1859, Feb. 14 DE BOW'S REVIEW. JULY, 1858. ART. I.-DIRECT TAXATION AND FREE TRADE. We have on several occasions referred to the subject of Direct Taxation, and indicated the many considerations which should induce the adoption of that system of revenue in our country. When Mr. Boyce, of South Carolina, made a movement in Congress for the appointment of a Special Committee to analyse and report upon the expendi-tures of the Government, and to propose a plan of reform, we heralded it with gratulation, and offered him the right hand of fellowship in his labors. The result of the investigation so far has been communicated to the country, in a report, exhibiting great research and ability, and which has been received with marked attention and favor in the North and the South. It is our belief that Col. Boyce has inaugurated a movement the effects of which will be felt in the future financial policy of the Government. It will interest our readers to have the report, and we give it to them without omitting a line.-EDITOR. The expenditures for the fiscal year ending June 30, 1857, independent of the public debt, as appears from the report of the Secretary of the Treasury, are $65,032,597 76. The first question is, whether those expenditures are greater than what they should be under an economical administration of the government. We think they are. The best mode of determining this question is to compare the present total expenditures of the government with the total expenditures of the government at some past period of our history, and, further, to compare some of the leading items of our expenditure now with the leading items of our expenditure then. With this view, we have compared the receipts and expendi tures of 1857 with 1823, the result of which appears by the following statement: If space would permit, the contrast might be carried into many other items of expenditure, and the results would be startling. But enough has been done to show that the ratio of expenditure is far in excess of the increase of population. The expenditures ought not, for very obvious reasons, to increase in proportion to the increase of population. But conceding that it should, the expenditures of the government, in round numbers, should not exceed $28,000,000; whereas it is $65,032,559 76-an excess of $37,032,559 76. This result is sufficiently striking, but it is rendered much more so when we consider two important facts: 1st. That 6,196,000 acres of the public land were granted during the last fiscal year for railroad purposes, which may be valued at $15,490,000, being at the rate of $2 50 per acre. That appropriations to supply the deficiencies of the last fiscal year have been called for, amounting, in round numbers, to $10,000,000, making the total expenditures of the government, in round numbers, for the last fiscal year, $90,000,000-an excess over the ratio of expenditures in 1823 of $62,000,000. The administration of the government in 1823 was not considered peculiarly economical; on the contrary, it was pronounced at the time by some as extravagant, and really was much more so than the first term of Mr. Jefferson's administration. For a further illustration of the increased expenditures of the government, see exhibit A, at the end of the report. 2d. Considering as established the proposition that the expenditures of the government are far in excess of what they should be, we pass on to consider the remedy, if remedy there be, for this lavish waste of the public money. What is the remedy for this vast and increasing expenditure? The only remedy likely, in any degree, to be effectual, is to change the existing system of taxation. The regular increase of our expenditures shows that it is not attributable to any particular party or administration, for this increase has gone on constantly under every party and every administration, with the regularity of a great principle. To make an individual a prodigal, you have only to supply him with an unlimited amount of money; to make a government extravagant, you have only to do the same thing. The first economical defect of our present system of taxation, by duties on imports, is, that it operates as a bounty to one, and that a very important class-the manufacturers. Under the operation of this first defect, the great manufacturing class, which represents a vast capital, which is intensely alive to its peculiar interest, which is vigilant, active, powerful, and capable of prompt and ready combination, is MANUFACTURES OF THE UNITED STATES. 3 interested in increasing the taxation of the government; for the higher the taxes are, if laid on the principle of protecting their products, the better for them. Suppose the question were submitted to the cotton manufacturers, or the iron manufacturers, whether the duties on cotton and iron products should be increased or diminished, does any one doubt what their answer would be? So far as they are concerned, they consider high duties as bounties to them, and they would be in favor of them, if the revenues thereby derived were thrown into the sea. Under the present system of taxation by duties on imports, this great class are favorable to high taxation. To form some idea of the stupendous magnitude of this manufacturing interest, take the following statement, showing the value of the products of manufacture of the United States for the year 1850.-(Financial Report, Executive Document, 3d Sess. 34th Congress, vol. 2, 1856-'57, page 166.) Statement showing the manufactures of the United States and Territories for the year 1850. Manufactures of cotton. Manufactures of pig iron.. Manufactures of iron castings.. Manufactures of iron wrought. Product of the fisheries.. Product of salt manufactures. Manufactures produced in families. All other manufactures... Total value of products of manufactures.... $61,869,184 00 43,207,545 00 12,748,727 00 25,108,155 00 22,628,771 00 18,213,681 00 10,000,182 00 2,222,745 00 27,493,644 00 832,103,265 00 ..$1,055,595,899 00 This reference to the products of manufactures may give us some idea of the immense capital engaged in manufactures. This capital may be estimated at $500,000,000. This vast capital is all more or less interested in high duties -that is, in high taxation. The influence of the manufacturing class on taxation is not merely in proportion to the capital they represent, as compared with the capital engaged in other industrial pursuits; for, from very obvious reasons, some of which have already been incidently alluded to, it is far beyond this ratio. As an illustration of this influence, we would refer to the facts connected with the modification of the tariff during the last Congress. It is notorious that the only great interest represented here at that time by outside agents was the manufacturing interest. One of the first steps towards an economical administration of the government is to place that great and active interest permanently on the side of low taxation, and the only effectual mode of doing this is direct taxation; which necessarily implies the total abandonment of protective duties, which are but another name for bounties. When you have put all the great interests of capital on the side of low taxes, you have taken one of the most decided steps that you can possibly take in favor of low taxation, which is the necessary antecedent of economy. The next prominent evil of the present system of taxation, is that, by its indirect operation, the people are ignorant of what they pay they are ignorant of what they pay to the government, and equally ignorant of what they pay to the protected interests in the shape of bounties. If the object be to obtain from the people the largest amount possible without arousing them, then the indirect system-the present system is the best; but if the object be only to obtain from them the least amount that will suffice for the just wants of the government, then the direct system of taxation is the best. The happy ignorance of the people of the United States as to the amount of taxes they are paying is one great cause of their remaining so passive under the enormous increase of our expenditures which has been going on for years. If we desire an economical government, we must be candid with the people, and let each one know exactly what he pays. The people, ignorant of how much tax they are paying in the enhanced price of commodities, will tolerate an expenditure of $100,000,000 much more patiently than one of $50,000,000, when each one has to pay his ascertained share directly from his own pocket. Economy here must be preceded by vigilance among the constituency; as long as the constituency are indifferent on this subject, the representatives will be carried along unresisting in the vortex of extravagance. > Another objection to the present system is the large expenditure necessary in the present mode of collecting the revenue, in paying the army of employés engaged in the present revenue service, in building costly structures in various parts of the United States, and in maintaining custom-houses which do not pay their own expenses. Upon this point we would call attention to the following facts: The direct cost of collecting the revenue from customs for the last fiscal year, ending June 30, 1857, $64,171,034 05, was $3,552,359 50, employing three thousand and eighty-eight officers. This is independent of the cost of the custom-houses and revenue cutters, the interest upon which investment would largely increase this sum. To see further the operation of the present system, take the following statement: .. OUR CUSTOM-HOUSE SYSTEM. 5 Amount of revenue collected, and expenditures at certain custom-houses, for the fiscal year ending June 30, 1857. The total net revenue from the following eighteen customhouses for last fiscal year, viz: Belfast, Bath, Bangor, Portland, Waldoboro', Wiscasset, Burlington, Barnstable, Gloucester, Bristol, Providence, Plattsburg, Wilmington, Del., Pittsburg, Cincinnati, Sandusky, Toledo, and San Francisco, was $1,769,163 43. The total cost of the public buildings in those places for custom-houses, post offices, and court-rooms. finished since 1850, is $2,443,776 94. The total expenditure. incurred for the last fiscal year in collecting said net income of $1,769,163 43 was $567,839 02. Another defect of the present system is the immense patronage it gives to the Federal Government. This army of officers might by each State paying over its assessed quota, be almost entirely dispensed with. Instead of three thousand and eightyeight employés now in the revenue system, we need, under a different system, have no more than one treasurer in each State. Another prominent defect of the present system is its necessary inequality; for no tariff can be constructed that does not, in a greater or less degree, operate as a bounty on one portion of the community and as a double tax on the great class of consumers. It requires no argument to prove that in a republic there should be equality in taxation; the Constitution attempts to accomplish this purpose in declaring that "all duties, imposts, and excises, shall be uniform throughout the United States." But every tariff, in a greater or less degree, must necessarily violate the spirit of this provision. Another defect of the present system is, that it necessarily cripples the productive energies of the country by in |