1794.]

NEW TAXES PROPOSED.

565

which Mr. Smith, of South Carolina, was Chairman, and on the twenty-third of December the committee made their report, in which, after a review of the debt, the expenditure and resources of the nation, they recommend a continuance of the existing taxes on manufactured sugar and snuff, on carriages, on licenses to retail liquors, and sales at auction, to continue until 1801, when the deferred debt of fifteen millions becoming due, it would be necessary to make further provision for the debt. On the subject of a direct tax, they say that it ought not to be meddled with, but should "remain as our grand resource in case of war."

This report furnished materials for the most protracted and varied debate of the session, in which its principal purpose of continuing the existing duties was opposed by the Republican party, and supported by the Federalists. If the former obtained an advantage over their adversaries on the topic of the "self-created societies," that advantage was balanced, or more than balanced, by their course on the question of redeeming the public debt. It was likely to excite the surprise of the American people, and it did provoke the taunts of their opponents, that the very men who had upbraided the Federalists with wishing to perpetuate the public debt, and had accused Hamilton of so framing his system of finance as to produce this result, should now, when a plan of redeeming the debt was proposed, unite in opposition to it.

The objections which they made to the plan could not defend the party from the charge of inconsistency. Some urged that, to continue the small duties laid on snuff and refined sugar, would be injurious to the manufacturing interests; and others, that they would press on the class of consumers. Some insisted that it was premature to decide on the continuance of taxes which yet had two

566

DIRECT TAXES.

[CHAP. VII. years to run: others again urged the insufficiency of the existing taxes, and professed themselves friends to a direct tax, though they did not venture to propose it.

While those of the Republican party who engaged in the debate spoke highly in favor of direct taxes, in preference to indirect, the Federalists made no other objection to them than their admitted unpopularity. This requires explanation. It was, at that day, a favorite maxim with the Republicans, that direct taxes were particularly suited to popular government, as they were more economical than indirect taxes, for two reasons: one was that, being inconvenient and unpalatable, they begat a vigilance in the people which would check the extravagance to which all governments have a proclivity: the other reason was, that taxes on consumption draw more money from the pockets of the people, because not only is the tax added to the price of the commodity, but also a profit on the tax to him who has advanced it. Both of these supposed recommendations of direct taxes, however, admit of ready answers.

As to the preference given to direct taxes, because they are more felt by the people, this is to incur a certain evil for the mere chance of a benefit; and as to the supposed saving in the cost of collecting direct taxes, though that may be true in European countries, it is not true in the United States. From the vast extent of territory, and the wide dispersion of their population, the valuation of real estate is there very expensive, and these valuations, from the rapid changes which such property is ever undergoing, must be frequently, perhaps annually, made. Thus, while the cost of the impost has been less than five per cent., that of the direct tax has been about twentyfive per cent. This difference between the two species of tax has been many times any presumable addition to

1795.]

TREASURY REPORT.

567

the tax by way of profit to those who advanced it, and which, moreover, is not always advanced; and from which it follows, that indirect taxes are more economical, as well as more easy to the people, than direct taxes; and thus we see how unsafe it is to draw rules of policy from other countries without duly considering the difference of circumstances.

On this question, as well as that of the self-created societies, a majority of the House decided rightly; and a bill was introduced founded on the report, which, after some disagreement of the two Houses, was finally passed.

While the subject of the redemption of the debt was under discussion in the House, the Secretary of the Treasury sent to the Senate the official report required of him by act of Congress, in which he submitted a plan, on the basis of the existing revenues, for the further support of public credit.

This report, communicated to the Senate on the twentieth of January, 1795, presented copious details of what had been already done relative to the debt, under the three heads of: first, the revenues which had been established; second, the provisions for funding the public debt, and paying the interest; third, the provisions for reimbursing and extinguishing the debt.

He shows the whole public debt, foreign and domestic, to be a little upwards of seventy-six millions of dollars, exclusive of one million four hundred thousand dollars due to the Bank, and some anticipations of the current revenue that the annual revenue was $6,552,800 74 The annual expenditure, $5,681,843 84

He then submits a number of distinct' financial propositions, on each of which comments are made with a view to the improvement of public credit, and the redemption of the public debt.

568

NEW NATURALIZATION ACT.

[CHAP. VII.

This was Hamilton's last official act. He soon after sent in his resignation. It was understood that the insufficiency of the salary attached to his office had compelled him to give it up, and to resume the practice of the law. He was succeeded by Oliver Wolcott, of Connecticut, who was a great admirer of Hamilton, and an honest supporter of his views.

1

During the previous month, General Knox had sent in his resignation, and was succeeded by Timothy Pickering, of Massachusetts.

The great number of immigrants who were now flocking to the United States inclined sober-minded men of all parties to make the rights of American citizenship less easily obtained. The previous residence required of them was therefore extended to five years; and the declaration of an intention to become a citizen was further required to be made three years before naturalization.

Mr. Giles proposed that the applicant should add to the renunciation of his former allegiance, any title of nobility which he may have previously possessed. This was treated with ridicule by the Federal members, one of whom moved to add, that if the new citizen had been a slaveholder, he should also renounce his right to hold slaves. Mr. Giles's amendment, however, prevailed by a majority of fifty-eight to thirty-two.

The third of March put an end to the session, and to the third Congress.

CHAPTER VIII.

WASHINGTON'S ADMINISTRATION.

SECOND TERM.

1795-1797.

IN March, the treaty negotiated by Mr. Jay, which both parties, with opposite views and feelings, had been anxiously expecting, was received; and in June the Senate was summoned to decide on its ratification. After deliberating on the subject from the eighth to the twentyfourth of the month, precisely two-thirds of that bodythe number required by the Constitution-advised its ratification, with the exception of the twelfth article, which related to the West India trade.

By this article, a direct intercourse with the British West Indies was permitted to the United States under two conditions, which restricted the trade to vessels of not more than seventy tons, and prohibited the exportation from the United States of the principal products of the West Indies, among which cotton was included, that commodity not being known to Mr. Jay to have been one of the exported products of the United States. On both these accounts that article was deemed inadmissible, and the ratification was consequently made subject to this exception.

The Senate had, according to usage, deliberated on the treaty with closed doors, and it was understood that it was not to be promulgated until it was finally concluded; but on the twenty-ninth of June, Stephen