The evening telegraph. [volume] (Philadelphia [Pa.]) 1864-1918, 1866-05-10
GreHing Ttlesraph
THURSDAY, MAY 10, 1866.
The ConsoIidated Debt Bin.

of our national debt into long five per
cent. loan, Is to that feature of it which pro-
poses to make the stock entirely free of all
taxation, municipal State, or national II
this were wholly new feature, it might be
expected to encounter opposition; but it is
not. Not dollar Of our national debt is now
subject to municipal or State taxatian. 1t
has never been the policy of the Government
to subject its obligations TO the uncertainties
of such burdens, for the simple reason that
Il would thereby put itself completely at the
mercy OF the States. A United States stock,
subject to State or municipal taxation, might
have its entire interest eaten up in that way,
and thus become utterly valueless as an in
vestment. The most that could be done, if
such policy were entered upon at all, would
be to fix limit beyond which local or State
taxation should not be imposed. But even
this is impracticable with reference to our
present debt, because it was contracted un0er
an agreement that it should be free from
such taxation; and any violation of that
agreement would be reputation, which, of
course, is not to be thought of
State or municipal taxation OF United
States bonds is therefore out OF the question;
and the only remaining consideration is
whether the Government would make more
money by allowing the debt to remain in its
present form, subject to its present rate of
national taxation, and bearing It's present high
rates of interest, or by funding it into long
loan at reduced rate of interest and free of
all taxation? The present taxation of nationa
bonds is the tax upon the income arising from
them. Senator SHERMAN, in introducing the
pending bill, said of this present income tax
upon United States bonds, that it did not rea-
lie to the Government one-tenth of one per
cent. on the aggregate debt He says
at cannot be denied tnat a strong feeling
grows out OF the exemption from Safe taXaton
of so large an amount of property, and various
propositions have been made 10 subject them to
taxation by the United States. While they bear
interest st a rate equal to that paid in most of
the States on notes and securities subject to tax,
this feeling OF inequality will continue to in
crease. They are now subject to income tax
levied by the Unite1 States, but owing 10 the
six hundred dollar exemption, now proposed 10
be increased TO one thousand dollars, and also
to The large amount held abroad, which cannot
be reached, and the readiness with which The
tax is evaded, it came to the United States less
than One-tenth OF one per cent. on the aggre late
debt, In consideration OF the reduction in the
rate OF interest from elk and seven and three
tenths per cent. to five per cent, Jhis bill pro
poses to extend the present exemption from
State taxation to the income tax and Will IN
effect, secure to the United States reduction of
one-siXth OF the present interest fund with but
the trihlng loss OF the income"
Suppose, then, we take the Seven-thirties,
and convert them into the proposed five per
cent. stock, and tree it from the income tax
how will the operation stand? We shall lose
the income tax, amounting to one-tenth OF
one per cent; we shall sdUe the reduction of
interest from seven and three-tenths per cent.
to be five per cent; our net gain, therefore,
will be two and two-tenths per cent
Upon the six per cent. stocks we shall
save by the reduction one per cent; and
deductiug the one-tenth of one per cent.
income tax, we have net gain of nine. e.tenths
of one per cent. The gain, therefore, to the
Government by giving up its income tax, fit
can thereby secure the funding of the debt
into five per cent loan, is at a rate OF % to
1 upon the Seven-thirties, and 8 to upon
the six per cents. As financial operation
then, we had much better give up the insigni-
. fcant income tax, and secure the reduction
OF interest. r e..
As we remarked the other day, this saving
so far as the payment of interest is con
cerned, is equivalent to the wiping out of two
hundred and seventy-fve millions of the
principal of the Seven-thirties, or three hun
dred and thrty-three millions of the six per
cents. J hat is, were two hundred and
seventy-fve millions of the Seven-thrties
or three hundred and thirty-three mil
lions of the six per cents. to be paid
to-day, and our total debt thus much
reduced, the amount Of interest we should
thereby save would be just equal to
what we would save by the proposed fund
ing Of the present debt into five per cent
loan. As matter of national economy,
therefore, the taxation of the bonds had bet
ter be given up, if the proposed reduction in
interest can thereby be secured.
But there is another view of this question
of taxation worthy OF consideration. The
feeling against the exemption of United
States bonds from taxation arises almost
wholly in connection with municipal and State
taxation. 1t is where a city or a State finds
that its revenues are dmin shed by this ex-
emptiOn that complaints are made. The re-
duction of the rate of interest upon national
securities to the low figure of five per cent
would go tar to remove all occasion for these
local grumblines. Where, as in our State,
the legal rate OF interest is only six per cent,
nd kha hold o. ~