THE FINANCIER OF THE CONFEDERATE

THE

STATES.'

HE finances of the North during the Civil War center about Salmon P. Chase, the Secretary of the United States Treasury during three years of that struggle. During those years C. G. Memminger held a similar position under the Confederate government. In judging the success or failure of the financial policy of the Federal government, we fairly give much weight to the personal influence of Mr. Chase upon legislation in Washington. In studying the financial history of the Confederate States, we similarly turn particularly to Mr. Memminger and his efforts to raise the means with which to carry on the hopeless struggle with the North.

Mr. Capers' Life and Times of C. G. Memminger is the first attempt at a financial history of the Confederate States. The author was attached to Mr. Memminger in an official capacity, and it is from such men we justly expect the information necessary to base a history and criticism of the Confederate finances upon. But much is left unsaid regarding the finances of the South, in which Mr. Memminger played such a prominent part, and to which he owes his place in American history. However, the reader gains an intimate knowledge of the personal character and honorable career of Mr. Memminger, which throws some light on the unexplored field of Southern history, political and financial, during the war.

Like Mr. Chase, Mr. Memminger had no special recommendations which fitted him to be the financier of a nation, especially during the exacting times of a great war. Though of foreign birth, he lived in Charleston from his early childhood. A lawyer by profession, he played no unimportant part in South Carolina politics, being particularly interested in the financial policy and banking laws of

The Life and Times of C. G. Memminger. By Henry D. Capers, A. M., Richmond, Va., Everett Waddey Company, 1893, 8vo, 604 pp.

the State. As a member of several State Legislatures, and as chairman of the Ways and Means Committee, his influence in favor of sound banking and currency was considerable. After serving on the committee of the Montgomery Convention to frame a provisional constitution, he was nominated Secretary of the Treasury by Mr. Davis immediately after the latter's inauguration, which position he held till the summer of 1864.

Large expenditures, which grew from day to day with the increasing dimensions of the war, and the absence of funds with which to meet them, called for prompt action on the part of the Confederate Congress. A revenue act was at once passed on February 28th, 1861, which authorized a loan of $15,000,000. Ten-year 8 per cent. bonds were to be issued; interest payment was secured by the imposition of an export duty on cotton of % of one cent per pound; the coupons of the bonds to be receivable in payment of this tax. These bonds were taken up at par, largely by the banks, the entire loan being floated by November, 1861. This first Confederate loan was by far the most successful of those made during the war; the provisions regarding the coupons and the payment of interest helped to keep their price in the market much higher than that of any later issue.

In May, 1861, Mr. Memminger offered his budget to the Confederate Congress. He proposed a uniform tax of 12% per cent. on imported goods, of which, however, as subsequent events proved, little could be expected, owing to the successful blockade of the Southern ports. A loan of $50,000,000 at 8 per cent. at home or abroad was suggested, but as this, together with the previous loan, would absorb the available loanable capital, he proposed the issue of $20,000,000 of treasury notes, redeemable in three years, in denominations of $5 and upward, the notes of large denominations to bear 8 per cent. interest. Moreover, a direct war tax of $15,000,000 was urged, to be apportioned among the several States, and to be assessed, levied and collected by the State tax machinery.

The Confederate Congress acted upon these suggestions, and on May 16th, 1861, enacted a law which provided for an issue of $50,000,000 of 8 per cent. bonds. In lieu of $20,000,000 of these bonds, the same amount of treasury notes was authorized, bearing no interest, but receivable in payment of debts or taxes due the government, except the cotton export duty, and they were made exchangeable for the bonds. The Secretary was also called upon to collect information regarding the feasibility of raising $10,000,000 by means of the revenue systems of the individual States. This desired information was offered the Congress in July, 1861, and upon it was based the act of August 19th, 1861, the first Confederate tax law, which, however, did not bring in any revenue during the first year of the war. Beside the small amounts realized from customs duties and from the seizure of United States funds, the revenue of the Confederate States government during the first year of its existence was almost exclusively derived from the issue of bonds and treasury notes. During the first nine months, out of a revenue of about $50,000,000, $18,000,000 were raised by issuing bonds, and $32,000,000 by issuing treasury notes; for the year ending February 17th, 1892, the figures were 31 and 96 millions of dollars respectively.

To return to the tax law of August, 1861: It was evident that the government could not continue indefinitely the policy of borrowing, unless some stable revenue from taxes were established. The Confederate, like the Federal Constitution, required the apportionment of direct taxes among the States according to their representation in the Congress. The policy of depending upon the States for the levy and collection of the war tax was a fatal error. The act provided for a large issue of notes, fundable in 8 per cent. bonds, the principal and interest of which were to be paid out of the proceeds of a general property tax of 5 pro mille. Taxable property included all real estate, slaves, merchandise, bank and other corporate stock, money at interest or invested in securities other than Confederate bonds, cash on hand, cattle and household goods. $500 worth of property was exempt in each family; also the property of educa

tional, religious, and charitable institutions. Assessments were to be made on November 1st, 1861, and collections on May 1st, 1862. An important provision was added by which any State was allowed to assume its share of the tax by paying the amount less 10 per cent. to the Confederate Treasury in treasury notes. The Secretary was also given discretionary power to extend the dates for assessment and collection, which he made full use of. Moreover, most of the States, as was expected, assumed their share of the tax, in most cases by issuing bonds or treasury notes, and paying over the proceeds to the government at Richmond, as was done in Alabama, Georgia, Mississippi, South Carolina, North Carolina, and Virginia. By August 1st, 1862, $10,000,000, or half the contemplated proceeds of the tax, had reached the government, and a year later the arrears still amounted to $2,000,000.

The popular dislike of direct taxation could not be withstood by the Congress, which, instead of making the tax laws more stringent, made their enforcement more lax by liberal extensions and exemptions in the case of certain districts. The State Legislatures, on their part, by assuming the tax and borrowing, merely added to the aggregate indebtedness of the country, instead of raising their quota by taxes. The States, instead of the Confederate States, became the borrowers. In his Report of March, 1862, Mr. Memminger again urged the necessity of adopting a stringent tax law. "Enlarge the government's loans, by enlarging the means of repaying them, in other words, increase taxes," was his advice. Such a stringent measure was proposed in the Confederate House of Representatives in September, 1862, which, had it been adopted, would have raised a forced loan of 20 per cent. of all produce and profits from all sources except from investment in Confederate bonds. However, a voluntary loan of produce, especially of cotton, in payment of bonds subscribed for, was provided for, which netted the government about $25,000,000 before January, 1863.

The lack of success with the war tax of 1861 strengthened the policy of borrowing instead of taxing. By the close of

1862, $410,000,000 in treasury notes were outstanding, of which more than two-thirds bore no interest. The premium on gold had correspondingly risen to 125 per cent. Taxation was looked upon with disfavor previous to 1863. It was generally felt that the people were sacrificing enough, without being called on to bear the further burden. of taxation. But during the first months of that year a remarkable change of feeling evidenced itself. In his Report of January 10, 1863, Mr. Memminger referred to the redundancy of the currency, and proposed to reduce it to $150,000,000 by funding the remainder in 8 per cent. bonds. A I per cent. tax on property and a ten per cent. tax on incomes would, he thought, net $60,000,000, an amount sufficient to pay the interest on all the outstanding bonds. This idea of heavy taxation, the proceeds of which were to secure the bonds in which the redundant currency could be funded, caught the popular fancy. The inflated currency was a tangible evil, which the people were anxious to remove, even at the cost of burdensome taxes. There arose a popular demand to be taxed, and a popular outcry against repudiating or compromising the Confederate debt.

This movement culminated in the passage of the act of April 24th, 1863, a comprehensive tax law, which taxed the people independently of the State governments,—whether directly or indirectly, there was no Supreme Court to decide. The law levied a tax of 8 per cent. on all manufactured goods, and on all agricultural products not necessary for family consumption, and grown in any year previous to 1863. A tax of 1 per cent. was levied on all moneys, banknotes, and currency, on hand or on deposit. An elaborate system of license taxes was aimed at a large variety of wholesale and retail dealers. A tax of 1 per cent. was levied on all salaries above $1,000 and under $1,500, and 2 per cent. on the excess. However, salaries in the army or navy were exempt. Furthermore, a progressive tax on incomes above $500 was included, the rate rising from 5 per cent. to 15 per cent. A tax in kind,-especially favored by Mr. Memminger,-was levied on the staple agricultural products, and a tax of 1 per cent. on all cattle, horses and