was at war with the French republic. From the beginning of 1803 till the end of 1814, she was at war with the French empire. Specie payments were suspended in 1797, and resumed twenty-five years afterwards, in 1822. The average premium on gold during that time was from 20 to 25 per cent.

The amount of the debt unredeemed on the 5th of January, 1823, was £791,806,312 11s. 8d., or $3,832,342,552 90. The increase of the debt during the thirty years from 1797 till January 7th, 1823, was £552,456,164 11s. 8d., or $2,673,887,836 58. In 1823, the population of Great Britain and Ireland was 21,193,438, and the total valuation of real and personal property was $10,698,600,000.

The average Price per centum, of the Three per cent. Public Funds in each Year from 1793 till 1823.

The average price of the three per cent. stocks during the war with the French republic, eight years, was 61% per cent., being equivalent to a rate of interest on £100 of £4 178.

During the year 1802, the average price was 71 per cent., being equal to a rate of interest on £100 of £4 4s. 3d. During the war with the French empire, eight years, it was 62 per cent., being equal to a rate of interest on £100 of £4 15s. 6d.

From the beginning of the year 1815, the end of the war with the French Empire, till the end of the year 1821, seven years, it was 70 per cent., being equal to a rate of interest on £100 of

£4 5s. 6d.

The average price during the whole term of thirty years, from the beginning of 1794 till the end of 1822, was 64 per cent., being equal to a rate of interest on £100 of £4 12s. 8d., or about 4 per cent.

The average price in the year 1823, after the resumption of specie payments, was 79 per cent., being equal to a rate of interest of 34 per cent.

It should be stated also that the wars of England were with a foreign power, while ours was intestine, and involved our existence as a nation. On the 6th of January, 1866, the respective values of British and American securities in London, were, British 3 per cents, 87 per cent., equivalent to a rate of interest of 34 per cent.; of American gold 6 per cents, 644 per cent., equivalent to a rate of interest of 9 per cent. At this time the debt of Great

Britain is about $4,000,000,000.

This comparative view of the amount of increase, and the ratio of increase of their debts, and the rates of interest paid respectively by two great nations of the same origin, under somewhat similar circumstances, is worthy of the attention of the statesman, and the political economist. It will be referred to hereafter in examining the probable effect of the measure recommended in this report, to increase the value of our securities. The proposition may be stated here that the rate of interest in a country depends in general on the stability of its institutions, the security of property, the proportion of the debt to its resources, and the probabilities of a steady continuance in collecting the necessary revenues, and duly meeting its obligations.

ACTS OF CONGRESS.

The acts authorizing the emission of the bonds and securities of the United States, contain no provisions on the subject of taxation except the following:

The Act approved February 25, 1862, entitled, "An Act to authorize the issue of United States notes, and for the redemption or funding thereof, and for funding the floating debt of the United States."-2 Stat. at Large, p. 345.

Sec. 2 provides, that "all stocks, bonds, and other securities of the United States, held by individuals, corporations, or associations, within the United States, shall be exempt from taxation by or under State authority."

The Act approved March 3, 1863, entitled, "An Act to provide ways and means for the support of the Government."-12 Stat. at Large, p. 709.

Sec. 1 provides that "all the bonds and treasury-notes, or United States notes issued under the provisions of this act, shall be exempt from taxation by or under State or municipal authority: Provided, That there shall be outstanding of bonds, treasury-notes, and United States notes, at any time, issued under the provisions of this Act, no greater amount altogether than the sum of nine hundred millions of dollars."

The Act approved June 30, 1864, entitled, "An Act to provide ways and means for the support of the Government, and for other purposes."

Sec. 1. provides that "all bonds, treasury-notes, and other obligations of the United States, shall be exempt from taxation by or under state or municipal authority."

The Act approved January 28, 1865, entitled, "An Act to amend an Act entitled, 'An Act to provide ways and means for the support of the Government, and for other purposes,' approved June 30, 1864."

Sec. 1. authorizes the issue of treasury-notes, and provides that "such notes shall be exempt from taxation by or under state or municipal authority."

All these acts contain, in some form, the provision that the securities of the United States shall be exempt from taxation by or under state or municipal authority, except the Act of February 25, 1862, which does not contain the word "municipal.” The effect is the same, however, as municipal corporations exist, and act by and under state authority.

The constitutionality of this provision has been doubted, but it is fortified by the repeated sanction of Congress, the opinions of the Attorney-General, the decisions of several of the State and District Courts, and general practice. Until overthrown by the decision of the Supreme Court of the United States, it must be taken as established.

The opinion has been expressed, that, although the states cannot tax the national securities directly, they may do so indirectly, by a tax on incomes derived from them. This seems clearly to be an error, as Congress has already, and in advance of the states, appropriated such incomes as a source of revenue and subject of taxation.

PROPERTY IN THE GOVERNMENT SECURITIES TAXABLE BY THE UNITED STATES.

These acts of Congress constitute the contracts between the United States and the bond-holders, which became operative upon the sale of the securities. The bond-holders know that. They also know that their terms cannot be altered or extended, except by the consent of Congress.

They contain in terms the exemption from taxation under state authority. The contract extends no further. The effect is the same as if the proviso had been, "All the bonds, &c., issued under this act shall be exempt from taxation by or under state or municipal authority (meaning the authority of the several state governments), but they shall be subject to taxation by the United States." The power of the General Government to tax them is, therefore, clear, if it has the power to tax any property. Whether the tax should be upon the principal bond or the income, is not material, in this connection.

As if to remove every shadow of doubt, we have an act passed by the same Congress which passed the first act cited above, and at the same session.

An act" to provide Internal Revenue," &c., approved July 1, 1862 (sec. 91), provides "that upon income derived from interest upon notes, bonds, or other securities of the United States, there shall be levied, collected, and paid, a duty not exceeding one and one-half of one per centum."

The amendatory Internal Revenue Acts of June 30, 1864, and March 3, 1865, sec. 16, provide "that incomes derived from interest upon notes, bonds, and other securities of the United States, shall be included in estimating incomes under this section." By the last act the tax was fixed at five per cent. on incomes below five thousand dollars, and at ten per cent. on those above five thousand dollars.

SHALL THE POWER BE EXERCISED.

Having now shown the amount and character of the debt, and the facts necessary to a full understanding of its relations, so far as they could be obtained in time, and having established two propositions-first, that the securities must be taken to be exempt from taxation by or under state authority, second, that it is perfectly competent for the United States to tax either the property in them, or the income or dividends derived from them

and having shown that Congress has exercised that power on several occasions, it is necessary to inquire whether or not justice and sound policy demand that they should further exercise it, and if they do, to what extent and in what manner.

OUR PECUNIARY CONDITION.

In order to settle this question, we must be acquainted with the pecuniary condition of the country, the prospect of any change in it, and if any, what? and especially the manner in which it is affected by existing taxation. And first, it must be borne in mind that business is now, and for some years past has been, carried on and debts contracted under the operation of acts of Congress making the unconvertible notes of the Government a legal tender for all debts, except the interest on a part and the interest and principal of another part of the bonds of the United States. These notes are receivable for all public dues except customs, and, with bank-notes of the same value, compose the currency of the country. What is to become of this currency? Will a fixed standard of value be again established? If it will, when ? Upon what principle? How will its value compare with the value of the present currency? What will become of the debts now payable in lawful money? These are questions of the utmost importance. And as it is known that the policy of the Government and of Congress is not yet settled, all the light possible should be thrown upon them. The views of the writer of this report were presented in a letter to the Secretary of the Treasury, of November 7, 1865, which, however, did not meet his personal observation until some time in December. He said:

"As my conclusions differ radically from any which, so far as I know, have yet been made public, and the subject is of such vital consequence, involving the welfare of millions, and the preservation or destruction of the prosperity of our people, I take the liberty of stating them to you in a condensed form."

"The want of a specie standard is productive of many evils and dangers. Fluctuation in values, and the apprehension of a further depreciation, are necessary incidents, and reckless speculation on the one hand, and the discouragement of fair investments and enterprises on the other, are its certain consequences. Hence a great inflation of prices, as the manufacturer and business man must charge not only a fair profit on his investment,

* That a part of the inflation is owing to our tax system is also quite clear.