Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1878-08-12
Taxation of United States Bonds.

Taxation of United States bonds is one Of
the stock cries of the greenback demagogues.
The picture of men in community escaping
taxation by having their property in bonds,
is considered by them an effective argument.
But among men well informed upon the sub
ject it has no weight.
In the first place, the Constitution of the
United States has put it entirely out of the
power of States and towns to tax its securi-
ties. 1t has been tried and always failed,
because the Constitution stood in the way.
Forty years ago the Supreme Court, speaking
through Chief Justice Marshall, said
"The American people have conferred the pow
er Of borrowing money upon the government, and
by making tina, government supreme, have shi, Id
ed its action in the exercise of that power from
the action Of local governments. The grant OF
the power is Incompatible with u restraining or
controlling power, and the declaration Of supre-
macy is a declaration that no such restraining or
controlling power shall be exercised.
The right TO tax the contract to any extent, when
made must operate on the power to borrow before
il is exercised and have sensible influence the
contract. tax on government stock lie
thought by this Court to be tax on the cont act
. tax on the power Of the United States 20 borrow
money on the credit of the United States, and
consequently repugnsnt to the Constitution"
And the Supreme Court has never deyiated
from this decision, and probably never will
while the Constitution remains as it is. 1t
is mere waste of words then TO talk about
taxing the bonds If the States were per-
mitted to tax them they might by the exer-
IF taf ha vaJ g.
and the government be rendered powerless to
effect loans.
A recoppense for the non-taxation of bonds
is found in the low rate Of interest which
they pay. Taxable bonds Of cities and States
must pay higher rate Of interest than gov.
eminent bonds. While government bonds
are selling at per cent, the bonds of mu-
inequalities must bear per cent. The fact
that government bonds are not taxed enters
into tAe consideration with the purchaser at
the time be bnys, and the government gets
the benefit of it in lower rate Of interest.
But suppose it were possible legally to tax
United States bonds, what portion of them
would probably be reached by the assessors OF
towns and cities when they came to assess the
annual taxp Taxable bonds of cities and
railroads have ways of escaping the assessors
by which they largely eyade taxation 1t is
not right, is dishonest, but we are dealing
with facts and not with morals. We have TO
take things as they are and not ar we think
they ought to be- and it il fact which as
SCISSORS very well know that there are bond.
in all the larger cities and towns, which are
legally taxable, that are not found in the in
ventories returned, and SO cannot be taxed
Now put a tax upon United States bonds.
and the same process by which city, railroad
and State bonds escape payment Of taxation
would be applied to the government bond-
and the revenue would be but small per-
centage oil what it should be. The govern
ment would have to pay higher rate of in
terest upon its bonds Oh account of their tax.
able character, and the sum that would be
realized by the municipalities would bo mea.
gre. Bat since the Constitution has taned
the way to taxation Of the bonds, that settles
the matter, and there we have to leave it. and
let the desasgogues rant as much as they
please about 1t.