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an object of investment instead of being thrown on the market, and a sure and steady system of finance would be established.

A tax of one per cent on property, if it could be made as productive as last year's, would raise twice the amount of the last war tax, say forty millions. But inasmuch as portions of the States are in the hands of the enemy, it would be proper to make a deduction of probably one-tenth, which would leave the amount at only thirty-six millions.

This sum would be subject to still further abatement so long as the decision of the Confederate Court of South Carolina as to the power of Congress to tax State bonds remains unreversed. The very large amount of money invested in this form was included in the war tax of last year, and the tax thereon was paid every where except by those who raised the question in South Carolina. For the ensuing year the case would be different. If the same was laid by Congress, it is probable that the holders of State bonds would claim exemption under this decision, and Congress itself might be unwilling to re-enact, in the same form, a law which had been declared unconstitutional by the co-ordinate branch of the government, until that decision is reversed. The question is of such magnitude and involves such great interests that appeal was taken. But this appeal cannot be decided until a Supreme Court shall be organized. It may be worthy, therefore, of the consideration of Congress, whether the question should not be raised in another form by taxing the income of the bonds in the hands of the citizens. The taxing power over income in the hands of citizens for consumption may be distinguished from that over State bonds specifically as property. In my view, both are constitutional, and the public interests demand that every proper effort should be made to insure a consideration of the question in all its aspects. In either case, however, the tax would probably prove unproductive until the question shall be finally decided. It is necessary, therefore, to estimate for an abatement on the tax of last year. Assuming one hundred millions as the probable amount invested in State securities, a tax of one per cent would amount to $1,000,000, and so much must therefore be abated from the estimate.

In estimating the rate of a tax on incomes, the only basis to which I can refer is the value of the entire property of the eleven Confederate States. It may be assumed that the net income of this property is measured by the average rate of legal interests of the money which represents its value. If the tax were laid upon net income, and that income were faithfully returned, it could in this way be estimated with some degree of accuracy. But the devices are so many by which a return of net income can be evaded as to make such returns unreliable. A resort to gross income is therefore more expedient. The difference between the two must be at least 25 per cent; but under existing circumstances, and for the purpose of an estimate, it would be prudent to disregard the difference and assume that the returns of gross income will be about equal to the average rate of legal interest. It is believed that even the proceeds of skill, speculation and labor, which may be returned where no capital is involved, will not materially vary the result.

The estimate formerly made to Congress of the value of all the property in the eleven Confederate States, in which taxes have been collected, was $4,632,000,000. If we leave out the odd number in these figures, on account of such property as is now beyond the reach of taxation, and for other con

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tingencies, we have in round numbers $4,000,000,000 The average of interest in the Confederate States may be set down at 7 per cent, which would make the total income equal to say $280,000,000. A tax of 10 per cent on this sum would produce in the gross about $28,000,000, and this, added to the property tax of $35,000,000, would raise a sum total of $63,000,000, or, in round numbers, $60,000,000, after deducting expenses and contingencies.

PAYMENT OF DEBT, ETC.

The Treasurer says: Assuming that the States may be induced to extend their guaranty to $500,000,000, I propose to adjust the debt upon the plan of the hundred million loan, so as to insure its discharge within a given period. The length of this period depends upon the sum which Congress will devote to the annual payments. The commencement of the period or the date at which the first payment is to be made is, of course, within the control of Congress, and involves the same inquiry as to the amount now to be raised by taxes. A postponement of this first payment of principal would seem to allow a diminution of the tax. But it must be observed that some considerable time must elapse before the guarantees of the States can be had; and further time must be consumed in carrying the plan into execution and in procuring returns of the sales. During all this period the 8 per cent and 7.30 notes are outstanding, and will absorb nearly as much more money as will afterwards be required to meet the first annual payments on the principal. Besides this, it cannot be too strongly urged that the present is the appropriate moment at which to commence a proper system of taxes. The patriotism of the country is now fully aroused. The duty of contributing largely to the support of the government is generally recognized. The large amount of money in circulation will make the payment easy, and the payment itself will aid the taxpayer by reducing prices to their proper condition.

The collection of the produce loan, together with the purchase of produce under the act of April 21, 1862, has been prosecuted with vigor. The total amount of subscriptions to the loan, valued in money, is about $25,000,000; of which $7,631,044 have been collected at an expense of one-third of one per cent. The purchases of cotton thus far reported by the agents amount to 69,507 bales, costing $4,474,400. The purchases at the present moment have probably reached 250,000 bales, including those of which reports are on the way. In order to dispose of the cotton, two forms of certificates have been devised. By one the various parcels of cotton are registered and disposed of. By the other the government obligate itself to deliver certain quantities at certain points at a fixed price. By the advice of our ministers abroad, some of the latter certificates, covering about 30,000 bales of cotton, have been placed, as an experiment, in the foreign market; but sufficient time has not elapsed to hear from them. The details of this branch of the department are set forth in the report of the clerk in charge, to which your attention is invited. The important and responsible duties entrusted to this clerk render it proper that his office should be placed on a level with other branches in the department. I would therefore respectfully recommend that the office be raised to the grade of a chief clerkship.

The legislation which will be required to carry into effect the several matters recommended in this report, is the following:

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1. An act limiting the period for funding the Treasury notes, bearing date prior to 1st December, 1862.

2. Authority to issue a sufficient amount of Treasury notes to pay the appropriations required for the support of the government to 1st July

next.

3. Authority to issue bonds and stock sufficient to fund the notes already issued, entitled to be funded at eight per cent, and those hereafter to be funded at seven per cent.

4. A call upon the States to guaranty the war debt, upon a plan to issue six per cent bonds, payable in instalments, in twenty-five years, upon the plan of the one hundred million loan.

5. A modification of the loan act of April, 1862, by reducing the time to five years, within which the government may redeem the bonds. 6. A war tax upon property and income.

FINANCIAL CONDITION OF MICHIGAN.

From the report of the State Treasurer of Michigan we take the following statement for the year ending November 30, 1862:

The total amount of receipts of the office for the fiscal year, is...

The balance against the treasury, and in favor of State Nov. 30, 1861, was The total of payments for the year is. Leaving a balance in the treasury of...

$1,124,595 10

$27,179 79

896,620 69

200,794 62

$1,124,595 10

WAR DEBT.

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During the past year, there has been sold $158,200 war bonds authorized by an act authorizing a war loan," approved May 10, 1861. These bonds were mostly sold early in the year, to meet the war expenses incurred in

1861.

The amount received for the bonds sold was.

To which add for accrued interest....

And for premium on gold received for bonds....

Total...

$150,539 94 2,578 80 31 88

$153,150 62

STATE DEBT.

The funded debt of the State is as follows:

Full paid $5,000,000 loan bonds 6 per cents, due Janu

ary 1, 1863.....

Adjusted bonds, 6 per cents, due January 1, 1863.
Temporary loan, 7 per cents, due January 1, 1878
Renewal loan, 6 per cents, due January 1, 1878...
Canal bonds, 6 per cents, due January 1, 1879....
War loan, 7 per cents, due January 1, 1886....
Outstanding internal improvement warrants.

$177,000 00 1,746,185 00

50,000 00

216,000 00

100,000 00

607,300 00

3,553 75

FUNDABLE DEBT.

$140,000 outstanding part paid $5,000,000 loan, which, when funded, will amount to...

80,999 80

Total of funded and fundable debt

The trust fund debt is made up of the following items, to-wit:

Primary school fund....

University fund...

Normal school fund.

$2,981,038 55

$753,801 73 185,887 33

22,453 47

Railroad deposits

Total....

2,217 32

$964,359 85

During the past year, the balance of the "Penitentiary Bonds," amounting to $13,000, has been paid.

Under the provisions of section 7, of "An act authorizing a war loan," approved May 10, 1861, and of section 1, of "An act to provide a tax for interest on the war loan," approved May 10, 1861, the sum of $40,072 99 has been received, which is applicable to the war loan sinking fund. The requisite drawings of the numbers of our small war bonds, to be redeemed, was made on the first of October, and the numbers drawn have been advertised for redemption on the first day of January next. This will reduce the war loan" debt to $567,227 01. It will be further reduced by about $48,000, which will be applicable to the sinking fund at the close of 1863.

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In pursuance of section 9, of "An act to provide means for the redemption of the bonds of the State, maturing January 1, 1863, approved March 11, 1861," a circular was issued to the holders of such bonds inviting an exchange of the six percents authorized to be issued by the act. In response to this circular a portion of the bonds have been exchanged, and sealed proposals invited for the purchase of the balance. Under the law, these proposals are to be received on the first day of December in the city of New York. Upon the completion of this negotiation, it will be made the subject of a special report to the Legislature.

TWO MILLION LOAN SINKING FUND.

Under the provisions of section 4, of act No. 122, approved March 11, 1861, the sum of $21,506 98 has been levied in the State tax of 1862, which will be applicable to the sinking fund of the "two million loan" at the close of the year 1863. Section 6 of the same act also provides "that all moneys which may be paid into the Treasury after January, 1863, to the credit of the Primary, School, Normal School, and University funds, shall be set apart and in like manner applied to the purchase of bonds issued under this act. This wise and liberal provision for the gradual but certain retirement of our bonds has had the effect to advance their value in the market, and to materially promote the credit of our State, which is soon to take rank among the most favored in the land. It is therefore respectfully suggested that no legislation hereafter should be permitted, the effect of which would alienate these funds from the object contemplated under the law above referred to.

The State Auditor gives the following schedule of the receipts and expenditures:

RECEIPTS AND EXPENDITURES FOR THE YEAR ending noveMBER 30, 1862.

At the commencement of the year the Treasury was overdrawn to the amount of $28,334 53.

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We have received through a correspondent of the State Auditor of Public Accounts, a statement of the public debt of Missouri, made up to this time. From this statement we gather the following particulars. The whole indebtedness of the State is $27,370,090, and is composed of the items named below:

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A small portion of this debt bears 5 per cent interest, and another, but inconsiderable amount, 7 per cent.

*To this amount add for outstanding warrants, $587 13, making actual cash balance in hands of State Treasurer, $200,794 62.

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