CHAPTER been carried to a point which it was not desirable to IIL exceed, and which could not be exceeded without going 1790. counter to the sense of the great body of the merchants.

1791.

Jan. 5.

Considering their general attachment to the federal system, their ready co-operation in the enforcement of the revenue laws, their cheerful submission to the additional duties imposed at the last session, and the extent of the innovation already made on the former system of contributions, their opinion, though not decisive on the subject, the secretary considered to be entitled to respect. Nor would it be wise to give occasion for supposing that trade was to bear the whole weight of federal taxation.

Direct taxes were not only difficult of collection, but it was desirable to reserve them for cases directly involving the public safety, and interesting, therefore, to the whole community. The only alternative seemed, therefore, to be a tax on internal consumption; and surely, of all articles consumed, none were fitter to be taxed than spirits, whether foreign or domestic. Indeed, the policy of this tax, as regarded the health and morals of the community, was supported by a memorial from the Philadelphia College of Physicians.

A bill in close conformity to the secretary's plan was very warmly opposed by the voluble Jackson, who did not wish to subject the trade between Georgia and the West Indies to any further burdens; by Parker of Virginia; by Stone of Maryland; and with great earnestness by Steele and Bloodgood of North Carolina. According to Steele, the consumption of spirits was so great in North Carolina, that the amount of tax thus made to fall upon his constituents would be ten times as great as in the case of Connecticut. Livermore, on the other hand, sustained the bill, as proposing a mode of taxation not only equal and just, but one likely to be agreeable to the peo

III.

ple, who would consider it a drinking down, as it were, CHAPTER of the national debt. The bill was also supported by

Madison. As money must be had, he saw no better 1791. means of raising it. The opposition to the bill was , strengthened by a series of resolutions against it, passed by the Pennsylvania Legislature, then in session at Philadelphia. But, after a series of warm debates, it was carried through the House by a vote of thirty-five to twenty-one. As finally passed, the act imposed upon all imported spirits a duty varying from twenty to forty cents per gallon, according to strength-a great advance. upon the first timid tariff, but not half the amount which has since been levied. The excise to be collected on domestic spirits varied with their strength, from nine to twenty-five cents per gallon on those distilled from grain, and from eleven to thirty cents when the material was molasses or other imported product; thus allowing, espe cially when the duty on molasses was taken into account, a considerable discrimination in favor of the exclusively home product.

For the collection of these duties, each state was made an inspection district, with its Supervisor; each district to be subdivided, as might be necessary, into Surveys of Inspection, each with its Inspector. As As many Offices of Inspection as might be found convenient were to be established in each district, to have the control of the landing of all imported spirits, and, in the case of domestic spirits, the ascertainment of the quantity and quality, as well as the collection of the duties. All distillers were required to enter their distilleries at the nearest office of inspection, with a complete description of all the buildings, which buildings were to be subject to the constant examination of an inspector appointed for that purpose, who was to gauge and brand the casks, the duties

CHAPTER to be paid before the removal of the spirits from the disIII. tillery. But, to save the expense and the trouble to 1791. both parties of this constant oversight, the small country stills not situate in any town or village were to pay an annual rate of sixty cents per gallon on the capacity of the still. All casks containing spirits, not properly branded and certified, were liable to forfeiture. On the exportation of domestic spirits, a drawback was allowed equivalent to the excise, except a deduction of half a cent per gallon, with an additional drawback of the molasses duty in case of spirits distilled from that material.

The resolutions of the Legislature of Pennsylvania against this tax being echoed in North Carolina, Virginia, and Maryland, no doubt became one principal cause of the opposition encountered in its collection. In these four states the small private distilleries were very numerous, amounting, it was said, in Pennsylvania alone, to not less than five thousand.

While the House had been employed on the excise, another proposition of the Secretary of the Treasury for a national bank had been under consideration in the Senate. In his report on this subject, Hamilton had urged in favor of such an institution the facilities which banks afforded to trade, and the benefits to be expected in a commercial point of view. But what he chiefly dwelt upon was the convenience to the government of a paper medium in which to conduct its monetary transactions, and of a resource for such temporary loans as might from time to time be required.

Duly to estimate the force of these reasons, it is necessary to understand the precise monetary position of the United States at the moment they were offered, and what had been hitherto the experience of the country on that subject. From the first commencement of the North.

American settlements, as they were always in debt to CHAPTER the mother country, there had been a constant tendency in such coin as might reach them to flow toward En- 1791. gland. Hence, for the convenience of domestic trade, it had been found necessary to establish some additional local currency. In Virginia, Maryland, and North Carolina, tobacco, the chief exportable product, long served for that purpose; in New England, corn and cattle, at certain rates, fixed from time to time, were the established medium for the payment of taxes and the discharge of colonial contracts. The first innovation upon this primitive system was made in Massachusetts, in 1690, by the issue of government bills or treasury notes, receivable in payment of taxes; and afterward, to give them a greater currency and value, made a legal tender in payment of debts. This expedient had been resorted to at first, and was imitated in the other New England colonies, in the adjoining province of New York, and soon after in the Carolinas, not with any design to furnish a currency, but as a convenient, and, indeed, necessary means of anticipating the taxes during the first two intercolonial wars, from 1689 to 1714. Such, however, was found, or thought to be, the convenience of these bills, merely as a medium of trade, that a scheme had been hit upon for continuing their issue even during peace, and with the professed object of furnishing at once a currency for the people, a revenue to the government, and a source whence capital might be borrowed by the enterprising. This scheme, first introduced in South Carolina, but speedily imitated in Massachusetts, had consisted in the issue of colony bills, to be let out on interest to such as could give the required security, the interest to furnish a revenue to the state, and to serve, so far, as a relief from taxation. This loan-office sys

CHAPTER tem, as it was called, had been subsequently introduced III. into the other New England states, also into Pennsyl1791. vania, New Jersey, and Maryland; and in these three lat. ter states had continued to be kept up down even to the Revolution. But both these methods of issue, whether by way of loan or to meet the exigencies of government, were found liable to great abuses, quite fatal to the paper as a measure of value. There was a constant tendency to over-issue, whence resulted a corresponding depreciation. Yet this very fault of the system was what chiefly served to recommend it to many-a profuse issue of paper operating, in fact, as a general insolvent law, all debtors being thereby enabled to discharge their debts at a half, a third, a quarter, sometimes a tenth or twelfth part of the amount actually due.

After an ample experience of these bills of credit in every form of issue and in all their methods of operation, Massachusetts, on the termination of the third intercolonial war in 1748, had concluded to abandon the paper system altogether, the indemnity allowed her by the British Parliament for her expenses in the capture of Louisburg furnishing her the means to redeem her outstanding bills at the current rate of about twelve for one. To compel the other New England colonies to imitate her example, or, at least, to restrict their issues within narrow limits, the passage of an act of Parliament was procured, by which they were prohibited to issue any bills, except from year to year, in anticipation of taxes previously laid; nor could even these be made a legal tender.

The breaking out of the war, which resulted in the conquest of Canada, and the heavy expenses which all the colonies were obliged to incur, led in all of them, Massachusetts only excepted, to new and profuse issues