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the amount of tax collected, so that it amounted to a bounty. It appears from this fact that some of our ancestors were as expert in defrauding the revenue as some of their descendants have since proved to be. In addition to these taxes there was also imposed in 1794 a tax on sales by auction.

No new internal revenue taxes were imposed until a stamp act laying duties on stamped vellum, parchment, and paper was passed July 6, 1797. The hated stamp tax which was one of the leading causes of our separation from the mother country, because imposed upon us by a foreign parliament, was cheerfully submitted to when enacted by our own representatives in Congress assembled.

Finally, on April 6, 1802, soon after the accession of Jefferson to the presidency, all internal taxes were repealed. These taxes had never been popular with the party which supported Jefferson, and it seized an early opportunity to abolish them. Of these taxes, if the tax on distilled spirits was, as we have seen, assailed by open violence, the tax on pleasure carriages was assailed in the courts by a vigorous attack on its constitutionality. Its opponents maintained that it was a direct tax, and should be apportioned among the States according to population. The Supreme Court decided that it was not a direct tax within the meaning of the Constitution, and that the tax was constitutional. See the case of Hylton v. The United States, 3 Dallas, 171, which is the leading case on the subject of what constitutes direct taxes under the Constitution, or rather what are not direct taxes.

The amount derived from the acts of 1791, 1792, 1794, and 1797 was about $6,325,000. At the time of their repeal, it was estimated that there were about $700,000 assessed that remained uncollected.

The financial necessities of the government occasioned by the second war with Great Britain, beginning in 1812, compelled the reimposition of most of the taxes which had been levied from 1791 to 1802, with some additional ones; the first act of this series being dated July 22, 1813. An uniform tax of twenty cents per gallon was laid upon distilled

spirits, whether produced from foreign or domestic material. The tax on licenses for the sale of liquors was increased, and the tax on pleasure carriages was changed by making the basis of taxation the value of the carriage and harness, instead of the size and kind of vehicle as before. Tax on sales by auction was doubled. Taxes were also levied for the first time on manufactures of iron, candles, hats and caps, umbrellas and parasols, paper, playing and visiting cards, saddles and bridles, boots, bootees, and leather. Beer, ale, and porter were taxed very lightly, at the rate of six per cent ad valorem; but tobacco, cigars, and snuff were taxed quite heavily, at twenty per cent ad valorem.

Congress did not again allow drawback on exported snuff, its former experience having been a sufficient deterrent. A drawback was, however, allowed on spirits and refined sugar exported. Taxes were also levied on household furniture, gold and silver watches, gold, silver, and plated ware, and jewelry and paste work. The stamp tax does not seem to have been reimposed, except as to notes, bonds, obligations, etc., of bankers, and bills of exchange. A composition was permitted by which the bank or bankers might submit to a tax on their profits, in lieu of stamp duty. This composition was to be made by the Secretary of the Treasury, but it was optional with the banks.

No startling incident appears to have attended the imposition and collection of these taxes. They were collected peacefully, and were repealed when the exigencies that required them ceased to exist, December 23, 1817. The total amount realized from the taxes under the acts of 1813, 1814, and 1815 was about $15,435,000.

From 1817 to 1861, the expenses of the government were defrayed by the duties on imports. The Mexican War obliged the government to procure a temporary loan, which was soon paid off; and during the latter part of Buchanan's administration, money was borrowed by the United States at a high rate of interest, to meet some extraordinary expenses; but no internal taxes were imposed until the great Rebellion brought the government face to face with the necessity of

using every possible resource to raise revenues to equip and support great armies and a powerful navy.

The act of August 5, 1861, was primarily an act levying customs duties. It also levied a direct tax of $20,000,000 on the various States, to be assessed upon land, and a tax of three per cent on incomes over eight hundred dollars, and provided for assessors and collectors of internal revenue and a commissioner of taxes. The direct tax was collected in the loyal States generally by the legislatures assuming the tax, except in the case of Delaware, where it was assessed upon the land. For the collection of the direct tax in the seceding States special acts were passed, and a considerable amount of tax was collected in several of them as fast as our armies advanced or the Rebellion was subdued; but a number of these States never paid anything, and the collection of the tax was suspended from time to time, until finally, to equalize matters, all of if that had been paid was refunded to the States paying the same. The income part of the act of August 5, 1861, never was put in force, neither were the internal revenue officers provided for by it ever appointed.

The act of July 1, 1862, was the first internal revenue act which became operative after Congress began to impose taxes of this kind during the Rebellion. It took effect September 1, 1862. It suspended the act of August 5, 1861, it organized the internal revenue service, and is the act which is largely the basis of our present system of internal tax laws. It also contained the first income tax law ever enacted by the United States under which any tax was collected. As for the rest, it taxed almost everything on the earth, or in the air above, or in the waters under the earth, which the law-makers could think of as susceptible of yielding revenue. Nearly every occupation was subject to a license tax, except clergymen and schoolmasters. Lawyers and doctors did not escape a ten-dollar license fee. Nearly every manufacture had to pay tribute, but I believe cotton was the only agricultural product, in an unmanufactured condition, which was taxed, and minerals in the state of raw material were generally exempt.

Of course the three sources of revenue which have remained ever since, amid all mutations, as the backbone of the system, spirits, tobacco, and beer, -received the particular attention of the law-makers, but it was not until several years later that a system was perfected by which the taxes. on these articles were collected with any degree of completeIn fact, for a considerable period of time, the amount of frauds and evasions far exceeded the amount of the revenue from these sources.


The next important act was the law of June 30, 1864, which to a great extent reënacted the act of July 1, 1862, with such amendments and additions as experience had shown to be necessary. The income feature of this act was amended by the act of March 3, 1865, before the act took effect; and the entire act was subsequently amended very extensively by the acts of July 13, 1866, and March 2, 1867, but the original section numbers were generally retained.

The act of July 13, 1866, was the first act to reduce taxation after the close of the war. Many manufactures were exempted from tax by this act, and also by the act of March 2, 1867, and March 31, 1868. The act of July 13, 1866, is to be further noted as the first law requiring stamps to be placed on casks of fermented liquors. This was the beginning of the stamp system, destined to be fruitful in good results for the revenue. On February 3, 1868, the cotton tax was repealed.

The next important act, and perhaps the most important ever enacted with reference to spirits and tobacco, was the act of July 20, 1868, by which stamps were first required on distilled spirits, and the tax on tobacco and cigars was also made payable by stamps. It revised the entire law relative to spirits and tobacco, and also reduced taxes. This law was framed by the Ways and Means Committee, of which General Robert C. Schenck was chairman, and the committee received valuable aid from eminent political economists, such as Hon. David A. Wells, then Special Commissioner of the Revenue, and Hon. Benjamin F. Tracy, an acute lawyer, afterwards Secretary of the Navy, who, as District Attorney for the

Eastern District of New York, had had much experience in prosecuting offenders under the old statutes, and knew the defects to be remedied from actual practice in the courts. The tax on spirits was reduced by this act from $2.00 a gallon to fifty cents, but there were additional charges imposed which made the tax really about sixty-seven cents a gallon. The resulting increase of receipts from spirits was surprising, as will be detailed elsewhere. By this act, also, distillery bonded warehouses were established, and the period of deposit limited to one year. No allowance was made for leakage in warehouse.

The act of July 14, 1870, repealed taxes on gross receipts, legacies and successions, passports, and special taxes, except those relating to spirits, fermented liquors, and tobacco. The income tax, which had expired by limitation December 31, 1869, was extended over the years 1870 and 1871, the rate reduced from five per cent to two and one half per cent, and the exemption increased from $1,000 to $2,000.

The act of June 6, 1872, repealed stamp duties on all instruments except bank checks, abolished the allowance of moieties as reward to internal revenue officers, and established a uniform rate of twenty cents per pound on tobacco, instead of two rates of sixteen and thirty-two cents per pound. The tax on spirits was made seventy cents per gallon; the barrel tax and other taxes on distillers were repealed, which, added to the gallon tax of fifty cents, had already made the tax since the act of July 20, 1868, equivalent to sixty-seven cents.

By the act of December 24, 1872, assessors and their assistants were abolished, and their duties were devolved upon collectors and their deputies, while the actual power of assessment was devolved upon the Commissioner of Internal ReveThis was an important change in the law. The reason of it was, that the taxes had come to be collected mostly through the sale of stamps, and the assessment rolls were no longer of paramount importance, as formerly.


The act of March 3, 1875, increased the tax on distilled spirits to ninety cents per gallon, and on tobacco to twentyfour cents per pound, and on cigars to $6.00 per thousand.

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