Reduction of internal taxes [microform] : an address before the New York Tariff Convention, November 29, 1881 : condensed

MASTER NEGATIVE if COLUMBIA UNIVERSITY LIBRARIES PRESERVATION DIVISION BIBLIOGRAPHIC MICROFORM TARGET ORIGINAL MATERIAL AS FILMED - EXISTING BIBLIOGRAPHIC RECORD OCLC: 38461817 Entered: 19980218 ► Type: BLvl : Rec stat: Replaced: Srce: d Desc : 1 2 3 4 5 6 7 040 007 007 007 049 100 1 245 10 19980218 Audn: Biog: Fict : 0 DtSt : s Used: Ctrl : MRec : Indx: 0 ELvli K Srce: d Audn: Ctrl- Form: a Conf: 0 Blog: MReci Cont: GPub: Fict: 0 indx: Ills: Fest: 0 DtSt: s Dates- PRl *c PRl t • h *b d *d a +e f tf a *g b *h a *1 c *j p j h *b d -td a *e f *f a *g b *h a *i a +j p , h *b d *d a *e f a— *g b *h a *i b p 5 19980218 Lang: eng Ctry: pau Dates: 1887, ^ 5 049 PRIA 1 " - - - -j F ► 7 Jn (William Darrah), »d 1814-1890. 1 the New York T-ifrCopenL™'"Novim^:rL ► 9 300 Phrladelphxa : *b Industrial League, *c 1887. I F 9 300 15 p. ; *c 23 cm. I ► 10 440 0 Tariff tract ; tv no. 2, 1887 i ► 11 500 Caption title. 1 RESTRICTIONS ON USE Reproductions may not be made without permission from Columbia University Libraries. TECHNICAL MICROFORM DATA FILM SIZE: REDUCTION RATIO: //.'/ IMAGE PLACEMENT: lA DATE FILMED 3/3//f INITIALS TRACKING # : FILMED BY PRESERVATION RESOURCES, BETHLEHEM, PA. TARIFF TRACT No. 2, 1887. Published by The INDUSTRIAL LEAGUE, at No. 261 South Fourth Street, Philadelphia, where copies of this tract may be had for distribution. Address The Industrial League. REDUCTION OF INTERNAL TAXES. An Address before the New York Tariff Convention, November 29, 1881. (Condensed.) BY HON. WILLIAM D. KELLEY. * I To REFUSE to abolish at the earliest practicable day our whole system of internal taxes, except the tax on notes other than those of National banks, would show a disregard of the teachings of the fathers and the cherished traditions of the people. Excise duties and personal and land taxes have ever been regarded as constitut- ing legitimate sources of revenue for State and local governments. Interference with them by the National Government has alwavs provoked resistance. The framers of the Constitution believed that duties on imports would furnish adequate revenue for the cur- rent expenses of the National Government, and the people have preferred that it should leave unimpaired all other sources of taxa- tion. It is true that the Federal Constitution provides that “ Con- gress shall have power to lay and collect taxes, duties, imposts, and excises” with which “to pay the debts and provide for the common defense and general welfare of the United States but the men who framed that Constitution did not intend that the Government should derive its current revenues from direct or internal taxes. Terrible experiences had taught them that resort to such taxes might be necessary in time of war, or to provide for the then exist- ing debt, or to meet any long-continued system of extraordinary expenditures. They therefore empowered Congress to impose such taxes. Neither the Continental Congress nor that of the Confed- eration was authorized to tax persons or things. They could de- clare the amount of revenue required and assess it in proportional quotas, the former upon the Colonies, the latter upon the States, but neither body had been empowered to enforce the collection and pay- ment of the indicated quota. To prevent the Legislature of Alassa- chusetts from providing for the assessment and collection of the 2 KEDUCTION OF INTERNAL TAXES. sum levied by the Congress of the Confederation upon that State was the object of Shay’s Rebellion. The history of Continental money, and the financial impotency of the Confederation which left a debt of more than $76,000,000 to confront the first Congress under the Constitution, had shown the patriots of that day that the power of taxation was a vital element of any stable system of government, and that such government must possess the right to impose, when exigency required, excise duties and taxes on land and persons. Consequently the grant of power I have cited was embodied in the Constitution. It was, however, I repeat, not believed that it would be necessary for the United States Government to resort to the imposition of any other taxes or duties than those which it should impose on goods imported from foreign countries. This is demonstrated by a study of the opinions expressed by Mr. Madison in the Convention for framing the Constitution, and by him and other gentlemen who had been members of that Convention or of State Conventions that ap- proved the Constitution, in the debates of the first Congress. That body met April 6, 1789, and in less than seventy-two hours after it assembled Mr. Madison introduced a measure for providing a national revenue. His introductory remarks were brief; and, though he did not allude in terms to direct or internal taxes, he took occasion to emphasize his opposition to a resort to either. He said : The deficiency in our treasury has been too notorious to make it nec- essary for me to animadvert upon that subject. Let us content ourselves with endeavoring to remedy the evil. To do this a national revenue must be obtained ; but the system must be such a one that, while it secures the object of revenue, it shall not be oppressive to our constitu- ents. Happy it is for us that such a system is within our power ; for I apprehend that both these objects may be obtained from an impost on articles imported into the United States. The discussion, in both Houses, of the bill thus presented was elaborate. There were advocates of Free Trade and of Protection in each House, but no member of either appears to have suggested a resort to any form of internal taxes; on the contrary, resort to them was disclaimed, and the assertion that “direct taxes can not be thought of, and even the excise Avould be unpopular,” elicited no dissent. It w'as the duty of Congress to designate sources of revenue and to provide agencies for their collection. Meanwhile the Govern- ment was without income, and was supported by unauthorized loans which Hamilton, as Secretary of the Treasury, negotiated through ADDRESS BY HON. WILLIAM D. KELLEY. 3 the Bank of New York. Having made these loans without author- ity of law, Hamilton took early occasion to recommend “the mak- ing of previous provision by law for such loans as the public exi- gencies may call for, defining their extent, and giving special au- thority to make them.” Madison’s Revenue Bill, though introduced literally upon the opening of Congress, did not become a law until July. By its terms the collection of duties was to begin on the 15th of August. The term was too brief, and the custom-houses in several States were not organized until late in September. Meanwhile each day added its expenses to the debt of the young nation. Whether the duties imposed would yield sufficient revenue for its support was problematical. On so vital a point no doubt must exist, and to se- cure adequate means for the support of the Government Congress reluctantly consented to the imposition of internal taxes, the collec- tion of which, under a bill prepared by Hamilton, should begin in 1792. The measure was intended as, and proved to be, a temporary expedient. The taxes imposed yielded in the first year less than $209,000, and in the second less than $308,000. The tariff, in 1791, produced $4,399,000; in 1792, $3,443,000; in 1793, $4,255,- 000, the collection of which larger sums aroused no popular feeling. But such was the repugnance of the people to the imposition of internal taxes by the Federal Government that two years sufficed to arouse hostility to the law, and to invoke, especially in Western Pennsylvania, the spirit that had inspired Shay’s Rebellion in Mas- sachusetts. It took the form of organized war, and is known in his- tory as the “Whisky Rebellion.” The appeals of Washington were in vain. The insurgents were so well armed and organized that the Administration was compelled to march into the insurrection- ary district an army composed of militia drawn from several States. The annual expenses of the Government were then a little over $6,000,000 ; yet the suppression of this revolt against internal taxes cost about $1,500,000. A repeal of the law in the face of such resistance could not be thought of. Its enforcement was required to illustrate the power of the Government to protect itself and enforce every act of Con- gress until the Supreme Court pronounced it to be unconstitutional. Congress, however, modified the law, and, while appearing to en- large its scope, contrived to make it more acceptable to the mal- contents. The taxes on spirits distilled from materials the product of the United States were reduced, and the importation of spirits from foreign parts, except in casks of the capacity of ninety gal- lons and upwards, was prohibited. The object of these provisions / 4 REDUCTION OF INTERNAL TAXES. was two-fold : to increase the revenues of the Government, and to inspire the discontented portion of the people with the hope that they might obtain a monopoly of the spirit trade of the country. Additional objects of taxation provided for were such as would reach the merchants of the seaboard cities — carriages, snuff, re- fined sugars, auction sales, licenses for retailing wine and spirits, and stamps on bills of exchange, bills of lading, and kindred in- struments. Farmers and planters could no longer assert that they alone were taxed. The amount collected under this amended law did not justify its retention. In but one year did it yield so much as $1,000,000. It was repealed, having in eleven years yielded but $6,112,097. The interference of the Federal Government with what were re- garded as subjects of taxation belonging legitimately to the States and local governments was a pervading source of discontent among the people, and in his first annual message President Jefferson recommended the repeal of the law. In doing this he said that the augmentation of population combined ivith other circum- stances had produced an augmentation of revenue which justified the repeal of all internal taxes. “ The remaining sources of reve- nue,” said he, “ivill be sufficient to provide for the support of Government, to pay the interest on the public debts, and to dis- charge the principal in shorter periods than the laws or the general expectations had contemplated. War, indeed, and untoward events may change the prospect of things, and call for expenses ivhich the imports can not meet; but sound principles will not justify our tax- ing the industry of our fellow-citizens to accumulate treasure for wars to happen we know not when, and which might not perhaps happen but for the temptations offered by that treasure.” Congress, responding to the wishes of the people, acted promptly on the President’s suggestion, and the first law providing for the col- lection of internal taxes by the National Government was repealed in 1802, at the end of eleven years of ineffectual enforcement. President Madison summoned Congress to meet in extra session in May, 1813, to provide men and money for carrying on the war with England. The receipts for customs in that year were a little over $13,000,000. This sura was palpably inadequate for the conduct of a war that might be costly and protracted. In his message the Piesident, after stating the receipts and expenditures for the preceding six months, advised Congress to “adopt a well- defined system of internal revenue in aid of existing sources.” Mr. Gallatin, Secretary of the Treasury, submitted drafts of laws which embodied the provisions of the law of 1789 and its supple- % V’ i ADDRESS BY HON. WILLIAM D. KELLEY. 6 r ments. He also proposed a direct tax on houses, lands, and slaves at their assessed value. These laws were enforced four years, during which the direct taxes yielded §10,469,992, and the excise or in- ternal taxes $14,143,852. Both were unpopular, and, responding to the demands of the people. President Monroe in his first message to Congress said : It appearing in a satisfactory manner that the revenue arising from imposts and tonnage and from the sale of public lands will be fully ade- quate to the support of the civil Government ; of the j>resent militarj’ and naval establishments, including the annual augmentation of the latter, to the extent provided for ; to the payment of the interest on the public debt; and to the extinction of it at the times authorized, without the aid of internal taxes, I consider it my duty to recommend to Con- gress their repeal. To impose taxes when the public exigencies require them is an obligation of the most sacred character, especially with a free people. The faithful fulfillment of it is among the highest proofs of their virtue and capacity for self-government. To dispense with taxes when it may be done with perfect safety is equally the duty of their represen- tatives. To those who are living under a law which yielded in one year, 1866, more than $310,000,000, it may seem strange that the people were so impatient of the petty exactions of these earlier laws. To me the wonder is that this generation has not long since followed the example of its fathers in demanding immediate repeal. On this point Hon. D. D. Pratt, then Commissioner of Internal Reve- nue, in his annual report for 1875, said : These forms of taxation have never met with popular favor, and with the exception of the present revenue law have never maintained their footing upon the statute-book for any considerable time. The tax- gatherer from earliest history has been an unwelcome presence, and his business an ungracious one. His oflSce is inquisitorial in its very nature, leading to inquiries into people’s aflfairs, the condition of their business, their losses and jgains, matters which most people prefer keeping secret from the public. The process of assessment and collection is summary, involving, in case of delinquency, penalties and sacrifice of property. The tax is a palpable thing to be paid, or some cherished possession is to be sold to meet it. No circumstances of poverty, misfortune, sickness, or death stay the distraint. Injustice in the assessment itself is reliev- able only by a circuitous process, involving first an application for abate- ment, next an application for a refund after the tax is paid or collected, and, these being overruled, an appeal to the courts against the collector. Here at last the claimant, who has insisted that he either owed no tax at all or a tax less than that demanded, collects from the Government what he has compulsorily paid, but frequently at the expense of ruinous delay and sacrifice. This picture of the vexations and hardships inherent in the ad- I 6 REDUCTION OF INTERNAL TAXES. ministration of a system of internal taxation is not overdrawn. They were appreciated by the members of the 37th and 38th Con- gresses to whom we owe the present law. They, however, found it impossible to provide means for the suppression of the Rebellion without resort to every constitutional source of taxation. Remem- bering how quick the people had been to repeal the laws of 178^ and 1813 they regarded the original law and its several supple- ments as a vast and comprehensive but temporary measure, a resort to the extraordinary powers with which the Constitution invested Congress specially to meet the exigencies of war. That it was not regarded as a permanent part of our revenue system is apparent from the alacrity exhibited by Congress to repeal the most oner- ous taxes at the earliest possible day after the close of the war. Indeed the war had scarcely closed when Congress busied itself in putting the system in process of gradual but rapid extinction^ So vigorously was the work pressed that Hon. David A. Wells, then Special Commissioner of Revenue, in his report of December, 1869, stated that taxes which if continued would at that time have yielded upwards of $200,000,000 per annum, had been repealed. This, it must be remembered, was the work of less than four legis- lative years. The prevailing sentiment in Congress was that the speedy abolition of internal taxes should be pressed as the policy of the country; and on the 12th of December, 1870, Mr. Kelley, of Pennsylvania, submitted to the House of Representatives of the 41st Congress the following resolution : Resolved, That the true principle of revenue reform points to the aboli- tion of the internal revenue system which was crc'ated as a war measure to provide for extraordinary expenses, the continuance of which in- volves the employment, at the cost of millions of dollars annually, of an army of assessors, collectors, supervisors, detectives, and other officers previously unknown, and requires the repeal at the earliest day consist- ent with the maintenance of the faith and credit of the Government of all stamp and other internal taxes. This resolution was adopted with but six dissenting votes, and it doubtless expressed the almost unanimous sentiment of the people. The American disciples of the Cobden Club had organized under the name of Revenue Reformers.” They saw in the terms of this resolution a declaration of principles so discordant with the British doctrines to which they had committed themselves that they com- menced an agitation by which they hoped to insure the repeal of this resolution or the adoption of one of opposite tenor. Pending this agitation the 42d Congress was elected, and in order to test the opinion of new members on this question Mr. Kelley soon after its i I ADDRESS BY HOK. WILLIAM D. KELLEY. orMnization announced hia intention of bringing the new House to a vote on the resolution just quoted. In order to give th«e who would reduce the duties ou imports rather than repeal interna taxes ample opportunity to organize their forces he permitted t e mouths of December, January, February, and March to pass, and on the 10th of April brought the 42d Congress to a direct vote by yeas and nays on his resolution. The 42d Congress reaffirmed the action of the 41st, with but 21 dissenting voices. These votes confirm with emphasis my assertion that internal taxes were impose as an inevitable but temporary burden from which the people were to be relieved at the earliest possible day. Time will not permit me further to pursue this point. CIVIL SERVICE REFORM. The demand for reform in our civil service is not a party catch- word, but the expression of a profound and growing conviction. The power the Government may exercise through the management of its patronage is feared by every patriot ; and measures and policies which involve an increase of the number of those who depend on Government employment for subsistence are in so lar regarded with disfiivor. This sentiment unites with economic rea- sons in demanding the abolition of the Bureau by which the mter- nal tax laws are administered. It is in charge of a commi^ioner, Avhose duties are well-nigh as important as were those of the bec- retary of the Treasury prior to our civil war. There were on the rolls of this Bureau during last year about four The cost of collecting the taxes for that year was $o,063,330. As they are collected in all the States and Territories of tlie Union, the political influence of these thousands of agents may be exert- ed in every election district in the country. If the time has come when we can rely upon customs duties, the traditional dependence of the National Government, we should abolish this source of ex- penditure and patronage. Why maintain tivo sets of officers and duplicate the cost of collecting our revenue if it be not absolutely necessary? These are consequences involved in the continuance of the internal tax system beyond the exigency which compelled a resort to it. To relieve the Government from the annual expend- iture of $5,000,000 in personal patronage, to remove four thousand people from its service and remand them to private pursuits, woul certainly be a long stride in the direction of civil service reform. These figures fail to represent the cost of this surplus system of taxation. The present law has, it is true, given rise to no or- ganized military resistance like that which appeared in Shay s or j 8 REDUCTION OF INTERNAL TAXES. the 'Whisky Eebellion ; but it would be a grave mistake to assume that it has been' peaceably enforced. In his report for 1880 Com- missioner Raum saA’s : It will be seen that during the last four years and four months 4,061 illicit distilleries have been .seized, 7,339 persons have been arrested for illicit distilling, 26 officers and employes have been killed and 57 wound- ed in the enforcement of the internal revenue laws. The litigation they have engendered has clogged the ivheels of justice in the United States courts in every judicial district; and to aiiproximate the real cost of the collection of these taxes would require us to know how many days of each session of the district and circuit courts of the United Stales haA'e been devoted to revenue cases ; how much the ordinary business of the courts has been interfered with and delayed by this jurisdiction; how many parties and Avitnesses have been required to be in attendance on such cases; hoAV far they trav'eled to reach the distant court house ; for how many days or Aveeks they were required to neglect their business, and what sum it cost each party, juror, and Avitness to giv'e such attendance npon the court. Each successUe report of the Commissioner contains among other schedules an abstract of the reports of District Attorneys. From the abstract embodied in the report for 1880 I find that the Avhole number of suits pending July 1, 1879, Avas 9,476 ; the whole number commenced during the fiscal year 1880 Avas 5,848 ; the number of suits decided in favor of the United States in 1880 Avas 2,621. Of these judgment and costs were paid in 1879 in but 877 cases. During the same year 415 cases Avere settled by compromise, 1,653 were dismissed, and 571 de- cided against the GoA^ernment. “ Here at last,” said Commissioner Pratt in the passage cited from his report, “the claimant Avho in- sisted that he either oAved no tax at all, or a tax less than that de- manded, collects from the GoA’^ernment Avhat he has compulsorily paid, but frequently at the expense of ruinous delay and sacrifice.” I recur to this passage because each annual abstract of reports of District Attorneys concerning suits and prosecutions under the internal revenue law includes sums refunded for taxes illegally assessed and collected, Avhich have amounted to over 81,000,000 in one year. A system of taxation that invoh^es all these consequences is certainly one not to be cherished by those Avho Avould reform our civil service. It Avill be said that the taxation at the close of the Avar, Avhen yve were raising $300,000,000 a year from the productive resources of the Korthern States alone, may hav'e been a burden, but that noAV our taxes, derived as they chiefly are from s])irits and tobacco, are ADDRESS BY HON. AVTLLIAM D. KELLEY. exactions A'oluntarily assumed by those Avho pay them. Thus it AV'as said during the 46th Congress, by a no less intelligent student of economic questions than our lamented President, that the citizen Avho paid the spirit tax made a voluntary contribution to the rev^e- nues of the GoA^ernment. Ko economic theory could be Avider of the mark than this. The sick and the dying pay this tax. It draAvs on the resources of CA^ery dispensary or other establishment for the relief of inA^alid poor. The good Avife in Maine or Kansas, lioAA'eA’er zealously she may desire to support the prohibitory law of the State, pays it when she prepares her camphor or arnica bottle. Xinety per cent, of the bottles and jars that adorn the shelves of a Avell-appointed pharmacy contain alcoholic produc- tions. It is the chief ingredient in quantity in all tinctures, fluid extracts, and elixirs; in chloroform, collodion, and ethyl ether; and is represented in a large percentage of the solid drugs dispensed by such an establishment. Nor is it in medicinal preparations alone that this tax is in- voluntarily paid, for alcohol enters as an ingredient or productive atrent into an infinite number of essential commodities. Addressing practical manufacturers it were idle to attempt to specify the infinite number of uses to Avhich alcohol is applied, or how largely the tax of $1.70 per gallon increases the cost of ar- ticles into the production of Avhich consumers do not suspect that it enters as agent or ingredient. An illustration or two in passing may not be out of place. When the Avar created a necessity for internal taxes American perfumery was finding acceptance in the markets of the world. It was not only displacing the perfumery of other countries in South America, ]\Iexico, and the West Indies, but was finding a market beyond the Atlantic in all countries from which it was not excluded by high duties or absolute prohibition. We then imported all our essential oils. The imposition of the spirit tax, and of war duties upon spices and essential oils, closed our leading manufactories and put an end to our export of perfumery and cosmetics. The restoration of this industry is noAV specially desirable. Ours is the land of fruits and flowers. Blossom and fruition are not marked by seasons in Cali- fornia: they are perpetual; yet the orange groves of Florida enjoy a Avider fame than those of California. Nor are these the onlv States in Avhich flower farms aa411 be sources of great profit Avhen the production of essential oils shall be demanded by our restored as- cendancy in the markets for cosmetics and perfumery. To this con- summation the repeal of the spirit tax is a condition precedent. Apart from economic considerations tAA^o classes of thinkers offer 10 REDUCTION OF INTERNAL TAXES. V definite views on the spirit tax. One would repeal the tax because it would not have the Government derive any part of its revenue from an article so liable to abuse. In support of their opinions this class may point with telling effect to the situation of the British Government. In the course of an article on Taxation of the Liquor Traffic, in the Princeton Revieio for September, 1878, that eminent moralist, Judge Robert C. Pitman, of Massachusetts, said : Tlie liquor traffic itself presents in England an appalling bribe against any effective legislation for its diminution. The returns of revenue for the United Kingdom for the year 1877 show that the traffic contributed £7,478,156 from the customs, and £25,969,126 from the excise ; making a total of £33,447,282, or over $160,000,000, and being over a third of the whole colossal revenue of the nation. A reform that threatens this must stir the very depths of the human heart and lay hold on the heights of religious motives, and then call for heroic effort. Not only the reform- ers, but intelligent journalists and students of public affairs, have come to recognize the gravity of the alliance between the Publicans and the Chancellor of the Exchequer. Surely every philanthropist will pray that the day may never come when our Government may be thus enslaved by the liquor traffic. The other class to which I refer would maintain these taxes, and would increase them in the belief that by their imposition the use of alcoholic stimulants may be abated. Judge Pitman did not ignore this aspect of his question, and in concluding his essay said : We are compelled to the conclusion, that the taxation of the liquor traffic offers no effective regulation of it ; that if held out as a measure of reform it is delusive, and stands in the way of better legislation ; and that in itself it has the double vice of being opjiosed to the better moral instincts, and of being operative as a bribe to pervert the public con- science. In this connection I content myself Avith remarking that I find in the Constitution no clause Avhich gives Congress authority to enact sumptuary laws. But if the Constitution did impart such poAver, and if it be expedient to prohibit the groAving of tobacco and the distillation of grain or molasses, this should be done in express terms by direct legislation. If the poAver Avas Avithheld, Congress should not be asked in the name of morals or religion to do by indirection Avhat it has no poAver to do directly. In the im- position of taxes duties, imposts, and excise, the objects to be con- sidered are defined by the terms of the Constitution ; they are “ to pay the debts ” and to “ provide for the common defense and general Avelfiire of the United States.” The fact that the internal taxes noAV collected are no longer needed for these purposes should im- pel statesmen Avho accept the Constitution as their guide to labor for repeal. Again, I ask that these taxes shall be repealed at the earliest practicable day because they are the sole restraint upon the freedom of trade betAveen American citizens. But for the restrictions they impose, trade within our territorial limits, and among our more than 50,000,000 people, AA'ould be free as air. The controlling idea of Madison and his associates in the Constitutional CouA’ention, subse- quently adopted by the German people under the title of the Zollver- ein, made possible the union of many discordant States in one grand Empire. Mr. Madison’s idea embraced the creation of a uniform system of impost duties, and the establishment of absolutely Free Trade within the States in all the commodities Avhich the jjeople of each might produce, combined Avith like absolute Free Trade among ourselves in foreign goods regularly received through a customs district. The British people have never conceiA’ed such freedom of trade as we enjoyed before the war ; and when relieved of these tax- es, and the arbitrary regulations Avith Avhich their collection A’exes those upon Avhom they are assessed, the freedom of our vast do- mestic trade Avill be an instructiA’e example to the AA’orld. INTERNAL TAXES FOSTER MONOPOLIES. Very feAV of us knoAV hoAV in\ddious these taxes are, or appre- ciate the influence they ha\’e had in creating monopolies. Let us take matches as an example. Prior to the assessment of a tax on this article the establishment of a match factory required but little cajjital. Indeed the business Avas so accessible that small factories Avere found in many parts of the country. The tax laws concen- trated the production of this trh'ial article, (the retail price of Avhich should be the one-hundredth part of a cent, but from the tax on AA’hich Ave deri\'ed last year OA'er $3,500,000,) and put the Avhole trade in the hands of a syndicate or copartnership. Stamps must be applied to the boxes before the article can be put on the market. The price of the stamp is more than the cost of the matches, the box, the labor of boxing them, and the packing of them in bulk for shipment. The provision of hiAV Avhich requires a stamp to be affixed to each box before it leaves the factory is not arbitrary : it is necessary to secure the payment of the tax. It has, hoAA^eA^er, been productiA’e of gravest consequences by ingeniously imposing burdens on poverty and bestoAving faAmrs on ca])ital. It does this under the jiretext of relieving agents of the Treasury from the annoyance attendant upon the sale of stamps in petty quantities. Under its terms he Avho can not purchase more than fifty dollars’ r 12 REDUCTION OF INTERNAL TAXES. ADDRESS BY HON. WILLIAM D. KELLEY. wortli of stamps at a single purchase must pay their full face value in cash; but he who can buy more than fifty dollars’ worth may by giving an acceptable bond for ultimate payment, have sivty days credit, and a discount of 5 per cent. ; while he who can pur- ch^.e more than five hundred dollars’ worth may have a like credit mi 0 per cent, discount. The repeal of the match tax will abolish tins unjus discriniination, and, by permitting enterprise to compete Mith capital, will reduce the price of matches more than 50 per cent [This prediction has been fully verifie.l, the match tax hav- ing been repealed in 1883.] Again, let us look at cigar-makers as a class. As shoAvu by ftie recent census they numbered more than 65,000, many of them invalids, cripples, and widows who, before the imposition of inter- nal taxes found remunerative employment in the manufacture of cigars. Their hands were their implements. The trade required no outlay of money for tools, and he or she who could skillfully manipulate the filling and wrapper had an assured income. Those whose humble homes included a front room could expose cigars for sale. Employment from larger establishments was also open to them, and many of them paid for their materials by their wages account Deserving of our sympathy as are the classes of people to ^ Inch I allude, they are excluded from such independent employ- ment by the internal revenue laivs. Many of these people were not A poor, but illiterate. !Many Avere foreigners, too ignorant of our aiiguage to comprehend legal technicalities, however well expressed. T lat unconscious violation of laiv or regulation should frequently occur Avas inevitable, and many an honest person has paid a ruinous penafty for the infraction of a provision of law or ruling thereon 01 \\ hicli the victim liad never heard. Let me call your attention to this pamphlet issued by the Com- missioner of Internal Eevenue, and entitled, “A Tax Manual for Ugar Manufacturers, containing the portion of the New Compila- lon of Internal Revenue Laivs now in force relative to the Manu- facture Removal, Sale, etc., of Cigars, and including Regulations, nsti uctions, Rulings, and Decisions of the Commissioner of Inter- nal Revenue on the subject.” The text of statutes now in force covei-s more than nine closely-printed pages; and regulations, decis- ions, etc., fill t Aventy. three. ^ To comprehend all the provisions and regulations embodied in this pamphlet would cost an experienced aAvyer much careful study. Its sections and ])aragraphs are nu- merous, and many of them convey their meaning by reference to folbwiro*'"''' 30 appeam the Any manufacturer selling his cigars, or removing them from the place where they Avere made, AA'ithout complying AA'ith the requirements .stated in Xos. 9, 10, 12, and 13, subjects such cigars to forfeiture, and incurs lia- bility to fine and imprisonment. Each poor man or AV’oman before engaging in the manufacture of cigars must seek the Collector of the District, Avho may reside hundreds of miles from his or her home, must pay a special tax as cigar manufacturer, must give special bond as cigar manufacturer, and must purchase adequate stamps for boxes before cigars may be put into them for sale. He must, hoAA’e\"er illiterate or ignorant of our language, make entries of the manufacture of cigars or their sale. He must also keep an account by separate entry of each pur- chase or sale of leaf tobacco, tobacco stems, or other material used in the manufacture of cigars. Who, in vieAV of such a body of minute and complex regulations, and of such inordinate penalties, Avill doubt that all the small manufacturers of cigars have been forced to abandon the only employment in Avdiich they Avere skilled, or to accept such Avages as their more wealthy brethren may be AA'illing to pay? These regulations and penalties AA’ere not adopted AA’antonly. They are essential to the collection of the revenue and protection of the rights of those Avho conscientiously pay the taxes they incur. Writing to Madison in 1794 Jefferson said, “the excise Uiaa’ is an infernal one.” His indignation AA-as probably stirred by the contemplation of inevitable hardships such as I haA^e brought to your notice. OUR DUTY TO THE SOUTH. In conclusion let me appeal to you to urge the earliest possible repeal of these taxes as an act of justice savoring of magnanimity to the South. Their enforcement is a constantly- recurring reminder of eA’ents of Avhich, in the interest of our common country, aa’C should all be glad to obliterate e\^ery painful memorial. The AAar did not close until the Southern people had parted Avith every species of property but their fenceless fields and dilapidated buildings. A less heroic people looking to the necessities of the future AA'ould liaA^e de- manded of its leaders an earlier surrender; or finding themselves so helplessly impoverished, so Avanting in the means for reorganiz- ing the feAv industries AA'ith Avhich they AA’ere familiar, Avould liaA’e abandoned themselves to sullen despair. Their entire labor system had been overthrown; their farms AA'ere fenceless; they AA’ere Avith- out agricultural implements, or Avorking or reproductive stock; they had no continuous system of transportation connecting the interior of their States with the seaboard or AA’ith the cajiital or the leading 4 II J 14 REDUCTION OF INTERNAL TAXES. cities of the Confederacy. The hopelessness of their condition can not be exaggerated; yet they did not despair. Having believed supremely in the cause for which they had made such sacrifices, they could not recognize their conquerors as friends, and appeal to them for sympathy or aid. They had not honored labor, but committed it to slaves, and had even confided their few commercial operations to factors and agents. It took centuries to bring conciliation and common prosperity to the contending factions of Britain, between vhom there were no distinctions of race, and it would have taken many generations to reconcile the South had her people not accepted the hard conditions their rashness had involved, and determined to conquer them by their own energy. The Southern people are not only engaging in familiar industries, but are creating new ones. As a Southern man, unwilling to see textile factories established in this country, John Eandolph said he never saw a sheep without wishing to kick it ; but now sheep husbandry is pursued in Texas and other Southern States as a passion, and on a scale unknown to the people of any Northern State. The water-power which flows through cotton fields is creating prosperous manufacturing villages, and yarn and fabrics embodying Southern labor constitute an im- portant element in our domestic and international trade. But not to the manufacture of fibres alone has Southern enterprise and energy been directed. The extent and variety of her mineral resources can hardly be exaggerated ; these are being explored and, as rapidly as capital can be obtained, they are giving work and wages to freed slave and poor white in the construction and opera- tion of industrial establishments. The new South has her zinc fac- tories, her copper works, her kaolin pits, and porcelain factories. To name Lynchburg, Chattanooga, and Birmingham is to suggest her j)rogress in the conversion of her fuel, limestone, and ore into iron and steel. The diversified industries of the South, however, are in their in- fancy. The capital they create is each year applied to their exten- sion, but more than can be thus produced is required for their rapid development. They need the fostering care of the Government, and in no way can this be bestowed more accejkably than by the immediate repeal of our internal taxes. IMost of the Southern States are heavily burdened with debt. Should the Government, in view of our overflowing treasury, remit to these States all the ordinary sources of taxation, it would inspire their people with a new measure of confidence in the North, and Avith faith in their own ability to pay their outstanding obligations. The fact that ADDRESS BY HON. WILLIAM D. KELLEY. lO they need what revenue may be justly derived from these sources, and that the nation does not need what it collects, is frequently re- ferred to by Southern representatives in justification of the prev- alent belief that these unnecessary taxes, imposed for conquest, are retained in a spirit of vindictiveness. I have hastily invited your attention to the destructive eflfect of the match tax upon manufacturers whose capital was small ; to the fact that the tax on cigars is a heavy direct burden on manual la- bor, and to the many harsh and intricate regulations by which manufacturers of cic:ar3 on a small scale are harassed. These have given rise to many just protests. But the taxes on spirits and to- bacco have been even more harsh and aggravating in their effect on the holders of small tracts of land in many parts of the South. As many Pennsylvania farmers prior to 1861 distilled each year a few barrels of pure Avhisky to sell after it should have attained a given age, so Southern OAvners of small orchards, or of a feAV fruit trees around the dwelling-house, w^ere in the habit of distilling their fruit. It Avas to the sale of their peach brandy or apple Avhisky that many of them looked for the cash Avith Avhich to pay taxes and doctors’ bills, and to procure an occasional article for the comfort or adornment of their homes. Others not fortunate enough to OAvn an orchard distilled part of their corn, and thus secured their small annual supply of money. The spirit tax effectually deprived these classes of their habitual dependence for ready money. The entire crop of many of these people Avas not sufficient to justify a compli- ance Avith the laAV ; and many an honest man has been driA’en to the painful alternatiA^e of seeing his crop of fruit rot upon the ground, or of engaging AvIth his neighbors in a treaty offensiA'e and defensive against all persons engaged in the collection of the sjiirit tax. The case of the OAVuer of a small piece of ground deA'oted to tobacco-groAving is scarcely less painful, and must iuA'est the “ moon- shiner” Avith his sympathy. Under the proAusions of the laAV he mav not sell an ounce of his crop to his neighbor, nor to any citizen Avho is not a licensed dealer in leaf tobacco. There are many thou- sands of these people, for Avhose small crop there AA'ould be a ready market in the neighborhood, Avhose entire production is too small to pay for its transportation to a distant centre of trade. I may not extend these illustrations, but in conclu-sion Avould repeat that justice to the South requires the earliest possible repeal of the entire system of internal taxes ; and I aver that the abolition of these taxes aaoiiUI do more to harmonize the country than an)^ single act of legislation that statesmanship can suggest. I trust it may be done and done quickly.