The Sun.
London, England, 1868-02-13 00:00:00

THE SUN, LONDON, T UR SDAY EVENING, FEBRUARt 13, 1868.

REPORT OF THE EON. DAVID A. WELLS, SPECIAL

CO3DLISSIONER OF REVENUE.

Treasury Department,
Office of Special Commissioner of the Revenue,
Washington, D. C., January, 1868.
Hon. Hugh M'Culloch, Secretary of the Treasury.
Sir,—As Special Commissioner of the Revenue of
the United States, I have the honour to submit to
you my second annual official report, and would re-
quest that the same, if approved, may be presented
to Congress for consideration.
The law establishing the office of Special Com-
missioner of the Revenue requires that he shall in-
vestigate the sources of national revenue, the best
methods of collecting revenue, the administration of
existing revenue laws, and the relations of foreign
trade to domestic industry ; and in the discharge of
these duties the Commissioner has been actively
and uninterruptedly engaged since the adjourn-
ment of the Thirty-ninth Congress ; a portion of the
time having been devoted, under the directions of
the Secretary of the Treasury, to a personal exami-
nation of the revenue systems and industrial con-
ditions existing in Great Britain and some of the
leading States of continental Europe.
The Commissioner repeats the statements rela-
five to the amount of the national debt and rate of
its funding and reduction, which were fully stated
in the reports of Secretary M'Culloch. He states
the amount required to provide for the interest on
the national debt on November 1, 1867, to be in
coin, $104,698,205 ; in currency, $29,609,718. This
he foots up to amount to $134,307,923. By fund-
ing the debt bearing currency interest the amount
to be provided for yearly would be $130,304,223.
The average annual expenditures of the Govern-
ment other than for interest were, for the ten years
ending 1830, $1 07 per capita ; 1840, $1 61 per
capita; 18504163 per capita; 1860, $2 06 per cap.,
in gold, while for the five years 1861 to 1866 they
were $l4 32 per cap., an increase of 900 per cent.
The following table exhibits a comparison of the
average annual expenditures of the Government—
detail and aggregate—for the decade, 1851-61 ; and
the actual expenditures for the fiscal year ending
June 30, 1867 :

1851-61. 1866-7.
Average annual. Actual annual
(gold) (currency)
millions. millions.
For the Civil Service 523.92
For Pensions
For Indians 3.33
For Navy l 2 34
For War, exclusivo of Boun-
ties 16.93

Total ordinaryexPenditures 57.87
Interest on Public Debt
Bounties to Soldiers..

Total, exclusive of payments
for redemptou of Public
Debt

The following table shows the aggregate and
specific receipts of national revenue for the fiscal
years ending June 30, 1866 and 1867, respec
tively

1866. 1867.
From Internal Revenue $310,906,984 17 $265,920,474 65
From Customs (coin) 179,046,651 58 176,417,810 88
From Public Lands
From Miscellaneous
sources 67,119,269 91 42,824,852 50
From Direct Taxes

Total 5559,712,790 81 $490,526,917 49

The customs having averaged for thirty months
$170,000,000 iu gold per annum, there is no cause
to doubt that they will amply meet the demand of
$130,000,000 for coin interest on the debt. That
the National Government can conduct its business
at the present time with the same ratio of expendi-
ture to population that it did during the decade
prior to the war is not to be expected. The crea-
tion of a debt, of a new system of revenue, the
large increase of the army, and of pensions ; the
abnormal condition of a portion of the country, and
the general increase of prices, all contribute to
render such a result impossible ; but that an abso-
lute necessity has existed for increasing the ordinary
expenditures of the last fiscal year (1866-7) 206
per cent., or $129,000,000 above the expenses of
the fiscal year (1860-61), or 247 per cent. above
the average of the decade, from 1851 to 1861, may
well be doubted.

The expenses of the State Department, $1,548,589,
have not largely increased since 1861, and are not
excessive. As there are 80,000 applications o❑ file
for pensions, increased appropriations may be ex-
pected therefor. The Commissioner recommends
the reduction of the army and navy to the mini-
mum ; no new public works to be built save from
urgent necessity ; no claims for damages by the re-
b.:llion to be paid ; retrenchment ; no money to
be appropriated to buy foreign territory.
Immigration is flowing into the country at the
rate of over 300,000 per annum, adding $150,000,000
to our producing capacity. Inventions are develop-
ing our industry, 10,907 patents having been
granted during the year. Our crops are increas-
ing in quantity and value, and manufactures are
advancing. On the latter head the Commissioner
reports as follows

In the manufacture of cotton, the amount of
machinery at present in the country, and which is
substantially engaged in the work of production, is
from 15 to 20 per cent. more than existed at the
beginning of the war ; while the export trade in
coarse cottons, formerly (before the war), large,
but afterwards almost entirely lost, is now recover-
ing with gratifying rapidity. In the department
of woollen industry, notwithstanding the recent un
usual depression of this interest, the erection of new
mills has continued, with a reported general im-
provement in the character of the products. I❑
regard to this latter point, the Secretary of the
National Association of American Woollen Manu-
facturers, in his annual report (October, 1867),
uses the following language :—" The vast improve-
ment in woollen goods, exhibited the present year,
is the subject of universal comment and surprise
with merchants." And, again :—" Our progress
has not been limited to improvement of old fabrics,
in style or economical production ; many new
fabrics have been successfully achieved." The
recent introduction of important improvements for
manufacturing certain descriptions of woollen goods
by power, formerly made wholly by hand and im-
ported, is also cited.

Another authority on this subject (The New York
Economist) also says :—" It can truly be said of
our (woollen) manufacturers this season, they
have made wonderful progress over last year.'
Such continued improvements in the manufacture
of woollen goods will soon place us beyond the name
of rivals, and cause our products to be emulated the
world over ; as our most choice styles and saleable
patterns are the result of American ingenuity both
in colouring and style."

In the department of iron industry, the number
of blast furnaces for the manufacture of pig iron, in
operation during the past year, has been in excess
of that of any former period, while an unusually
large number of new furnaces are now in process of
construction.

During the same period the rolling-mills of the
country were generally in continuous operation ;
new establishments of this character, and new and
extensive works for the manufacture of Bessemer
steel, have also been erected ; while a marked in-
crease in the American product of ordinary steel is
reported. _ _

The Commissioner would also, in this connection,
call attention to the fact that, notwithstanding the
almost continued reported depression of the iron
terest in the United States, the average annual in-
crease in the domestic product of pig-iron is remark-
ably uniform, and greatly in excess of the ratio of
population—the annual ratio of increase of pig iron
from 1850 to 1866 having been in excess of 8 per
cent., while that of population from 1850 to 1860
was about 31 per cent. ; or, stated differently, the
increase in the production of pig-iron, from 1810 to
1866, was 2,371 per cent., while that of population
was 410 per cent. The annual ratio of increase in
the product of pig iron in the United States since
1855 has also been greater than in Great Britain.
The increase in the production of anthracite coal
(which may be taken as a measure of the production
of all American coal), during the year 1866, was
about 3,000,000 of tons over the product of 1865,
on a gross return for the former year of 12,399,747.
This extraordinary increase was referred at the time
in part to a speculative revival of trade and indus-
try succeeding the termination of the war, and also
to the stimulus of very high, prices. These stimu-

lants, however, if they were really influential, have
clearly not operated in any degree during the past
year, and yet the gross product of anthracite coal
sent to market has not materially diminished, the
deficiency, up to the 30th of November, 1867, in
the aggregate of coal sent eastward from Pennsyl-
vania, having been only 170,041 tons, as compared
with the movement of the corresponding period of
1866 ; while the stock on hand at the various
markets available for consumption at the close of
the season of 1867 was estimated at less by 250,000
tons than the stock on hand at the close of the two
preceding years. It seems, therefore, certain that
the conditions of ability to consume—which con-
ditions are mainly industrial have not become
impaired during the past year ; or, in other words,
the industry of the country has developed during
the past year to such an extent as to render what
in 1866 seemed abnormal and uncertain now legi-
timate and permanent.
The record of the export trade in petroleum for
the last three years has also been very similar to
that of coal. Thus, for the years 1864 and 1865,
the annual export of petroleum, with the advantage
of a high premium on gold, averaged about
30,000,000 gallons ; but during the year 1866 the
exports suddenly rose to an aggregate of over
65,000,000 ; and this extraordinaryjncrease, which
originally might have seemed speculative and tem-
porary, has during the past year been substantially
maintained.

In the department of Commerce and Navigation
the Commissioner reports an increase of tonnage
upon the Northern lakes and other inland waters
in excess of that of any former period, the increase
of tonnage engaged in commerce upon the lakes
during the past yearbeing estimated at fully 15 per
cent., or about 40,000 tons, exclusive of vessels of
small capacity. According to the returns of the
Chicago Board of Trade, the increase, under the
new classification, in vessels and tonnage upon the
lakes for the year ending March 31, 1867, over the
corresponding period in 1864, was as follows :

1864 Vessels 648 Tonnage 202,304
1866 Vessels 997.. Tonnage 281,077

The American commerce employed upon .the
ocean has also recovered in a degree, during the
past year, from its recent extreme depression.
The returns of the leading railroads of the coun-
try for the ten months ending October 31, 1867,
also indicato an increase of commercial movement
over the corresponding period of 1866 ; the abso-
lute increase in the net earnings of seventeen of the
principal lines having been equal during this period
to $ll per mile, or 1.23 per centum. The month
of October, 1867, is reported as probably the most
prosperous of any recorded month in the history of
American railroads.

The aggregate business of the country for the
fiscal year 1867, as measured by the returns of the
Internal Revenue, from the taxes on sales and spe-
cial taxes (licenses), does not, moreover, indicate
any falling off as compared with the preceding
year, but on the contrary a slight increase.
The Commissioners argue that when the country
was expending, from 1861 to 1866, an average of
$712,000,000 per annum in the war, notwithstand-
ing it ran in debt for nearly the whole amount, still
there was a withdrawal from the labouring and pro-
ductive industries to that extent, viz., $2l 07 per
head, and says—But hostilities have now ceased
and peace has returned ; and with such a change in
the condition of affairs this question becomes both
permanent and suggestive—if a portion of the coun-
try could contribute of its surplus labour and capital
an annual value of $2l 07 per capita for destruc-
tive purposes, will it not be easy for the whole coun-
try, with its labour and capital restored to produc-
tive employments, to contribute $8 73 per capita
for the payment of interest, expenses, and the re-
duction of debt? And yet the payment of this sum
will meet at present an annual expenditure of
$140,000,000 for ordinary expenses, $130,000,000
for interest, and $50,000,000 for the reduction of
the principal of the debt ; and, if the same rate ofper
capita
taxattihoen
ebneticroe principal of the debt inntinued for the future, it
extinguishwill
less than 20 years, even if it shall become necessary
to add to the above estimate of $140,000,000 for
ordinary expenses a sum equal to $2 per head on
the annual average increase of population, which
average increase may be expected to augment the
population of the United States, by the year 1834,
to nearly sixty millions ($60,000,000). Further-
more, this proposed $8 73 per capita, which is only
about three-fourths of the rate of taxation paid in
1866, after reducing the rate of that year to gold,
can be obtainel without a recourse to any of the
internal taxes which materially impede production,

as will be elsewhere demonstrated; and, as all past
experience shows that the wealth of this country
increases in a much more rapid rate than popu-
lation, the burden of the uniform rate of $8 73 per
capita will become annually less and less onerous.
But notwithstanding this exhibit, there are many
persons, both in public and private stations, who,
either intimidated by their own apprehensions, or
misled by their own lack of information, consider it
to be their present mission to magnify the burden
of the National, State, and local debts of the coun-
try, and to predict for the nation an inabili y to
either carry or extinguish them. The data pre-
sented sufficiently proves, however, that so far as
the material strength and development of the coun-
try are concerned, these gloomy anticipations have
little or no foundation; and in respect to the largest
absolute debt of any one of the States, viz., that of
New York, which has recently been discussed in an
official report, in such a manner as tends to create
distrust and impair credit, the Commissioner would
call attention to the fact, that the estimated present
average annual value of the apples alone, sent to mar-
ket from eight of the sixty counties of that State,
viz., $4,500,000 to $5,000,000, is sufficient to pay
the interest on the entire debt, and add about
$2,000,000 annually to the sinking fund ; or, in
other words, if all other forms of industry or produc-
tion in the State of New York should cease to con-
tribute to the State debt, but the apple trees in the
eight counties referred to should continue to grow
and produce, their annual product, if devoted to
this purpose through the patriotism of their owners,
would in less than ten years extinguish the whole
debt, including the present unliquidated cost
($15,000,000) of the Erie Canal.
Turning now from the further immediate consi-
deration of data drawn from domestic sources to a
comparison of the financial condition of the United
States, present or prospective, with that of other
countries —our compeers in wealth, population, and
civilization —we are led to the following conclusions,
That the United States is the only one of the lead-
ing nations of the world which is at present mate-
rially diminishing its debt and reducing its taxes :
and the only one, moreover, which offers any sub-
stantial evidence of its ability to pay its debt within
any definite period, or even anticipates the probabi-
lity of any such occurrence.
The Commissioner here presents a statement of the
condition of the debt of Austria, Italy, Russia,
Prussia, Spain, and Turkey. The Commissioner
says that the causes of our commercial depression
are general and not local, confined to no one coun-
try,r and the result of a natural and not unexpected
reaction from a period of high prices, speculation,
and over-production. In fact, the people of the
United States have great cause of congratulation
that the wave of commercial depression which, since
the termination of their war, has swept over the
commercial centres of the whole civilized world has
brought so little of disaster to their interests, inas-
much as there is not to-day a country in Europe in
which the paralysis of industry is not greater, the
failures more numerous, and the prospect of an early
return of commercial prosperity and activity less
encouraging than in the United States.
The Commissioner compares the prices of leading
products this year and last, to show that we arc
simply returning to sound and healthy prices, to the
advantage of all.
Reviewing the events of the past year, it would
seem, furthermore, that so far from there having
been any adverse influence exerted upon prices
through a contraction of the c irrency, the tendency,
in truth, has been entirely in the opposite direction ;
for it cannot be doubted that a fall of prices equiva-.
lent, on the whole business of the country, to at
least 10 per cent., must have been equivalent to a
- large addition to the machinery of exchange before

existing. W-...at the practical increase of the cur-
rency effP.,eted indirectly in this manner has amounted
to Cannot be definitely stated ; but, in the opinion
of the Commissioner, it has not been less, during
the last twelve months, than one hundred millions
of dollars.

In the previous report of the Commissioner it was
proved that while up to the commencement of the
year 1867 the average advance of commodities was
about 90 per cent., that of wages was not in excess
of 60 per cent. Nuw, however, the case is being
entirely reversed ; commodities have fallen so much
more rapidly, that the purchasing power of wages,
even when reduced, is probably greater at the pre-
sent time than when they had attained their maxi-
mum. The condition, therefore, of domestic indus-
try, when once revived through the removal of
taxes, will probably continue to improve with great
rapidity, for production will rapidly follow con-
sumption, and production in turn is the great legiti.
mate source of both national wealth and national

revenue.
Relative to the tax on distilled spirits, he reports :
First :.The tax has been placed at such a rate as to
constitute in itself so great a temptation to fraud,
that average human nature, as it exists in the
United States, is not able to resist it. And, secondly,
the system under which the officers have been se-
lected to collect the tax and supervise the manufac-
ture has not, thus far, recognized honesty, intelli-
gence, and business capacity as the first, only, and
essential qualifications for appointment.
The Government has never collected quite
$30,000,000 on a production of 50,000,000 gallons,
or on one gallon in three of all that has been manu-
factured. He advocates the reduction of the tax
to 50 per cents a gallon, and the collection of the
tax at the place of manufacture, abolishing all
bonded warehouses. This tax, he thinks, will
yield a revenue of over $25,000,000. He advo-
cates a repeal of the special or license tax, and sub-
stitution of a tax from two to three per cent. on
sales, and of ten cents per gallon on spirits recti-
fied.

The tax obtained from fermented liquors bas in-
creased under the stamp system, and will reach
$6,000,000.
The collection of the tax on tobacco is still more
difficult than on distilled spirits. It is evaded, by
the dishonesty of officers, by counterfeit brands,
by using inspected packages a second time, by sub-
stituting the higher tax for the lower taxed tobacco,
by allowing sales of Small quantities without inspec-
tion marks, by inadequate bonds, &c. Adopting
the Commissioners estimates would result, he thinks,
in the following revenue, &c.
From distilled spirits (new system) 550,000,000
From fermented liquors 6,000,000
From tobacco and its manufactures 20,000,000
From income
From stamps
From legacies and successions 2,000,000
From banks, railroads, &c.
From s•daries
From gross receipts _ _ 7,440,000

From miscellaneous (schedule A, &c.) 2,100000
From fines, penalties, &c.

Total $152,000,000

Accepting the above estimates as correct, there
then remains to be provided for from some other
sources, a deficiency of $18,000,000 necessary to
make up the required sum of $170,000,000, with
such additional amount as may be provisionally re-
quired to meet unexpected or extraordinary contin-
gencies.

As a means of reforming the collection of re-
venue, he recommends a Board of Commissioners
to examine applicants for revenue officers, and
make rules for collecting revenue. This Board
should consist of an Assistant Secretary to the
Treasury (Chairman), a Commissioner of Internal
Revenue, a Commissioner of Customs, and two so-
licitors.