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TESTIMONY

9119

TAKEN BY THE

SUBCOMMITTEE ON THE TARIFF

OF THE

u. 5. Conpress. SENATE COMMITTEE ON FINANCE

IN CONNECTION WITH

THE BILL H. R. 9051, TO REDUCE TAXATION AND
SIMPLIFY THE LAWS IN RELATION TO THE

COLLECTION OF THE REVENUE.

IN FOUR PARTS.

PART 1.

WASHINGTON:

GOVERNMENT PRINTING OFFICE,

HF1755 .Azo 1888

401657

20

SENATE.

50TH CONGRESS,

1st Session.

REPORT No, 2332, and views of the minority.

IN THE SENATE OF THE UNITED STATES.

OCTOBER 4, 1888.-Ordered to be printed.

Mr. ALDRICH, from the Committee on Finance, submitted the following

REPORT:

[To accompany bill H. R. 9051.] The Committee on Finance, to whom was referred the bill (H..R. 9051) to

reduce taxation and simplify the laws in relation to the collection of the renenue, respectfully report:

The demand for a careful and thorough revision of our revenue laws is imperative. This revision is necessary:

(1) To reduce the national revenues, which are now excessive.

No valid reason can be given why we should, under existing circumstances, continue to collect annually a sum approximating $60,000,000 in excess of the amount required to administer the Government economically and to keep the pledges of public faith.

(2) To protect honest importers and domestic producers, from the disastrous consequences resulting from fraudulent undervaluations of im. ported merchandise, on which ad valorem rates of duty are levied.

The alarming extent of this dishonest practice, and its demoralizing and destructive effect upon public and private interests, and the necessity for prompt adoption of remedial legislation, have been repeatedly brought to the attention of Congress by successive Secretaries of the Treasury. The enormous increase from year to year, in the quantity of importations of manufactured and other articles of merchandise, which are subject to ad valorem duties, is largely attributable to this cause. Duties which are nominally protective to American industries, and which would be actually so if honestly collected, prove both delusive and destructive when, through defective laws and negligent or corrupt administration, but a fraction of the amounts lawfully due are levied and collected.

(3) To remedy the defects, anomalies, and incongruities which have been from time to time discovered in the tariff schedules or which have been created by erroneous decisions of the Treasury Department.

The interpretation given to the 7th section of the act of March 3, 1883, by which the cost of coverings and charges of all kinds is excluded from consideration in the assessment of dutiable values, has had the effect, without changing nominal rates, to reduce largely, but in an irregular and unequal inanner, the amount of duties collected on

imports.

1

(4) To secure the proper re-adjustment and equalization of tariff rates, rendered necessary by modified business conditions, improvements in methods of production, radical changes in prices, or by new elements or sources of competition.

(5) To give relief and protection to many industries which are now suffering on account of the inadequate rates levied on competing prod. ucts.

The public demand for a reduction of revenue is more urgent on account of the inexcusable retention in the national Treasury, or on de. posit in national banks, of vast sums of money in excess of the amount required to pay the current demands upon the Treasury and to meet the maturing obligations of the Government. This sum, with the additions which will accrue within the next four months and before any legislative action reducing the revenues can be effective, will be sufficient to pay in full the outstanding 41 per cent. bonds due in 1891, $221,000,000.

The existence of this immense surplus furnishes occasion for constant anxiety and apprehension of possible financial disaster. The failure to prevent this dangerous accumulation, inciting, as it does, extravagant expenditures, and constituting an ever-present menace to the prosperity and enterprise of all our people, can not be too severely condemned; but it is a failure for which the executive department of the Government is alone responsible.

This accumulation could and should have been profitably avoided, and the possibility of business disaster averted, by a prompt return of the money collected from the people, to the channels of trade, through the purchase of United States bonds that could at all times have been obtained for prices which, to the Government, would have been equal to an investment, of otherwise unprofitable funds, at a rate of interest of not less than 2 per cent. per annum.

It is probably true that the $60,000,000 deposited in national banks can not now be withdrawn without peril to the business interests of the respective communities where the banks are located, and that this sum must remain, for an indefinite period, a permanent loan to favored institutions without interest. This unfortunate situation, however, must have been foreseen when the deposits were made, and it should not be aggravated by further deposits, nor should it furnish an excuse for the failure to promptly dispose of the much larger sum remaining in the Treasury in the manner indicated.

To amend the provisions of law which enforce the collection of excessive revenue, and to remedy the defects which we have enumerated are within the scope of legislative relief, and Congress may properly be held responsible for any evils resulting from a continuance of existing conditions. It may, however, be fairly said that responsibility for delay in the adoption of legislative remedies rests upon the party in control of the House of Representatives, which by the Constitution has sole power to originate revenue bills. The participation of the Sepato

in any effort to care existing evils by proper legislation has not been possible, from the fact that the bill under consideration is the first that has reached the Senate in more than five years giving them jurisdiction over the subject.

In view of the universal demand for relief from the unsatisfactory condition in which we find ourselves, the inaction of those whose anxiety for reform has been manifested by repeated declarations is remarkable. It would have been easy at any time when Congress has been in session since the 3d of March, 1885-and its sessions have covered at least twenty months of that period—to have secured the concurrence of the two Houses upon a measure which would have reduced the revenue, and amended the administrative features of our customs laws in a satis. factory manner.

The refusal to adopto.or even to consider a measure of this kind, has been publicly declared by a leading member of the House of Representatives (Hon. Samuel J. Randall), to have been "owing to the fact that a majority of the Committee on Ways and Means seem to have determined that, unless their own peculiar views can be incorporated into law in regard to customs taxation, and the continuance of the internal-revenue system without reduction or modification, they will prevent any reform in this direction.”

It has been the evident purpose of those who have controlled the policy of the party in power, to delay action, to magnify causes for uneasiness, and to multiply and intensify evils until the people of the country should imperatively demand relief, and then to assume that the evils and embarrassments from which we are suffering are the necessary incidents of the protective system, and that relief can only be found in the emasculation or destruction of that system.

The known attachment of the great mass of the wage-earners of the country to a system which has been productive to them of unexampled prosperity prevented the adoption of a policy of open attack, and made it necessary that some plansible reason should be found for the stealthy accomplishment of their destructive designs.

Yourcommittee, after a thorough examination of the provisions of the bill (II. R. 9051) referred to them by the Senate, have become convinced of its inadequacy as a remedial measure in view of the condition which confronts us.

(1) Its adoption would probably result in an increase, instead of a reduction, of the revenue from customs.

It is claimed by the friends of the bill that the reduction of revenue from this source would amount to $19,486,240.75, but we are confident that the large reduction in rates proposed would result in greatly in creased importations. When American producers supply a considerable portion of our market with articles in general use and the rates on these are reduced below the protective point, both importations and revenue must increase.

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