At the last session of Congress I submitted a measure somewhat similar to this, in the form of an amendment to the revenue bill, but it was postponed rather than defeated. The bill I now introduce contains but two sections: the first proposes to levy a tax of two per cent. on the circulation of all bank bills; the second provides for a tax of ten per cent. on all fractional currency under one dollar, issued by corporations or by individuals. I propose, in the first place, to examine this proposition purely as a question of taxation, before stating its effect upon the currency of the country.

In the outset, it is necessary for us to remember the distinction between the ordinary process of banking and the issuing of bank bills. The business of banking proper consists in loaning money, discounting bills, facilitating exchanges of productions by the agency of commercial paper, and in receiving and disbursing the deposits of individuals. The issue of bank bills is an exclusive privilege, conferred only upon comparatively few corporations. It is a privilege that an individual cannot enjoy. No person can issue his bills in the form of paper money without an express corporate franchise, granted to him either by a general banking law or by an act of incorporation. All the business of banking may be exercised by private individuals, except this franchise. There is no reason why any one may not carry on all the business incident to banking, except this one of issuing bills to circulate as money. Indeed, the largest banking houses in this country and in the world do not exercise the privilege of issuing bills. We know that the Rothschilds, the Barings, Mr. Peabody, one of our own distinguished citizens in England, and our heaviest banks in this country, do not exercise it. The Bank of Commerce of New York, with a capital of $9,000,000, has now less than $2,000 of circulation; and nearly all the leading banks of the city of New York, comprising the majority of the banking capital of the State of New York, issue a comparatively small amount of bills. It is also true that the strongest banks issue the least number of bills, and the weakest banks support themselves and make profit by issuing the largest quantity of bills. Mr. Chase, in his report, states this proposition very plainly. I will read an extract from it:

Circulation commonly is in the inverse ratio of solvency. Well-founded institutions, of large and solid capital, have in general comparatively little circulation; while weak corporations almost invariably seek to sustain themselves by obtaining from the people the largest possible credit in this form. Under such a system, or rather lack of system, great fluctuations and heavy losses in discounts and exchanges are inevitable; and not unfrequently, through failures of the issuing institutions, considerable portions of the circulation become suddenly worthless in the hands of the people.

In the West, where capital is not abundant, we have suffered more from a system of banking operations than from any other financial cause. Banks have been founded often upon no capital, or upon fictitious capital; sometimes upon bonds purchased on credit; and then, after they have spread their notes all over the country, filling the pockets of the people with a worthless currency, they suddenly explode, and the note-holders suffer the entire loss. It is true that in the older States, where capital is more abundant, they have a better system of

banking; but, after all, it will be found that the weakest banks issue the most notes. The strongest banks do without this privilege, or use it lightly. All the leading banks in this country which have ample capital may dispense with the privilege of issuing bank bills with but little inconvenience; while those of small capital, dependent upon their circulation, may very properly give way to private bankers, who carry on their operations entirely with other currency and upon individual responsibility.

The business of banking proper is very heavily taxed by our excise law. It will be found by reference to the tax bill that all commercial paper-checks, drafts, orders, bills of exchange, foreign and inland, protests, certificates, bonds, powers of attorney-every instrument that is used in the ordinary process of banking-is heavily taxed, while bank bills are not taxed at all. This is a discrimination, it seems to me, that is very unjust.

When a private banker undertakes to do business, he has first to apply for a license to carry on the ordinary operations of banking, and for that license he pays $100. But a bank of circulation is expressly exempted from the necessity of procuring a license. While all the ordinary functions of banking, all those that are useful to the people, and which are purely voluntary-the operations of loans, discounts, exchanges, and deposits-are taxed for license, the business of issuing paper money, which may alone be done by corporations chartered under general or special laws, pays no license. I will read the clause:

Bankers shall pay $100 for each license. Every person shall be deemed a banker within the meaning of this act who keeps a place of business where credits are opened in favor of any person, firm, or corporation, by the deposit or collection of money or currency, and the same or any part thereof shall be paid out or remitted upon the draft, check, or order of such creditor, but

Mark you

but not to include incorporated banks or other banks legally authorized to issue notes as circulation.

All other banks and bankers, whether they are incorporated or not, whether they are associated together or not, have to get a license; and there is an express reservation and exception in favor of banks authorized to issue paper money. Now, why is this? Is there any reason for it? I think there is none.

Again, sir, take the stamp taxes. Every commercial instrument must be stamped. If I issue my note for $100, I must place on that note a stamp in order to make it valid. I then must pay interest on that note. If I invest the proceeds in any kind of business, I must pay a tax upon that business, first in the form of a license, and then in the form of a tax upon the production. After that, I must pay a tax upon my profit. The stamp tax attaches to every form of commercial instrument. Why should it not attach to a bank bill? And yet, by another provision of the revenue law, which I will read, banks of issue are expressly exempted from this tax. In the section providing for stamp duties occurs this clause :

Bill of exchange (inland), draft, or order for the payment of any sum of money exceeding twenty and not exceeding one hundred dollars, otherwise than at sight or on demand, or any promissory note, except bank notes issued for circulation, for a sum exceeding twenty and not exceeding one hundred dollars, five cents; exceeding one hundred dollars and not exceeding two hundred dollars, ten cents, etc.

Now, why should there be this discrimination? I, as an individual, must pay these stamp duties; a banker doing business must pay them; a person who has embarked his credit in the most necessary pursuit, having no special privileges whatever, must attach a stamp to his note when he issues it in any form, whether in the form of a certificate, a promissory note, a bill of exchange, or in any of the multiplied forms of commercial paper. There is no way in which he can issue his note, whether bearing interest or not, whether payable on demand or not, in which it is not taxed by the Government; and yet a note issued by a bank incorporated with special privileges is expressly exempted from the operations of this law. Why is this, Mr. President? There is no reason for it.

The only tax levied by this act on banks of circulation is the tax of three per cent. on the net income, and that tax is deducted from the dividend to the stockholders. I venture the assertion that there is no interest in this country so lightly taxed as banks of circulation. Three per cent. on the net income: how much is that? It is only fifteen cents on $100 of circulation. Contrast the tax imposed on an ordinary manufacturer with the tax imposed on a bank. A man is engaged in the business of production, that which adds to the wealth of the country; he is converting the raw material into something necessary to sustain life: what process of taxation is he subjected to (and very properly, for I do not object to the taxes)? He first has to get a license for his employment; he then invests his capital in real estate or machinery, which is taxed. If he issues his note, check, or other commercial paper, he must attach a stamp to it; he must then pay three per cent. on the entire product of his business-not three per cent. on his profits, but three per cent. on his entire production, often greater than his capital; and if he should make any profits, he must pay three per cent. on his profits. That is the process of taxation to which we compel a manufacturer to submit.

How is it with the bank of circulation? The bank of circulation carries on its mammoth business without paying any license; it issues its note without paying any stamp-duty; it circulates that note without interest; it does not pay that note in specie; it does not pay three per cent. on its production, its manufactured article of paper money. It only pays three per cent. on its profits. Nor is that all. It is not three per cent. on the gross profits of the bank, but three per cent. on the net profits of the bank; after every expense that may be conjured up, salaries, fees, employments, is deducted from the profits, the balance is subjected to the insignificant tax of three per cent. This is all the revenue paid by such banks on their exclusive franchise. Even that little tax, by the express provisions of the law, may be deducted from the dividend of the stockholder; and the stockholder does not pay the tax twice, because this is deducted from his own income tax.

Mr. President, I can run this comparison further, and show that in all the employments of life there is a discrimination in favor of the bank of circulation. It is not in favor of corporations, because corporations are heavily taxed by this law. Let us look. Railroad companies pay three per cent. on the gross receipts from passengers. The receipts of a road for passengers are sometimes one-fifth of its capital stock. Railroad companies pay three per cent. on the gross receipts from passengers, without any deduction. Insurance companies pay one per cent. on their gross receipts, and, as was stated in debate here last spring, the annual receipts of an insurance company are often equal to the capital out of which they have to pay their losses. So here is a tax on insurance companies, confessedly among the most useful institutions in the country, of one per cent. on their gross receipts, which is equivalent to ten per cent. on their profits. Then how is it as to salaries? We, as Senators, receive $3,000 a year, and we pay a tax of three per cent. on our gross salary; and there is no deduction made for our very necessary expenses, though I suppose most of us have none of the $3,000 left when we go home. The tax is levied on the gross

salary.

Now, how is it with a private citizen? After payment of the taxes assessed upon property and employments, the taxes on stamps and licenses, there must still be paid a tax of from three to five per cent. on gross incomes over $600. And yet, although all classes of the community-corporations, citizens, men, women, and children-bear with patience this heavy rate of taxation, banks of circulation having exclusive privileges, having the franchise of making money and issuing promises to pay without paying interest upon them, pay but three per cent. on their net profits from circulation, and even that is deducted from dividends to the stockholders. This is an unequal, unjust system of taxation, and should be corrected.

There are reasons which, to my mind, are very potent why the taxes on banks of circulation should be heavier instead of lighter than those on other employments. The force of them, I think, will be perceived when I state them. We know very well that the profits on the issue of bank notes are now vastly increased. I have a statement before me which shows that the average profits of the banks of the State of New York in the last year were twelve and a half per cent.-a very heavy profit. This profit is this year greater than usual. We all know that the business created by the war, the unusual activity in commercial credits, has been very profitable to the banks.

But that is not all. The burdens imposed upon the banks by their charters have been lessened by the suspension of specie payments. When a bank had to keep in its vaults coin to the amount of one third of its circulation in order to redeem that circulation, when it was liable at any day to be called upon for the redemption in gold and silver of every dollar of it, that was a burden which very much lessened the profits. But now there is no such liability, and there is no such responsibility. Whether right or wrong, we know that all these banks have suspended specie payments, and now practically put upon the people their currency without paying either principal or interest. I say, therefore, they ought

to be taxed more heavily than other employments in life. Why, sir, I remember very well-and some of the Senators here remember it also -an interview which was sought by the bankers of our chief commercial cities-all of them intelligent and patriotic men-with the Secretary of the Treasury, to which they invited the financial committees of the two Houses to hear their proposition for carrying on the financial operations of this Government. We all went to the office of the Secretary of the Treasury, and the proposition was there made that the United States should issue no paper money whatever; that the specie clause, as it is called, of the Sub-Treasury law should be repealed; and that we should carry on the war upon the basis of the paper money of the banks, legalizing the suspension of specie payments, and that the Government should issue no paper except upon an interest of six per cent., or higher, if the money markets of the world demanded more. That was their plan of finance--the plan substantially adopted in the war of 1812, and which has been condemned by every statesman since that time—a plan of carrying on the operations of this great Government by an association of banks over which we had no control, and which could issue money without limit so far as our laws affected it. That was the scheme presented to us by those very intelligent gentlemen.

But, Mr. President, what are the objections to this tax? for this subject has been conversed about, and I bring the matter to the attention of the Senate now, in order that we may anticipate these objections, and excite others, if they exist. It is objected that this tax interferes with vested rights. If I understand it, all the taxes that are now levied by the Government are to maintain vested rights in property, liberty, and life. They are not to interfere with vested rights. Why, sir, every private citizen holds his property subject to the power of taxation, and Congress must designate the objects of taxation. When, after a man buys a farm, a new tax is imposed upon it, as a matter of course that impairs to some extent the value of the farm. And is the franchise of a corporation more sacred property than the franchise of an individual, the right which he possesses under the laws to hold his land as property? Not at all. All these corporate franchises are held subject to the power of taxation in Congress, which is sometimes necessary to be exercised in the most potent manner in order to maintain the Government. The States cannot by an act of incorporation place their property beyond the power of Congress. A State may, by law, make a contract with individuals which it cannot impair by taxation; but it cannot thus affect the power of Congress.

Every tariff and The law that we various employ

But it is said this tax discriminates against banks. revenue act discriminates in the objects of taxation. passed at the last session discriminates between the ments of life; it has a multitude of taxes, some higher, some lower. The only limitation upon the power of Congress on that subject is, that the taxes must be uniform; that is, a tax that applies in Vermont must also apply in Louisiana; a tax that is imposed on the people of Ohio must also be imposed on the people of New York; but the objects of taxation may be selected by Congress according to its wisdom, and taxes may be higher on one business and lower on another.