of the war in 1713 were loth to take up again the burden or taxation and
for the next forty years the government supported itself almost entirely
by means of bills of credit. The usual method of procedure was this.
Bills of credit were issued and loaned at interest, for a term of years,
to landholders on mortgage security to double the amount of the bills.
These loans were termed "Banks." The following table shows the Banks
issued before the Revolution, the number of years for which they were
loaned, the rate of interest received and the value of the bills at the
time of issue.
_No. _Date._ _Amount._ _Years _Rate of _Value of silver in
of loaned._ Interest._ bills._
Bank._
I 1715 £40,000 13 5 12s. per ounce.
II 1721 40,000 13 5 16s. per ounce.
III 1728 40,000 13 5 18s. per ounce.
IV 1731 60,000 10 5 22s. per ounce.
V 1733 100,000 10 5 25s. per ounce.
VI 1738 100,000 10 5 27s. per ounce.
VII 1740[103] 20,000 10 4 6s. 9d. per ounce.
VIII 1743[104] 40,000 10 4 6s. 9d. per ounce.
IX 1750 25,000 10 5 6s. 9d. per ounce.
At the expiration of the loans interest ceased and repayment was made in
ten equal annual instalments.[105] The amount legally outstanding in
January 1740-1 was £340,000, (sterling value £88074-16s. 10-3/4d.)[106]
the actual amount was doubtless greater, as we know that repayment was
not always promptly made.[107] In addition to the Banks the General
Assembly had from time to time made direct issues of bills of credit.
Before 1739, however, these issues were principally to replace worn and
torn bills and did not increase materially the circulation. According to
a report made in October 1739 the amount issued up to that time
(including everything but the banks) was £117,001-15s. This sum had been
offset by bills burnt to the amount of £105,704-15s. 3d., leaving an
increase of circulation due to these issues of £11296-19s. 9d. Under the
stress of war which now began and continued for several years these
issues were largely increased. According to a report prepared in
February 1749/50, for transmission to the English government, there was
issued from September 1740 to February 1747 £206,000. The committee sums
up its report in regard to these bills as follows: "At divers times,
from the year 1710, to the year 1747, the colony has emitted bills of
credit to the amount of £312300, old tenor; and there hath been called
in and burnt at several times from the year 1728 to 1748, £176,964, 6s.
10d.; and by the last settlement of the general treasurer's account, it
appears that there was then in the public treasury, £24,891 10s. 10d.
from all which it appears that there is now outstanding of the bills
issued to supply the treasury, £110,444 2s. 3d.; the whole of which
outstanding sum was issued in the years 1746 and 1747,and is equal to
£10,040 7s. 5d. sterling."[108]. The amount legally outstanding in bank
money was £390,000 old tenor (£210,000 nominal) sterling value £35,444,
9s. 2d. The increased issues had depreciated the paper money so rapidly
that its relation to sterling was now as 11 to 1. As in 1739, the actual
amount outstanding the legal amount. By the aid of remittances from
England for the reimbursement of war expenditures Massachusetts
succeeding in sinking her paper bills. Rhode Island with much larger
proportional issues failed to follow the same course.
Douglas in 1748 estimated the total amount of bills of all kinds
outstanding at £550,000 old tenor and even this seems to have been an
under rather than over estimate.
In 1751 came the ninth and last bank, of a nominal value of £25,000
equal to £237000 old tenor. The issue of this bank was the last victory
of the paper money party. For many years a strong opposition had been
developing. As early as 1731 a protest against the issue of the fourth
bank, signed by prominent citizens, had been sent to the king. Protests
were also entered against the seventh and eighth banks, and in 1750
another petition against paper money issues signed by seventy two
persons, representing the merchants of Newport, the commercial centre of
the colony, was presented to the king. In 1751 parliament passed an act
which, supported by the growing sentiment in favor of better financial
methods, may be said to mark the downfall of the paper money policy. The
principle provisions of the act were that, after September 29, 1751,
bills of credit could be issued only with the consent of the
home-government, and that provision must be made for calling them in
within two years in the case of issues to meet current expenses, and in
five years in the case of emergencies such as war. The time of the bills
already out was not to be extended, and no bills issued or to be issued
were to be made a legal tender. It seems best to anticipate for a moment
and trace to its end the history of the issues already made. First, as
to the bills issued to supply the treasury. Of those which had been
called in and burnt previous to 1749, £88725 had been sunk by means of
grants made by parliament to reimburse the colonies for the expenses
incurred in King George's War. In 1751 £24280 more wore sunk in like
manner. Between this date and 1785 £17368 were sunk from the proceeds of
taxes leaving outstanding £93688. This sum was called in by a tax for
the exact amount levied in 1769.
Provision for calling in the bank money by repayment of the loans had
been made as we have seen in the acts of issue. The whole amount should
have been repaid by 1767, but instead of this a report made to the
general assembly in May 1770 shows that there was still outstanding
£92615 old tenor value.
The bills continued to depreciate rapidly. In 1763 the following table
was adopted as a standard for the determination of old tenor debts.
£. s. d.
In the year 1751 a Spanish milled dollar was worth 2 16 0
In the year 1752 a Spanish milled dollar was worth 3 00 0
In the year 1753 a Spanish milled dollar was worth 3 10 0
In the year 1754 a Spanish milled dollar was worth 3 15 0
In the year 1755 a Spanish milled dollar was worth 4 05 0
In the year 1756 a Spanish milled dollar was worth 5 05 0
In the year 1757 a Spanish milled dollar was worth 5 15 0
In the year 1758 a Spanish milled dollar was worth 6 00 0
In the year 1759 a Spanish milled dollar was worth 6 00 0
In the year 1760 a Spanish milled dollar was worth 6 00 0
In the year 1761 a Spanish milled dollar was worth 6 10 0
In the year 1762 a Spanish milled dollar was worth 7 00 0
In the year 1763 a Spanish milled dollar was worth 7 00 0
At the same time it was "enacted and declared, that lawful money of this
colony is, and shall hereafter be silver and gold coin; and that nothing
else shall be taken and understood to be lawful money of this Colony."
Old tenor suffered a still further depreciation, until in the tax act of
February 1769 it was ordered that it be received at the rate of $1 for
£8. By act of September 1770, its circulation was forbidden after
January 1, 1771. The rapid depreciation since the issues at the time of
King George's War together with the return of Massachusetts to a specie
currency at the end of the war seems to have been disastrous for Rhode
Island commerce which was mostly with the West Indies. The disturbance
was aggravated by the approaching war, and so numerous did mercantile
failures become that a general insolvency act was passed in 1756.
Financial History 1751-1790.
_Financial History 1751-1775._
During the French and Indian war paper money was issued in large
quantities but provision was made for its redemption in accordance with
the Act of Parliament in 1751, and an earnest attempt was made to meet
the obligations thus incurred.
The period from 1751 to 1775 was really a period of war financiering,
for the debt incurred for war purpose was not extinguished until the
beginning of the Revolution, and we shall treat it as a whole.
The sources of revenue were loans, bills of credit, treasury notes,
grants made by the English government, and taxes.
_Loans._
These were usually advanced by private individuals. Unfortunately the
accounts entered in the colony book by the auditing committees were not
kept in such a manner as to enable us to determine with satisfactory
certainty either the amounts borrowed or the times of repayment. The
difficulty is the greater with regard to the latter point. So far as the
books show the sums borrowed between 1751 and 1775, reduced to sterling,
amounted to about £28,441, of which all but about £4,000 was borrowed
during the six years 1755-1761.
_Bills of Credit._
The history of the bills issued up to the year 1751 we have already
considered. It remains to describe the issues of the present war.
The first of these issues was in 1755 to meet the expenses of the Crown
Point expedition. The bills were of the old tenor denomination,
amounting to £240,000 equal to £13,500 sterling. They were to circulate
two years without interest and then be called in and sunk. The
subsequent issues were all in what were known as lawful money bills.
They were issued at various times from 1756 to 1767, the total amount
being £97,569 equal to £73,360 sterling. All but £6660 were issued on or
before August 1762, £14,000 issued in 1756 were to run for two years and
without interest. The other emissions were for five years with interest
at 5%. The bills were declared equal to silver at 6s. 9d. per ounce.
_Treasury Notes._
These were interest bearing notes issued to meet the bills of credit,
bonds given for money borrowed or other treasury notes as they fell due,
when receipts from other sources did not suffice for redemption. The
practical effect was to work an extension of the debt. As shown by the
treasury reports these notes seem to have been issued for the most part
between the years 1765 and 1775 and amounted to £46,549 lawful money
equal £34,999 sterling. The greater part seem to have been redeemed at
the outbreak of the Revolution.
_Receipts from England._
These were grants made by the English government to reimburse the colony
for expenses incurred in the war. These grants made throughout the
course of the war amounted to about £50,000 sterling and there was
received from the English commanders in this country about £4000 or
£5000 more, making in round numbers £55,000.
_Taxes._
We now come to the source of revenue which concerns us most nearly. A
slight attempt to resume taxation had been made at the time of King
George's war. A tax of £10,000 old tenor (£1677 sterling) had been
ordered in 1744 and another of £5,000 new tenor (£2000 sterling) in
1747/8, but the paper money party was still in the ascendant and it was
not until after the overthrow of that party that the policy of taxation
was seriously resumed in 1754.
The following table will show the taxes levied from that date to the
beginning of the Revolution, together with their sterling values at the
time the tax was ordered.
(o. t. = old tenor. l. m. =
lawful money. The second
column contains the
sterling values.)
1754 £35,000. (o. t.) £2102
1755 70,000. (o. t.) 3710
1756 53,000. (o. t.) 2274
4,000. (l. m.) 3008
1757 100,000. (o. t.) 3917
150,000. (o. t.) 5875
4,000. (l. m.) 3008
1758 6,000. (l. m.) 4512
110,000. (o. t.) 4129
1759 11,000. (l. m.) 8271
1760 15,547. (l. m.) 11689
1761 16,000. (l. m.) 12030
1762 8,000. (l. m.) 6015
1763 12,000. (l. m.) 9023
1764 12,000. (l. m.) 9023
1765 12,469. (l. m.) 9375
1766 6,000. (l. m.) 4511
75,000. (o. t.) 2252
1769 6,000. (l. m.) 4511
93,688. (o. t.) 2638
1770 12,000. (l. m.) 9023
1771 £12,000. (l. m.) £9023
1772 12,000. (l. m.) 9023
1773 4,000. (l. m.) 3008
1774 4,000. (l. m.) 3008
This would give an average annual taxation for the twenty-one years of
£6,950 sterling or $33,777. in our money, equal to about 70 cents per
capita.
Taxation, however, varied greatly at different periods. For the eleven
years 1756-1766 the average annual tax was $43,707., about $1.00 per
capita; for the five years 1757-1761 it was $51,935., equal to $1.18 per
capita. Taxation reached its height in 1760 and 1761 amounting to
$57,637. a year and $1.28 per capita. By 1773 it had fallen off to
$14,619. a year, or a trifle less than 25 cents per capita. An estimate
of the rateable property in 1762 gave a valuation of £26,105,423 old
tenor, equal to about $4,224,178. Using this as a basis the rate of
taxation in 1760 and 1761 would have been about 1.36 per cent. on the
value of rateable property. An estimate of 1769 gave a property
valuation of $7,706,449. (£2111356 lawful money). The rate of taxation
in 1773 and 1774 was only .19 per cent. on this valuation. The average
rate for the whole period seems to have been about one half of one per
cent. By far the greater part of this taxation was for war purposes. The
regular expenses of colonial government do not seem to have exceeded
$7300. (£2000 lawful money) per annum, which towards the end of the
period would amount to not more than 12 cents per capita, or one tenth
of one per cent on valuation.
The above is a general outline of the financial operations of the
period. The indebtedness of the colony at any particular date is
difficult to determine. A committee in 1762 estimated that there were
outstanding bills to the amount of about £53231 sterling. According to a
report of a like committee in 1762 the amount was about £43000. In
addition, however, the colony was considerably in debt for money hired.
Whatever debt there was, however, seems to have been, for the most part,
extinguished in the early years of the Revolution.
Financial History of the Revolution.
With the opening of the Revolution a new debt began to roll up. £60,000
in bills of credit (lawful money) were emitted in 1775 and £80,000 in
the following year. A meeting of commissioners from the New England
states, in Providence, December 1776, recommended that Rhode Island
issue no more bills of credit, except of fractional denominations, but
depend upon loans and taxes. The State complied with the suggestion and
the only other issue of bills, before 1780, was in May 1777, when £4,500
in fractional currency was emitted. These bills of credit, as well as
the continental bills, were declared a legal tender. They seem to have
kept their value fairly well until the beginning of the year 1777, when
a rapid depreciation set in. In accordance with the recommendation of
Congress they were called in by Act of May 1778, and their circulation
forbidden after July first of that year. After this date continental
money, probably, formed the main circulating medium, until depreciation
had gone so far that in 1780 the tender laws were repealed and a return
made to a gold and silver basis. Up to June, 1779, the colony seems to
have borrowed £162,756. In addition there were, all through the war,
issues of certificates in payment of various obligations. It is
impossible even to approximate to their amount. They were in many cases
made receivable for taxes and were redeemed in this way. Taxation was
resumed in March 1777, and vigorously applied, but so heavy were the
burdens which fell upon the State in its weakened condition that in the
summer of 1780 the treasury was empty.
This led to the issue of £20,000 more in bills of credit. This was the
last issue of paper money by the State during the War. A considerable
portion of the debt had been redeemed by taxation. That part of the debt
incurred during the paper money period, which still remained
outstanding, was called in by several Acts of 1782 and scaled down to
the basis of the special value at the time the obligation was incurred,
for which amount the treasurer issued his notes, payable in lawful money
(silver), in from three to six years, bearing interest at six per cent.
The want of accurate accounts leaves us in doubt as to just what was the
effect of this consolidation and reduction. A committee reporting in
October 1783 places the state debt at £123,892-15-11, in addition to
£19,922-2-0 of the state's proportion of the new continental emission
(March 1780) outstanding.
The greater part of this latter sum, however, had never left the
treasury. A report of a committee in March 1787 placed the debt at
£153,047-15-7. In the mean time steps had already been taken for its
extinguishment.
In the years succeeding the war the colony was in a wretched economic
condition. It was exhausted by the heavy financial and other burdens,
the disturbance to industry, and the loss that had resulted from a long
continued and destructive occupation of the commercial centres or the
state by the British, as well as by the presence of the American army
which had to be clothed and fed. Trade was interrupted, a large portion
of the able bodied men had entered the army, and even those who remained
at home were liable to be called upon at any moment for temporary
service, or to have their property taken at an appraised valuation.
Services rendered to the state were paid for only by promises of
constantly decreasing value. As a result of all these causes economic
society was disorganized. In the midst of such conditions the state was
called upon to face a heavy debt. The treasury was completely exhausted
and the people seemed unwilling to submit to further taxation. The
legislature again turned to paper money for relief, and in May 1786
ordered the issue of the tenth bank. The amount was £100,000 and it was
to be loaned, as were the others, on double mortgage security. The rate
of interest was four per cent., and repayment to be completed within
fourteen years. Depreciation was immediate and rapid, but the paper
money party was firmly seated in power and the legislature passed acts
of the most extreme character to enforce the circulation of the bills.
The ordinary legal procedure, including trial by jury, was suspended in
the case of offenders against the paper money laws. These "forcing
acts", as they were called, came to naught, however, as the supreme
court refused to exercise jurisdiction. Balked in their effort to force
the circulation of the bills, the legislature turned to the easier task
of paying off the state debt in the depreciated currency. By a series of
acts, ranging from December 1786 to March 1789, the holders of the state
debt were ordered to bring in their claims and receive payment in the
paper bills, under penalty of forfeiture of the whole amount. As a
result of this threat about one half of the debt seems to have been
presented and paid, the smaller holders as a rule yielding to necessity,
the larger holders standing out in the hope of a more profitable
adjustment. The paper money party was now nearing the end of its power.
An act of October 1789 made the bills of 1786 receivable at fifteen to
one for coin, and authorized those to whom the money had been loaned by
the state to make repayment upon the same basis.
In May 1790 the state entered the Union, and the possibility of such
schemes in the future ceased. Those who had been able to resist the
attempt of the state to pay their claims in a depreciated currency now
reaped the benefit of their foresight. By act of August 4, 1790 Congress
provided for the assumption of $21,500,000. of state debts, of which
$200,000. was allowed to Rhode Island. Seeing the injustice which would
accrue to those who had been compelled to accept their payment in paper
money, the assembly in June 1791 passed an act repealing the various
acts which had declared null and void the securities which had not been
brought in in accordance with the acts of 1786-1789. Where payments had
been made on securities in paper money the treasurer was authorized to
reduce the amount so paid to specie value and deduct it from the face
value of the security, the remainder to be presented with other
securities for subscription to the United States loan. The United States
commissioner, however, refused to receive these certificates, as the law
under which the assumption took place provided that only those notes and
certificates which had been issued prior to January 1, 1790 would be
received. Thus the whole of this assumption enured to the benefit of
those who had not brought in their securities for payment, as ordered by
the state. On the day following the assumption of the state debts, just
referred to, Congress provided for a settlement of accounts between the
United States and the individual states. The latter were to be debited
with all advances made by the general government and credited with all
disbursements made for "the general or particular defence during the
war, and on the evidence thereof according to the principles of general
equity (although such claims may not be sanctioned by the resolves of
Congress, or supported by regular vouchers)." The settlement of these
accounts showed Rhode Island to be a creditor of the United States to
the amount of $299,611. The final settlement between the state and its
creditors is shown in the report of the general treasurer in Feb. 1797.
The whole amount of the debt recognized by the state was $503,594.76.
$419,662.30 of this was paid by the transfer of United States stock in
the possession of the state and $83,932.46 by the issue of 4% state
certificates. This last formed what was known as the registered state
debt. It was added to, from time to time, by the recognition of new
claims for Revolutionary service and was diminished by occasional
purchases by the state at a rate below the par value, but the state was
always loth to recognize its full responsibility for the debt and ended
by practical repudiation.
The above is an outline of the financial history of the state during the
Revolution. We now turn back for a moment to obtain a more detailed idea
of taxation. Perhaps this can best be done, as in the case of the French
and Indian war, by means of a table. (The date given is that of the
passage of the act assessing the tax. The first column contains the
nominal amount of the tax as stated in said act. The second column
contains the nominal amount of the tax actually assessed, certain
deductions being necessary on account of the occupation of portions of
the state by the enemy and for other reasons. The third column contains
the same reduced to specie value, and the fourth column contains the
same expressed in our present dollars. The taxes marked with a star are
for continental purposes)[109].
Date. Nominal Nominal Specie Value in
value in value value dollars.
pounds. assessed. assessed.
March, 16,000 12,658 11,613 42,387.
1777.
Aug. 1777. 32,000 25,316 16,877 61,601.
Dec. 1777. 48,000 37,115 11,973 43,701.
------- --------
147,689.
Feb. 1778. 32,000 24,365 6,962 25,411.
June 1778. 32,000 24,289 6,072 22,163.
Oct. 1778. 32,000 After 6,000 21,900.
------- --------
69,474.
Feb. 1779. 60,000 June, 6,912 25,229.
x Feb. 90,000 1778, 10,369 37,847.
1779.
June 1779. 60,000 the 4,471 16,319.
x June 225,000 first 16,766 61,196.
1779.
x Dec. 120,000 and 4,628 16,892
1779.
------- --------
157,483.
x Feb. 180,000 second 5,418 19,776.
1780.
x May 1780. 180,000 columns 3,913 14,282
May 1780. 180,000 are the 3,913 14,282.
July 1780. 10,000 same. 10,000 36,500.
July 1780. 400,000 5,797 21,159
Nov. 1780. 1,000,000 13,514 49,326.
Nov. 1780. 16,000 16,000 58,400.
------- --------
213,725.
May, 1781. 20,000 20,000 73,000
May, 1781. 6,000 6,000 21,900
------- --------
94,900
x Jan. 6,000 6,000 21,900
1782.
Jan. 1782. 12,000 12,000 43,800
x Feb. 6,000 6,000 21,900
1782.
x June 12,000 12,000 43,800
1782.
------- --------
131,400.
June 1783. 20,000 20,000 73,000
------- --------
73,000.
June 1784. 20,000 20,000 73,000
------- --------
73,000
Aug. 1785. 20,000 20,000 73,000
------- --------
73,000.
------- --------
June 1786. 20,000 13,333 48,665.
------- --------
48,665
March 1787. 20,000 3,534 12,899
Sept. 1787. 30,000 5,000 18,250.
------- --------
31,149.
June 1788. 30,000 4,000 14,600
------- --------
14,600
March 1789. 20,000 1,667 6,085
------- --------
6,085.
In addition to these money taxes there were various other burdens which
took the form of more or less arbitrary contributions. Enactments were
early passed regulating the prices of all articles, and, in case they
could not be otherwise procured, authorizing their seizure at these
stated prices to meet various expenditures. It became customary, when
troops were to be raised, to require each town to raise a certain
number, often a cause of considerable expense, and, as the war went on
and paper money and loans failed as sources of state revenue, it was
common to hold each town responsible for a certain quantity of clothing
or provisions. Payment of some kind was generally provided for, but,
owing to the wretched financial conditions of the time, these
requirements must have operated to a certain extent as a tax.