this tax. And now every man who thinks it is better to retain this tax a while longer is threatened with the indignation of the people. I am inclined to think that we shall be able to endure and survive it.

Sir, the same threats were made against Sir Robert Peel when he proposed to renew the income tax. The politicians of that day denounced him, and were able after a while to punish him to some extent; but it did not deter him. It was the reorganization and reinstitution of the income tax in England that led to that revision of taxes which changed the whole current of affairs in England; and I believe now that if the property-holders of this country, who are compelled to pay the income tax, will bear with it a little while longer, for the two years during which it is to exist, they will never have cause to regret it.

So far as my own State is concerned, I am impartial in this matter. The State of Ohio pays her full proportion of the income tax according to her population. I have here the statement. Most of the Western States pay but little income tax, but Ohio pays dollar for dollar, according to her population. The old tax was just about a dollar an inhabitant. Ohio pays her share; and I have it to say, for the men of Ohio who pay this income tax, that, with very rare exceptions, such as I do not wish to name, they have not complained of the tax, but are willing to bear their share of it. But, impelled by a sense of duty, in the interest of the whole people, I feel bound, without any regard either to my own interest or that of my State, to maintain this and all other taxes until I can see daylight ahead and a better time to repeal them.

INTERNAL TAXES AND TARIFF.

IN THE SENATE, MARCH 15, 1872.

THE Senate, as in Committee of the Whole, having resumed the consideration of the bill (H. R. No. 173) to repeal the duties on salt, Mr. Sherman said:

MR. PRESIDENT: I am sorry that, even for a moment, the evil shadows of our long political debates are cast upon a purely business discussion, which affects the interests of all the people of the United States, and yet need not excite any political feeling, or any division of opinion except upon questions of dry political economy. I take it that it will be most agreeable to Senators if I confine my remarks this morning to a general statement of the condition of the country, to such facts as in my judgment authorize us to enter, for the sixth time since the close of the war, upon a repeal of taxes, and also to state the general principles upon which this reduction is proposed, rather than to burden you with elaborate details. These will be more properly stated as the debate progresses.

The taxes already repealed yielded $233,000,000. But our revenues still largely exceed our expenditures, and we are justified by several reasons in continuing the repeal of taxes. Those which remain yield

largely more than in former years, and more than was estimated by the most sanguine person. The production of the country has greatly increased. Industry in almost every department has been actively employed. The consumption of our people, which under our system of revenue is chiefly the basis of taxation, has by the prosperity of our industry been also largely increased. At the same time the national expenditures are diminishing. Our financial condition is improving in every particular. We are slowly but surely, without contraction or expansion, but by the increasing uses of our paper money, approaching a specie standard. The interest of our debt is daily diminishing, through the diminution of the principal and the reduction of the rate on that which remains. All these favorable circumstances enable us to approach the question of the further reduction of taxes with more system and better information than formerly, and, I trust, with the sincere desire to make the reduction in such manner as to yield the largest possible relief to our people.

The only questions to be considered are, how much and what taxes ought to be repealed?

Let me first state how the subject now comes before us. On the 14th of March, 1871, the House of Representatives passed three bills: A bill to repeal the duty on coal; a bill to repeal the duty on salt; and one to repeal the duty on tea and coffee. The duties thus proposed for repeal yielded last year $21,000,000. The Committee on Finance was of the opinion that it was not wise to consider these bills, except in connection with the whole subject of revenue reduction. On the 12th of April, 1871, the Senate passed the following resolution :

Resolved, That the Committee on Finance is hereby instructed, during the recess of Congress, to carefully examine the existing system of taxation by the United States, with a view to propose such amendments to the bills of the House of Representatives repealing certain taxes, now pending in the Senate, as will simplify, revise, and reduce both the internal taxes and the duties on imported goods now in force; and so that the aggregate of such taxes shall not exceed the sums required to execute the laws relating to the public debt, and to pay the current expenditures of the Government, administered with the strictest economy; and so that such taxes may be distributed as to impose the least possible burden upon the people.

In obedience to these instructions the Committee on Finance did. during the recess examine in detail the laws imposing taxation, and agreed upon amendments to both the tariff and internal revenue laws. But in reporting to the Senate our action, we had to consider the power of the Senate over revenue bills. The powers of the two Houses in this respect are regulated by article one, section seven, clause one, of the Constitution of the United States, as follows:

All bills for raising revenue shall originate in the House of Representatives, but the Senate may propose or concur with amendments, as on other bills.

This provision' has often been the subject of controversy between the two Houses. We had before us three bills of the House, with the unquestioned power to propose amendments to either of them. It was clear that, if the House proposed to repeal or modify certain taxes, the Senate could propose instead to repeal or modify other taxes. But as all the taxes proposed for repeal by the House were customs duties,

the question arose whether we could, in the way of amendment, propose the repeal of internal taxes. The parliamentary law, as well as the practice heretofore, settled this question in the affirmative. The subjects are germane to each other. They are both "bills for raising revenue." The distinction is only as to the subjects and mode of taxation. The House has itself repeatedly connected the two in one bill, and notably so in the act passed two years ago. The modification of one compels the modification of the other. The logic of the subject matter compels us to consider the whole revenue, when proposing to reduce either form of taxes. Still, to avoid all possible dispute, the Committee on Finance thought it advisable, while considering the whole subject of taxation, to confine their amendments to customs duties, and to offer these amendments to one bill rather than to three. The amount of customs revenue proposed for repeal by the House substantially conforms to that proposed by the Senate. The House will no doubt in due time pass a bill to reduce internal taxes, when the Senate can propose its amendments. In debate, however, we must consider the subject as a whole, and must therefore consider how much revenue we can dispense with, and what taxes ought to be repealed or modified.

Since the close of the war it has been the highest public policy to maintain our revenue at a point largely in excess of our expenditures; for a large surplus revenue has been not only useful in paying unliquidated debt, but also of great importance in reëstablishing the public credit, in improving our currency, and in reducing the rate of interest to be paid. But the time has now arrived when we can safely reduce our revenues to barely enough to pay the expenses of the Government, economically administered, the interest on the public debt, and such additional sum as it may seem to be good policy to apply on the principal.

The expenditures during the fiscal year ending June 30, 1871, including interest, were $292,177,188.25; for the current fiscal year (partly estimated), $293,403,382.92; for the next fiscal year (estimated), $273,025,773.99. These sums exclude the sinking fund and all payments on the principal of the debt. The net receipts of the Government during the last fiscal year were $383,323,944.89; for the current fiscal year (partly estimated), $365,198,374.60; for the next fiscal year (estimated), $359,000,000. The actual surplus revenue for the year ending June 30, 1871, was $91,146,776.64; for the current fiscal year (partly estimated), $71,794,991.68; for the next fiscal year (estimated), $85,974,226.

The question arises, how far the estimates of expenditure will be increased by additional appropriations by Congress. It is not probable that any material change will be made in the aggregate appropriations for the current fiscal year, while our current receipts are largely in excess of the estimates. The increase is caused, to some extent, by the importation of goods in place of duty-paid goods destroyed by the fire at Chicago. The estimate of the Secretary of the Treasury contemplates a reduction of expenditure for the next fiscal year, as compared with this year, of more than twenty million dollars, or, as compared with last year, of more than nineteen million; but this is explained,

mainly by the exclusion from the estimates of the premium paid on bonds and the premium received on gold, which balance each other.

The estimates are based upon appropriations required by existing laws. They can be, and ought to be, diminished in several important branches of the public service. The abolition of the franking privilege, the reduction of public printing, the reduction of the internal revenue service, a close scrutiny of the pension list, a careful limitation of appropriations for public buildings, and a general cutting off of expenditures that grew out of the war, but which have survived the war, would enable us to repeal other taxes without injury to the public service.

On the other hand, the wants of a great and growing country like ours, exercising new powers, extending daily its influence into new regions within our own limits, and into far-distant countries whose civilization is more and more influenced by commerce with us—all these compel a gradual increase of just and proper expenditure. Such an increase does not indicate extravagance, but it does indicate growth, health, and strength.

There is another cause of a nominal increase of expenditure, which operates slowly and silently, but as surely as the march of invention and civilization. It is in the changing purchasing power of money. The dollar of to-day may contain as many grains of gold as does the dollar of a year ago, but its purchasing power is diminishing year by year, at a rate not less than one per cent. per annum. This change is partly caused by the increased production of the precious metals,' and by the diminution of labor required, and the new inventions applied, to produce them. But, more than by all else, it is caused by the new device of modern finance which substitutes paper and credit, in innumerable forms, in the place of gold and silver; so that these metals are not now, as formerly, the active agencies of commerce, either foreign or domestic, but the mere standard or gauge of value. Even paper money, so called, the greenback and bank note, are crowded from their old use, and the check, draft, acceptance, and bill are the coin of exchanges, great and small, foreign and domestic, to an extent never before known. These facts make less coin necessary than formerly, and, coupled with the actual increase of gold and silver, slowly and surely depress their purchasing power, and make a greater sum necessary, not only to buy marketing or pay for labor, but to conduct a government.

This obvious tendency of a diminution in the value of money not only increases our expenditures, but adds to our revenues by the increased value of production. It also largely diminishes the burden of debt, and especially of a national debt running for a long period of years. It is also obvious that, as nearly one half of our expenditures are on the basis of paper money, they have been increased to at least the extent of the depreciation of that money. Salaries have been from time to time increased, to cover this depreciation, the increase in some cases being several times as great as the amount of the depreciation. The cost of all supplies for the army and navy, and of all labor for the civil service, has been enhanced in the same way. As our paper money approaches to a specie standard, we may expect a corresponding reduction

in the cost of supplies, but can hardly hope for a general reduction of salaries.

Again, we may reasonably hope that expenditures growing out of the war will diminish as time passes. My colleague in the House, General Garfield, made an interesting and accurate statement, showing that out of the $291,564,441.43 of aggregate expenditures for the last fiscal year, $175,543,140.27, or sixty and one half per cent. of the whole, was paid directly for the expenses growing out of the late war. The Secretary of the Treasury has estimated for a probable diminution of these expenses; but we must remember the vast mass of unliquidated war claims which are now under examination, large amounts of which will unquestionably be allowed, and will enter into our expenditures for some years to come. The great mass of our expenditures, probably over eighty per cent. of the whole, is settled by laws which are practically, if not theoretically, beyond the action of Congress. The public debt, the permanent appropriations, the salaries of public officers, the pay of the army and navy, Indian treaties-all these are in effect beyond probability of diminution. Still, as I have already stated, there are reforms which, if adopted by Congress, would enable us to propose a greater reduction of taxes than it is prudent for us now to do.

I wish to call the attention of the Senate for a moment to some remarks made in the House of Representatives by one of its most distinguished members, on this very point, which I think are apt to mislead the public at large, as well, perhaps, as the Senate and the House. The chairman of the Committee of Ways and Means, in cautioning the House against a too extravagant expenditure of the public money, has estimated for new items of appropriation, in addition to the sum of $273,000,000 which I have already given, and which he says were omitted from the estimates. But this is, by a careful examination, easily explained. He says:

Now, I want to call the attention of the House to what the officers of the Department have added to this amount:

Estimates for 1872-'73, not including pay toward public debt....

To be added:

$273,025,773

On a careful analysis of this statement I find that his fears are entirely unfounded, and that the estimates already given by me include every item of expenditure, with but few exceptions, that are necessary