilled rum for that quantity
was 356,699 gallons; that is to say, nearly as many gallons of rum
went out as of molasses came in; and, admitting that a gallon of
good molasses will make a gallon of rum, yet the average is below
it. Inferior or common molasses falls short of producing gallon
for gallon by from 5 to 7-1/2 per cent. Now make an allowance for
this deficiency; allow also for the quantity of foreign molasses
consumed in the United States in other ways; allow likewise for
the quantity of rum made from molasses, and not exported, but
consumed at home: allow for these three items, and the conviction
becomes irresistible, that whiskey was used in the distillation of
rum in the year 1839, and exported with the benefit of drawback!
and that such will continue to be the case (if this blunder is not
corrected), as the duty gets lower and the temptation to export
whiskey, under the disguise of New England rum, becomes greater.
After 1842, this must be a great business, and the molasses drawback
a good profit on mean whiskey.
Putting these two items together--the sugar and the molasses
drawbacks--and some millions must be plundered from the Treasury
under the preposterous provisions of this compromise act.