Prescott journal. [volume] (Prescott, Wis.) 1861-1871, 1868-08-14
WHY the Bonds Cannot b.
Taxed.
[From the New York Tnbnne.l


A correspondence at Clinton, Iowa.
askes Us to answer the Question: Why
qopernment bonds shomd not and con
not be righgully taxed. We answer /:
By three successive decisions of the Uni
ted States Supreme Court. it has been
decided that for state, city, or other 10
cal authority to tax national bonds is in-
consistent with those clauses of the Con-
stitution which make the national gov
eminent, within the scope of its delega
ted powers, supreme over all state or To-
cal laws. The power to borrow money
is national power, vested by the Con
stitution in the national government
The power to tax being in its nature un-
limited save By the will of the state levy
ing the tax, would enable tie state to
tax federal bonds 100 per cent as easily
~ pei Uent-- III short, 1t would place
the power of the nation to borrow in
subsection to the power of the state to
tax. The states could, therefore, by the
exercise of this power, destroy the ia
tional government. This has been the
argument of the Supreme Court AS de-
liyered by Chief Justice Marshal and
Others This is sufficient reason why
The bonds cannot be taxed by any state
or local authority.
In considering whether Congress has
power to tax these bouds. it is proper 10
observe the effect of taxes levied before
the bonds are issued and those levied af
ter. If tax is proposed before or con
temporaneously with the issue of the
bonds, the lender adds the amount of
tax to his rate of interest, or refuses to
lend. Thus if the government could
sell an untaxed per cent. bond at par.
it can only sell such a bond after it has
been subject to per cent, tax for one
sixth less than par, or at SO l 3. 1.-THE
interest unlaxed weuld be six per cent,
the interest taxed would be seven. On
a square transaction. therefore, where
government aud the lender both know
in advance that the bond Is To be taxed,
the government gains nothing and the
lender loos,s nothing by the lax, but
the former pays just enough additional
interest t. make il even.
In order that The nvernmen shall eff
feet any increase of Its revenue by tax
ing its bonds, it is necessary, therefore.
that il shall have issued them with tn
impression on the minds Of purchasers
that they would not be taxed, and then
after the purchasers had bought them at
tne price they womb be nth if no, tax
I'd. the government repu,ia,es the faith
"n which he bought them, and taxes
them. In this way he government
would realize - temporarvrrotit 20 equa
t. the ainpnnt pf ne uS. e. I vl.l
spccee.i IA sw uaH /. the 'e- ~
much al h,> hasgslp. Ia n. If me
gn,efnIn nt j. like ing = heu, sub
jet u concealed mortgage, or hose
afflicted with latent disease. II isa
fraud. 1t may be answered that the
lender knew that the government could
tx its bonds, and therefore took them
subject TO any exercise of this power the
government might see fit to put forth
This proves TO" much. For the gov
eminent might choose to tax the princi
pal 100 per cent, or the ipterest per
cent. annually. either of which destroves
the whole value IF the houd. Can it he 1
pretend d that j; would not be total re
pudiation for Congress to tax the princi
pal 100 per cent? OF course not
Then it is repudiatian pro tdato to tax
any portion of 100 per cent. Whatever
arguments avails to justify taxing the
bonds per cent. justifies taking them
wholly out of existence As the taxation
Gifts own debts by government is le-
pudiation in whole or in part, it cannot
be claimed that the public creditor had
notice beforehand that Congress would
repudiatel
A LITTLE GIRL. on hearing her mother