Year: 1870

By decision of the Supreme Court.
rendered many years since, it was set
tied that no state or municipal authority
has the constitutional right TO levy any
tax upon bonds issued by the General
Government. The ground taken by the
Conrts is that, if this right were conced-
ed, then it might be SO exercised as-ef-
fectually to destroy the power of the
Government "to borrow money" and
pledge the credit of the United States.
as provided for in the Constitution. If
a state could tax the national bonds one
per cent, then it might tax them ten.
per cent, or at any other rate in its dis
cretion; and, if so, then their market
value, as an investment for the sake of
the interest, might be greatly impaired,
if not wholly destroyed, by state legisla-
ton. This plainly would be inconsist-
ent with the grants of power to Con-
gress: and hence the Court ruled that
all taxation of national bonds by any
local authority is unconstitutional. Such
is now the settled law of the land; and
that. too, whether these bonds are ex-
pressly exempted from such taxation or
not.


This decision, however, does not ap-
ply to the question whether the Gov
ernment itself has the right to tax its
own bonds. Some have held to such
right, and claimed that IL should be ex-
ercised. General Butler adopts this
view; and not long since the Democratic
State Convention of Ohio gravely re-
solved that such q tax should be i'm
posed, in amount equal to "the fair
average rate of taxation in each State
for State purposes. The idea is upon its
g., 81, Tn
to these bonds, the Government is q
debtor, and is bound by the same rules
of honor and truthfulness that are ap-
pIicable to all dabtor-. Having made
contract with its creditor for the pay
ment Of money at a given rate of inter-
est, it has no moral right so to exercise
its legal powers as to change the terms
of this contract in respect to either prin.
cipal or interest. To do so would be
gross violation of public faith. IF the
Government may reduce the rate of il
terest by retaining a portion of it under
the name of tar, or diminish the value
of its own bonds By taxing them as per-
sonal property, then it has the power
aUhoLLy to cancel its own obligations in
this way. The least exercise of such a
power would not only be plain and
positive act of cheating, but also imply
that the degree of the exercise is mere
question for governmental discretion.
It would place the rights of the creditor
in the tender mercies of the debtor, and
leave it at the option of the latter TO re-
pudiate his own obligations. Such
principle as between private in
dividuals would not be tolerated for a
sought to be practiced by government.
10 fha M of Enauory and nothing
else.


The effect of adopting this doctrine,
even as theory, would be most disas-
trous upon the credit of the Govern
ment. Let it be once understood that it
may at its pleasure repudiate its obliga-
tions under the form of tax upon its
own securities-let this be accepted as
the current idea of the American people
and the United States would then
have no credit in the money market of
the world, and deserve none. One of
the reasons why our national securities,
notwithstanding our ample resources
and high rates of interest, sell for less
than English consols, that yield much
lower rate of interest, consists in the
doubt which has been created in respect
to our financial integrity. At one time
we have had the proposition to pay our
debts by an unlimited issue of irredeem-
able paper, and at another the equally
base proposition of changing the con-
tract by taxing the national bonds.
These ideas have been advocated on the
floor of Congress, and found favor with
great many Democrats, and we regret
to say few Republicans. The majority
of the people has steadily voted them
Down by voting men into power opposed
to them-at least, in sufficient numbers
to make the action of the Government
honest toward its creditors. We hope
never to see the day when the majority
will take any other view. We believe
that in this respect capitalists, both at
home and abroad, may safely trust the