ditions of the commercial world can not be safely ignored in our investigations of this subject, and, when proper allowance has been made for its present and prospective effect upon the amount of revenue to be derived from duties upon imported goods, I think it will be found that, instead of increasing existing rates upon articles now dutiable, it will be necessary to resort to taxation upon various kinds of importations. heretofore exempted simply because they were not included within the scope of the protective theory. Of course, there are some exceptions to the general proposition that increased rates upon articles now taxed would not increase revenue. Articles of taste and luxury, and articles of prime necessity, which can not now be produced in this country in sufficient quantities to supply the home demand, will yield revenue under rates of duty higher in proportion to their value than could be imposed, for revenue purposes, upon the great mass of commodities now subject to tariff taxation. So far as our dutiable schedules now include such articles, some increase of revenue might be secured by imposing higher rates, but even this will prove to be an annually diminishing amount, except in the cases of such articles as can not, on account of natural conditions, be hereafter produced here.

Of all the great manufacturing nations, ours is the only one which annually produces a surplus of food and raw materials, and, unless we fail to utilize our resources, we must become the great exporting country of the world. No very considerable part of our natural material can be much longer profitably carried to other countries and returned to us in the form of manufactures, but it will be converted into the finished product by our people in their own shops and factories, and, after supplying the home demand, the surplus will go abroad, to compete successfully with like products of other peoples not so favorably situated. This is the result toward which we have been rapidly advancing since 1892, and, unless our progress is seriously checked by unusual adverse influences, the time can not be very far distant when the importation of manufactured products as one of the sources of revenue must be substantially excluded from our estimates. While a revival of business and a return to more prosperous conditions would increase the income of the Government from customs, under the exisiting rates of duty, on manufactured articles, it is reasonably certain that the quantities and values of such articles hereafter imported will be less than they were before the depression began, and that they will not in the future, under any rate that may be established, reach the proportions of ten or fifteen years ago.

If this view of the subject is correct, it is evident that new objects of taxation must be included in our tariff schedules, or the attempt to secure the usual proportion of revenue from customs must be abandoned, and some other method of raising means to support the Government must be adopted; but, whether revenue shall be raised by duties on imported goods or by the imposition of taxes in some other form, there are certain funda

mental rules and principles applicable to the subject, which can not be disregarded without injustice to the people from whom the exactions are to be made. The first and most important one is, that no tax should be laid except for public purposes, and that all sums paid by the people should be received by the Government. Any tax, whether impost or excise, which increases the cost of commodities to the consumer, beyond the amount collected by the Government, is unjust and indefensible upon any correct economic principle. Taxation should not only be imposed for public purposes alone, but it should be limited as far as possible to such articles as the people can avoid the use of without impairing their ability to earn a subsistence or increasing the cost of any part of the materials on which they work, that is, on articles of voluntary, rather than on articles of necessary, use; and all such taxes should be so adjusted, when possible, as to distribute the burdens of Government equally upon the people, according to their ability to bear them. It is not claimed that absolute equality in the distribution of the burdens of taxation can be secured in all cases, under any practical system that can be devised, but gross inequalities can certainly be avoided, and they are much less likely to result when revenue is made the sole object of tariff legislation than when the customs laws are framed to accomplish other purposes.

When the true principles of taxation are recognized and applied in our fiscal legislation, there will be no difficulty in securing an ample revenue for the support of the Government, in the exercise of all its proper functions, without subjecting our industries to injurious and unnecessary burdens, or our trade to injurious and unnecessary restric tions. Although the number of purely revenue articles has been much diminished by the economic changes that have taken place during the last few years, such articles are still sufficient in number, and they are and must continue to be imported in such quantities, as to afford, under moderate rates of duty, all additions to the income of the Government that future exigencies may prove to be necessary; and, no matter what may be the preferences of any part of our people upon the subject, the necessities of the situation demand the adoption of a system of taxation which will utilize these resources.

To Hon. THOMAS B. REED,

J. G. CARLISLE,

Secretary.

Speaker of the House of Representatives.

TABLES ACCOMPANYING THE REPORT ON THE FINANCES.

XCIII

Length of loan.

When redeem- Rate of interest. able.

Price
at which
sold.

Amount
authorized.

Amount issued.

TABLE A.-STATEMENT OF THE OUTSTANDING PRINCIPAL OF THE PUBLIC DEBT OF THE UNITED STATES JUNE 30, 1896.

Amount outstanding.

TREASURY NOTES OF 1846.

Act of January 28, 1847 (9 Statutes, 118).

TEXAN INDEMNITY STOCK. Act of September 9, 1850 (9 Statutes, 447)..

14 years..

Jan. 1, 1865...

10, 000, 000. 00