Mr. RAYMOND. So I understood. The estimate of the SecyTreasury is for the same ear. Now, Mr. hairman, down to the year 1861, for the 5 years immediately preceding that year and the commencement of the war, the imports averaged about 350 million dollars. I am sure they will not be less than that from this time forward. Our imports are always measured by the amount of our experts. Our capacity to buy usually determines the amount we do buy. We are bringing into direct contribution to our commerce a larger extent of country than ever before. A million and ahalf of men are going from the field into productive pursuits. The South is soon to be open to commerce, and the South will produce largely with proper encouragement and aid at the hands of the Government; rind I was lad to hear the chairman of the Committee of Vays and Means refer to this as one of the great reliance s of the country for revenue, namely, encouragement of the industry of the South, and aid in developing the resources of that rich and productive region. Now, sir, with all these sources of production I am sure we can fairly estimate our exports for the next year and for a series of years to come at not less than $400,000,000, had our imports will be atleast as large as they were during the 5 years previous to 1861. What, then, will be the probable revenue from customs? The present average rate of duty I believe is sometiiing over 40%., probably nearer 45 than 40. That is not likely to bereduced, and it ives us 140 millions. Indee, the furtherimposition of these domestic excise duties will remder it indispensable that we increase the duty on foreign imports in order to keep the balance even between foreign and domestic duties. But, sir, without going into an intricate or close calculation on this subject, adducc these facts merely to show that the estimate of the SecyTreasury, $100,000,000, is exceedingly low, and that it is more likely to be 150 millions than 100, at the rate at which imports are coming in now. Estimating the custom duties at $100,000,000 will leave $250,000,000, or a little less, to be raised by domestic taxation. This bill now on our tables, upon which our action is invoked, proposes to provide frthis sum each year for the expenses of the government. Now, it is idle to conceal from ourselves the fact that this is a grievous burden, and it will always be felt to be a grievous burden by the mass of the people upon whom it rests. No matter how rent may be their alacrity, no matter how determined may be their purpose to pay it, no matter how ready they may be to sacrifice all they have in maintaining the honor of the nation, it will still be felt now and always as a serious burden; and the extent of its weight will depend upon the manner in which it is distributed among the different classss and pursuits of the country. Now, this is entirely a new subject for us. We have had no exerience in devising Ways&Means to distriute duties upon domestic articles, so as to make them rest more or less lightl upon the mass of the people. The task was t rust upon us suddenly. be war came upon us sud enly, and with the war came taxes, out of which its expenses could alone be met. When the rebellion came upon us we all know how eagerl the people demanded that taxation should pay the expenses of the war for its suppression. Their determination to rese ue the Government from the peril that threatened it prompted them to demand that taxation should be resorted to as the means of produ My colleague from the northern part of the State of NewYork, [Mr. HUL sunn] then chairman of the ComWays&Means in the Assembl of NewYork, will remember how universal tec came to us, as it went to Congress also, that taxes should be increased and that the country should ay the expenses of the war as it went alou instead of resorting to loans. Naturally enonglgi Congress responded to that demand. It responded at once, and necessarily without much consideration. The laws of industry and of political economy were but little regarded. Congress issued its decree that everybody and everything should be taxed in every way. Upon all the processes as well as the products of industry, upon all work, and upon all tools by which work was to be done, upon all classes and conditions of men taxes were imposed without stint and without precaution. Every branch of trade, every kind of manufacture, raw mate rial and net results everything that could be made to pay was swept along in the vast drag nct of that 1st tax bill. N ow, while the people paid these taxes with the cutest alacrity and readiness we must not all into the error of supposing that such a system could be endured permanently. As a temporary necessity, they have borne it with a degree of courage and atience that could never have been exhibited y another people on the face of the earth; and this is not an empty national boast it is conceded by the highest authorities of England, that in this as in many other things the people of the U.S. have proved themse ves entirely a people by themselves. The London Economist perhaps the highest financial authority in England, in speaking of the taxation through which the U.S. have passed during the last 4 or 5 years, says that “no other nation would have endured a system of excise duties so searching, so effective, and so troublesome.” and it adds that “to have imposed such taxes in England would have cause a revolution.” and it is to the eternal honor of the American people that in this, as in everything else connected with the salvation of their country, they have responded nobly to the calls of the Government. But this, as I have said, was from the necessities of the case a temporary provision. It became necessary, and the last Congress foresaw the necessity, to make provision for some permanent arrangement and system of internal) duties. The 1st step which it took was a judicious step. It was to follow the example of that nation which has had more eXperience of internal taxation than any other, GreatBritain. GreatBritain always, in devising ways of taxation, appoints commissions or committees who take evidence carefully and elaborately; for taxation, even more than the ordinary action of government is an experimental science purely deductive in its nature. There are no general principles which will instruct any nation as to the specific taxes it may impose. It must. inquire into the facts and be governed by them. It must scrutinize each particular branch of industry. its hearings on all others and the bearin of the whole on the welfare and prosperity ol the nation; and the system of taxation must be suited to the emergency in each particular case. Congress aut orized at its last session a commission of 3 gentlemen familiar With the subject from theoretical study and enable of making personal investigations of the facts relating to it. Those gentlemen have been engaged with assiduity, and intelligence, and, I think, with a degree of success far greater than could have been predicted, in investigatin the whole of this great and novel subject. he have collected a vast body of evidence, which I am sorry to say has not yet been printed and delivered to Congress for its instruction, but the summaries made from it and published from time to time must have done much to enlighten all those members who wish to understand the subject in its details and the action proor to be taken. ow, all that I propose to do upon this occasion is to recur briefly to 2 or 3 General principles which I think should guide us in acting on the tax bill which is now before us. In imposing taxes upon domestic industry there are certain great principles familiar to all readers of political economy which it will not be wise for us wholly to neglect. We are to impose taxes upon a great variety of articles. The present law, as I have said, taxes every thing. We seem to be almost in the condition of England when she 1st began her system of taxation, so amusingly described by Sidney Smith, when every Englishman came into the world by the aid of a doctor who had aid:1 tax, and that he aid all the way throng life, until he was finall buried in a taxed collin, in a taxed grave, and by an undertaker who had paid a tax; and it was then, and then only, that is taxation ceased. Now, I do not suppose that we can reach a full and thorough compliance with all the theoretical principlos of taxation laid down by the writers on o itical economy; but we can keep them stea ilyin view, and we ought always to aim to come up to them as perfectly as possible. In the 1st place, it is always desirable to impose taxation npon the results of industry rather than upon its processes. The processes of the manufacturer, the tools of the manufacturer should not be taxed, but the results of the manufacture, when they make their appearance, in profits and income, are propersubjects of taxation. When aman is endeavoring by labor to produce certain products he should not be taxed in his ellorts, in his labor, but only in the result, the products of that labor. It is a very commonp ace maxim, but a very true one, and one to be borne in mind in all these economical discussions, that labor is the source and the only source of national wealth. Productive industry feeds all the sources of national wealth. It is the fountain from which we draw all the moneys we need for maintaining the Government or for any purpose whatever. If we tax the processes of production we tax the fountain head, and thus diminish the ability to kee up the supply. It is rather the duty of the government not todiminish the force of this productive industry, but to stimulate it, to aid it, to increase it. Suppose a man is engaged in the manufacture of engines or anything of the kind, like our friendfrom Massachusetts, [Mr. Anus] why is so largely engaged in the manufacture of axes, shovels, another agricultural implements, it is not wise to tax the processes of that manufacture, either in respect to the raw material that is used or the too s that are employed or the food of the workmen that are ired. All those things should be as nearly free from taxation as possible; but when the net results, the profits, the income, are produced, they are tife legitimate subjects of tax.ation, and may be levied upon accordingly and that, in my judgment, is what is really involved in what is commonly called the free trade policy of England. England found her selfin a condition when her main and essential interest was the manufacture of goods for the markets of the world. She he to compete with other nations in those markets; and she found it absolutely indispensable for the production of those goods at such a rate as to enable her to successfully maintain that competition to relieve her manufacturers from taxation upon everything that entered into the processe s of production. She took the duty of rawcot ton because she needed raw cotton for the goods she manufactures. She took the dut off corn, for she needed corn to feed her wor men, and by taxmg corn she obliged the manufacturers to increase the wages of their workmen to ay the increased cost of their support. An so everything that entered into the working of her looms, her forges, and her machine shops was relieved from taxation. It is idle to call that policy free trade. As it is very properly said y the commissioners of internalrevenue in their admirable report upon this subject, and as it had been remarked before by some French economists, it is only a more subtle form of protection. Instead of taxing and excludiu the goods of other nations, inasmuch as they went to the markets the ports of which she could not control, she very wisely reduced the cost of producing her own goods. That is a principle of universal application, one that we should apply just as rapidly as we can; for the same reasons that make it applicable to England make it applicable to us. When we perfect our system of internal taxation; when we get it to a point where it will conform to the fundamental principles of political economy, the whole of this long list of manufactured articles that now figures on our tax bills will disappear, and we shall have left simply taxation upon the results of industry upon the profits of labor; in other words, so far as the result of manufactures go, we will have taxation upon incomes alone. I consider incomes to be the fairest of all subjects for taxation, and I was a little surprised to hear the chairman of the ComWays&Means [Mr. Momma] apologize for continuing the income tax a little longer. It seems to me that income is the 1st thing, so far as industry and the products of industry are concerned, which should be taxed; for in taxing income you tax that which a man has and nothing else, and that too in exact proportion to the amount of what he has. If you encourage your people in their labor, in manufactures, in producin wealth, then after they have reduced it an have the net proceeds in their pockets, it is quite just and air and proper for the Government to claim a propers are of those profits to meet its own necessities. But the industry of the nation should be left unfettered; or if fetters have been imposed upon it, it should be allowed to regain its freedom at the earliest possible moment. Of necessity, there are expections to this rule; and cases where it cannot c at once and fully applied. Cotton is undoubtedly one exception. In myjudgment, it is proper to impose a tax upon cotton; and I think the rate proposed by the committee is not too high. Iowever, that question will come up for more careful consideration when the bill comes to be examined by sections. I refer to it now, merely to say that although the tax upon cot ton may seem to be an exception to the general principle I have laid down, yet the fact that cotton is a monopoly of this country, and must be bought from us by all other manufacturing countries, takes it out of the cate gory. It is not, for example, like iron. England has iron, and we have iron. We cannot, t icre fore, tax iron in the raw state, as we may tax cotton. Should we attempt to do so, we should expose ourselves to unfair, unjust, and injurious competition on the part of England. But it; we tax cotton England must pay the tax a so. But, not to dwell upon this point, the next principle to which I ask attention for a moment is that we should tax, so far as possible, the su iei fluities and not the necessaries of life. n the application of this principle to income is, I suppose, to be sought and found the justification of the exception of a minimum which is always made. In England, where an income tax has come to be one of the fixed taxes of the country, and will never be repealed, at least while she needs so large arev cuuc as she now does, I believe the taxis 6 pence to the pound, and 100 of income are exempt from taxation. The cost of living in this country is somewhat higher, and especially for the working classes it is very considerably higher. Our present law exempts $600 of income from taxation. The committee recommend that the amount exempted be increased to $1,000, and in this I think they have recommended wisely, although it will subtract $3,000,000 from the revenue in the aggregate. An exemption of $1,000 will be but a just exemption. That amount will not maintain a working man and his family in this country in any better condition than that in which he ought to live. The Government should not trench upon the necessities of the great mass of its people. The absolute necessities of the people should be e ared, should be held sacred from the hand of the tax collector. The people should be allowed to enjoy undiminished so much of their earnings as they need to supply those necessities. In regard to the income tax, I observe also that the committee recommend a repeal of the extra 5%. on income over $5,000. Incomes to the amount of $1,000 are to be wholly exempt. The amount of income above 81,000, up to $5,000, is to be taxed at the rate of 5%. By the present law an additional tax of 5% is imposed on all over $5,000. I know that theoretical writers insist that it is unjust and impolitic to impose a graduated income tax; that every man should pay the same%age on his income, whatever its amount may be. But there is this fact which, it seems to me, ought to be considered: that the 2nd $5,000 of a mans income is (morally much more easily earned than the 1st $5,000, when any business is entered upon that will insure large profits. Certainly a man can better afford to pay a 2nd tax on all over $5,000 than to pay a heavy tax on the 1st $5,000 of his income. I confess that I do not think it wise, in the present state of the country, to exempt the 2nd $5,000 of a mans income from a 2nd tax. I know that this may fall heavily upon portions of the cominn nity, but fortunately they will be those portions of the community which can best affor to bear it, and those portions oft he community, I will add, which have thus far borne all taxation with the utmost readiness, and which show no signs of complaint at the taxation to which they are subjected. Even if it should be deemed wise to reduce somewhat the%age of tax on the 2nd $5,000 of income, I hope the House will not think it wise to release it from extra taxation altogether. The same principle of taxing snperflnities and incomes instead of necessaries applies to the taxation proposed upon commodities, upon beverages, upon articles consumed. I know that it is somewhat difficult, theoretically, to define what are necessaries and what are superfluities. What is a necessit to one man is a superfluity to another, and what is a superfiuity to an man at 1st becomes soon a necessity of life. But at the same time there are certain things which are used merely to gratify artificial tastes and such things, I think, may very properly be called superlluities of life and among these all nations recognize distilled spirits, whisky, fermented liquors, to bacco, and to a certain extent, tea and coffee These, especially distilled spiriLs, are always made the subjects of heavy taxation. In England distilled spirits are heavily taxed, and yield a very large portion of the revenue. 4 of these articles sugar, tea, tobacco, and spirits yield $07,000,000 out of $112,000,000 received from customs in England; and licenses, malt and spirits, yield $92,000,000 out of $97,000,000 eceived as excise. ey are always resorted to, and bear a very large proportion of the burdens of taxation. Our own tax bill aims at the same thing and goes upon the same principle. Under the law now upon your statute book whisky is taxed 2 dollars a gallon, and in England it is taxed $2 50. There is no rate upon these articles which can be so high as to be objectionable. On the contrary, the higher the tax the greater the indirect benefit in diminishin consumtion, for all concede that a law which should largely increase the domestic use of spirits as a beverage would not conduce to the welfare and morality of the nation at large. The only limit, in my judgment, to the amount of duty to be imposed upon Whisky is the practical enforccment and collection of the tax. Ihere we encounter a serious difficulty, for if we at the tax so high as to make the profit on illicit distillation very great we shall tempt or force men into that illicit distillation. I suppose the cost, the prime cost, of producing whisky is about 25 cents a gallon, and when you put a duty of 2 dollars on that the profit on every gallon a man can sell in evasion of the law becomes immense. If we get the duty so high as to lead men to see that such enormous profits can be made we shall render it certain that this billicit distillation will be largely resorted to. This has been expe rienced everywhere. There is but one way to prevent it, and that is by the enactment of severe and rigid laws. We must have one of 2 things: either the tax shall be so low as not to tempt men to go into illicit distillation, 31the law must be so severe that they will not O it. Since the original internal tax law was enacted, we have made various experiments in the tax on whisky. I believe it be an at 20 cents a gallon, then rose to 60, then to $1 60, and then to 2 dollars. I do notknow whether anyone of these taxes continued longenougb to enable us to arrive at any general inference as to the rate that would yield the largest returns. It is certain that the present tax of 2 dollars is promoting illicit distillation to a degree which threatens the collection of any revenue whatever on whisky. In one single collection district in the city of NewYork, where 2 years ago there was not a single distillery, there are now 30 illicit distillers in cellars and out of the way places, each making whisky, from one to 5 gallons:1 day, on which, of course, they pay no duty and make an enor mous profit. I understand that in one district of Virginia, in the neighborhood of Richmond, where there Were no distillerics 2 years since, there are now 300 making whisky in evasion of the law and in the State of Georgia, where there Were but few at short time ago, there are now 1500. How is this to be remedied? It can only be done by making the law so stringent that it will not be evaded. That is almostimpossible in this country. The English Governmeuthas succeeded by looking into the detail of every mans business, by having an inspectorin every mans distillery. In our country the facilities for evasion are so great that it is impossible to provide these remedies. I do not know what particular remedy the committee has recommended. but I cannot think of any likely to be more effective than a, very heavy license tax and a very severe nnishment for evading the law. If none are allowed to distill exceptthose who pay a heavy license, all who evade or defy the law may be subjected to severe punishment. Large distilleries are willin to pay a license as large as may be demon ed, provided they can be protected against illicit distillation. But how many of these same large distilleries which ay the taxes on their products have been forced to suspend. They cannot pay the tax of 2 dollars a gallon and carry on their business in competition with illicit distilleries all over the country, which make and sell their whisky and pay no tax whatever. This House has to choose, after deliberation, between these 2 things: either to reduce the tax on whisky so as to destroy this enormous temptation to illicit distillation, or to enact laws so stringent as to prevent the evasion of the law and the entire destruction of those who pay the tax. I believe the manufacture of whisky is not less than from 40 to lift million gallons a year. Last car it roseed the enormous amount of eigity million gallons, as the chair man of the committee has just stated. But 40 millions may probably be regarded as the minimum production of the country. At 2 dollars this would yield $80,000,000, and at one dollar it would yield $40,000,000; but certainly, as the law is now enforced, it is not likely to yield even half of that amount. This matter should demand careful attention, and I trust the House Wlll act upon it with due and sole regard to the interest of the revenue. The commissioners of revenue are of o inion, I believe, that one dollar perallon will actu ally yield more revenue than the proposed tax of 2 dollars, until or unless the proposed tax of 2 dollars is better enforced and more riorously collected. gI have dwelt longer on that point than I intended. Tobacco is another article which demands careful attention, and it is one of the sufferfluities which can be heavily taxed. but the next principle I desire to refer to, and I think it will be the last, is this: that taxes should be imposed upon as few articles as possible. A tax is a blow at best. It is a hurt, an injury inflicted upon somebody by the Government. It must all somewhere, and wherever it falls it will create complaint and produce injury. It is therefore evident that it should fall upon as few as possible. The eXpense, moreover, of collecting the revenue depends far more on the number of articles taxed than upon the amount of the aggregate collection. Our present tax lawimposes duties upon a great variety of employments which scarcely pay the expenses of collection. Take all the small trades, the tailor, the shoemaker, the milliner, the dress maker, all the small traders of that sort, and you will find that the amount of tax imposed upon them scarcely pays the expense of collection. nanote to one of the pages of the report of the commissioners of revenue is inserted an extract from the books of one of the tax collectors in the city of NewYork, from which it appears that there are many milliuers, dress makers, manufacturers of cloaks, &c., whose monthly taxes amount to $1 04, another to $1 20, in another to $1 68, in another to $1 75, and in another to only 42 cents, dzc. need not say that this scarce y ays omnibus fare to collect these taxes. All these and all like them should be, it seems to me, dismissed from the tax bill at once. So I think in regard to all manufactures of articles of indispensable necessity for the great mass of the community. Clothing has been taxed 5%. during the past year, and the chairman of the committee reports this year a reduction to 1%. ow, 1%. will simply vex the producers and yield very little revenue. Clothing is an article of universal use; it is consumed by all classes. But any considerable tax upon it must operate unetpially, because the poor man or the man in m ddle life wears just about as much clothing as the rich man, and has to pay substantially the same amount of tax. It seems to me, therefore, that we could relieve the eat mass of the community from that tax with tout interfering materially with the revenue. Last year it yielded something like 6 million dollars.“ rThis year it would no doubt yield much more at the same rate. But at 1%. it will yield but little and if no one else does so, I shall submit, at the propertime, an amendment to the bill to strike out clothing from the list of taxable articles alto gether. So, I think, taxes upon paper, upon type, upon books, and upon newspapers as taxes upon knowledge, an taxes upon adver tisements as checking free interchange of communication on business matters, and taxes upon insurance and savings as tending to discourage udence and forethought; and all other taxes, which these are samples, should be swept away as speedily as possible. The effect of our present system ofimposing taxes upon every article that is manufactured, and upon every part of such article, is very important in increasin prices by duplicating taxation. I will not well upon this branch of the subject, which you will find discussed clearly and fully in the report of the revenue commissioners to which I have referred. They cite the instance of an umbrella as an illustration. Formerly an umbrella. was made at a single manufactory. Now it is made by putting together the various parts, each made ya different process and each paying a separate tax. The stick of wood is one article, part domestic and part foreign, the foreign article being already taxed. Then the wire comes from another establishment; the handle of bone, ivory, orhorn, then the brasstube, then the elastic band of rubber, then the silk tassel, then the button and the cap each of these may come from a different manufactory and is subject to a separate tax; and when they are all brought together and made into an umbrella then they are taxed again. More than that, the manufacturer of each one of the various items composing the whole avails himself of the fact that the article is taxed to add to the price of that which he supplies, and not only to the amount of the tax, But so as to give him a little additional profit. He takes advantage of the tax to increase his profit. It is so in every Dept of business. You find that the price of everything is rnised,aud raised beyond the amount of the tax imposed upon it. They manage the matter retty muc as the owners of the city railroadJ cars did when they were authorized to add to their fare the amount of the tax. The amount of the tax was one 5th of one cent, and they added one cent and it is so in all Depts of business. It is in human na ture, and we cannot by an not we can pass here expel human nature from the masses of our people. Now, apply this rule to all the products of manufacturing industry. Consider that, on all these processes this duplication is goin on, and that each man adds something in adition to the tax to his part, and you will see a much more potent reason for the enormous prices that obtain today for everything than is to be found in the high price of gold. whydid not the price of everything fall when gold fell from 280 to 130? Simply because the price of gold and the inflation of the currency had comparatively little to do with the exaggerated prices at which all articles were held, not nearly as much as the fact of the duplication of taxes, and the exaggeration of profits which followed upon it. Now, by abolishing all these taxes on manufactured articles the tendency would be to correct this most serious evil. When England began her system of internal taxation, the list of taxed articles was enormous; everything she had was taxed, and taxed roundly; but grad ually, year by year, she has gone on reducing the number of articles on which internal taxes are imposed. Her internalrevenue now amounts to $161,000,000. It is drawn from 3 great sources: excises, stamp duties, and assessed taxes. The excises amount to $97,000,000, and of that sum more than 90 millions are “raised from 3 articles, and there are but 9 articles embraced in her whole list of excise duties. So, too, of her stamp duties. Her assessed taxes amount only to $10,000,000 a year in all, and of these 1/2 are raised from 2 items inhabited houses and car riages. This shows that a reduction or the number of articles taxed is quite consistent with an increased aggregate amount of taxation, provided the distribution is properly made. y nursing the great sources of internalreve nuc, by imposing taxes only where they can be easily borne, by putting them on superfiuities, by not taxing processes. but income, we should obtain the means, gradually, of reducing more and more the number of articles upon our list for taxation. Now, sir, I do not O into any examination of other items of this bill. These are the main principles which I think it would be well for us to bear in mind. But, after all, nearly everything will depend upon the administration of the law. There is no Dept oflaw in which administration, execution, rigid execution, careful execution, honest execution, is so importantas it is in connection with our interna revenue. If it is honest, vigilant, and correct, revenue can easily be collected so as to ield large returns. lf it be lax, negligent, and still worse, if it he corrupt, there is no end to the losses which the Government will sustain. With arigid system of collection, which involves the necessity of employing capable men at remunerative prices and having ngood, efficient, and energetic staff, without reference to its cost with such a system the people of this country can bear all the burdens of taxation now imposed upon them, or which unyunforeseeu emergency may here aftIer require. hope the House, in discussing this bill, will have due and careful reference to that fact, as well as to the details of the tax itself. With a properadjustment of this law, to be made from year to year, I am confident that this nation, with its resistless enterprise, its boundless resources. its rapidly increasing population, will meet the emergency for which it is now required to provide with the same degree of honor and success that has attended its conduct of the war which has just been closed. The 1st reading of the bill having been dispensed with by unanimous consent, the committee proceeded to reconsider it by sections for amendment. The 1st section was read, as follows: That on and after the 1stday of July, 1866.in lieu of the duties on unmnnufactured cotton.as provided in an act to provide intenial revenue to support the Government, to pay interest on the public debt, and for other iurpose s approved June 30.1864.as amend viiby the not of March 3. 1805.there shall be paid by the producer owner or holder.upon all cotton producedWithin the U.S and upon which no tax has been levied paid or collecte. a tax of live centsperpound. as icrcinnfter provided; and the weight of such cotton shall be ascertained by deducting 4%. for tare from the gross weight of eachhole or package; and such tax shall be and remain ii lien thereon.in the possessionof any person whomsocvei.from the time when such cotton is produced as aforesaiduntil the sameshall have been paid; and no drawback shall in any case be allowed on raw or nnmanufactured cotton of any tax paid thereon when exported in the raw or unmaniilactured condition. But no tax shall be imposed upon any cotton imported from other countriyi and on which an import duty shall have been pai.