Year: 1866

Mr. Sherman's remarks upon this sub
jeet, in his recent speech, are condensed
by an eastern paper, as follows:


Mr. Sherman first laid it down as set
tied law, beyond all question, that no
State can tax the bonds of the United
States, unless the right to do so Is express
Iy conceded IN the act of Congress. Such
a power IN the States, he said, lis entire
ly inconsistent with the power of the Gen
eral Government to borrow money. -
And that point. he says, is settled more
clearly than almost any question of con-
stitutional law which has ever been moot
ed In this Government


He refers, for general principles, to the
noted case of McCulloeh against the
State of Maryland !" and for a specific
decision, to the case of Weston against
the City of Charleston in I'd Peters, 449
The city Of Charleston, in 1929, under
authority of a State law, levied a tax up
on United States bonds in the hands of a
citizen The Supreme Court Of the State
decided in favor of the validity of tho tax;
but Judge Huger dissented on the ground
that if the States can tax the stock of the
| United States, 1T is impossible not to
perceive that the fiscal operations Of the
General Government may be completely
frustrated by the States" He said, Con
gFess may offer ten per cent for loans, but
who will lend If the States can aDpFOpri-
ate the whole to their own use" The
case came before the Supreme Court of
the United States, and the Judges con
Cured unanimously In the decision
which was given by Judge Marshall, that
to allow the taxation of Government sc
curities would enable the States to de-
str0y the National Government, prevent
I
tanning the authority of the United
States" This view has been acquiesced
in by every judge who has ever sat upon
that bench, and has never since been
controverted by any State of the Union.


The question was brought up while
Judge fancy was on the bench, in Dob
bins Ggt the Commissioners Of Erie Com
pany," and the principle was reafirmed
Also, In the Bank of Commerce aOt. Tax
Commissioners of New York City" in
1862. In one case of later date, the
Court held, by majority, that shares In
national banks may be taxed, because it
was evidently the intention of Congress
not to exempt the shares from taxation,
If the States chose to tax them. 1t is
therefore, a settled principle of law,
whether 1t IS inserted IN the act or not,
that United States bonds cannot be taxed
by the States, unless Congress choose to
make it an express part of the contract at
the time of making the loan.


On the question whether Congress
should incorporate in the act permission
to the States to tax the bonds, he as ked
whether it would be wise now to allow
the States such a power over the public
credit All the bonds outstanding are
guaranteed against being taxed. IF the
new bonds are thus exempted, who would
surrender an existing bond for a new one
at five per cent. liable to taxation at the
pleasure of every State?


On the argument that 1t is unjust to
exempt so much property from local tax
es, he said 1t was not a privilege to the
holder of the bonds, but a right of the
supreme power of the whole country to
bo.5W money on the most favorable
terd4s IN ats power. IF the present rate Of
interest were to be continued the tax-pay-
er might justly complain. But if such
terms are offered that will induce the
bondholder to be satisfied with FIVE per
cent. for his money, while the taxpayer
gets six or seven per cent. for his the
bondsman may say with truth, I pay my
tax In advance" This policy In England
has reduced the rate of interest on pub
lie securities from six to three Der cent.


Mr.. Sherman closed this part of his
argument in these words: Il say, there
fore, thatin every view in which I can
/ take of this bill it Is a wise measure. in
tended to save interest on the public debt,
/ to adjust on correct principles equality of
| taxation, and to tighten the enormous
| burdens upon our people. And there is
another feature which commends it to my
favor IF this bill pass as it now
stands, the fundholders will themselves
pay off the principal of the public debt.
| The one per. cent. saved on the rate of in
terest will pay off every dollar of this
/ debt in thirty-six years. When the fund


holder and the tax payer stand before the
| public hustings, and this matter is drag
| ged into politics, as it will be, and the
taxpayer says to the fundholder: y our
property is exempt and free from all tax,
the fundholder may say No my friend, il


IS not; your money you can loan to your


neighbOr at six per cent interest and the
law enables you to collect the principal at


pleasure; [ have already paid for this
! privilege by deducting one sixth of my
income; [ have surrendered the princl-
pal sum loaned by me for an annuity fol-


thirty six years, and my share of the taxes


will pay off every dollar of the debt with
IN one generation"