THE TARIFF AND THE REVENUE

SYSTEM, 1866-1872

APPROVED:

M a j o t ^ P r o f e s s o r

Mi noir P ro fesso r

/ - D i r e c t o r o f the Depaj^tnwfrit o f His to ry

Dean o f the Graduate School

THE TARIFF AND THE REVENUE

SYSTEM, 1866-1872

THESIS

Presented to the Graduate Council of the

North Texas State University in Partial

Fulfillment of the Requirements

For the Degree of

MASTER OF ARTS

By

Robert S. Glass, B. A.

Denton, Texas

August, 1969

TABLE OF CONTENTS

Page

LIST OF TABLES iv i

Chapter

I . INTRODUCTION AND THE VIEWS OF THE ADMINISTRATION 1

I I . THE REVENUE LEGISLATION OF THE THIRTY-NINTH CONGRESS, FIRST SESSION 25

I I I . THE REVENUE LEGISLATION OF THE THIRTY-NINTH CONGRESS, SECOND SESSION 46

IV. THE CONTINUATION AND EXTENSION OF THE REVENUE iPOLICY, 1867-1872 68

V. CONCLUSION 91

APPENDIX 99

BIBLIOGRAPHY 110

i i i

LIST OF TABLES

T a b l e Page

I . P r i c e Index 100

I I . E x p e n d i t u r e s and R e c e i p t s 101

I I I . P r i n c i p l e Sou rce s of Revenue 102

IV. Revenue R e c e i p t s by Major C a t e g o r y 103

V. I n t e r n a l Revenue by C a t e g o r y 104

VI. I n t e r e s t on N a t i o n a l Debt 105

V I I . Customs as a P e r c e n t a g e of T o t a l Revenue 106

V I I I . R a t i o of D u t i e s t o D u t i a b l e I m p o r t s 107

IX. R a t i o of D u t i e s to T o t a l Impor t s 108

X. I m p o r t s and E x p o r t s 109

i v

CHAPTER I

INTRODUCTION AND THE VIEWS OF THE ADMINISTRATION

The C i v i l War marks an impor tan t t u r n i n g po in t in Ameri-

can h i s t o r y because of the many aspects of nati-anal l i f e t h a t

became s i g n i f i c a n t l y d i f f e r e n t a f t e r the war. One of these

aspects was the acce le ra ted growth of the n a t i o n ' s i n d u s t r i a l

c a p a c i t y . Accompanying t h i s growth, accord ing to many h i s t o -

r i a n s , was a change i n the government's p o l i c y regard ing the

r o l e of government i n the n a t i o n ' s economic development.

H i s t o r i a n s cus tomar i l y i n t e r p r e t the s i g n i f i c a n t l y h igher

t a r i f f ra tes of the p o s t - C i v i l 'War per iod as one of the, mani-

f e s t a t i o n s of the government's new p o l i c y of f o s t e r i n g the

n a t i o n ' s bus iness. They a t t r i b u t e the p r o t e c t i v e f ea tu res of

the t a r i f f schedules dur ing t h i s per iod to the dominance of

p r o t e c t i o n i s t i n t e r e s t s i n Congress. E i t he r i m p l i c i t l y or

e x p l i c i t l y , the charge aga ins t the t a r i f f o f these years is

t h a t i t was an ins t rument of aggrandizement fo rced upon the

country by the p o l i t i c a l power of vested i n t e r e s t s i n

c o l l u s i o n w i t h Radical Republ icans.

"'james G. Randall , The C i v i l War and Reconstruct! 'on (New York, 1937), p. 373; F. W. Tauss ig , The T a r i f f H i s t o r y ° I t h e Uni ted S ta tes , 8th ed. (New York, 1931), pp. 1 72-175; Char! es A. Beard andl Mary R. Beard, The I n d u s t r i a l Era, Vol . I I of The Rise of Ameri can C i v i l i z a t i o n , rev . ed. , 4 v o l s . (New York, 1 959j^ p~] T~08; Sidney Ratner , Ameri can Taxa t i on : I t s H i s t o r y as a Soc ia l Force i n Democracy (New York, 1942), pp. 78, 116-117; Howard K. Beale, The C r i t i c a l Year: A Study of Andrew Johnson and Recons t ruc t i on , 2d ed. I¥ew York, 1958J7 pp. 272ff":

This thesis is now somewhat dated with respect to the

ideas either of unity among industrial interests or of Rad-2

ical Republican unity on the question of the tariff. What

remains of the original thesis is that the high tariffs of

the war became a permanent protective system because of the

political dominance of greedy protectionist interests. This

part of the original thesis is also vulnerable. While there

is evidence to support the thesis, the evidence is highly

selective.

The rationale of the thesis is fairly simple. It began

with the popular nineteenth century notion that man is econom-

ically motivated and basically self-interested and greedy. It

ignored the idea that by pursuing his own self-interests, the

individual was also contributing to the general welfare. The

thesis assumed that because the tariff was comparatively high,

it must have been intended to be protective. Because a pro-

tective tariff was antithetical to the interests of free-traders,

the high tariff of the war must have been continued by pro-

tectionists. The thesis recognized that the need for revenue

2 Robert P. Sharkey, Money, Class , and Party: An Eco-

nomi c Study of Civil War and Reconstruction (Baltimore, 1 959) , pp. 145-171 , "passim; Kenneth Milton Stampp, The Era of Reconstruction, 1865-1877 (New York, 1965), pp. 105-107; Stanley Coben, ""Northeas tern Business and Radical Recon-struction: A Re-examination," Mississippi Val1ey Historical Revi ew, XLVI (June, 1 959), 68; Edward L. Gambill, "Who Were the Senate Radicals?" Civil War History, XI (September, 1965), 237-238; Glenn M. Linden. "'Radicals' and Economic Policies: The Senate, 1861-1873," Journal of Southern History, XXXII (May, 1966), 195-199.

was also a factor in the continuation of the war tariff but

gives it only token recognition.

Re-examination of the tariff question in the post-Civil

War years reveals that the tariff cannot be considered sepa-

rately from the broader questions of revenue policy. There

were several factors that contributed to the continuation of

the war tariff and the influence of protectionists was cer-

tainly one of them. More important, however, the war duties

were continued because the government's needs for revenue pre-

cluded a return to the pre-war revenue system. The laissez

faire philosophy of the time and the end of the war, however,

demanded a return to normalcy and a simple revenue system

which could be economically administered and which minimized

the impositions of the internal revenue taxes. The return to

normalcy and the reduction of taxes followed a scheme of pri-

orities which looked first toward reducing the internal duties

which were the most abnormal taxes in the light of past exper-

ience. When Congress completed its major revisions of the

internal tax system, the government's revenue needs were still

too high to permit major cutbacks of customs receipts. High

tariff rates, with some modifications, therefore continued.

The major revisions of the tax system were completed in

1872. In its essentials, the system remained in that form

until after the turn of the century. That form included an

internal revenue system, concentrated on whiskey and tobacco

taxes, that provided about one-third of the government's total

receipts and more than customs produced in any year before the

war. The so-called protective tariff system, which had pro-

vided about 90 per cent of the total revenue before the war,

never again produced more than 59 per cent of the revenue. The

revenue system that was established in the years between 1866

and 1872, and the tariff as an integral part of that system,

was an attempt to continue the basic laissez faire policies of

the past with heavy reliance on the tariff for revenue and with

minimal government interference in the lives of individuals.

High tariff rates were essential if customs was to produce

enough so that internal taxes could be minimal. The protection

afforded by the high rates was a necessary evil and the ne-

cessity was increasingly challenged until the nation accepted

greater governmental interference in its daily life through

internal taxation. The government's aid to industry through a'

high tariff was a consequence of the revenue system and did not

reflect a consciously adopted change in the role of government

in the economy.

The nation's unusually large need for revenue originated

in the Civil War years. For three decades prior to the war, *

the tariff had become progressively less protective as the

revenue sources proved more than adequate to the government's

needs. The first tariff act passed to meet the requirements

of the war continued the non-protective policy by increasing

the duties on the so-called revenue items of non-American

3

production. This act also included an income tax, but Sec-

retary of the Treasury Salmon P. Chase, thinking that the war

would not last long enough to set up the administration nec-4

essary to collect the tax, made no effort to enforce it.

Congress initially also thought that the war would be

short and that the war effort could be financed largely by bor-

rowing. By the second year of the war, Congress had changed

its appraisal of the situation and endeavored to meet more of

its financial requirements through taxation. New sources of

revenue were needed to meet the emergency conditions of the war

and Congress found these sources in internal revenue taxes.

This form of taxation had been virtually unused since the War

of 1812 and was therefore entirely new to most Americans in

1862. The Internal Revenue Act of July 1, 1862, included several

forms of taxation, the most prominent of which were the taxes on

alcohol and tobacco, taxes on a long list of manufactured items, 5

and a tax on individual incomes.

Congress also made additional demands for revenue from

customs. In view of the new tax burden placed on manufacturers,

the tariff act of July 14 was designed to offset whatever advan-

tages the increased costs of domestic production might give to

foreign producers. When revenue needs increased later in the 3U. S. Statutes at Large, XII, 292 (1863). 4 Ratner, American Taxation, p. 68.

5Randall , The Civil War, pp. 448-449; U. S. Statutes at Large, XII, 4 3 2 T T 8 3 T T ~ ~

w.ir, Congress raised tho rates on both Internal taxes and tariff

duties. The tariff rates were intended to achieve the two-fold

purpose of revenue and compensatory protection for manufacturers.

At the end of the Civil War, the tax system was such that

the protective features of the tariff schedule could not in any

realistic sense be compared with a protective tariff policy in

peacetime. The taxes paid on manufactured items alone in fiscal

1865 were more than customs had ever produced in one year before

the war. Customs, during the same year, produced only about

16 per cent more than excise taxes on manufactures. In general,

however, by 1866 customs duties had increased about as much as

the amount of taxes levied on manufactures.'7

The end of the crisis raised the question of how the nation

would return to peacetime financing. Indeed, part of this

question concerned tariff policy. Many people expected the

return of peace to mean a return to pre-war conditions and pre-

war methods of government financing, if not immediately, then

in a short time. These expectations met disappointment and

frustration. The war had brought changes to government finance

that could not be undone. Government expenditures, for example,

were never again as low as three times the pre-war high of

6 Davis Rich Dewey, Financial History of the United States,

7th ed. (New York, 1920), pp. 301-303.

^Derived from U. S. Census Bureau, Historical Statistics of the Uni ted States, Coloni al Ti mes to 1957 (Washi ngton , 1960), pp. 712-713, hereafter cited as HistorTal Statistics. The in-crease of customs revenue was figured over the base period 1859-1861.

$74 ,000,000 in 1858.** But the new conditions did not prevent

attempts to impose old solutions or to evaluate the new situation

in terms of concepts made obsolete by the changes. The end of

the war found the tariff and the entire revenue system facing the

demands of meeting financial needs with which the nation had had

no peacetime experience. The fate of the tariff depended on how

the government would adapt the concepts of the old order to the

new conditions.

Congress anticipated the end of the hostilities before they

actually were over in April, 1865. It was looking ahead to the

problems of an adjustment to a peacetime economy and budget when

it passed the Internal Revenue Act of March 3, of that year. In

section nineteen of this act, Congress provided for the appoint-

ment of three commissioners to consider the problems of revenue

and taxation and to recommend a plan for revision of the emergency g

measures of the previous four years. Questions of revenue and

taxation, prior to 1865, had been almost exclusively the domain

of the House of Representatives and its Committee on Ways and

M e a n s . ^ The Special Commission on Revenue, therefore, was a

significant addition to the taxation policy-making process. It

was important also as a reflection of Congress's recognition

81bid . , p. 711 9U. S. Statutes at Large, XIII, 469 (1866). 1 0Dewey, Financial History, pp. 501-504.

8

that the increased complexities of the revenue problems needed

a more systematic approach than the Ways and Means Committee

was able to provide.

Taxation policy ultimately rested on the legislation

passed by Congress and approved by the President. The executive

branch of the government had little to say about the formation

of that policy until the creation of the Special Commission on

Revenue. The President and the Secretary of the Treasury had

largely peripheral and certainly independent roles in the policy-

making process. The concept of the President and his cabinet

having an active and integral role in taxation and budgetary

policy-making was not to develop for many decades. Congress

created the Commission on Revenue to advise the policy-making

powers with the implied understanding that those powers rested

in Congress. The President and the Secretary of the Treasury

nevertheless assumed their largely empty roles of making broad

recommendations to Congress.^

The problems with which the government was most concerned

in the months following the peace, in addition to reconstruction,

were the highly inflated paper currency and the national debt.

President Andrew Johnson, in his first annual message to Congress

in December, 1865, placed a high priority on solving these

problems. He saw the inflated currency as a serious threat to

economic stability. He maintained that "we should look at the

^ A r t h u r Smithies, The Budgetary Process i n the Uni ted States (New York, 1955), pp. 49-66, passim.

9

national debt just as it is--not as a national blessing, but

as a heavy burden on the industry of the country, to be dis-

charged without unnecessary delay." He urged that the debt

be fully discharged in a 11. . . definitely fixed number of

years." The contraction of the currency and the" discharge —

of the debt would require continued heavy taxation and Johnson

recommended that taxes

. . . should be so adjusted as to fall most heavily on articles of luxury, leaving the necessaries of life as free from taxation as the absolute wants of Government economically administered will justify. . . . The taxes should be so distributed as not to fall unduly on the ^ poor, but rather on the accumulated wealth of the country.

While Congress may have felt no obligation or responsibility to

follow the President's recommendations, Johnson's message never-

theless expressed one of the common views of the situation and

can reasonably be supposed to have had at least some influence

on Congress and public opinion.

Congress also received the report of the Secretary of the

Treasury, Hugh McCulloch, in December. The Secretary, like the

President, was concerned about the currency. Both maintained

that the reduction of the currency to a par with gold was j

essential to return business to a healthy condition. The re-

duction was also necessary to prevent further deterioration

of the national credit and the ability of American interests

1 2 James D. Richardson, ed., A Compi1ation of the Messages

and Papers of the Presi dents, 1789-1902. 10 vols. (Washington, 1 904), VI, 364-366.

10

to compete in the international market. The premium on gold

had an unfavorable influence on the balance of trade by encour-

13

aging imports and discouraging exports.

Reduction of the currency, if it was funded, would have a

direct effect on the national debt and an indirect effect on

the revenue requirements for the reduction of that debt.

McCulloch, like Johnson, considered the debt to be a national

burden which should be paid as soon as possible. Repayment of

the debt was essential to strengthen the national credit, he

maintained, and "nothing but revenue will sustain the national 14.

credit. . . ." The national debt, which had been $64,844,000 in 1860 , had

increased to more than $2,808,000,000 by the time McCulloch re-1 5

ported to Congress—an increase of more than 4000 per cent.

The enormous expansion of the debt is important to an appre-

ciation of the widespread concern for the national credit at

the time. The general disapproval of the principle of a national

debt also had an important bearing on how most people viewed the 1 6

necessity of quickly repaying the debt. Within this framework,

then, the public would understandably consider high revenue needs

^ H o u s e Executive Documents, 39th Congress, 1st Session, No. 3 (Washington^ 1866) , pp^ 13-14.

1 41bid., p. 16.

1 51bid., p. 17; Historical Statistics, p. 711.

^ L e w i s H. Kimmel, Federal Budget and Fiscal Policy, 1789-1958 (Washington, 1959), pp. 55-60, 136-139.

n

for the government to be expedient, if not imperative. The

public in general, but especially those business interests

which had the most to lose from an economic crisis, were

therefore apprehensive about the ability of the government to

deal effectively with the financial problems of the nation.

It was at this point that proposals for dealing with economic

problems became involved with questions of reconstruction and

the re-admission of potentially obstructionist states of the

South. More important for the present discussion, however, is

that questions of revenue and taxation policy took shape within

the context of widespread concern for the economic security of

the government and the nation and were influenced by consider-

ations for that security.

Secretary McCulloch's proposal for dealing with the national

debt included the recommendation that Congress provide $200

million from the revenue annually for payment of the interest

and principal of the debt. He believed that it would signifi-

cantly strengthen the national credit without the necessity of

raising t a x e s . ^

McCulloch's remarks on the revenue system were very general

because the Commission on Revenue had not completed its report.

He indicated that because the system developed with little

opportunity for careful consideration, it would need revision

but that the revision should not be radical. The Secretary

^ H o u s e Ex. Docs., 39 Cong., 1 Sess., No. 3, p. 19.

12

looked for a simplification of the system by eliminating some

of the less remunerative sources of income. He urged that "it

is also of the highest importance that there should be a careful 1 8

adjustment of our internal to our external revenue system."

This solitary reference to the tariff system suggests that

McCulloch did not recommend a downward revision of the tariff

at that time.

The Secretary's philosophy of taxation appears to have

been, "to impose taxes judiciously, so as to obtain revenue

without repressing industry. . . ." This should be done by

adapting the system ". . . to the industrial habits and fiscal 19

capacity of the people." While these remarks might be inter-

preted as being biased in favor of manufacuring and business

interests, such an interpretation is probably too narrow.

The Special Commission on Revenue submitted its report to

Congress on January 29, of the new year. The commission con-

sisted of three men selected by the Secretary of the Treasury

to represent ". . . to a certain extent, different sections and 20

interests, and also different political sentiments." David

A. Wells, with Massachusetts textile interests, was chosen to

represent commerce. Philadelphia ironmaster Stephen Colwell

represented manufacturing interests. The Democratic member 1 81bid. , pp. 27-28. 1 9 Ibid. . . 2 01bid . . p. 28.

13

of the commission was Samuel S. Hayes, se lec ted as a represen-

t a t i v e of Western ag ra r i an i n t e r e s t s a l though he was Compt ro l le r

21

of the C i t y of Chicago.

The commission had a decided p r o t e c t i o n i s t s l a n t w i t h

Colwel l and Wel ls . C o l w e l l ' s home s ta te of Pennsylvania and

the i r o n i n t e r e s t s w i t h whom he had a d i r e c t involvement were

no to r ious f o r being s t r o n g l y p r o t e c t i o n i s t . Both Colwel l and

Wells had repu ted ly been i n f 1 uenced_by the idea-s-of Henry C. — —

Carey, an economist who supported t a r i f f p r o t e c t i o n f o r domestic

22

producers. While Colwel l and Wells were p r o t e c t i o n i s t s in

p r i v a t e l i f e , i t remained to be seen how t h e i r views would i n -

f l uence t h e i r p u b l i c work. Whatever the case, i t cannot be

assumed t h a t t h e i r views on the t a r i f f were p r i m a r i l y grounded

in narrow s e l f - i n t e r e s t or i n c lass i n t e r e s t . P r o t e c t i o n i s m ,

a f t e r a l l , was a ph i losophy of economic na t i ona l i sm which held

t h a t a t a r i f f was economica l ly b e n e f i c i a l , d i r e c t l y or i n d i r e c t l y ,

to the e n t i r e na t ion and not s imply se lec ted i n t e r e s t s .

The commission's r epo r t assumed tha t the un favorab le eco-

nomic cond i t i ons of the na t ion were s e l f - e v i d e n t and d id not

enumerate or descr ibe those c o n d i t i o n s . The commission was

f u l l y aware of the economic i m p l i c a t i o n s of the revenue system

t h a t had developed dur ing the war. The system was v a s t l y more

21 Hugh McCulloch, Men and Measures of Hal f Century

(New York, 1900), p. 239 ; Herbert Ronald F e r l e g e r , David A. Wells and the American Revenue System, 1865-1870 (New York, 194277 pp. 25-28.

99 F e r l e g e r , David A. Wei 1s, pp. 25-29.

14

diffuse and burdensome than it had been before the war and the

commission was faced with the novel problem of how to distribute

the burden with the greatest equity and the fewest adverse

effects.

The commission saw the challenge of adapting the revenue

system to the varied capacities of the economy as difficult but

surmountable. One of the primary demands made on the revenue

system was the repayment of the national debt. The ability of

the revenue system to meet this requirement obviously depended

on the ability of the economy to sustain a heavy burden of

taxation. The commission was confident that:

. . . if a[n economic] development in any degree approx-imate to the past can be maintained and continued, the extinguishment of the national debt, in a comparatively brief period, becomes a matter of no uncertainty. To secure this development, both by removing the shackles from industry and by facilitating the means of rapid and cheap intercommunication between the different sections of the country, is to effect at the same time a solution 23 of all the financial difficulties which now press upon us.

These expectations are clearly reasonable and nonpartisan

with respect to questions of free trade and protection. If

the commission was overly optimistic about the solution of all

the nation's financial problems, its ambitions were at least

honorable.

The promotion of economic. growth as a solution to the

revenue problem implied a basis for formulating a tax policy.

23 House Executive Documents, 39th Congress, 1st Session,

No. 34 (Washington, ~T£f66), p. 17.

15

The proposed objective of promoting economic growth was incon-

sistent with some provisions of the existing revenue system.

The commission's report pointed out that:

a system of taxation . . . so diffuse as the present one, necessarily entails a system of duplication of taxes, which in turn leads to an undue enhancement of prices, a decrease both of production and consumption, and conse-quently of wealth, a restriction of exportations and of foreign commerce, and a large increase2|n the machinery and expense of the revenue collection.

This observation primarily concerned the internal revenue

system but the commission found that "another matter of more

serious importance, in its bearing upon the industry of the

country, than the duplication of taxes, is the lack of equal-2 5

ization or adjustment between the tariff and the excise."

The report pointed to two examples of this lack of equalization.

One was the case of manila hemp, imported and then made into

rope. The combined taxes on the imported hemp and the manu-

factured rope was almost 50 per cent greater than the tariff

on imported rope. The discriminatory effect of the tax system

also applied to the parasol Industry, The combined taxes on

the various parts of a parasol were greater than the tariff on ? fi

the completed item.

The commission suggested that the remedy for such instances

of the lack of equalization between the tariff and the excise

might be found in increasing the tariff. It cautioned, however,

2 4Ibid., p. 13. 2 5Ibid., p. 15. 2 6Ibid., pp. 15-16.

16

against a permanent increase. Furthermore, it maintained,

. an increase in the tariff, sufficient to remedy all the

difficulties, would render the tariff itself almost prohibitory,

27

or at least so high as to invite continued assaults. . .

The general recommendations which the report urged for

promoting economic growth and erasing the inequities of the

system were " . . . the abolition or speedy reduction of al1 taxes

which tend to check development, and the retention of al 1 those

which , 1i ke the i ncome tax, falls ch i efly upon reali zed 28

wealth. . . The commission further urged that Congress

should work for ". . . such a revision of the present i nternal

revenue system as wi11 1ook to an entire exemption of the manu-

facturinq industry of the United States from al1 direct OQ

taxati on. . . . "

These recommendations were intended to enlarge the nation's

capacity for bearing taxes, but they were also based on the

experiences of other countries. The commission looked at the

revenue systems of Britain and France to see how other industrial

nations apportioned their taxes. Its study revealed that the two

European governments made a practice of exempting domestic in-

dustry. The commissioners believed that there were sufficient

similarities between the United States and the other two 2 71bid ., p. 16.

2 81bi d., p. 17.

2 9Ibid.

17

countries that the Americans could also expect success from

the policy.

The Revenue Commission report went on to make specific

recommendations and estimates of revenue for fiscal 1867. The

report gave little attention to the tariff but based its esti-

mate for customs receipts on expected imports and allowed for

some reductions and the addition of some raw materials to the

free list. The rationale for the selection of raw materials was

that they lay ". . . at the basis of great branches of industry;

and it is for the interest of the country that their production

and sale should be, in the greatest possible extent, increased

31

and cheapened." All other estimates and recommendations

concerned internal revenue.

One of the commission's most important recommendations,

especially in view of subsequent developments, pertained to

taxes on distilled spirits, most of which went into liquor.

The tax on a gallon of spirits was $2 at the time of the report

and the commission maintained that the high rate caused wide-

spread evasion. If Congress would reduce the rate to $1 per

gallon, there would be less tax evasion, the ccunmissioners said,

and the government would actually receive more revenue from tho

source than it had in the past. The lower rate was expectcd to

raise almost twice as much revenue. According to the commission

3 01bi d . , pp. 9-12

3 1Ibid. , pp. 18-19, 40-41.

18

the secur ing of a la rge revenue from d i s t i l l e d s p i r i t s i n the Uni ted States i s abso lu te l y necessary to insure the successfu l c a r r y i n g out of any plan f o r s i m p l i f y i n g the i n t e r n a l revenue system, and r e l i e v i n g the general i n d u s t r y of the country from a burden o f t a x a t i o n which must i n e v i t a b l y r e s u l t i n d i s a s t e r . No i n d u s t r i a l i n -t e r e s t i n the count ry can b e t t e r sus ta i n the burden of t a x a t i o n than d i s t i l l e d s p i r i t s . 3 2

Another of the commission's most impor tan t suggest ions

was to increase the tax on c o t t o n . The est imated e f f e c t elf

the proposed increase plus the r e t u r n of co t ton lands to the

Union would be to r a i se the revenue from t h a t source from less

than $2,000,000 to $40,000,000. The commissioners be l ieved

t h a t the tax would be e q u i t a b l e and des i r ab l e because, i n being

passed on to the consumer, i t would have the e f f e c t o f being a

d i r e c t tax. '* '*

The commission's a t t i t u d e toward the income tax is another

ins tance of i t s concern f o r making the new revenue p o l i c y a

system of d i r e c t taxes . Income taxes had prov ided almost 20

per cent of the t o t a l revenues i n f i s c a l 1865, and the commission

urged the r e t e n t i o n of the tax except f o r i t s p rogress ive

f e a t u r e s . The d i s c r i m i n a t i o n , sa id the r e p o r t , was " . . . i n

f a c t a tax on the r e s u l t s of successfu l i n d u s t r y and business 34

e n t e r p r i s e . . .

The Commission made severa l o ther recommendations but the

most impor tan t was t h a t the ra tes on manufactured items

3 2 1 b i d . , p. 24

3 31b i d. , pp. 20, 26.

3 4 1 b i d . , p. 27.

19

excepting spirits, beer, tobacco, cotton and a few others

should be reduced by 50 per cent. This reduction would still

allow more than $50,000,000 to be applied to the principal of 35

the national debt. The commission recommended, however, that

it would be preferable to reduce taxes to a minimum rather than

reduce the principal of the debt at that time. Such a course, so far from protracting the time at which the national debt can be discharged, would, it is believed greatly accelerate it; inasmuch as "the power of contrib-uting to the public revenue increases almost geometrically as the activity of the societary cirulation increases ari thmeti cally."36

The commission believed that if its recommendations were fol-37 lowed, national production would double in the next ten years.

One of the goals that the commission urged was that the

sources of revenue be gradually concentrated into as few as

possible. This would serve the two-fold purpose of facili-

tating tax collection and, with judicious selection of the forms

of taxation, distributing the tax burden equally throughout the 38

population. The commission was not explicitly concerned with

laissez faire principles, but it saw the advantage of a policy

of concentrating duties as increasing the " . . . freedom from needless official impositions and intrusions. . . . i,39 Such

3 51 b i d. , P- 35. 36II)id. , P. 41. 3 71 b i d . , P. 42. 3 81b i d. , P. 35. 3 91 b i d. , P . 36.

20

a p o l i c y , if a d o p t e d , would also have the e f f e c t , or at least

give the a p p e a r a n c e o f , e l i m i n a t i n g w a r t a x e s . The eventual

e l i m i n a t i o n of the m u l t i t u d e of w a r taxes by c o n c e n t r a t i n g the

r e v e n u e system would look toward a return to the l a i s s e z faire

s t a n d a r d s of the day and the s i m p l i c i t y of the p r e - w a r r e v e n u e

s y s t e m . j i

The report and its r e c o m m e n d a t i o n s were r e m a r k a b l y o b j e c t i v e . I t

F r e e t r a d e r s could see little in the report that pleased th!em, i

h o w e v e r , b e c a u s e the g u i d e l i n e s that the c o m m i s s i o n used as the

basis for its r e c o m m e n d a t i o n s a p p e a r e d to v i o l a t e l a i s s e z faire

tenets by f a v o r i n g special i n t e r e s t s . A policy more to the

liking of f r e e t r a d e r s would have been a p r o p o r t i o n a l r e d u c t i o n

of all forms of t a x e s . Such a policy m i g h t have c o n f o r m e d to

the s t a n d a r d s of l a i s s e z faire g o v e r n m e n t , but the R e v e n u e

C o m m i s s i o n was more c o n c e r n e d with the practical e x i g e n c i e s of

a r e v e n u e system than with f o l l o w i n g a p h i l o s o p h y that met the

strict r e q u i r e m e n t s of o r t h o d o x laissez faire a d v o c a t e s . The

p o p u l a r i t y of the l a i s s e z f a i r e p h i l o s o p h y m a d e it a l m o s t inevi-

table that the c o m m i s s i o n ' s report and the a d o p t i o n of any

policy that r e s e m b l e d it would offend many p e o p l e who felt that

they had been s l i g h t e d by an unequal r e d u c t i o n of t a x e s . The

c h a r g e a g a i n s t the a d o p t i o n of a system of p r i o r i t i e s in tax

r e d u c t i o n would be the f o s t e r i n g of special i n t e r e s t s . The

c o n t r o v e r s y s u r r o u n d i n g the relation b e t w e e n a s y s t e m of

p r i o r i t i e s and the l a i s s e z faire ideal of free and equal com-

p e t i t i o n would be f u r t h e r c o m p l i c a t e d by the point of view

21

expressed by the commission. The members of the commission

held that the policy recommended in their report would encourage 40

rather than obstruct free competition. Any controversy was

largely idle, however, until Congress and the President acted

upon the commission's report.

President Johnson's annual message to Congress in the |

preceding month had contained only general remarks on taxation

policy. Johnson probably disapproved of the commission's!recom-

mendations that tax reductions should have priority over repay-

ment of the debt. While he probably disagreed on other specific

points also, there was no basic conflict between Johnson's

message to Congress and the contents of the Revenue Commission

report. The views McCulloch expressed to Congress coincided

more closely with the report than Johnson's did.

The response that Congress would make to the recommendations

of the Revenue Commission, the President, and the Secretary of

the Treasury would depend on a wide variety of factors. One

of those factors would certainly involve laissez faire doctrines

in their various interpretations. Congressmen who held moderate

views would be faced with evaluating the comparative exped-

iencies of conflicting alternatives of policy. Congressmen

were, as always, faced with possible conflicts of their obli-

gations to constituencies and to larger questions of national

interest. There were economic as well as political considerations

on both the local and national levels. 40

Ibid., p. 35; Henry Carey was another who held this position. See, Sharkey, Money, Class, and Party, p. 154.

22

Congressional acceptance of the recommendations of the

Revenue Commission would depend, in p a r t , on Congress's op in ion

of the e f f e c t of the tax burden on i n d u s t r y . Johnson, McCulloch

and the commission had a l l spoken of the unstab le c o n d i t i o n of i

business i n genera l . To a la rge ex ten t they a t t r i b u t e d these

cond i t i ons to the i n s t a b i l i t y of paper cu r rency . A f t e r the Act

of Ju ly 17, 1861, paper currency grew in volume and d imin ished

41

i n va lue . The p r i c e of one hundred d o l l a r s of go ld currency

measured in paper currency changed i r r e g u l a r l y w i t h f l u c t u a t i o n s

of as much as f o r t y - s e v e n d o l l a r s in the average p r i c e from one

month to the next dur ing the per iod 1862 to 1866. The average

monthly p r i c e of one hundred d o l l a r s of gold currency rose to

as high as two hundred and e i g h t y - f i v e d o l l a r s of paper currency 42

i n J u l y , 1864. The i n s t a b i l i t y of the currency s e r i o u s l y

aggravated the general r i s e of p r i c e s . Pr ices in general d id

not increase as r a p i d l y as the p r i ce of g o l d , nor d id they

advance u n i f o r m l y . Wholesale p r i c e s , which were 85 per cent

h igher i n 1865 than in 1860, advanced more r a p i d l y than r e t a i l A O

pr i ces and wages lagged behind the cost of l i v i n g .

The quest ion of a revenue p o l i c y which would promote a

r e t u r n to economic s t a b i l i t y i nvo lved the r e l a t i o n between the

premium on gold and the p r o t e c t i o n of the t a r i f f . F reet raders 4 V S. S ta tu tes a t Large, X I I , 259 (1863) . 42

Wesley C l a i r M i t c h e l l , Gojd, P r i c e s , and Wages under the Greenback Standard ( B e r k e l y , 1 908) , pp. 5 -7 .

4 3 I b i d . , p. 279 ; see Table I .

23

alleged that the premium on gold gave protection to domestic

industry in addition to the protection afforded by the tariff.

This was true but it remained true only as long as the premium

on gold was rising. The price of gold rose until it reached a

peak in 1864; thereafter, it declined. Prices of domestic goods

and services continued to rise, however, shifting the balance

to the favor of importation. Business was caught in a pincers

movement between rising costs and increasing competition from

imported goods. The continued decline of the premium on gold i

and its consequent advantage to importation further weakened * t

the security of American business in the immediate post-wa|r 44 '

years. i

The instability of economic conditions caused by the

currency was further complicated by the cutback of government

expenditures and the expansion of the labor force with dis-

charged soldiers. On the basis of the report of the Secretary

of the Treasury, government expenditures were expected to drop 45

one billion dollars from fiscal 1865 to fiscal 1867. Figures

for the gross national product for these years are not available

but the average GNP for the years 1869-1873 was $6.71 b i l l i o n . ^

Whether or not the revenue needs of the government and the

necessity to pay off the national debt required a revenue policy

that promoted economic stability and growth, as the Revenue 44

Sharkey, Money, Class, and Party, pp. 146, 150-151. 45

House Ex. Docs., 39 Cong., 1 Sess., No. 3, pp. 18-21 46

Historical Statistics, p. 139.

24

Commission c la imed, Congress was faced w i t h the cha l lenge of

forming a revenue p o l i c y to promote economic s t a b i l i t y f o r

i t s own sake. Once Congress decided t h a t the cond i t i ons o f .

the economy j u s t i f i e d such a p o l i c y , a l l quest ions of the

p r i n c i p l e s o f f r e e t rade or p r o t e c t i o n would be secondary.

CHAPTER II

THE REVENUE LEGISLATION OF THE THIRTY-NINTH

CONGRESS, FIRST SESSION

Most attempts to describe the efforts of the 39th Congress

to revise the tariff system have concentrated on the two major

tariff bills that the Congress discussed. By using the debates

and provisions of the bills they demonstrate that protectionist

sentiment was dominant and prevented any reduction of the

tariff rates.^ They ignore or minimize the context of the

debates and completely ignore the absence of certain arguments

from the debates. The tariff was an integral part of the

entire revenue system and must be considered in conjunction

with the efforts to revise the internal tax system. Con-

gressional action necessarily waited for a bill from the House

Committee of Ways and Means.

Justin S. Morrill was chairman of the Committee of Ways

and Means. He was a Republican from Vermont and an admitted

protectionist. Morrill and his committee had it in their

Howard K. Beale, "The Tariff and Reconstruction," American Historical Review, XXXV (January, 1930), 289-292; Ida M. Tarbell, The Tariff in Our Times (New York, 1911), pp. 33-44.

25

26

power to prepare arid report a bill that favored special

interests, but they could not force it on Congress. Whatever

legislative influence the prejudices of the chairman or his

committee might have had were, therefore, largely limited to

the fate of a bill before it was reported.

In accordance with the priority which the Revenue Com-

mission gave to revision of the internal revenue system, the

committee reported a bill to revise internal taxes before it

reported a bill to revise the tariff. In its essentials, the

internal revenue bill followed the recommendations of the

Revenue Commission.

Morrill presented the bill to Congress on May 7, 1866.

He noted, in the^opening remarks of his presentation, that "in

revising our internal revenue laws, the question that meets us 2

at the threshold is, how much revenue have we to spare?" i j

The implications of this remark are crucial to the tariffj !

question. The remark implies that the policy that Morrill and j

at least the majority of his committee adopted was that any

reductions of revenue would come from tax cuts in the internal

rovonuo systoin and not from tho tariff. This policy would

generally conform to the recommendations of the Revenue Com-

mission but in outward appearances did not allow for reductions

of the tariff on raw materials as the commission suggested.

Passage of a bill based on the policy that all revenue reductions

2 Congressional Globe, 39th Congress, 1st Session, p. 2434.

27

would come from cuts i n i n t e r n a l revenue sources would s e t t l e

the quest ion of t a r i f f reduc t ions w i t hou t even b r i n g i n g up the

<1 u i! :> L i o n in a t a r i f f b i l l . This remainder of M o r r i l l ' s presen-

t a t i o n made i t c l e a r t h a t the i n t e r n a l revenue b i l l was indeed

based on such a p o l i c y .

The committee chairman's p resen ta t i on of the b i l l conta ined

a d d i t i o n a l remarks on revenue p o l i c y . M o r r i l l mainta ined t h a t

. . we must s i m p l i f y our laws, reduce the burdens of t a x -

payers so f a r as p o s s i b l e , and cheapen the cost of l i v i n g . But 3

a l l cannot be done a t once." The b i l l , he s a i d , proposed to

e l i m i n a t e some taxes and reduce o t h e r s . He repeated ly s t ressed

the b e n e f i t s of the b i l l to the average c i t i z e n . "These

exemptions and reduct ions w i l l lessen f a m i l y expendi tures and

be a r e l i e f to a l l c lasses of the community." "The reduc t ions

have been made w i th the so le view of the g rea tes t good of the

g rea tes t number. . . " I n our l i s t of exemptions we s t rove

to reach e a r l i e s t those a r t i c l e s upon which a reduc t i on of cost

would b r i ng r e l i e f to the masses of people. . . . " 4

I t may be argued t h a t these remarks were designed to s o l i c i t

support f o r the b i l l and were only a subter fuge f o r ga in ing

reduc t ions of taxes on manufacturers . Whatever r e l i e f the b i l l

would g ive manufac turers , the p rov i s ions of the b i l l never the less

i n d i c a t e d t h a t the consumer would a lso b e n e f i t ; i f M o r r i l l ' s

31b i d . , p. 2436.

4 1 b i d . , pp. 2436 , 2437.

28

remarks were politically motivated, they were not entirely

hypocri tical .

The reductions and exemptions that the committee included

in the bill were designed to reduce the revenue from internal

sources by $75,000,000. This figure was the committee's esti-

mate of the excess of receipts over expenditures for fiscal

1867. The estimate of receipts allowed for the bill's increase

of the tax on cotton. The estimate for expenditures included,

against the recommendation of the Revenue Commission,

$200,000,000 that the Secretary of the Treasury suggested

should be applied to the payment of the interest and principal

of the national debt.

The committee proposed reduction or exemption from taxes

on more than eighty items. The largest reduction was from S

income taxes. Here the committee followed the recommendations

of the Revenue Commission that exemptions be allowed for the

first one thousand dollars instead of only six hundred dollars.

The committee also endorsed the suggestion that the progressive

features of the law be eliminated. These two amendments of

the income tax law would reduce revenue an estimated twenty

million dollars. Morrill looked to the eventual elimination

of income taxes because the tax had originally been intended

to be only temporary and because the tax was undesirable.

Morrill did not object to the principle of a tax on incomes

51bid. , p. 2438.

29

but r a t he r to the e f f e c t s of the t a x . He claimed t h a t the law

was i n q u i s i t o r i a l because i t p r i ed i n t o the secre ts of i n d i -

v i dua l s and exposed them to p u b l i c v iew. The law a lso tempted

people to unders ta te t h e i r incomes and thereby tended to

undermine pub l i c mora ls . M o r r i l l d id ob jec t to the p r i n c i p l e

of p rogress ive t a x a t i o n i n the e x i s t i n g law. He mainta ined

t h a t " i n a repub l i can form of government the t r ue theory i s

to make no d i s t i n c t i o n s as to persons i n the ra tes of t a x a t i o n .

Recognizing no c lass f o r spec ia l f a v o r s , we ought not to

c rea te a c lass f o r spec ia l bu rdens . " 6

The Committee of Ways and Means gene ra l l y agreed w i t h the

Revenue Commission about the d e s i r a b i l i t y of o b t a i n i n g the

maximum amount of revenue poss ib le from taxes on a l c o h o l . The

committee b e l i e v e d , however, t h a t the ra te should not b.e lowered

u n t i l the e x i s t i n g ra te could have a longer t r i a l . ' '

Consider ing t h a t s i g n i f i c a n t reduc t ions of the t a r i f f

would r equ i r e t h a t customs be supplemented by a s u b s t a n t i a l

amount of i n t e r n a l revenue, the r e c e i p t s from income and a lcoho l

taxes were p a r t i c u l a r l y impo r t an t . With the except ion of manu-

f a c t u r e r s ' t axes , which were d i v i ded among scores of i t ems , the

two most impor tan t forms of i n t e r n a l revenue came f rom, taxes

on incomes and a l c o h o l . Large r e c e i p t s from a lcoho l taxes

could prov ide a s u b s t a n t i a l amount of the supplement necessary

6 1 b i d . , p. 2437.

7 1 b i d.

30

to the eventual reduction of the tariff. Reduction of income

taxes, however, would delay the lowering of tariff rates.

Morrill's view of the end result of the revision of the

revenue system was perhaps as significant as the committee's

specific recommendations for revision. Looking forward to

a permanent revenue system, he hoped that "at an early day

spirits, malt liquors, tobacco, cigars, cotton, stamp taxes,

and perhaps a small number of other objects, . . . with custom

duties, will afford revenue commensurate with all the wants O

of the Government.' The revenue system that had developed

by 1872, with the exception of the tax on cotton, was exactly

what Morrill foresaw in 1866. The chairman was hardly

prophetic in his remarks. He simply reflected the consensus

that the internal revenue system, although it could not be

eliminated, should be minimized and concentrated into those

forms which could most easily bear the burden. There was dis-

agreement over the details regarding the permanent system, such

as the questions of taxes on cotton and incomes, but it was

generally a foregone conclusion that the internal tax system

would be simple and most likely centered around taxes on alcohol

and tobacco. Morrill's remarks are symptomatic of the basic

assumption that directed the revision of the revenue system to

its eventual conclusion.

81bi d . , p. 2436.

; 31

The presentation of the internal revenue bill also con-

tained remarks directed specifically at the tariff question.

Morrill maintained that the existing rate of importation could

not long be continued. The rate of importation increased so

much that imports for the first three quarters of fiscal 1866

were already about 50 per cent greater than imports for the Q

entire previous year. Morrill believed that the situation was

abnormal and that imports in the future would be lower, but he

was nevertheless concerned about the effects of importation: Financial disaster, as well as increased depression to our industrial interests, cannot fail to follow such an influx of foreign goods as we have witnessed the present season. That trade must in some degree be postponed until we recover from the exhaustion caused by the war, until capital and labor can adjust itself t& its new conditions of peace, or until we have something to exchange for British, French, and German iron, wine, and haberdashery, besides merely our national credit.10

These comments clearly indicated that unl.ess Morrill was in the

minority in his committee, the tariff bill would certainly not

encourage imports but might even propose a general increase of

tariff rates.

The House of Representatives debated the bill at consider-

able length and after numerous amendments, passed it on May 28.

The vote on the bill was 110 in favor, 11 opposed, and 62 not

g Derived from Cong. Globe 39 Cong., 1 Sess., p. 2435;

U. S. Bureau of the Census, Historical Stati sti cs of the Uni ted States, Colonial Times to 1 957 (Washington, I 960), p. 539.

1 0Cong. Globe, 39 Cong., 1 Sess., p. 2435.

32

v o t i n g . ^ The widespread support the b i l l rece ived makes the

d i s t r i b u t i o n of votes somewhat i n c o n c l u s i v e . Approx imate ly

h a l f of the Democrats and a t h i r d of the Republicans d id not

vo te . The eleven votes aga ins t the b i l l were a l l Democratic

and about equal to the p a r t y ' s votes f o r the b i l l . Oppos i t ion

to the b i l l tended to be geographica l a l s o , w i t h e i g h t o f the

eleven votes coming from Kentucky, I nd iana , I l l i n o i s and

Wisconsin. The debates on the f l o o r of the House gave l i t t l e

i n d i c a t i o n of the reasons f o r the o p p o s i t i o n , w i t h the poss ib le i

except ion of the f o u r negat ive votes from Kentucky. These |

were apparen t l y i n p r o t e c t aga ins t the laws concerning a lcoho l

taxes .

The most s i g n i f i c a n t aspect of the vote on the i n t e r n a l

revenue b i l l was the small amount of oppos i t i on i t r ece i ved ,

no tw i ths tand ing the la rge number of Representat ives who, f o r

whatever reason, d id not vo te . The vote i n d i c a t e d a general

and perhaps almost unanimous endorsement of the p o l i c y of

g i v i n g p r i o r i t y to reduc t ions of i n t e r n a l taxes over t a r i f f

du t ies and c o n f i n i n g a l l major reduc t ions of revenue f o r the

next f i s c a l year to i n t e r n a l tax sources. The debates reveal

no oppos i t i on to such a p o l i c y . Even Francis C. Le Blond from

Ohio and Lewis W. Ross from I l l i n o i s , both Democrats and ardent

f r e e t r a d e r s , f a i l e d to p r o t e s t the p o l i c y which would reserve

none of the reduc t ions f o r s i g n i f i c a n t cuts in t a r i f f r a t e s .

n i b i d . , p. 2865.

; 33 i

The H o u s e v e r s i o n of the bill w e n t to the S e n a t e w h e ^ e i

it was sent to the Finance Committee. Senate discussion 6f

the committee's report began June 20, and ended five days later

when the bill was passed, with amendments, by a voice vote.\^

The most important of the more than six hundred amendments the

Senate made to the bill concerned the taxes on cotton and in-

comes. The Senate refused to increase the tax on raw cotton

which the House had raised from two cents a pound to five cents.

The Senate also rejected the House changes in the income tax

law, which had followed the recommendations of the Revenue

Commission.

The conference committee urged a compromise which post-

poned the changes of income taxation but would increase the

tax on cotton from two to three cents a pound. Before the

compromise was finally accepted, there was some concern in the

Senate about the relation between the internal revenue bill

and the tariff bill, which had been introduced in the House on

June 28. The tariff bill, as Morrill had earlier hinted,

proposed numerous increases of the tariff. Senator Hendricks,

Democrat from Indiana, was one of the many Senators opposed to

the increase of the tax on cotton. As a representative from

an agricultural state, he objected to the principle of taxing

an agricultural commodity. He viewed an excise bill with a

tax on an agricultural product and a tariff bill that was

1 2Ibid., p. 3396.

34

designed to further protect, if not exempt, industry from

foreign competition as parts of a system that was decidedly

discriminatory. While Hendricks found the revenue bill with

a cotton tax the more objectionable because of the features of

the tariff bill, his objections were directed neither at the

priority given to reductions of internal taxes nor at the

failure of the tariff bill to reduce rates. Hendricks, obvi-

ously concerned about the effect of taxes on his section and

state, did not even consider the existing tariff to be essen-

tially a protective tariff. He claimed:

I will support that system of tariff which is designed for revenue. I am willing that the labor of New England shall be benefitted by a revenue tariff. We have to raise a large amount of gold to meet our public debt, and I am willing to agree to a revenue tariff. I think that is enough.13

John Sherman, Republican Senator from Ohio, disputed

Hendricks' claim that the Internal revenue bill was scctionally

biased but agreed with the Indiana Senator's objections to a

prohibitive tariff. The basis for Sherman's objection, however,

was somewhat different. He would not support a tariff bill

which, by restricting imports, decreased the revenue from customs

On the other hand, he claimed:

if, . . we can levy larger duties on imported goods, yielding us a larger revenue in gold, without materially disturbing our commercial interests, we will certainly do so; we will be bound to do so. Every civilized country in modern times looks to duties on imported

1 3Ibid. , p. 3609.

35

goods as a fruitful source of revenue. If we can derive all our revenues from duties on imported goods, we are justified in doing so. That has been the policy for years, and no nation will ever resort to a system of internal taxation when it can raise sufficient revenue by duties on imported goods. I believe even the Democratic party would go so far as to say that all that can be raised from imported goods for revenue should be raised rather than to resort to internal

taxati on.14

Sherman's position could easily have been an oblique

argument for protection, but there is no evidence in the debates

that any Democrat or Westerner disagreed with him. If anyone

though it possible to rely exlusively on customs revenue at

that time, there is no evidence of it; the concern at the

moment was with reducing the internal revenue system as much

as practicable. Sherman's view of what that system should be

bears a striking resemblance to Morrill's ideas. . . If

we could raise all outT internal revenue from tobacco, whisky,

and a few articles of luxury, and from the income tax, we ought 15

to favor that course. . . . "

The debates in the Senate, as in the House, indicated that

there was little or no basic objection to the policy of at

least postponing a significant reduction of the tariff. Those

writers who maintain that "step by step with this removal of

the internal taxes, a reduction of import duties should have

taken place, . . can find no support for their view among

1 41bid. , p. 3610. 1 5Ibid.

36

1 C

Congressmen debat ing the i n t e r n a l revenue b i l l . The b i l l

precluded a s c a l i n g down of t a r i f f ra tes but there were no

complaints or p ro tes t s from the m i n o r i t y par ty or from the

t r a d i t i o n a l sources of a n t i - t a r i f f sen t iment . The i n t e r n a l

revenue b i l l concerned the t a r i f f on ly i n d i r e c t l y , however,

and s p e c i f i c d i scuss ion of t a r i f f ra tes awaited debate on the

t a r i f f b i l l t h a t M o r r i l l presented to the House on June 28.

In h is p resen ta t i on of the b i l l , M o r r i l l expressed

ser ious concern about the unfavorab le economic cond i t i ons of

the n a t i o n . He blamed the cond i t i ons p r i m a r i l y on the i n f l a t i o n

caused by the vast expansion of the cu r rency . The derangement

of the monetary system was a heavy burden on the economy but

i t could be solved only g r a d u a l l y . In the meantime, the s i t u a t i o n

could be a l l e v i a t e d by l e g i s l a t i o n . Such l e g i s l a t i o n must

recognize the unfavorab le e f f e c t of i n f l a t i o n on the compet i t i on

of American products w i t h f o r e i g n impo r t s . The l e g i s l a t i o n must

a lso recognize t h a t the vast increase of imports was a d ra in of

the n a t i o n ' s money supply and, as such, j eopard i zed the govern-l

ment 's capac i t y to decrease the volume of currency and even tua l l y

resume specie payments. The ou t f l ow of go ld also threatened the

government's a b i l i t y to pay i t s matur ing o b l i g a t i o n s . 1 7

Clea r l y i t is the duty of the Government to moderate i f i t cannot c o n t r o l t h i s reck less course of t rade

1 £1 F. W. Tauss ig , The Tar i f f Hi s t o r y of the Uni ted S t a t e s ,

8th ed. (New York, 1931), p. 172; see a l s o , Sidney Ratner , Ameri can Taxa t i on : I t s Hi s t o r y as a Soc ia l Force in Democracy (New York, 1942), p. I l 6 .

17Cong. Globe, 39 Cong., 1 Sess . , pp. 3465-3467.

37

before bankruptcy ensues and the business of the country receives a check from which i t may take years to recover . . . . There i s not a member of the House who does not know and fee l t ha t there i s urgent need of l e g i s l a t i o n upon the t a r i f f . To ad journ w i t hou t such l e g i s l a t i o n would be a ca lami ty and a b lunder .18

M o r r i l l a lso i n d i c a t e d t h a t another reason f o r r e v i s i o n

of the t a r i f f was the inadequate du t ies on imported wools.

He mainta ined t h a t compet i t i on from f o r e i g n imports had so i n -

creased t h a t domestic wool producers were s e r i o u s l y th rea tened .

Perhaps an equa l l y impor tan t reason f o r r e v i s i n g the t a r i f f was

the t e r m i n a t i o n of a r e c i p r o c i t y t r e a t y cover ing t rade w i th

Canada. The du t ies on items of t h i s t rade was obso le te and

19

needed updat ing .

The chairman went on to discuss o ther fea tu res of the b i l l

b u t , before conc lud ing , suggested t h a t "unless we are w i l l i n g

to cou r t the usual sequence of war we must now adopt measures 20

t h a t w i l l s h i e l d our people from general f i n a n c i a l r u i n . "

The measures t h a t M o r r i l l proposed would g ive a general increase

to t a r i f f r a t e s . He mainta ined t h a t the p r o t e c t i o n the measures

would g ive the people would a lso accrue to the government by

p r o t e c t i n g the tax base of the i n t e r n a l revenue system. M o r r i l l

considered the t a r i f f b i l l essen t i a l to the p rese rva t i on of the

i n t e r n a l revenue but d id not be l i eve t h a t the proposed ra tes

were so high as e i t h e r to decrease customs revenue by s e r i o u s l y

1 8 I b i d . , p. 3467.

1 91b i d. , pp. 3466, 3467.

2 0 1 b i d . , p. 3468.

3 8 -

21

restricting trade or to increase the revenue from customs.

He admitted that the circumstances of the country might justify

more protection than the bill offered: but rather than jeopardize a sound policy, rather than excite the odium which extravagance is always likely to excite, I should counsel temporary inconvenience and the lowest rate of duties under which it is possible for our various branches of manufacturers, not prosper, but to live, hoping that a better time is coming. . . .22

The relation between the proposed bill and the recommen-

dations of the Revenue Commission is subject to different

interpretations. One point of view would hold that the W$ys f

and Means Committee ignored the commission's suggestion against j

increasing the tariff. There is some validity to this posntion i

but a point of view that recognized ambiguity in the commission's

report might hold another interpretation. The commission recom-

mended that internal taxes be reduced to ease the problem of the

lack of equalization between the external and internal tax

systems rather than permanently increase tariff duties. Having

already moved to reduce internal taxes, the Ways and Means

Committee proposal for increasing the tariff was directed at

other problems than equalization of taxes. The commission's

recommendation against raising duties, therefore, did not apply

to the tariff bill.

Observers who pointed to the apparent discrepancy between

the Revenue Commission report and the provisions of the tariff

2 1 Ibid. 2 21 b i d.

39

bill were on less debatable ground in regard to the commission's

suggestion to lower rates on raw materials. In theory, at

least, the question on this point was not how best to equalize

the tax systems, but whether the national interest would be

served best by lowering the tariff and therefore the cost of

raw materials, or by protecting the producers from adverse

economic conditions. The commission decided in favor of the

former, but the committee decided in favor of the latter. Some

members of the House disputed the committee's decision but 23

apparently most concurred.

Analysis of Morrill's presentation reveals little if

anything conclusive about the necessity of increasing the

tariff. Morrill's arguments are susceptible to a variety of

interpretations, ranging from a devious subterfuge for high

protection to a realistic appraisal with a modest and conser-

vative remedy. There is no doubt that the bill was intended

to increase protection without necessarily increasing revenue

and in that sense could be called a protective tariff measure.

There is also little doubt that the committee considered tariff

increases either justifiable or necessary to remedy various

unfavorable economic conditions; this was the basic assumption

behind the bill and the principal question that Congress had

to answer. Ardent freetraders might have maintained that

nothing justified protection, but the large moderate group

23 See remarks by Kasson, ibid., pp. 3472, 3718; and remarks

by Hooper, ibid., p. 3717.

40

took a r e l a t i v i s t i c approach . Except f o r th a r d e n t f r e e t r a d e r s ,

t h e n , the b i l l invo lved the q u e s t i o n of f r e e t r a d e vj^. p r o t e c -

t i o n i s m only to the e x t e n t t h a t a moderate might have though t

t h a t the b i l l asked f o r more than c i r c u m s t a n c e s w a r r a n t e d . The

p r i n c i p l e of i n c i d e n t a l p r o t e c t i o n f o r d i s t r e s s e d or n a s c e n t

i n d u s t r i e s had , a f t e r a l l , been g e n e r a l l y accep ted f o r many

y e a r s . The q u e s t i o n s t h a t a lmost p e r e n i a l l y c a l l e d f o r r e -

examina t ion were the d e f i n i t i o n s of i n c i d e n t a l p r o t e c t i o n and

d e s e r v i n g i n d u s t r i e s . The problems were r e l a t i v e to ever

changing c i r c u m s t a n c e s , and the a l r e a d y high r a t e s of t h e war

t a r i f f compl ica ted the c i r c u m s t a n c e s f a c i n g the T h i r t y - n i n t h

Congress .

There was much more o p p o s i t i o n to t he t a r i f f b i l l than

to the i n t e r n a l revenue b i l l . The o p p o s i t i o n g e n e r a l l y d i s -

puted the b a s i c assumption of the b i l l t h a t c i r c u m s t a n c e s

r e q u i r e d more p r o t e c t i o n . I t saw the proposed I n c r e a s e s as

expanding the c o m p e t i t i v e advan tages of s p e c i a l i n t e r e s t s

r a t h e r than p rov id ing r e l i e f f o r i n d u s t r i e s and the economy.

The s u p p o r t e r s of the b i l l g e n e r a l l y endorsed M o r r i l l ' s

a p p r a i s a l t h a t the v a r i o u s c i r c u m s t a n c e s c a l l e d f o r i n c r e a s e d

p r o t e c t i o n . For them, the q u e s t i o n was not whether or not to

i n c r e a s e the r a t e s but only how much the r a t e s should be r a i s e d .

D i scus s ion of t he l a t t e r q u e s t i o n q u i t e n a t u r a l l y then had the

appea rance of p r o t e c t i o n i s m running rampant . I t i s u n d e r s t a n d a b l e

t h a t some of t he f r e e t r a d e r s and the more c o n s e r v a t i v e of t he

41

moderates would c h a r a c t e r i z e the proceedings as a p r o t e c t i o n i s t

24

sess ion.

I f some of the suppor ters were mot iva ted by b e l i e f i n

high p r o t e c t i o n i r r e s p e c t i v e of the c i rcumstances, o thers were

mot ivated by s incere c o n v i c t i o n t h a t economic cond i t i ons were

ser ious and needed a h igher t a r i f f to r e l i e v e them. Among

the l a t t e r group were undoubtedly some who, under normal con-

d i t i o n s , would have opposed a h igher t a r i f f f o r p r o t e c t i o n .

John Hogan, Democrat from M i s s o u r i , expressed what c e r t a i n l y

went through the minds of o ther r e p r e s e n t a t i v e s : Being myself a f r e e - t r a d e man, I wish s imply to say t h i s : I am f o r a f a i r t a r i f f i n re ference to e v e r y t h i n g , but i f we must have a high p r o t e c t i v e t a r i f f a t a l l , then I want the laborers of my p o r t i o n of the count ry p ro tec ted a l so . . . .25

Hogan u l t i m a t e l y voted aga ins t the t a r i f f b i l l but h is sent iments

c o n t r i b u t e d to the impression t h a t the var ious proposed increases

i n the b i l l were in tended more to serve l oca l and s p e c i f i c i n -

t e r e s t s than economic necess i ty or na t i ona l p o l i c y . Amasa Cobb,

Republican from Wisconsin, a lso c o n t r i b u t e d to the impression

t h a t the b i l l was a product of l o g r o l l i n g . More cand id , or

perhaps less sub t l e than o ther Congressmen, Cobb asked f o r

suppor t f o r h is proposed increase in exchange f o r h is suppor t ? fi

f o r o ther p roposa ls .

Whatever observat ions may be made about the charac te r of

the debate on the t a r i f f b i l l , they must recognize t h a t a wide

24

See remarks by Ross, i b i d . , pp. 3639-3640.

2 5 I b i d . , p. 3632. I b i d . , p. 3544.

42

variety of factors were involved in the debates. The question

of the necessity of increased protection seems to have been

more of an issue with opponents of the bill than the pure

principle of protection among the bill's supporters. Sec-

tionalism raised its head and although the charges were so

trite and unconvincing that they brought laughter in the House,

some Westerners may have sincerely believed that the bill was

prejudiced against their section. The opposition of local

interests and national interests involved positions on all

sides of the question. Any impression that the debate was

characterized by strong protectionist sentiment must give

consideration to the concern over the effect of the vast in-

crease of imports over the previous year, the concern for the

stability of business conditions, and the concern about the

effect of the outflow of gold on the monetary system. Morrill's

fear for the security of the internal revenue system if the

tariff were not revised was apparently not shared by others.

From the point of view of this discussion, the most

notable feature of the debates was the absence of any com-

plaints that the bill did not propose a general downward

revision of the tariff. It is true that such a revision had

been largely precluded by the reductions included in the

internal revenue bill; this fact alone, however, did not rule

out the possibility that some Congressmen would nevertheless

call for a general tariff reduction. Although opponents of

the bill were not averse to revising the tariff, they repeatedly

43

imp l ied s a t i s f a c t i o n w i t h the general l eve l of e x i s t i n g d u t i e s .

The i r sent iments were e s s e n t i a l l y the same as those of Senator

27

Hendr icks , above. This again i n d i c a t e d the general r e c o g n i t i o n

o f at l e a s t the temporary necess i ty o f a h igh t a r i f f .

The quest ion of the necess i ty of ma in ta in i ng the l eve l o f

customs revenue was ra i sed in the d iscuss ion o f one of the

proposed changes i n the r a t e s . James F. Wi l son , a Republican

opponent of the b i l l from Iowa, proposed t h a t the e x i s t i n g

duty on co f fee be cut i n h a l f . The amendment to the b i l l was

passed and fo l l owed by another proposal by Wilson to reduce

the ra te on tea by h a l f . Wilson be l i eved t h a t because r e c e i p t s

f o r f i s c a l 1866 had produced a surp lus of $100,000,000 to

apply to the deb t , reduct ions on the two items would be permis-

s i b l e . M o r r i l l opposed both proposals because they would reduce

the revenue. Others supported M o r r i l l i n h is o p p o s i t i o n to the

reduc t ion on tea . They added t h a t the duty on t e a , as we l l as

c o f f e e , was a dependable source of revenue and should not be

abandoned. Wiilson and h is suppor ters argued t h a t the revenue

would not be s e r i o u s l y threatened by reduc t ions t o t a l i n g about

$8,000,000 because the recent i n t e r n a l revenue b i l l a l lowed f o r

a $50,000,000 surp lus f o r f i s c a l 1867. Fur thermore, they

argued, the reduc t ion would g ive some r e l i e f to the masses of OQ

people from t a x a t i o n on an a r t i c l e of n e c e s s i t y .

27 See above, p. 34.

28 Cong. Globe, 39 Cong., 1 Sess.» pp. 3656-3658.

44

The amendment passed by a m a j o r i t y of one but the d i s -

cussion i n d i c a t e d t h a t the House was r e l u c t a n t to d im in i sh the

revenue. C r i t i c s of p r o t e c t i o n might argue t h a t reduc t i on of

ra tes on non-domest ica l l y produced goods would merely perpetuate

the p r o t e c t i v e charac te r of the post-war t a r i f f by r e q u i r i n g

more revenue from p ro tec ted i tems. But the ques t i on , ra the r

than f r e e - t r a d e or p r o t e c t i o n , was whether to extend s e l e c t i v e

r e l i e f by a token reduc t i on of p r o t e c t i o n or extend general

r e l i e f by s i g n i f i c a n t l y reducing taxes on a few a r t i c l e s of

mass consumption.

The b i l l camc; to a vote 1n the House on Ju ly 10, a f t e r

atjout two weeks of d e l i b e r a t i o n . I t passed w i th n i n e t y - f i v e

votes f o r i t and f i f t y - t w o aga ins t i t , t h i r t y - f i v e Represen-

29

t a t i v e s not v o t i n g . The b a l l o t i n g crossed both geographical

and par ty l i n e s but a lso tended to f o l l o w those l i n e s . The

b i l l rece ived the suppor t of 69 per cent of the Representat ives

from the nor theas te rn s ta tes but on ly 34 per cent of the Repre-

sen ta t i ves from the nor th c e n t r a l s t a t e s , i n c l u d i n g Kentucky.

Only 9 per cent of those from the Northeast opposed the b i l l

compared w i t h 48 per cent from the nor th c e n t r a l s t a t e s .

The Republican par ty gave the b i l l much more support

than the Democratic p a r t y . Among the Republ icans, 62 per

cent voted f o r the b i l l and only 19 per cent aga ins t i t .

For the Democrats, 68 per cent voted aga ins t the b i l l and 14

2 9 I b i d . , p. 3725.

45

per cent f o r i t . I t i s notab le t h a t the on ly Democrats who

voted i n favor of the b i l l were Representat ives from s t r o n g l y

p r o t e c t i o n i s t Pennsylvania.

The Senate reacted to the b i l l more c o n s e r v a t i v e l y than

the House. Fearing t h a t the proposed b i l l would reduce the

revenue and t h a t the Senate would not have t ime in the remainder

o f the session to g ive adequate cons ide ra t i on to the measure,

the upper house voted on Ju l y 12 to r e f e r the b i l l to the

30

Committee on Finance to be repor ted in the next sess ion .

The f i r s t session of the T h i r t y - n i n t h Congress adjourned

w i t h o u t r e v i s i n g the t a r i f f system. Whatever may be sa id about

the lobby ing and pressures on one s ide or the o ther o f the

q u e s t i o n , the t a r i f f b i l l had been n e i t h e r passed nor de feated.

C r i t i c s of a h igh p r o t e c t i v e t a r i f f could po in t to what they

thouqht WAS p r o t e c t i o n i s t con t r o l of Congress hut the fac t

remained t h a t , w i t h two excep t ions , the issue ra i sed by the

b i l l was not r a i s i n g or lower ing the t a r i f f , but whether or

not to r a i se i t . The except ions were raw m a t e r i a l s and co f f ee

and tea . Downward r e v i s i o n was successfu l i n the case of

co f fee and tea but the House f a i l e d to support r educ t i on o f

du t ies on raw m a t e r i a l s . Reduction on raw ma te r i a l s was

supported more i n the form of comp la in t s , however, than i n

a concerted e f f o r t to e f f e c t the change.

3 0 1 b i d . , p. 3758.

CHAPTER I I I

THE REVENUE LEGISLATION OF THE THIRTY-NINTH

CONGRESS, SECOND SESSION

The per iod between the f i r s t and second sessions of the-

T h i r t y - n i n t h Congress gave the na t ion t ime to pause and r e f l e c t

on the t a r i f f b i l l before the Senate and on t a r i f f quest ions

i n genera l . The South, which might or might not have supported

a t a r i f f r e d u c t i o n , would almost c e r t a i n l y have g iven s t rong

oppos i t i on to a general i nc rease . Except f o r Tennessee, however,

which was readmi t ted i n the l a s t few days of the sess ion , the

South could do noth ing more than s i t i d l y by and wa i t to see

what the res t of the country would do. The sec t i ona l d i f f e r e n c e s I

t h a t separated the Northeast from the n o r t h - c e n t r a l s ta tes

were more than i n d u s t r i a l i n t e r e s t s vs^. a g r i c u l t u r a l i n t e r e s t s .

The p rov i s ions of the t a r i f f b i l l r e l a t i n g to du t ies on wool

and woolens, a f t e r a l l , favored both a g r i c u l t u r a l and i n d u s t r i a l

i n t e r e s t s and i n f avo r i ng the wool grower , the b e n e f i t s of the

p rov i s ions would cross s e c t i o n a l boundar ies. Freet raders could

agrue t h a t the p rov i s i ons on wool were inc luded i n the b i l l to

gain a g r i c u l t u r a l suppor t f o r what was e s s e n t i a l l y a Nor theastern

manufac turers ' t a r i f f , but the f a c t remained t h a t n e i t h e r b ig

46

47

business nor i ndus t r y was un i ted on t a r i f f ques t i ons . Nor th-

eastern businessmen, i n f a c t , were s e r i o u s l y d i v i ded over the

t a r i f f . ^ A contemporary observer repor ted t ha t among New

England t e x t i l e m i l l owners a m a j o r i t y opposed the b i l l before 2

Congress. Much of the low t a r i f f sent iment among New England

i n d u s t r i a l i s t s , however, was due to t h e i r des i re f o r low import

du t ies on raw m a t e r i a l s . Manufacturers i n the reg ion had more

d i r e c t access to f o r e i g n sources o f raw ma te r i a l s than they d id

to domestic sources. This was p a r t i c u l a r l y t r ue of cheap c o a l .

While the t y p i c a l f r e e t r a d e r feared t ha t high p r o t e c t i o n would

reduce c o m p e t i t i o n , some New England producers were concerned

t h a t h igher p r o t e c t i o n would increase compe t i t i on by a t t r a c t i n g

new and poss ib le c u t t h r o a t compet i t i on i n t o the f i e l d .

New York, s i t u a t e d between pockets o f low t a r i f f sent iment

i n New England and high p ro tec t i on i sm i n Pennsy lvan ia , was a lso

d i v i ded over the t a r i f f , both between and w i t h i n i n d u s t r i e s .

Low t a r i f f support was p a r t i c u l a r l y s t rong i n New York C i t y ,

1n par t because of the la rge Impor t ing and commercial I n t e r e s t s

t h e r e . Impor te rs , merchants, sh ippers and the f i n a n c i e r s who

Stanley Coben, "Nor theastern Business and Radical Recons t ruc t ion : A Re-examinat ion, " M i s s i s s i p p i Va l ley H i s t o r i c a l Review, XLVI (June, 1959), p. 68.

2 Herber t Ronald F e r l e g e r , Davi d A. Mel 1s and the Ameri can

Revenue System, 1865-1870 (New York, 1 942) , p. 147. 3

Coben, "Nor theas tern Business and Radical Recons t ruc t i on , " pp. 69-71 .

48

4

Invested 1n these en te rp r i ses opposed h igher t a r i f f s . The

New York State Chamber of Commerce went on record as opposing

f u r t h e r increases of the t a r i f f and lodged i t s o b j e c t i o n w i t h

Congress. ®

The powerful economic i n t e r e s t s of the r a i l r o a d were i n

disagreement over the t a r i f f . While some f a c t i o n s feared a

high t a r i f f would increase the costs o f i r o n and s t e e l , o thers

sought p r o t e c t i o n f o r the new Bessemer s t e e l works, hoping

t h a t the costs of the supe r io r s tee l would go down i f the

B r i t i s h monopoly could be broken by compe t i t i ve American s tee l

m i l l s . ®

C l e a r l y , Nor theastern business i n t e r e s t s were not un i t ed

behind the t a r i f f b i l l before Congress nor behind high p r o t e c t i o n

Labor in the sec t i on was also s e r i o u s l y d i v i ded over the ques t ion

of p r o t e c t i o n . ^ The issues ra ised by the t a r i f f b i l l were much

more complex than s imply a quest ion of Nor theastern ascendancy

or dominance of i n d u s t r i a l i n t e r e s t s .

Opinion in the predominant ly a g r i c u l t u r a l West was f a r

from unanimous aga ins t the t a r i f f . A study of the newspapers

4 1 b i d . , pp v 76-77. 5

House Miscel laneous Documents, 39th Congress, 1st Sess ion, No. 125 (Washington, 1866), pp. 1 -2 .

®Coben, "Nor theas tern Business and Radical R e c o n s t r u c t i o n , " p. 76; Congressional Globe, 39th Congress, 1st Session, p. 3-516; i b i d . , 39th Cong. , 2d Sess . , p. 637.

^Robert P. Sharkey, Money, C lass , and P a r t y : An Economic | t u i ^ of. C i v i l War and RecFn"strucFfon (BTTtTmore, 19T9T7TpT~"

49

in the s ta tes of the Old Northwest revea led , in f a c t , t ha t

a l though there were several newspapers t h a t opposed the t a r i f f

b i l l , no tab ly the Republican Chicago T r i bune , most newspapers

were e i t h e r neu t ra l on the quest ion or supported the proposed 8

increase of p r o t e c t i o n . More than simply a mat ter o f narrow

s e l f - i n t e r e s t , many people considered the t a r i f f and p r o t e c t i o n

a quest ion of economic p o l i c y i n v o l v i n g na t i ona l w e l l - b e i n g .

The e l e c t o r a t e , r a the r than being d i v i ded between f r e e t r a d e r s

and p r o t e c t i o n i s t i n d u s t r i a l i s t s , was predominant ly moderate.

I t was unnecessary i n 1866, f o r a group of high p r o t e c t i o n i s t s

to consp i re to e rec t a p r o t e c t i v e t a r i f f system; the broad

middle ground had a l ready accepted the p r i n c i p l e o f p r o t e c t i o n .

Only the ex ten t of p r o t e c t i o n was in quest ion and t h a t l a r g e l y

invo lved d i f f e r e n c e s of degree, not p r i n c i p l e .

The charac te r of the high t a r i f f support was of course

i n f l uenced by concern f o r the downward t rend i n the economy

t h a t began in A p r i l , 1865, and would not reach bottom u n t i l

December, 1867. A t a r i f f increase was considered an a t t r a c t i v e

remedy f o r the economic recess ion by many moderates and doubt less

brought a t l e a s t a temporary s h i f t o f s t r eng th to p r o t e c t i o n i s m .

The f a t e of the t a r i f f , t h e r e f o r e , d id not r e s t s o l e l y on

pressure from only a few "cap ta ins of i n d u s t r y " or from a

8 Clarence Lee M i l l e r , The States of the Old Northwest and

the T a r i f f , 1865-1888 (Emporia, Kansas, 1 929) , p. 30. g

Rendigs Pe ls , American Business Cyc les , 1865-1897 (Chapel H i l l , 1959), pp. 92-94.

50

narrow i n d u s t r i a l c l i q u e . P r o t e c t i o n i s m , a t t h a t p o i n t i n

t i m e , r e f l e c t e d the sympathies and persuasions of a l a rge

number, perhaps a m a j o r i t y , of the people, on ly some of whom

could be sa id to have d i r e c t l y had vested i n t e r e s t s 1n a pro-

t e c t i v e system. Nor were these people the dupes o f vested

i n t e r e s t s any more than the a g r i c u l t u r a l f r e e t r a d e r s were the

dupes of New York or London merchants. Support f o r a t a r i f f

increase would r i s e or f a l l accord ing to such changes as p r i c e

t rends and economic expansion or c o n t r a c t i o n , but dur ing

approx imate ly the f i r s t two years a f t e r the war , suppor t f o r an

increase was s t r ong .

The t a r i f f b i l l was never the less c o n t r o v e r s i a l , a n d f o r t h i s

reason i t was avoided as a na t i ona l issue in the e l e c t i o n s i n

the f a l l o f 1866. Pres ident Johnson was desperate f o r con-

s e r v a t i v e Republican support on r e c o n s t r u c t i o n i ssues , but

because some of the conserva t i ve Republicans supported a t a r i f f

i nc rease , he dared not a l i e n a t e t h a t suppor t by opposing the

t a r i f f . He t h e r e f o r e avoided the issue when campaigning i n

beha l f of conserva t i ve c a n d i d a t e s . ^ Congressional candidates

se lec ted t h e i r p la t fo rms accord ing to p o l i t i c a l advantage,

avo id ing the t a r i f f i n some l o c a l i t i e s and using i t one way

11 or another i n o ther reg ions .

^Kenne th M i l t o n Stampp, The Era of Recons t ruc t i on , 1865-1877 (New York, 1965), p. 105.

11 Howard K. Bea le , "The T a r i f f and Recons t ruc t i on , "

American H i s t o r i c a l Review, XXXV (January , 1930) , p. 294.

51

When the second session of the Thirty-ninth Congress met

in December, 1866, the principal task as far as the revenue

was concerned was to legislate for the coming fiscal year,

beginning July 1, 1867; any new legislation could affect

little more than the last quarter of the previous fiscal year.

The President's recommendations were very general, possibly

to avoid complicating his problems on reconstruction policy.

He urged nothing more than economy in government and reduction

12

of taxes with an allowance for reduction of the debt.

The Report of the Secretary of the Treasury also urged

economy in government and reduction of both internal and

external taxes . . in order that production may be increased

and new life infused into certain branches of industry that

are now languishing under the burdens which have been imposed 1 3

upon them." Secretary McCulloch was particularly concerned

about the rebuilding of the merchant marine and about con-

struction in general. Among the remedies that he urged for the

nation's economic ills was . . . a careful revision of the tariff, for the purposes of harmonizing it with our internal taxes--removing the oppressive burdens now imposed upon certain branches of industry,, and relieving altogether, or greatly relieving, raw materials from taxes. . . .14

1 2 James D. Richardson, ed. , A Compi1ati on of the Messages

and Papers "of the Presidents, 1789-1902, 10 vols. (Washington, 1904), VI, 450-451.

13 ' House hxecutive Documents, 39th Congress, 2d Session,

No. 4 (Washington, 1867} , pp. 7-8. 1 4Ibid. , pp. 13-14.

52

McCulloch recognized the c o n t r o v e r s i a l nature of the

t a r i f f ques t ion and the problems of reaching an acceptable

s o l u t i o n . He a lso recognized t h a t because of changes in

circumstances the t a r i f f quest ion bore l i t t l e resemblance to

the problems of t a x a t i o n p r i o r to the war. The q u e s t i o n , as

McCulloch saw i t , was "How sha l l the necessary revenue be

ra ised under a system of i n t e r n a l and ex te rna l taxes w i t hou t

s u s t a i n i n g monopol ies, w i t hou t repress ing i n d u s t r y , w i t hou t

1 5

d iscourag ing e n t e r p r i s e , w i t h o u t oppressing labor? " He

suggested t h a t tax reduc t ions should f o l l o w the general

p r i n c i p l e s of m in im iz ing the number of i n t e r n a l t axes ,

harmonizing i n t e r n a l and ex te rna l t axes , reducing or exempting

raw ma te r i a l s from import d u t i e s , and p lac ing the burden o f

taxes on those whose i n t e r e s t s were most p ro tec ted by t axa t i on . ^®

He r e f e r r e d Congress to the repo r t of David We l l s , Special

Commissioner of the Revenue, f o r more s p e c i f i c recommendations.

The post of Special Commissioner of the Revenue was

created by the I n t e r n a l Revenue Act of the prev ious Ju l y 13.

The o f f i c e replaced the three-man commission t h a t Wells had

served on. Secretary McCulloch appointed Wells to f i l l the new p o s i t i o n on Ju ly 16. The appointment was f o r f ou r y e a r s ,

17 t e r m i n a t i n g June 30, 1870. In the i n t e r i m per iod between

1 5 1 b i d . , p. 19.

1 6 I b i d . , p. 22.

^ I b i d . , p. 18; U. S. S ta tu tes a t Large, XIV, 170 (1866-1867).

53

the first and second sessions of the Thirty-ninth Congress,

McCulloch instructed Wells to prepare a tariff bill that would

replace all others that had been passed. The instructions

included the guidelines that McCulloch later suggested to 1 8

Congress in the report noted above. The general tariff

bill passed by the House was clearly unsatisfactory to McCulloch

and, presumably, also to Wells. The object was to prepare a

substitute for the bill then in the Senate Committee of Finance.

Accordingly, when Wells finished his report, he presented it

to the Senate rather than to the House.

The report of the Special Commissioner of the Revenue

was directed at revision of both the internal and external

revenue systems. Remarks relating to the first were of interest

to the House and its Committee on Ways and Means, later to

report another internal revenue bill, and remarks relating

to the second were of interest to the Senate and its Committee

of Finance. Wells allowed that Congress could reduce the

revenue $55,000,000 for fiscal 1868. He urged that internal

taxes be reduced $35,000,000 by general reduction on manu-

factures. He suggested that the remaining cut in revenue come

from reductions of duties on raw materials and exemption of 1 9

important imports not produced in the United States. He

argued against the general increase in the House version of

| O House Ex. Docs., 39 Cong., 2 Sess., No. 4, pp. 18-19.

'19 Senate Executive Documents, 39th Congress, 2d Session,

No. 2 (Washington, 1867), pp. 31, 33-34.

54

the t a r i f f b i l l , c l a im ing tha t wh i l e c ircumstances might j u s t i f y

some moderate i nc reases , the ex ten t of increase proposed by

the House would only f u r t h e r aggrevate the n a t i o n ' s i l l s by

20

boost ing p r i ces even h ighe r . Wells inc luded h is own ve rs ion

of a t a r i f f b i l l w i t h the r e p o r t .

Senator W i l l i am P i t t Fessenden, a moderate p r o t e c t i o n i s t

from Maine, repor ted the b i l l from the Committee o f Finance.

The committee had adopted a s l i g h t l y mod i f ied ve rs ion of We l l s ' s

b i l l as an amendment to the House b i l l . From the s tandpo in t of

the f r e e t r a d e r and the t a r i f f r e fo rmer , the Wells b i l l , being

more moderate, was p r e f e r a b l e to the House b i l l . Proposing

some reduc t ions on raw m a t e r i a l s , t a r i f f reformers might say

t h a t the b i l l was an improvement over the war t a r i f f s . But be

t h a t as i t may, i t was f a r s imp ler f o r one man to devise what

he and a few sympathizers thought was an en l igh tened p o l i c y

than f o r a m a j o r i t y i n Congress to accept any s i n g l e proposal

w i t hou t mod i fy ing i t to accommodate d i ve rgen t po in ts of v iew.

The Senate accepted the commit tee 's recommendations but then

proceeded to modify the Wells b i l l upward.

The upper house was exceedingly r e l u c t a n t to s a c r i f i c e any

revenue from customs, no tw i ths tand ing We l l s ' s recommendations.

Oppos i t ion to the proposed i nc reases , as in the House, d ispu ted

the c la im t h a t the h igher ra tes would not decrease the customs

r e c e i p t s . The opponents a lso denied t h a t c ircumstances

2 0 I b i d . , pp. 36-37, 41-42.

55

j u s t i f i e d the proposed increases and urged that the b i l l be

postponed un t i l the internal revenue system could be reviewed

by action on the revenue b i l l then in the Committee on Ways

and Means. The Senate would then be in a bet ter posit ion to

adjust the t a r i f f in harmony with internal taxes.

Senator Grimes of Iowa was an opponent of the proposed

increases because he was a f ra id that they would reduce the 21

revenue $50,000,000. Grimes represented an agr icu l tura l

constituency but was not averse to increasing the t a r i f f i f

i t would raise more revenue. I f th is b i l l when passed into a law would indeed "provide increased revenue from imports" no man could support i t more cheerful ly than I would. That is precisely what my constituents desi re , and which they believe the interests of the country demand. They would be glad to see that kind of l eg is la t ion adopted which would secure such an "increased revenue from imports" as would be s u f f i c i e n t to pay the annual governmental expenses and the in terest on the public debt without resort to internal taxes. True r e l i e f is only to be found in the abol i t ion of the manufac-turers ' t a x . 2 2

Grimes's posit ion re f lec ts the unpopularity of the internal

tax system and the basic assumption of f reetraders and

protect ionists a l i k e , that the customs revenue was the core

of the en t i re revenue system. I t was impossible for any

revenue system based on this assumption to reduce t a r i f f

21

Cong. Globe, 39 Cong., 2 Sess., p. 699. 2 2 I b i d . , p. 696.

56

du t ies to anyth ing resembl ing the pre-war schedule. John

Sherman of Ohio recognized t h i s in the Senate debates.

These phrases [ " p r o t e c t i v e t a r i f f , " "revenue t a r i f f , " and " f r e e t rade t a r i f f , " ] , i f not always decep t i ve , are t o t a l l y i n a p p l i c a b l e to any t a r i f f law t h a t any one would propose f o r the Uni ted States now.

For us now, t h e r e f o r e , to t a l k about a f r e e - t r a d e t a r i f f is s imply an a b s u r d i t y ; and f o r us to t a l k about a p r o t e c t i v e t a r i f f i s unnecessary because the w i t of man could not poss ib l y frame a t a r i f f t h a t would produce $140,000,000 in gold w i t hou t amply p r o t e c t i n g our domestic i n d u s t r y . . . . I t i s very c l e a r t h a t upon an o rd ina ry y e a r ' s i m p o r t a t i o n the ra te of duty t h a t w i l l have to be l e v i e d upon impor ta t i ons i n order to produce $140,000,000 w i l l not be much less than f i f t y per cen t . a_d va lorem, even i f we could prevent a l l underva lua t ion or s m u g g l i n g . 2 3

Sherman disagreed w i t h Grimes, however, b e l i e v i n g t h a t

an increase would r a i s e more revenue. For t h i s , Sherman

rece ived the wrath o f the Chicago T r i bune , which had a

Republ ican and f r e e t rade e d i t o r i a l p o l i c y . Grimes, on the

24

o ther hand, rece ived high p ra ise from the paper.

When the b i l l came to a vote on January 31, i t prov ided

f o r a general increase but on ly about h a l f the increase t h a t 25

the House b i l l con ta ined . I t resembled on ly remotely the

b i l l Wells had prepared. The Senate passed the b i l l , twenty -

seven to t e n , w i t h f i f t e e n not v o t i n g . The d i s t r i b u t i o n of

2 3 I b i d . , appendix , p. 70.

24

86

25

^Chicago T r i bune , January 21, 1867, p. 2 ; i b i d . , January 28, 1867, p.2."

Cong. Globe, 39 Cong., 2 Sess . , p. 1957.

57

votes was s i m i l a r to t h a t i n the House v o t e ; votes from the

n o r t h - c e n t r a l s ta tes d i v i ded evenly but o f those v o t i n g , those

from the Northeast gave the b i l l t h e i r unanimous suppor t .

The b i l l went back to the House but before t h a t body took

i t up, aga in , M o r r i l l presented the House w i t h the i n t e r n a l

revenue b i l l t h a t h is committee had been working on. M o r r i l l

i n t roduced the b i l l on February 13, w i t h l i t t l e t ime remaining

in the sess ion.

In view of the Congressional re luc tance to reduce revenue

from customs, i t made l i t t l e d i f f e r e n c e t h a t the es t imate by

the Committee on Ways and Means of r e c e i p t s and expendi tures

f o r f i s c a l 1868, showed an excess of r e c e i p t s o f on ly $34,000,000

That was $1 ,000,000 less than WellsJs recommended reduc t i on o f

i n t e r n a l revenue and l e f t no th ing remaining f o r payment on the

debt . The committee f e l t , however, t h a t a d d i t i o n a l revenue

could be expected by more e f f i c i e n t a d m i n i s t r a t i o n and c o l l e c t i o n

and w i t h the e l i m i n a t i o n o f tax loopholes by passage of i t s b i l l .

The committee a l lowed tha t taxes could be reduced near l y

$37,000,000,w i th a small surp lus remaining f o r payment on the

d e b t . 2 7

M o r r i l l recommended s e l e c t i v e reduc t ions r a t he r than a

general c u t . The most impor tan t reduc t i on he proposed t o t a l e d

an est imated $19,500,000. That m o d i f i c a t i o n . involved r a i s i n g

2 6 I b i d . , p. 931.

2 7 I b i d . , p. 1218.

58

t h e income t ax exempt ion from $600 t o $1 ,000 and making t h e

2 8

t a x u n i f o r m a t 5 pe r c e n t i n s t e a d of p r o g r e s s i v e . This

Wrtt 1.1m <» flint* mod i f* I en U on l.hrtt, IJio llounn hn<l ( in se r t tlif*

p r e v i o u s summer but t h a t t h e S e n a t e had t u r n e d down. The

House a c c e p t e d t h e c o m m i t t e e ' s recommendat ion on t h e income

t ax a f t e r h e a r i n g James A. G a r f i e l d of Ohio m a i n t a i n t h a t t h e

d i s c r i m i n a t i o n in t h e t ax would e v e n t u a l l y be found u n c o n s t i -

t u t i o n a l . 2 9

On F e b r u a r y 25, t h e House a g a i n p a s s e d an i n t e r n a l r e v e n u e

b i l l t h a t p r e c l u d e d any m e a n i n g f u l r e d u c t i o n of t h e t a r i f f

30

even i f Congress had been d i s p o s e d to a t t e m p t i t . More

s i g n i f i c a n t l y , t h e b i l l p a s s e d w i t h o u t p r o t e s t t h a t a l l t a x

r e d u c t i o n s were t a k e n from t h e i n t e r n a l r e v e n u e .

Immed ia t e ly a f t e r p a s s i n g t h e i n t e r n a l r e v e n u e b i l l ,

t h e House began work on t h e S e n a t e ' s v e r s i o n of t h e t a r i f f

b i l l . Only a week remained in t h e s e s s i o n and M o r r i l l f e a r e d

t h a t t h e two houses might no t have t ime t o r each ag reemen t on

t h e b i l l i f t h e House of R e p r e s e n t a t i v e s s p e n t too much t ime

d e b a t i n g i t . Hie t h e r e f o r e moved t h a t t h e House r e f u s e t o

concu r in t h e S e n a t e amendment and r e f e r t h e b i l l t o a c o n -

f e r e n c e commi t t ee t o work ou t a compromise . The mot ion was

2 8 I b i d . , pp . 1216-1218 .

2 9 1 b i d . , p . 1482.

3 0 1 b i d . , p . 1550.

59

d e f e a t e d by a vote of e i g h t y - f i v e to e i g h t y - s i x and t h e House

31

proceeded to deba te the b i l l .

The House deba te s on the amended b i l l were l a r g e l y j u s t

a c o n t i n u a t i o n of the d e b a t e s of the p r ev ious summer. The

m a j o r i t y r e p e a t e d i t s i n s i s t e n c e t h a t t h e n a t i o n needed h i g h e r

p r o t e c t i o n and the m i n o r i t y r e p e a t e d i t s o p p o s i t i o n . In t he

cou r se of t he d e b a t e , Lewis Ross , t he f r e e t r a d e r from I l l i n o i s ,

§ t a t e d what might be r ega rded as the low t a r i f f p o s i t i o n on

import d u t i e s . He conceded t h e need f o r p r o t e c t i o n f o r both

a g r i c u l t u r e and m a n u f a c t u r i n g , but ma in t a ined t h a t t he e x i s t i n g

r a t e was much h ighe r than n e c e s s a r y . I t i s t r u e , I have been educa ted in t he school of f r e e t r a d e ; but we must a l l r e c o g n i z e the c o n d i t i o n of t h e coun t ry a t the p r e s e n t t i m e . I b e l i e v e t h a t wi th our d e p r e c i a t e d cu r r ency we need a t a r i f f of from t h i r t y to f o r t y per c e n t . . . .32

Ross was obv ious ly in a small m i n o r i t y but in view of the

s e v e r e c r i t i c i s m t h a t the pos t -wa r t a r i f f system l a t e r r e c e i v e d ,

h i s p o s i t i o n i s of p a r t i c u l a r i n t e r e s t .

The deba t e on the t a r i f f b i l l con t inued u n t i l February 28,

when M o r r i l l , s e e ing t h a t the House could not complete i t s

d e l i b e r a t i o n s in t ime to reach a compromise with t h e S e n a t e ,

t r i e d aga in to ge t the b i l l ou t of the Committee of t h e Whole.

Such a p rocedure r e q u i r e d suspending the r u l e s by a t w o - t h i r d s

v o t e . In the even t t h a t M o r r i l l ' s motio.n p a s s e d , t he b i l l

3 1 I b j _ d . , pp. 1541-1543.

3 2 I b i d . , p. 1610.

60

could be sent to a conference committee by a simple majority

vote. The bill had the support of the majority but Morrill

could not get the necessary two-thirds to get it to the floor

of the House. The vote was 102 to 69 with 19 not voting.

The balloting varied little from the House vote on the bill

in the first session. The additional numbers came primarily

from those who had not voted on July 10. Most of the addi-

tional opposition, however, came from representatives of the

Northeast.^

For all practical purposes, the bill was dead,but Morrill

did not give up. He attempted to offer a resolution to raise

the rates on all items except coffee, tea, salt, sugar and

coal by a uniform 20 per cent. It was necessary to suspend

the rules in order to offer the resolution and the procedure

again required a two-thirds vote. The motion to suspend the 34

rules again received a majority but failed to pass. In both

cases, a tariff increase was blocked by a minority.

The next day, March 1, after the Senate passed the

internal revenue bill, John Sherman brought out a wool and

woolens bill for Senate action. The bill was originally passed

by the House in the last days of the first session when it

became apparent that the Senate would not then act on the general

tariff bill. The bill contained the same provisions regarding

3 31bid., p. 1659. 3 41 b i d.

61

wool and wollens that the general bill contained. The Senate,

however, again voted to defer discussion of the tariff until 3 5

the second session. The death of the House attempts to

raise the tariff prompted Sherman to revive the wool and woolens

bill in the hope that some relief could be given to the industry.

At first Sherman intended to modify the bill to conform to the

changes the Senate had made in the general tariff bill. Later,

fearing that there would not be time for the House and Senate

to reach a compromise on an amended bill, he opposed efforts

to change it. Alexander Cattell of New Jersey proposed one of

those attempts to amend the bill. Cattell's amendment was in-

tended to accomplish almost identically the same object as

Morrill's resolution would have done. The amendment to increase

tariff rates 2:0 per cent was defeated in the Senate, seventeen

to twenty-eight. The Senate then passed the bill without amend-

ments, thirty-one ayes and twelve nays. The bill received strong O C

support from all sections except the border states.

All that remained for the bill to become law was the

signature of the President. Johnson signed the bill just

before midnight of March 2, the day the Senate passed it,

in the presence of his cabinet which was advising him on last '17

minute bills.' Although the act has been considered " . . . a

Ibid. , 39 Cong., 1 Sess., pp. 4253, 4290.

3 6 1 bid., 39 Cong., 2 Sess., p. 1958. 37

Edward Stanwood, American Tariff Controversies in the Nineteenth Century, 2 vols. (New York, 1 903), II, 157-1 58.

62

great t r iumph f o r the p r o t e c t i v e p r i n c i p l e , " the " v i s t o r y " was

of l i t t l e value or conso la t i on to the hundreds of o ther i n t e r e s t s

38

which gained noth ing from i t . Another view of the passage

o f the wool and woolens act might even cons ider i t a de feat

f o r the p r o t e c t i v e p r i n c i p l e . In the course of Senate debate

over the b i l l , Reverdy Johnson of Mary land, noted t h a t the

West was then opposed to a p r o t e c t i v e system but wanted

p r o t e c t i o n f o r wool growers. Fearing t h a t the West would not

support a general t a r i f f increase unless i t inc luded p rov i s i ons

f o r wool growers, Johnson caut ioned t h a t " i f t h i s b i l l , t h e r e f o r e ,

passes in the shape in which i t came from the House i n a l l human

p r o b a b i l i t y no t a r i f f can h e r e a f t e r be passed which w i l l p r o t e c t 39

any o ther i n t e r e s t . " Subsequent developments proved t h a t

Johnson was e s s e n t i a l l y c o r r e c t .

Much of the h i s t o r i c a l i n t e r p r e t a t i o n of the outcome of

the s t r u g g l e over t a r i f f b i l l s i n the T h i r t y - n i n t h Congress

res ted on the e f f e c t of the Senate vers ion o f the general

t a r i f f b i l l . There has been an assumption t h a t the f i n a l

ve rs ion of the Senate b i l l was e s s e n t i a l l y the same as the 40

Wells ve rs ion of the b i l l . Those who held t h i s view were

3 8 1 b i d . , p. 158.

~^Cong. G1obe, 39 Cong., 2 Sess . , p. 1927.

^ F o u r d i f f e r e n t views o f the e f f e c t o f these b i l l s are g iven in Fred Bunyan Joyner , David Ames Wei 1s , Champion o f Free Trade (Cedar Rapids, 1939), pp. 52-54; Ida M. Tarbe l1 , The T a r i f f i n Our Times (New York, 1911), pp. 38-39; F. W. Tauss ig , The T a r i f f H i s t o r y of the Uni ted States , 8 th ed. (New York , 1931) , pp. 1 76-1 78; Beale."^The T a r i f f and R e c o n s t r u c t i o n , " pp. 289-290.

63

p r i m a r i l y i n t e r e s t e d in what they regarded as t a r i f f re form

measures inc luded i n We l l s ' s b i l l , such as reduced ra tes on

raw m a t e r i a l s . From the s tandpo in t of the f r ee t rade bias

of those h i s t o r i a n s , the passage o f any b i l l t h a t inc luded

such p r o v i s i o n s , would have been a step in the d i r e c t i o n o f

a " b e t t e r " t a r i f f p o l i c y , and should have been sought by the

c r i t i c s of high p r o t e c t i o n . From t h i s s t a n d p o i n t , the defeat

o f the b i l l meant t h a t " . . . the cause o f t a r i f f re form

rece ived a great se tback , " and was a v i c t o r y f o r h igh pro-

41 t e c t i o n . I f the b i l l had been passed, t h i s p o s i t i o n h o l d s ,

the growing h a b i t of l ook ing on the war ra tes as a permanent system might have been checked, and the at tempts a t t a r i f f reform i n subsequent years would probably have found s t ronger support and met w i t h less successfu l o p p o s i t i o n . . . . The f a i l u r e of the at tempt of 1867 encouraged the p r o t e c t i o n i s t s in f i g h t i n g f o r the r e t e n t i o n of the war du t ies where-ever they could not secure an increase over and above them. . . .42

This p o s i t i o n i s obv ious ly con t ingen t upon the supposed

reforms o f We l l s ' s b i l l s t i l l being i n the f i n a l Senate b i l l

and upon t h e i r not being overbalanced by undes i rab le fea tu res

of the b i l l . Such an assumption is tenuous at bes t . A c lose

comparison of the two forms of the t a r i f f b i l l would be an

extremely arduous task because of the many items inc luded and

the vary ing amounts o f each impor ted. Never the less , the

debates i n d i c a t e t h a t on the whole the f i n a l form of the

41 Sidney Ratner , American Taxa t i on : I t s H i s t o r y as a Soc ia l

Force i n Democracy (New York , 1^42) , p. "1177"

Tauss ig , T a r i f f H i s t o r y , pp. 177-178.

64

Senate bill proposed a general increase of rates and the so-

called reform measures in the Wells bill were severly modified,

When Cattell of New Jersey proposed to amend the wool and

woolens bill to increase general rates by 20 per cent, he in-

dicated that in his opinion the Senate's general tariff bill

had provided for an increase of about 15 per cent based on 43

the value of dutiable imports. This increase would have

raised the general level of the tariff from about 47 per cent

to about 62 per cent. Considering the necessity of moderate

support for acceptance of his proposed amendment, it is

extremely doubtful that Cattell would overestimate the effect

of the bill. With the general tariff level already more than

double the 1860 level, an additional increase of 15 per cent

was unacceptable to low tariff advocates.

Tariff moderates might have supported the final form

of the Senate bill for the reforms rather than opposed it

for the increase, but Wells's proposed reforms did not remain

untouched either. One of the most important raw materials

which Wells wanted admitted cheaply was soft coal from Nova

Scotia. His bill proposed a duty of fifty cents a ton on

this coal, but the Senate voted not to discriminate in its •

favor and instead put a uniform duty of $1.50 on the i t e m . ^

4 3

Cong. Globe, 39 Cong., 2 Sess., p. 1957.

4 4Ibid., p. 736.

65

With changes in the b i l l such as t h i s , there was l i t t l e f o r

the moderate oppos i t i on to suppor t .

The f i n a l t e s t of the a c c e p t a b i l i t y of the Senate b i l l

to t a r i f f moderates was t h e i r vo tes . I f the b i l l had been

dos l rab lo from a reform s t a n d p o i n t , tho ag ra r i an modoratos

would probably have supported i t . The i r votes r e v e a l , however,

as i n d i c a t e d above, t h a t they d id n o t ; n e i t h e r d id House

opponents of the b i l l who blocked i t from going to a conference

commi t t e e .

Fur ther i n d i c a t i o n t h a t the b i l l was unacceptable to low

t a r i f f advocates was found ou ts ide of Congress. The f r e e - t r a d e

Chicago Tr ibune s t r o n g l y endorsed We l l s ' s proposals but 4 5

vehemently opposed the Senate b i l l . The Nat ion was more

moderate than the Chicago Tr ibune^but i t a lso opposed the b i l l

i n i t s f i n a l f o r m . 4 6

Notw i ths tand ing the c la ims of l a t e r h i s t o r i a n s , the defeat

o f the general t a r i f f b i l l of the T h i r t y - n i n t h Congress was a

defeat f o r high p r o t e c t i o n . The moderate, m i n o r i t y oppos i t i on

owed i t s success to the c l o c k , which ran o u t . I f the reduc t i on

of du t ies on raw ma te r i a l s c o n s t i t u t e d t a r i f f r e fo rm, then the

m i n o r i t y , which inc luded many i n d u s t r i a l i s t s , stood l i t t l e

chance of re forming the t a r i f f . The i r p o s i t i o n was d e f e n s i v e ,

however, and i t was the b i l l ' s suppo r t e r s , r a t he r than i t s

45 Chicago T r i bune , January 4 , 1867, p. 2 ; i b i d . , January

23, 1867, p .2 . 4 6The Na t ion , IV (January 31 , .1867),.,81 .

66

opponents who lost by its defeat. The fate of the bill in no

way explains why tho level of war duties was not soon reduced*,

on the contrary, it explains why they were not significantly

1ncreased.

It is idle to speculate on the fate of the bill if it

had passed both houses. There is little question that President

Johnson opposed the measure, but there is no certainty that he

would have vetoed it.

The importance of the debates over the bill lies in the

fact that there was general recognition among both the bill's

opponents and its supporters that the need for revenue was

too great to reduce customs receipts at that time. The Congress

placed a priority on reduction of internal taxes and confined

its reductions to those. The largest single reduction of

internal taxes was from the changes in the income tax which

the Senate opposed in the first session of the Congress but

finally accepted in what became the Internal Revenue Act of

March 2, 1867. This particular reduction, as well as the others

of the internal tax system, was made from a choice of values

and policy concepts that looked toward a return to pre-war

taxation policy. If there was a significant number of free-

traders who opposed the rate of reduction of internal taxes

on the ground that it postponed reduction of the tariff, they

did not make themselves known. The staunchly free-trade

Chicago Tribune, in fact, endorsed the reduction and changes

67

of the income tax and was disappointed that taxes on manufac-4 7

turers were not reduced more.

47 Chicago Tribune, February 12, 1867, p. 2; ibid., February

27, 1867. p. 2.

CHAPTER IV

THE CONTINUATION AND EXTENSION OF THE REVENUE

POLICY, 1867-1872

The F o r t i e t h Congress convened immediately a f t e r the

c l o s i n g o f the T h i r t y - n i n t h . I f the Radical Republicans were

c l o s e l y assoc ia ted w i t h high p r o t e c t i o n , then the gains made,

by the Radicals i n the e l e c t i o n s of the preceding f a l l suggests

t h a t the F o r t i e t h Congress would see renewed and perhaps more

successfu l e f f o r t s to r a i se the t a r i f f . The course of even ts ,

however, proved high p r o t e c t i o n i s m less successfu l dur ing the

F o r t i e t h than i t had been dur ing the T h i r t y - n i n t h Congress.

Preoccupat ion w i t h Reconst ruc t ion issues was a convenient excuse

f o r t h i s f a i l u r e , but as i n d i c a t e d above, Radical s t r e n g t h d id i

not mean p r o t e c t i o n i s t s t r e n g t h .

The f a i l u r e to r a i s e the t a r i f f i n the l a s t days o f

February and the f i r s t of March, prompted an at tempt to rev i ve

the issue ea r l y i n the new Congress. James Moorhead, a

Representat ive from Pennsy lvan ia , unsuccess fu l l y t r i e d th ree

times to persuade the House to consider the general t a r i f f

b i l l o f the previous Congress. He f i n a l l y rece ived some s a t i s -

f a c t i o n when he in t roduced a new b i l l t h a t rep laced the o ld

^See p. 2, above.

68

69

one and the House voted to r e f e r i t to the Committee on Ways

2

and Means. The commit tee, which was not appointed u n t i l

November, never repor ted the b i l l .

From the s tandpo in t of the t a r i f f and the revenue system,

the most impor tan t l e g i s l a t i o n of the F o r t i e t h Congress d e a l t

w i t h changing i n t e r n a l taxes . The Committee on Ways and Means

began i n t r o d u c i n g these measures at the f i r s t of the second

session i n December, and to a cons iderab le ex ten t they fo l l owed

the recommendations of the execut ive branch.

Pres ident Johnson, as customary, made very general recom-

mendations in h is annual message to Congress. He urged an

adjustment of the i n t e r n a l and ex te rna l , tax systems and a 3

l a rge reduc t ion of i n t e r n a l taxes . The Secretary of the Treasury a lso urged f u r t h e r reduc t ions

4

o f i n t e r n a l taxes . Secretary McCulloch was p a r t i c u l a r l y

c r i t i c a l o f the t a r i f f . He was not a f r e e t r a d e r but he ob jec ted

to a system which f a i l e d to subord ina te a l l o ther cons ide ra t i ons

to the prime o b j e c t i v e of revenue. For McCul loch, every t a r i f f

i n American h i s t o r y had f a i l e d to conform to h is p u r i s t i c

s tandards . The e x i s t i n g t a r i f f was t h e r e f o r e no except ion i n

2 Congressional Globe, 40th Congress, 1st Session,

pp. 8, 1 2, 38, 57, 58. 3

James D. Richardson, e d . , A Compi1ation o f the Messages and Papers of the P res i den t s , 1 789-1902 , 10 voTsT. (Washington, T W 4 ) , V I , TTS~ ~

4 House Execut ive Documents, 40th Congress, 2d Session.

No. 2 WaTh'lFgl¥nT~Tff68"lT"pT~5(yi.

70

this regard. Although the existing tariff was not strictly

a revenue tariff, McCulloch conceded that

. . . now, when a heavy debt and liberal expenditures create a necessity for large revenue, a considerable portion of which must, for some years to come, be derived from customs, it is difficult to perceive how, without excessive importations, even a strictly revenue tariff can fail to be a high one. 5

MCCulloch did not, at this time, recommend perfecting the system,

He indicated that the necessary modifications could not . .

be intelligently made until business ceases to be subject to C

derangement by an irredeemable currency." For the present,

he held, it would be sufficient for Congress to change as many

as possible of the ad_ valorem duties to specific duties to

avoid the complications of valuation. 7

The report of the Commissioner of the Revenue, which

appeared a month later, elaborated further on the Secretary's

ideas. Commissioner Wells reported that for some years Congress

should expect an expenditure of a comparatively constant figure

of $180,000,000 for interest and repayment of the public debt.

Because most of that figure was payable in gold and because

customs was the government's chief source of gold, the level of

customs revenue would have to be maintained. Wells believed,

however, that if all other considerations were subordinated to

that of revenue, the general level of the tariff could be

51b i d. , p. XVIII. 61bid. , p. XIX. 7Ibi d.

71

lowered without reducing the revenue. But he recommended post-

poning tariff revision until he had an opportunity to give the O

subject closer examination. In view of the charges that a

protective tariff was the Republican policy, it is interesting

to note that both the Secretary of the Treasury and the Commis-

sioner of the Revenue sought to subordinate the tariff to revenue

consideration in a way that the Secretary claimed had never been

done in American history. Such a policy, although it might have

afforded incidental protection, would have given less consider-

ation to protection than pre-war tariffs.

Commissioner Wells's recommendations with respect to the

internal revenue policy had greater importance for taxation

policy in general. Wells wanted to give the economy further

relief from taxation, but cutting taxes would require reducing

expenditures. He therefore urged economizing to the extent of

about $90,000,000, which would allow repeal of almost all taxes

on manufactures. In addition, he recommended repeal of the tax

on raw cotton and reduction of the tax on alcohol to fifty cents

a gallon. Wells believed that reduction would greatly increase

the revenue from that source because there would be less

incentive to cheat the government. He also believed that

tobacco taxes would provide $10,000,000 more revenue if their Q

administration was reformed.

8 House Executive Documents, 40th Conqress, 2d Session,

No. 81 (Washington, 1868), pp. 10, 11, 48, 49. 9Ibid. , pp. 12-14, 33-34, 38, 41 .

72

Congress began working on the Treasury Department's

program even before Wells's report was officially released.

Early in December, 1867, the House Committee on Ways and Means

reported a bill to repeal the tax on cotton. The tax had

provided $23,000,000 revenue in the preceding fiscal year, but

Congressional opinion had reversed since debate in the summer

of 1866. The bill had passed the House by more than a seven to

one margin. After receiving strong support in the Senate, the

bill repealing the cotton tax became law on February 3, 1 8 6 8 . ^

Robert Schenck of Ohio, the chairman of the Committee on

Ways and Means, introduced a bill that would virtually repeal

taxes on manufactures. After very little discussion, the House

passed the bill March 10, with 122 ayes and only 2 nays. The

Senate also gave the bill strong support and passed it three

weeks later.^

A bill incorporating Wells's recommendations to reform

the taxes on alcohol and tobacco passed the House without a

count, but the Senate gave the bill almost a six to one 1 2

majority. The bill became law on July 30.

It is often difficult to assess the effect of revenue

acts, but the effect of these three acts can be measured with

some assurance. As Indicated above, the repeal of the taxes

^ °Conq. Globe, 40 Cong., 2 Sess., pp. 1 3, 36, 358.

1 11bi d . , pp. 1796 , 1992.

1 21b1d. , pp. 3538, 3869.

73

on cotton and manufactures reduced rece ipts about $110 ,000 ,000 .

The changes of the laws regarding taxes on alcohol and tobacco

had the e f f e c t Wells pred ic ted . By the end of f i s c a l 1870,

taxes on alcohol and tobacco had produced more than double

t h e i r receipts for f i s c a l 1868. The net e f f e c t of the three

revenue acts there fore appears to have been a reduction of about

$60 ,000 ,000 . This change a f fec ted the r e l a t i v e proportions of

i n t e r n a l and external tax revenue. The in te rna l revenue acts

of the T h i r t y - n i n t h Congress had already increased the share of

the t o t a l revenue gained from customs from 32 per cent in f i s c a l

1866 to 41 per cent in 1868. The e f f e c t of the i n t e r n a l revenue

acts of 1868 was to increase tha t share to 49 per cent in f i s c a l

1869. Although Congressional l e g i s l a t i o n was gradual ly re -

s tor ing customs to i t s dominant posi t ion in the revenue system,

tho 1869 proport ion was s t i l l f a r from the 95 per cent shore

produced by customs in 1860 and 1861. Comparison of the rece ipts

from i n t e r n a l and external taxes f u r t h e r reveals that even a f t e r

the in te rna l revenue acts of 1868, the increase of taxes over

the 1860 receipts was s t i l l predominantly in te rna l revenue. By

1869, customs had increased only about $127,000,000 whi le in -

te rna l taxes , nonexistent in 1860, were $ 1 5 8 , 0 0 0 , 0 0 0 . 1 3 In

essence then, the ,h igh t a r i f f was less anomalous than the

1 3 Derived from U. S. Bureau of the Census, H i s t o r i c a l

S t a t i s t i e s of the United S t a t e s , Colonial Times to 1957 (Washington , 1560) , pp. 712, 713, h e r e a f t e r c i t e H - a s H i s t o r i c a l S t a t i s t i c s .

74

internal revenue system in a nation which for seventy years had

taken for granted an almost exclusive reliance on customs

revenue.

Representative Moorhead's failure to secure a general

tariff increase early in the Fortieth Congress did not

dissuade him from attempting selective increases. As a member

of the Ways and Means Committee, Moorhead, late in the second

session, reported a bill to achieve this purpose. In his pre-

sentation of the bill, he charged Wells with the failure to

pass the general tariff bill during the previous Congress. He

claimed that Wells, by Injecting his own version of the bill

into the middle of the legislative process, delayed action on

the measure so that Congress did not have time to pass it.

Moorhead also lamented the fact that the passage of the bill 14

was obstructed by a minority. Believing that conditions had

grown more favorable for high protection, Moorhead told Congress:

I do not want the tariff men to allow themselves to be hoodwinked in that way again. We have got this, bill now in such a position that a majority can put it through, and I ask the tariff men of the House to put it through.

Discussion of the bill continued for a few days and was

then postponed until the third session. Apparently discouraged

by the bill's progress, Moorhead dropped it after only one 1 fi

day of discussion in the third session.

14

Cong. Globe, 40 Cong., 2 Sess., pp. 4008-4009. 1 51bid., p. 4009.

^ I b i d . » 40 Cong., 3 Sess., pp. 94-95.

75

I f Moorhead and others who wanted a t a r i f f Increase

found conso la t i on in any 1 o<i 1 s 1« Lion of tho I ' o r t i n t h Gnrxjrruft,

they had to construe passage of a h i l l r a i s i n g ra tes on coppor

and copper ores as a v i c t o r y f o r the p r o t e c t i v e p r i n c i p l e .

The b i l l was in t roduced l a t e in the second session and f i n a l l y

passed on February 24, 1869, when the Senate, f o l l o w i n g the

lead of the House, overrode the P r e s i d e n t ' s veto by a t w o - t h i r d s

m a j o r i t y . The b i l l rece ived the support of many t a r i f f mod-

erates and the o p p o s i t i o n was l oca l r a t he r than sec t i ona l i n

1 7

cha rac te r .

The annual repo r t s of the execut ive branch of the govern-

ment preceded passage of the above act but had l i t t l e or no

e f f e c t on the l e g i s l a t i v e program of the remaining months of

the Congress. The p a r t i n g words of the lame duck Pres ident and

Secretary of the Treasury conta ined l i t t l e t h a t might s t i m u l a t e

l e g i s l a t i v e a c t i o n so l a t e i n the Congress. The Pres ident

dwel led on the enormity of expendi tures and the burden of 1 8

t a x a t i o n and again urged economy. Secretary McCulloch seems

to have taken h is l a s t r e p o r t as an o p p o r t u n i t y to put fo rward

a revenue p o l i c y t h a t he must have r e a l i z e d would be almost

un th inkab le f o r Congress at t h a t t ime . He recommended t h a t 1 Q

the t a r i f f be lowered and t h a t i n t e r n a l taxes be inc reased. 1 7 I b i d. , pp. 1465, 1 509. 1 8

Richardson, Messages and Papers, V I , 674-676. 19

House Execut ive Documents, 40th Conqress, 3d Session, No. 2 (Washington, ,1869), pp. X11 -X111.

76

The report of the Commissioner of the Revenue did not

have the lame duck quality of the other two reports. Wells

dissented from his superior's remarks concerning internal

taxes and urged their further reduction. He devoted most

of his report to a discussion of the tariff, the sum of which

was that the system should be revised to reduce prices while

gaining the necessary revenue at the lowest administrative

cost. Wells anticipated a large revenue surplus for fiscal 20

1870, which would allow some tariff reductions.

Congress, as indicated, did nothing more to revise the

revenue system during the remainder of the Fortieth Congress

except increase the import duties on copper and copper ores.

Shortly after the Forty-first Congress convened, however,

following the installation of the new administration, the

House Speaker appointed the Committee of Ways and Means, and

the House resolved that the committee should begin work on a 21

revision of the tariff and report back in the second session.

While the committee was preparing its report, the economy

slipped into a mild contraction, which continued until Decem-

ber, 1870, and doubtless had some influence on the outcome of 22

the committee's work. Clearly, two of the most important

20 House Executi ve Documents, 40th Congress, 3d Session

No. 16 (Washington , 1869) , pp. 22 , 60, 80. 21

Cong. 61obe, 41 Cong., 1 Sess., pp. 75, 424. 22

Rendigs Fels, American Business Cycles, 1865-1897 (Chapel Hill, 1959), p. 96.

77

f a c t o r s demanding the commit tee's cons ide ra t i on were the l a rge

revenue surp lus expected f o r f i s c a l 1870 and the con t i nu ing

gold premium. The p r i c e of gold and the index of wholesale

p r i ces had been dropping s ince 1865, but the margin between

the two had only dropped from t w e n t y - e i g h t po in ts to twenty -

fou r po in ts by 1869. The compe t i t i ve advantage t h a t the go ld

premium gave to imported goods had t h e r e f o r e dec l ined l i t t l e

s ince the end of the war. While wholesale and r e t a i l p r i ces

were d e c l i n i n g , the American businessman found t h a t l abo r

costs were r i s i n g . The index of wages rose 17 per cent from

1865 to 1869. 2 3

In c o n t r a s t w i t h t h i s s i t u a t i o n , t a r i f f op in ion i n the

West was s h i f t i n g . There was a growing demand i n the reg ion

24

f o r t a r i f f r e d u c t i o n . The opposing pressures f o r p r o t e c t i o n

and t a r i f f r educ t i on suggested t h a t the commit tee 's r epo r t

might urge some form of compromise measure t h a t would reduce

customs revenue and the general l eve l of du t ies but w i t hou t

i n d i s c r i m i n a t e s e l e c t i o n of i tems. Whatever form the repo r t

would f i n a l l y t a k e , i t wa,s sub jec t to the i n f l u e n c e of the

annual repor ts of the new P res i den t , Ulysses S. Gran t , and

h is Secre tary of the Treasury , George S. Bou twe l l . Those

23 Wesley C l a i r M i t c h e l l , Go!d, P r i c e s a n d Wages under

the Greenback Standard ( B e r k e l y , 1908) , p. 279; See Table I , below.

24 Clarence Lee M i l l e r , The States of the 01d Northwest

and the T a r i f f , 1865-1888 (Emporia, Kansas, 1929), p. 53.

78

influences were decidedly more conservative than their prede-

cessors had been. Andrew Johnson's fiscal conservatism set

him against the high government expenditures and heavy tax-

ation, and he confidently recommended reducing both. Grant,

by contrast, was more cautious with respect to revenue questions

in his first message to Congress. He was concerned about the

burden of the interest on the national debt and wanted to

reduce it as quickly as possible. While he recognized that

a revenue surplus might allow tax reductions, he urged that

revision of the revenue system be postponed for the present and

that the income tax be continued for three years at a reduced

rate. 2 5

Secretary Boutwell's report contained even fewer specific

recommendations regarding the revenue system. Only by impli-

cation did Boutwell suggest that the present system be continued 7 fi

without change. His first, as well as his later reports,

gave the impression that Boutwell was more concerned about

departmental administrative matters than about questions of

tax policy and that he placed a higher priority on strength-

ening confidence in the government's credit than reducing the

27 tax burden.

25 Richardson, Messages and Papers, VII, 30.

2 fi House Executive Documents, 41st Congress, 2d Session,

No. 2 (Washington, 1869), p. XVIII. 2 7Ibid.

79

The Commissioner of the Revenue a lso issued another r e p o r t

before the Committee on Ways and Means concluded i t s s tudy .

I t was the l a s t of We l l s ' s repor ts ,because the o f f i c e was not

extended past i t s t e rm ina l date of June 30, 1870. In t h i s

r e p o r t , the Commissioner once again d issented from the recom-

mendations o f h is supe r i o r i n the Treasury Department.

A n t i c i p a t i n g a surpus of near $124,000,000, Wells urged t h a t

taxes be reduced $50,000,000 i n such a way as to r e l i e v e i n -

dus t ry and reduce p r i c e s . He recommended t h a t the income tax

be cont inued but at a lower ra te and t h a t Congress repeal the

i n t e r n a l taxes on l u x u r i e s , occupat ion l i c e n s e s , gross r e c e i p t s

of t r a n s p o r t a t i o n companies, and sa les . a lso recommended

en la rg ing the f r e e l i s t of imports and reducing the t a r i f f on

some i tems. His proposed reduc t ions of the t a r i f f would t o t a l OO

about $14,000,000. Wells i nc luded the recommendation of a

gradual t a r i f f reform p o l i c y .

. . . which i s to . . . make such m o d i f i c a t i o n s or removals o f d u t i e s , year by y e a r , as exper ience or the c o n d i t i o n of the Treasury may i n d i c a t e as prac-t i c a b l e and d e s i r a b l e ; and t h i s , by p run ing , r a t he r than by r e c o n s t r u c t i o n , to g r a d u a l l y a t t a i n the g rea tes t degree of s i m p l i c i t y and e f f e c t i v e n e s s w i t h the l e a s t poss ib le burden upon i n d u s t r y and the people.

The i n f l u e n c e of the a d m i n i s t r a t i o n on the work of the

Committee on Ways and Means became apparent when the committee

28 House Execut ive Documents, 41st Conqress, 2d Sess ion.

No. 27 (Washington, 1869) , pp. LXVI I I -LXX, LXXI11-LXXIV, CV I I I CXXVII I .

2 9 1 b i d . , p. LXXI I . '

80

chairman, Robert Schenck of Ohio, reported to the House a

bill embodying many of Wells's recommendations. In spite of

the suggestions of the President and the Secretary of the

Treasury, the committee urged a tariff reduction. Schenck re-

ported the bill February 1, but discussion did not begin until

two months later. In the meantime, Congressmen subjected each

other to what must have been one of the most prominent ora-

torical events of the seasonjas nearly forty representatives

gave long prepared speeches on the subject of the tariff.

The most outspoken critics of the bill were low-tariff

advocates. They maintained that the bill failed to reduce 30

protection. Schenck pointed out that the bill provided for

tariff reductions of about $22,000,000 and exemptions of an

additional $2,000,000. It also included provisions for

increases of about $1,000,000 but the total reduction would

be about $23,000,000. Most of the reductions would be on

coffee, tea and sugar, but the other reductions were still much 31

more than the increases. Critics of the bill wanted greater

reductions, at times insisting that rates be restored to the

1861 level. 3 2

Debate on the bill continued slowly until the middle of

May,when it appeared that the bill would not pass. Schenck

"30 Cong. Globe, 41 Cong., 2 Sess., pp. 952-954.

31 Ibid. , appendix, p. 318.

32 Ibid. , 41 Cong., 2 Sess., pp. 2507-2509 , 2525, 3004 ,

appendix, p. 160.

81

then introduced an internal revenue bill which, like the tariff

bill, generally conformed to Wells's recommendations. It pro-3 3

posed reductions of about $33,000,000. This bill was also

criticized for not reducing taxes enough. Its critics maintained

that because the tariff reductions appeared to be lost, internal 34

taxes should be cut more. Amendments to the bill successfully 35

increased the reductions to about $45,000,000. On June 4,

Schenck moved to amend the bill by adding to it the supposedly

dead tariff bill. For parliamentary reasons, Schenck's proposal

could not be amended, although he had personally lowered the

duties on coffee and tea from the earlier House agreements.

Critics of the tariff bill filibustered in hope of gaining

separate votes on individual items, but the amendment came to

a vote two days later and passed, 137 ayes and 44 nays. The o c

entire bill then passed, 153 ayes and 35 nays. 37

The Senate amended, then passed the bill, 43 to 6. The

two houses compromised on the bill and the President signed it

July 14, 1870. The compromised version extended the extremely

unpopular and controversial income tax for two years, reducing

3 3Ibi d., 41 Cong. , 2 Sess. , pp. 3495

3 41 b i d., PP . 3963 , 3993, 4035.

3 51 b i d. , p. 4092.

3 61bi d. , PP . 4091 -4094, 4106, 4107.

3 7Ibid. s P. 5238.

82

38

the rate by half to 2-1/2 per cent and doubling the exemption.

The combined tariff and internal tax reductions totaled nearly

$75,000,000.

To suppose that the Revenue Act of July 14, 1870, was

either a victory for the protectionists because they prevented

the low tariff advocate from gaining their demands, or was a

victory for free trade because it reduced the tariff at all,

is to miss the essential revenue philosophy of Congress. From

1866, onward, Congress had been reducing taxes as the revenue

permitted. First in line for reduction were internal taxes

with the exception of those on alcohol and tobacco. Internal

taxes were, after all, the most objectionable in the post-war

period. Those remaining in 1870 were still very unpopular.

Whether a Congressman espoused a tariff for revenue only or for

protection, he wanted one that produced enough revenue ". . . a s

will relieve us from this internal revenue taxation, so pregnant 3 9

with fraud and outrage on the people. . . . " In December,

five months after the bill had been signed, the House of

Representatives still passed a resolution maintaining that

". . . the true principle of revenue reform points to the

38 For a discussion of the unpopularity of the tax, see:

Elmer Ellis, "Public OpiniOn and the Income Tax, 1860-1900," Mississippi Valley Historical Review, XXVII (September, 1940), p~I 225.

39 Cong. Globe, 41 Cong., 2 Sess., p. 2537; see also: ibid,

pp. 674"i 2005. t :

83

40 a b o l i t i o n of the i n t e r n a l revenue system. . . Whatever

41

the vote on the r e s o l u t i o n might mean, i t passed, 166 to 6.

By 1870, the expected revenue surp lus was great enough

to e l i m i n a t e most o f the remaining i n t e r n a l taxes and even

permi t some reduc t ion of customs. That the t a r i f f was too

high f o r the n a t i o n ' s revenue needs in 1870 was recognized

by a vast m a j o r i t y i n Congress, and t h a t the revenue needs o f

the na t i on never the less demanded a high t a r i f f was recognized

by t a r i f f c r i t i c s . James Brooks, a Representat ive from New

York and a c r i t i c of the t a r i f f b i l l , admi t ted t h a t " . . . a

t a r i f f f o r mere revenue now i s necessa r i l y h igher than any

t a r i f f f o r p r o t e c t i o n the Whigs proposed in 1832-33 under 42

Henry C lay , t h e i r g reat l e a d e r . " P r e r e q u i s i t e to the t a r i f f

r educ t i on of 1870 were the th ree i n t e r n a l revenue acts o f 1868,

repea l i ng the taxes on co t ton and manufacturers and i nc reas ing

revenue from the l e a s t o b j e c t i o n a b l e t axes , those on a lcoho l

and tobacco. Another p r e r e q u i s i t e was a l a rge revenue surp lus

t h a t would permi t a d d i t i o n a l i n t e r n a l tax c u t s , as we l l as

t a r i f f r e d u c t i o n . With the p r e r e q u i s i t e met in 1870, Congress

was able to approach a minimal i n t e r n a l revenue system and

begin reducing the mainstay of the revenue, customs. Fur ther

t a r i f f reduc t ions would depend on there being a s u f f i c i e n t l y

an I b i d . , 41 Cong., 3 Soss. , p. 70.

4 1 I b i d . , p. 71 . 42

I b i d . , 41 Cong., 2 Sess . , appendix, p. 159.

84

large surplus to allow Congress to reduce both internal and

external taxes. Essentially, future tariff reductions would

probably take place gradually and be based on the condition of

the Treasury as Wells had recommended.

After the summer of 1870, the government moved on to its

next consideration, fiscal 1872. Grant's revenue policy recom-

mendations were much less straightforward in his second annual

message to Congress than they were in his first. He apparently

learned a lesson about Congressional independence from the

legislature's failure to follow the clearly stated advice in

his first message. This time, in December, 1870, Grant merely

intimated that tax reductions should be postponed. Out of the

other side of his mouth he suggested guidelines for tax reduction

but without suggesting reductions. He endorsed the popular

demand for revenue reform but made the astute observation that

"revenue reform has not been defined by any of Its advocates

to my knowledge. . . ."

Grant also learned the value of a Secretary of the Trea-

sury. Whereas Boutwell all but completely overlooked the revenue

question in his first report, he made much more specific refer-

ence to it in his second report. After discussing his estimate

of receipts and expenditures for fiscal 1872, he said:

it is a noticeable fact that the estimated expenditures for the next fiscal year, including payments on account of the sinking fund, and for the interest on the public

43 Richardson, Messages and Papers, VII, 107.

85

debt, are so nearly equal to the receipts as to justify and demand the greatest caution in dealing with the revenues and business of the country.44

So that there would be no misunderstanding about his position,

Boutwell further stated that "the financial prospect, although

highly favorable, is not such as to warrant important changes

in the revenue system at the present session of Congress. . .

Congress took the reports of the President and Secretary

more seriously in 1871 than it had the year before. The House

nevertheless passed a bill to repeal the duties on coffee and

tea in the first weeks of the Forty-second Congress, but the 46

Senate took no action on the measure for the rest of the year.

The prospects of a tax reduction in 1872 were more fa-

vorable. The President felt confident enough to recommend tax

cuts in his third annual message. He advised repeal of all

internal duties except those on alcohol and tobacco and the

stamp taxes. In adjusting the tariff, he urged that the

". . . surplus be reduced in such a manner as to afford the 47

greatest relief to the greatest number."

Secretary Boutwell, with seeming reluctance, admitted that

the situation would allow further tax reductions but he warned

^ H o u s e Executive Documents, 41st Congress, 3d Session, No. 2 (Washington, 1870), p. VI."

45Ibi_d., p. XVI. 46

Cong. G1obe, 42 Cong., 1 Sess., p. 82. 47

Richardson, Messages and Papers, VII, 148.

,,45

86

of the necessity for at least $50,000,000 to pay on the debt.

As if urging restraint from Congress, he stated that . .

while relief from taxation is desirable it is yet more desirable

to maintain the public credit in its present elevated position.

. . . W i t h an anticipated surplus of $58,000,000 plus a

$23,000,000 appropriation for the sinking fund, Boutwel1 .sug-

gested a liberal reduction of $16,000,000 from internal taxes a q

and $20,000,000 from customs.

The political pressures for further tariff reduction were

growing in 1872. With only a few of the wartime internal taxes

still remaining after the revenue revision of 1870, attention

was shifting to the tariff issue. The issue of tariff reduction

was becoming increasingly important as a political issue in the

Northwest, and on the national scene the Republican party was

plagued by internal conflicts, the tariff being one of the most

50

important. The bolt of the Liberal Republicans produced a

convention in Cincinnati in May, 1872, which called for radical c I

tariff reduction. Petitions calling for tariff reduction also 52

i ncreased. 48

House Executive Documents, 42d Congress, 2d Session, No. I (Washington7 1071], p7 ITI".

4 9ib1d., p. VIII.

^ M i l l e r , The Old Northwest and the Tariff, pp. 72-75. 51

Edward Stanwood, American Tariff Controversyes in the Nineteenth Century, 2 voTsT (New" York, 1903) , II, 185.

5 9 Albert S. Bolles, The Financial Hi story of the Uni ted

States From 1861 to 1885, 2d ed. (New York, 1897J, p. 452.

87

Al though t a r i f f ra tes had been reduced i n 1870, d e c l i n i n g

from a l eve l of 47 per cent i n 1870 to 41 per cent by the end 53

of f i s c a l 1872, customs revenues cont inued to i nc rease . The

reason lay i n the 44 per cent increase of imports dur ing the

54

two year p e r i o d , r e f l e c t i n g i n pa r t the growing p r o s p e r i t y .

While the increased revenue from customs operated to ma in ta in

a high l eve l of surp lus r ece ip t s and argued f o r t a r i f f r e d u c t i o n s ,

the ra te t h a t imports were i nc reas ing argued aga ins t lower ing

t a r i f f r e s t r i c t i o n s . The revenue surp lus and p o l i t i c a l pressures

were the more conv inc ing of the two arguments.

The f a i l u r e of the Senate to act on the House b i l l r e -

pea l ing impor t du t ies on co f fee and tea prompted the lower

house to pass ano ther , i d e n t i c a l b i l l i n February , 1872. When

the Committee on Finance repor ted the b i l l , the Senate proceded

to make i t i n t o a general revenue b i l l , doub l ing the amount of 55

t a r i f f r educ t i on and a lso reducing i n t e r n a l taxes . An over -

whelming m a j o r i t y endorsed the b i l l , but when i t went back to

the House i t was r e j e c t e d in a r e s o l u t i o n t h a t c r i t i z e d the

Senate f o r usurping the C o n s t i t u t i o n a l a u t h o r i t y of the House 56

o f Representa t i ves .

53IHst;or1ca1 pp, 539, 712; §ee Tables IV, VII. 54

I b i d . , p. 538; see Table X'below* 55

Cong. Globe, 42 Cong., 2 Sess. , p. 2042. 5 61b i d. , pp. 2044, 2105, 211 1-2112.

88

The Seriate rev ived the f i r s t House b i l l concerning co f fee 57

and t e a , and Congress q u i c k l y passed i t . The House, i n t e n t

on passing i t s own general revenue b i l l , began work on a

proposal to reduce customs by $19,000,000 and i n t e r n a l du t ies 58

$13,000,000. C r i t i c s of the revenue system complained t h a t

the b i l l d id not go f a r enough and they s u c c e s s f u l l y added

a d d i t i o n a l reduct ions o f $12,000,000.

The House passed the b i l l by a l a rge m a j o r i t y , 149 to fi 0

61. The Senate then d r a s t i c a l l y mod i f i ed the b i l l , s u b s t i -

t u t i n g a s tandard 10 per cent reduc t i on on many imports and

adding a d d i t i o n a l r educ t i ons . The Senate ve rs ion passed by C "I

a vote o f 49 to 3. The compromise b i l l t ha t both houses

f i n a l l y accepted re ta i ned the essen t i a l f ea tu res o f the Senate

ve rs ion and prov ided f o r a t o t a l tax reduc t i on o f about

$53,000,000, approx imate ly $30,000,000 of which was from cus-6 2

toms. These reduct ions were near ly 50 per cent more than

Secretary Bou twe l l ' s recommendations and 65 per cent more than

the o r i g i n a l b i l l , but what was more s i g n i f i c a n t was t h a t the

b i l l f a i l e d to extend the income tax and t h a t , f o r the f i r s t 5 7 1 b i d. 9 PP . 2925, 2942.

5 8 1b i d. 9 P. 2475.

5 91b i d. f PP . 2825, 2948, 4206.

6 0 1 b i d. > P- 3652.

6 1 1 b i d. » p . 4088.

6 2 I b i d . $

1 P- 4215.

89

t ime , Congress reduced customs more than i n t e r n a l d u t i e s . With

the except ion of the a lcoho l and tobacco t axes , the income tax

was the l a s t of the p r i n c i p a l sources of i n t e r n a l revenue to

go. In s p i t e of the p r i o r i t y and unprecedented a t t e n t i o n g iven

to t a r i f f reduct ions i n the b i l l , some were s t i l l not s a t i s f i e d

t h a t the b i l l had gone f a r enough. There were charges at the

t ime as we l l as l a t e r t h a t the b i l l was " . . . a masterpiece

of p r o t e c t i o n i s t s t r a t e g y , " because i t made a minimal con-

cession to t a r i f f reform in order to prevent a r e a c t i o n t h a t

would b r ing r a d i c a l re form. I f the b i l l was a masterpiece

of p r o t e c t i o n i s t s t r a t e g y , i t somehow gained the enmity of the

s t rongho ld of p r o t e c t i o n i s m , Pennsylvania. F u l l y h a l f o f the

votes aga ins t the House vers ion of the b i l l , which o f f e r e d re -

duct ions of $9,000,000 less than the f i n a l v e r s i o n , came from

Ohio and Pennsylvania w i t h o n e - t h i r d coming from Pennsylvania

a lone. There may indeed have been low t a r i f f advocates who

votrttl f o r tho h i l l bocntiso i t wns h o t t e r thnn no reduc t i on flt

a l l but t h a t was c l e a r l y not the cho ice . Fur thermore, wh i l e

such a p o s i t i o n may have accounted f o r some vo tes , i t i s h i g h l y

u n l i k e l y t h a t i t accounted f o r very many. The South voted

e i g h t to one f o r the b i l l and the Nor thwest , except f o r Ohio,

supported i t by seven to one. A more reasonable exp lana t i on

fi Q 1

Sidney Ratner , Atneri can Taxat ion : I ts Hi s t o r y as a Soc ia l Force jjn Democracy (New York, 1942), p. 133; Cong. G1 obe, 42 Cong., 2d Sess. , p. 4209.

6 4Cong. Globe, 42 Cong., 2 Sess . , p. 3652.

90

of the b i l l , than that i t was a minimal concession from the pro-

t e c t i o n i s t s , would be that i t was a product of the two extreme

positions but strongly supported by the moderate middle ground.

The Act of June 6 , 1872, was the culmination of the Con-

gressional policy of f i r s t reducing the internal revenue system

to a minimum. The second phase of that policy was a gradual

reduction of the high t a r i f f . The policy had been c lear ly

established by the moderates from the beginning in 1866. The

policy had not been established by a high protect ion is t

minor i ty ; a f t e r the internal revenue acts of 1868 and the growing

revenue surplus, that minority was on the defensive.

There is l i t t l e question that Congress would have con-

tinued i t s policy of reducing the t a r i f f according to the

l i m i t s , of a revenue surplus had i t not been for the Panic of

1873. Depressed business conditions and decl ining revenue

prompted the repeal of the 1872 t a r i f f reductions by the Act

of February 8, 1 8 7 5 . ^

65 Stanwood, T a r i f f Controversies, I I , 186-188.

CHAPTER V

CONCLUSION

That the tariff in the post-Civil War years was a con-

troversial subject was owing to much more than simply that

some people saw it as protective or overly protective. The

tariff had always been controversial and always would be as

long as it remained an important part of the revenue system.

The issue brought into conflict irreconcilable ideas about

revenue policy and the role of the government in the economy.

General agreement was impossible because there were simply

too many different ideas about what should constitute the

government's policy. Certainly one of the most important

factors that separated the tariff controvers1es before the

war from those that followed it was the vast increase of gov-

ernment revenues and expenditures. The burden of post-war

finance strained the economic sensibilities of the nation and ,

intensified the controversy. The height of the controversy

and the volume of protest, therefore, did not necessarily

indicate that the revenue system had become more unjust or

more discriminatory.

After the rise of tariff rates during the Civil War, it

was an easy matter for freetraders to charge the protectionists

with maintaining the level of duties by means of political

dealing. There is little question that private interests found

91

92

some success in gaining a s y m p a t h e t i c ear among C o n g r e s s m e n

through the d e v e l o p m e n t of such lobbying o r g a n i z a t i o n s as

the National A s s o c i a t i o n of Wool M a n u f a c t u r e s , the A m e r i c a n

Iron and Steel A s s o c i a t i o n , and the National M a n u f a c t u r e r s '

A s s o c i a t i o n . Even if political p r e s s u r i n g by p r o t e c t i o n i s t

interests o u t w e i g h e d the p r e s s u r i n g from free trade i n t e r e s t s ,

it is one thing to exert i n f l u e n c e on the f o r m a t i o n of r e v e n u e

policy but q u i t e a n o t h e r thing to be the d e t e r m i n i n g f a c t o r in I

the f o r m a t i o n of that p o l i c y . The d i v i s i o n of o p i n i o n b e t w e e n

b u s i n e s s interests and w i t h i n the m a j o r i t y party t e s t i f i e s

a g a i n s t any form of united action on the t a r i f f . The u n i f y i n g

factors w i t h regard to r e v e n u e policy w e r e the high p o s t - w a r

e x p e n d i t u r e s and the universal c o n d e m n a t i o n of the internal

r e v e n u e s y s t e m .

The Union a c c e p t e d the n e c e s s i t y of e n o r m o u s w a r e x p e n -

d i t u r e s , but with the a d v e n t of peace the nation looked in

vain for a return to the budget that it had known b e f o r e the

w a r . The d i f f i c u l t y of a c c e p t i n g as p e r m a n e n t a s u d d e n in-

c r e a s e of p e a c e t i m e e x p e n s e s that n e v e r again d e c l i n e d to as

low as t h r e e times the p r e - w a r h i g h , m a n i f e s t e d itself in

c r i t i c i s m of the tax burden and the principal m e a n s of raising

those t a x e s , the high t a r i f f . One of the most i m p o r t a n t rea-

sons why the nation did accept the high e x p e n d i t u r e s , h o w e v e r

b e g r u d g i n g l y , was its r e c o g n i t i o n of the n e c e s s i t y for and

the high cost of paying off the national d e b t . A l t h o u g h

o r d i n a r y g o v e r n m e n t e x p e n s e s w e r e also at an u n p r e c e d e n t e d

93

height, the interest on the public debt was the largest single

expense; until 1882, it was higher than total expenditures for

any year prior to the war. The burden of paying the interest

and the principal of the debt was therefore one of the major

reasons for the necessity of a demanding revenue system and a

high tariff.

The unpopularity of what contemporaries termed an inqui-

sitorical internal tax system, with its army of tax-gatherers

and informers, resulted in its early simplification. Only its

least objectionable forms were retained. The vast reduction of

the internal tax system increased the proportionate burden of

customs revenue from what 1t had been during and Immediately

after the war; 1t did not, however, restore customs to anything

near the proportion of total revenue that 1t had carried before

the war. Although the high post-war tariff system was criticised

for violating the principle of laissez-faire government, the

Internal tax system was considered an even greater violation of

the principle of noninterference in the daily lives of the

citizens. Minimal government meant a minimal internal tax

system before it meant a non-protective tariff. The unprec-

edented concern with laissez-faire principles following the

war was undoubtedly in part a result of the nation's inability

to adjust to a growing system of taxation as rapidly as the

system was forced to grow. After the reduction of the internal

system, the tariff was almost inevitably the focal point of

much laissez-faire criticism in spite of the fact that objection

94

to governmental i n t e r f e r e n c e in the form of i n t e r n a l t a x e s had

r e s u l t e d in the c o n t i n u a t i o n of a high t a r i f f .

The idea t h a t Congress should have lowered t h e t a r i f f

a long with i n t e r n a l t axes found l i t t l e s u p p o r t on the f l o o r s

on Congress u n t i l 1870, when e x t e r n a l t a x e s were l owered , a long

wi th i n t e r n a l . A p o l i c y of c o r r e s p o n d i n g r e d u c t i o n s , beg inn ing

in 1866, would have denied t h a t i n t e r n a l t axes were more

o b j e c t i o n a b l e and more of a s o c i a l burden than cus toms . I t

could f u r t h e r m o r e have d imin i shed t h e r e d u c t i o n of t a x e s on

domest ic manufac tu re s and delayed an i n c r e a s e of consumpt ion .

Tho p o s s i b i l i t y t h a t onrl 1 or and l a r g e r t a r i f f r e d u c t i o n s would

have s t i m u l a t e d I m p o r t a t i o n enough to m a i n t a i n customs revenue

i s u n l i k e l y , f o r t he o v e r a l l l e v e l of i m p o r t a t i o n was a l r e a d y

high and i n c r e a s i n g . In any c a s e , most c o n t e m p o r a r i e s a p p a r -

e n t l y b e l i e v e d t h a t t a r i f f r e d u c t i o n would mean revenue r e d u c t i o n .

T a r i f f c r i t i c i s m may be d i v i d e d i n t o t h r e e c a t e g o r i e s f o r

purposes of d i s c u s s i o n . One form concerned the i n e f f i c i e n c y

and c o r r u p t i o n in t h e customs bureau a t t e n d i n g the expans ion

of the p o l i t i c a l pa t ronage sys tem. This c r i t i c i s m may have

been j u s t i f i e d but i t had l i t t l e or no th ing to do wi th r e v -

enue p o l i c y . Another fo rm, u s u a l l y advanced by low t a r i f f

p e o p l e , was t h a t t he t a r i f f was too high and was a p r o t e c t i v e

t a r i f f r a t h e r than a revenue t a r i f f . The deba t e over t he

r e s p e c t i v e c h a r a c t e r i s t i c s of revenue and p r o t e c t i v e t a r i f f s

became i n e x t r i c a b l y e n t a n g l e d in s e m a n t i c s , but t h a t did

not p r e v e n t men from s u f f e r i n g the i l l u s i o n t h a t they agreed

wi th one a n o t h e r about t he " e s s e n t i a l s . " Whether or not t h e

95

high tariff was protective is beside the point for this dis-

cussion. In the sense that high revenue needs required large

customs receipts, the tariff was for revenue. Protectionism

certainly played a part in Congressional tariff debates, but

it was not responsible for the nation's revenue needs.

The third form of tariff criticism was advanced by both

protectionists and critics of protection. It charged that the

relative duties on different items and classes of items were

maladjusted. Protection critics alleged that duties were too

high on protected goods and not high enough on the so-called

revenue goods. Protectionists claimed that duties on raw

materials were too high. The question of the validity of those

charges was secondary to the basic concepts of revenue policy

1n that they conceded the need for a high tariff. The charges

nevertheless warrant further study.

On one level, the tariff question was a matter of national

policy and the national economy but in the matter of details,

the tariff was a local matter. Accordingly, the tariff as a

political issue changed character when the focus shifted from

the national level to the local level. Local issues defied

national labels and national issues defied close defi nit ions.

Consequently, although the Republican party had a high tariff

reputation, it often differed little in appearance from the

Democratic party. The extent to which the Republicans d e s e r v e d

the blame they have received for the revenue policy and the

high tariff depended on the extent to which the Democratic

96

p a r t y , i f i t had been in the m a j o r i t y , would have formula ted

a d i f f e r e n t p o l i c y .

T a r i f f p o l i c y , being i n h e r e n t l y c o n t r o v e r s i a l , was an

ideal i s sue f o r a minor i ty par ty to r a i s e . As long as the

Democrats were in the m i n o r i t y , they could complain a t any

length about l e g i s l a t i v e cont ro l by the Republicans and claim

t h a t t h e i r own par ty would be more r e s p o n s i b l e and more r e -

sponsive to the d e s i r e s of the n a t i o n . There was l i t t l e to

s u g g e s t , however, t h a t a Democratic m a j o r i t y in the post-war

yea r s would have pursued a s i g n i f i c a n t l y d i f f e r e n t revenue

p o l i c y . When the Democrats achieved con t ro l of the House of

Rep re sen t a t i ve s in the F o r t y - f o u r t h to the F o r t y - s i x t h Congresses ,

they found the r e s p o n s i b i l i t i e s of the m a j o r i t y pa r ty a sober ing

expe r i ence . Faced with the oppor tun i ty to a t l e a s t a t tempt to

r o l l back the high t a r i f f and prove t h a t i t had been mainta ined

by the Republicans r a t h e r than by the r e s p o n s i b i l i t y of whoever

was in power, the Democratic House f a i l e d to send a s i n g l e

t a r i f f b i l l to the Senate .^ The l e g i s l a t i v e record from 1866

to 1881 s t r o n g l y sugges t s t h a t most of the blame f o r the high

pos t -war t a r i f f was the undeserved but i n e v i t a b l e f a t e of

whichever par ty was in power in the yea r s 1866 to 1872.

The T h i r t y - n i n t h Congress was e s s e n t i a l l y r e s p o n s i b l e

f o r the format ion of the revenue p o l i c y . I t c l e a r l y e s t a b l i s h e d

^Clarence Lee M i l l e r , The S t a t e s of the Old Northwest and and the T a r i f f , 1865-1888 (Emporia, Kansas, 1929) , p. 109.

97

the principle of postponing tariff reduction until the internal

taxes had first been reduced. The basic premises of the

revenue policy were assumed and taken for granted rather than

consciously agreed upon. They wore social values and con-

cepts that were Implicit in nineteenth century American life.

Habit was one of the most important factors. A seventy-year

tradition of relying almost wholly on customs receipts could

not be broken in a few short years, notwithstanding the sudden

expansion of the government's revenue requirements. The

acceptance of a comparatively simple internal tax system as a

permanent feature of American life was as much of a concession

as the nation would then make to innovation. The nation would

need more time to live with the traditional source of revenue

before it would decide that the social liabilities of a system

stretched to accommodate modern revenue demands outweighed

the virtues of that system.

If the post-war revenue system had been arrived at by

a cognitive process, it would have been a value choice

between alternative forms of taxation. It was apparent from

Secretary of the Treasury McCulloch's last report to Congress

that he recognized this when he expressed a preference for an

increase of internal taxes. In his memoirs, McCulloch made

the perceptive observation that "as long as the people are

resolved that the Government shall be mainly supported by

duties upon imports — by indirect, instead of direct taxes--

98

there must be a t a r i f f which cannot be o therw ise than pro-

t e c t i v e . " Al though the process was l a r g e l y unconscious,

the na t i on d id indeed reso lve to r e t a i n i t s t r a d i t i o n a l form

of suppor t .

I t would be i d l e to argue t h a t whatever the t a r i f f was,

i t was less than p e r f e c t . Such a p o s i t i o n assumes t h a t

p e r f e c t i o n i s a t t a i n a b l e and t h a t democrat ic p o l i t i c a l

processes, i f f r ee f rom ou ts ide i n f l u e n c e s , can and should

a t t a i n near p e r f e c t i o n . I t would a lso be i d l e to c r i t i c i z e

t a r i f f l e g i s l a t i o n f o r the l o g r o l l i n g and compromises t h a t

were made to s a t i s f y the high p r o t e c t i o n i s t s . Such an

o b j e c t i o n would merely be an i nd i c tmen t o f the e s s e n t i a l

g i ve -and- take of the democrat ic p o l i t i c a l process.

This study has chal lenged the l ong -s tand ing t hes i s t h a t

by the f a i l u r e to repeal or g r e a t l y reduce the war t a r i f f s ,

the government and the Republ ican par ty embarked on a

d e l i b e r a t e p o l i c y o f a i d i n g bus iness. This study suggests

the need f o r an ex tens ive re -examina t ion of revenue and t a r i f f

p o l i c y i n the years f o l l o w i n g 1872 and a re -examina t ion of the

r e l a t i o n s h i p between business and government through the

post-war pe r i od .

2 Hugh McCul loch, Men and Measures o f Ha l f a Century

(New York, 1900), p. 4F77

APPENDIX

The source o f i n f o r m a t i o n con ta ined i n Table I i s Wesley C l a i r M i t c h e l l , Go ld , P r i c e s , and Mages under t h £ Greenback Standard ( B e r k e l e y , 1908) , p. 279. The source f o r a l l succeding t a b l e s i s U. S. Bureau of the Census, H i s t o r i c a l S t a t i s t i c s o f the Un i ted S t a t e s , C o l o n i a l Times t o 1957 ( W a s h i n g t o n 7 T 9 6 0 ) : Table I I , p . 711 ; Table I I I , p p 7 6 9 § 7 712, 713; Table I V , p . 712; Table V , p p . 6 g 8 »

713; Table V I , p . 718; Table V I I , p . 712; Table V I I I , p . 539; Table I X , i b i d . ; Tab le X, p. 538.

99

100

TABLE I

P r i ce Index, 1860-1880

Wholesale Retai1 Cost of Years Gold Pr i ces Pr i ces L i v i ng Wages

1860 100 100 100 100 100 1861 100 97 104 103 100 1862 113 103 115 112 101 1863 145 133 143 129 112 1864 203* 180 170 156 130

1865 157 185* 176 168 1 50 1066 141 177 180* 170* 161 1867 138 162 172 168 168 1868 140 158 174 161 169 1869 133 1 57 164 156 175

1870 115 139 157 150 175 1871 112 131 146 147 179* 1872 112 134 144 148 177 1873 114 133 137 145 176 1874 111 130 136 145 172

1875 115 123 134 141 161 1876 112 113 129 133 1 53 1877 105 106 127 132 144 1878 101 95 122 132 141 1879 100 88 118 130 138

1880 100 105 118 132 139

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TABLE IX

RATIO OF DUTIES TO TOTAL IMPORTS

100

Y e a r F r e e a n d D u t i a b l e D u t i a b l e Y e a r

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1 8 2 5 48% 51% 1 8 7 3 28% 38%

1 8 3 0 57 62 1 8 7 4 2 8 39

1 8 3 5 21 40 1 8 7 5 29 41

1 8 4 0 18 34 1 8 8 0 29 44

1 8 4 5 29 34 1 8 8 5 31 46

1 8 5 0 25 27 1 8 9 0 30 45

1 8 5 5 23 27 1 8 9 4 21 50

1 8 5 7 19 22 1 8 9 5 20 42

1 8 6 0 16 20 1 9 0 0 28 49

1861 14 19 1 9 0 5 24 45

1 8 6 2 26 36 1 9 1 0 21 42

1 8 6 3 28 33 1 9 1 5 12 33

1 8 6 4 32 37 1 9 2 0 6 #

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1 8 6 7 45 47 1 9 3 2 20 59

1 8 6 8 47 49 1 9 3 5 18 43

1 8 6 9 4 5 47 1 9 4 0 13 37

1 8 7 0 4 5 47 1 9 4 5 9 2 8

1871 41 44 1 9 5 0 6 13

1 8 7 2 38 41 1 9 5 5 6 12

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