This balance consists in part of the coin on hand received from Bank of Louisiana, and the remainder in interest bearing Treasury notes. The appropriations made by Congress, and not yet drawn from the Treasury, are $81,879,913. The estimates for the support of the government to 1st July, the end of the fiscal year, are $290,493,713. In order to ascertain the amount to be raised by Congress, we must add The debt of the government was, at the same date, as follows: Bonds and stocks Treasury notes. Total $145,475,870 420,629,692 $566,105,562 EXCESSIVE CIRCULATION-THE REMEDY PROPOSED. The Treasurer tells us that the issue of Treasury notes on the last day of December amounted to $290,149,602, exclusive of interest-bearing notes. By adding to this sum a sufficient amount to cover the State Treasury notes and the bank notes in circulation we can arrive at the sum total of the currency. Twenty millions added to the Treasury notes would probably represent the whole. It is this aggregate, he says, which must be kept in view when we deal with the currency as a measure of values. It is the whole mass as it is accepted by the community in exchange for its various commodities which by its proportional relations to those commodities determines their prices. By a law as invariable as any law of physical nature, these prices rise or fall with the actual volume of the whole currency. Neither skill nor power can vary the result. It is, in fact, a relation subsisting between two numbers, the one representing the total values of property and the other the total circulating medium. The nature of that medium cannot change it. It would exist with a currency of gold with as much certainty as with one of paper, if the gold were kept within the country by restraints equal to those which retain the paper. The Treasurer then goes on to say that the circulation must be reduced, as that is the only remedy for an inflated currency. Before the war the circulation in the Confederate States was about $100,000,000. In order, therefore, that prices may be brought down to the usual point, two-thirds of entire volume of the currency must be withdrawn, which would leave a circulation of about $150,000,000. The remedy proposed is that after the lapse of a reasonable time the issues of Treasury notes bearing date prior to the 1st December, 1862, shall cease to be currency. This can be done with the least possible injury by following up the action of Congress at the last session, and fixing a period of limitation for funding these notes. The Secretary adds that as the law now stands, these notes are receiv able for government dues, and the holder is entitled to fund them in eight per cent securities, until the 22d of April next, after which date he can fund in seven per cent. I propose simply to fix a period of limitation for the exercise of this last mentioned privilege by enacting that after 1st July next the privilege of funding these notes shall cease. Six months have already been allowed for investment in eight per cent securities, according to the contract on the face of the note. Two months more will be allowed for investment in seven per cent, and if, after so long a notice, the holders do not choose to avail themselves of their privilege, the good faith of the government will stand clear of imputation. But it is essential to good faith that ample means should be provided by the government to secure and pay the principal and interest of the securities in which the holders are required to invest. This can only be effected by an ample and permanent tax. Such a tax is the corner stone of the whole fabric. Without it, the scheme has no foundation, and can secure neither public confidence nor success. To provide against any future redundancy, he proposes that the States should guarantee the war debt of the government, which he thinks will enable them to reduce the interest on their bonds to six per cent. The scheme proposed then is embraced in these three essential features: 1. A limitation upon the privilege of funding the notes issued prior to 1st December. 2. A war tax. 3. A guarantee by the State. TAXATION PROPOSED. On this point the Secretary savs: It must first be ascertained what amount it is necessary to raise. It has already been shown that up to the 1st of July next Remaining funded..... The annual interest on this sum at eight per cent is.... To this must be added the interest upon about one hundred and twenty million dollars of 7.30 notes.... And about $60,000,000 of six per cent certificates.... Also the interest upon eight per cent bonds and stock, say about $100,000,000.... Total ... $500,000,000 150,000,000 $350,000,000 $28,000,000 8,760,000 3,600,000 8,000,000 $48,360,000 This amount shows the lowest figures which should be raised by the tax. The soundest considerations of policy would add as largely to this sum as the people of our country can bear. If the tax be made payable in all kinds of Treasury notes it would absorb so much of the first issues, and, by reducing the amount to be funded, would abate the force of the objections to the scheme. If sixty millions of notes could be thus called in, the benefits resulting would fully counterbalance every possible hardship. The currency would promptly recover its value, the bonds would become 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 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: 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 $1,124,595 10 $27,179 79 is. 896,620 69 200,794 62 $1,124,595 10 WAR DEBT. 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 Full paid $5,000,000 loan bonds 6 per cents, due Janu ary 1, 1863.... Adjusted bonds, 6 per cents, due January 1, 1863. $153,150 62 $177,000 00 1,746,185 00 50,000 00 216,000 00 100,000 00 607,300 00 3,553 75 |