Year: 1865

Office of Compfr Of The Currency,


Washington, July %, 1865. J


DEAR SIR Your letter Of the l4th inst.
to the Secretary Of the Treasury, has this day
been referred to me, with the request that |
should answer it.


cannot but express my surprise that the
legislature n the State of Connecticut should
entertain proposition virtually to conds-
cate portion Of the Government Securities
held by inhabitants Of that State.


The law exempting from taxation Govern
ment securities Is so specific and clear that
it cannot be questioned. The bonds we're
disposed Of, and purchased with the proyis-
ion Of law as part of the contract, that they
we're exempt from taxation, and the country
has received an equivalent for such exemp-
tion in the additional price received for the
bonds.


Can any one believe that the obligations OF
the Government would have sold for anything
like the price reaiz d, or at any price at all
Commensurate with ;heir value, If it had been
supposed possible that they could be taxed
by state laws, directly or indirectly If
your legislature can impose tax Of Is per
cent. on the income derived from Government
securities, it is Just as compstant for it TO i'm
pD9t NdA VI ~ " AoO lft NtuNs
1t is source Of regret that any Northern
State should for single moment cOuntensuce
an attempt to repudiate or nullify constitu-
tioual act Of Congress, and One, too, that was
deemed necessary to preserve the integrity Of
the nation. In one aspect of the case, how
ever. it may be regarded as a most fortunate
occurrence, as it will serve to show the people
that it will not be safe for the Government
I - to ka
structed ss to permit their being represented
in Congress as a unit, as they would be but
too willing to unite with Northern men Of the
character of those favoring the measure under
consideration, to repudiate the national deot,
if not by direct action, by an equally destfuc-
tive want of action in providing the means Of
payment. am Z lad to hear, aud the whole
country have reason to rejoice, that the finance
committee Of our State senate stands opposed
to this insidious measure. The effect of the
proposed tax would be to reduce the value Of
the Government Securities in the hands Of
the people Of your State, Is per cent, provi-
ded there was assurance that no fcrther
exscton would be imposed. but without sucn
assurance would reduce the market value
much more, as the next, or any subsequent
legislature could increase the tax ~ the ex-
tent of destroying their productive value en-
tirely.


The State Of New Hampshire has passed
law imposing tax of 25 per cent. on the In
come derived from national securities. II
this action was confined to the two States.
the result wou simply be to deprive the
people of New Hampshire and Connecticut
of the privilege of holding or owning Govern
ment securities. 1t is very clear that the
States would not get the tax, as the owners
would sell the securities to parties out OF the
States, or 60 out themselves with the securi-
ties.


If, however. other Northern States should
follow their example, and it should be con-
ceded that they had the right to do 80, the
credit of the Government and of the national
currency would be practically destroyed.
This, perhaps, is the object Of the coDfed-
crate suicidal scheme. | think | am justified
in saying that there is not the least danger Of
the proposed act, if it should become a law,
( being sustained by the Supreme Court of the
United States.


I 1t is, perhaps, proper also that should
say that the Secretary of the Treasury con-
ours in my views as to the right Of the States
to tax United States securities. but is other
wise ig lorsnt OF the contents of this letter.


Referring to the proposed act to tax the
stock owned by individuals in national banks.
| am clearly Of opinion that such stock rep
resented by capital invested in whole or in
part in United States securities, is liable to
state taxation only on the amount not so in
vested. and inclose herewith a printed slip,
containing, letter written by Il. g. Spald-
ing, of New York, and one written by myself,
both concurring in the views have stated
on the subject.


Yours very respectfully,
! FREEMAN CLARKE.