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To James Madison from William Jones, [22 September 1814]

From William Jones

[22 September 1814]

Dear sir

Allow me to present to your view the enclosed sketch of our financial means, which is the result of my extreme solicitude and ardent desire to sustain the public credit and provide the money to carry on the war with energy and effect. I deprecate the loss of credit & consequent resort to means which must prove unequal oppressive and inefficient, and I hope these motives and feelings will excuse the liberty I take in troubling you with my thoughts on the subject. With Sincere respect & regard

W Jones


Taxes—a national Bank—loans—and Treasury notes; appear to be the resources on which we must rely for the means of prosecuting the war.

The product of the first will be remote—the aid of the second cannot be commanded in time to meet the immediate demands on the Treasury, which must therefore be derived from the third & fourth.

It is probable that an interest of 8 PerCent would induce a considerable Loan, but the amount is very uncertain, and it would still be subject to many of the embarrassments which have attended the recent Loans.1

It is not the real monied Capitalists who generally, and largely, subscribe to the Loans.

It is men of enterprize whose Capitals are otherwise employed, or speculators without capital, who have sufficient management to raise an artificial credit. They all rely upon the credit and sale of their stock, and chiefly upon the Banks, to enable them to make good their contracts. They are the mere Broker between the government and the real stockholder, and take every advantage of both. Those who purchase stock with a view to hold it, apply to a Broker as they may find it convenient to purchase.

Whether the Banks with their capitals in the hands of individuals from whom they cannot withdraw the accommodation without hazard, may subscribe freely to the Loan, and whether if they do, their notes can be made to represent actually their nominal value, where the expenditure may take place, may be doubted; and if they do not, how are individuals such as have hitherto subscribed to the Loans to make good their contracts.

Still we must rely in part upon this source to relieve our immediate necessities.

Treasury notes in the present state of Bank credit will probably be found to be a much better resource, If made redeemable in two or three years, and to bear interest at 7. PCt.

A national Bank it is believed would in a great degree remedy these evils.

But it has been argued that if a Bank were established, it would be found, that whatever portion of its capital it might be enabled to loan to government in the first instance; would be the extent of its capacity; for the amount of its Loan would be received in Stock and represent so much of its capital.

It is believed however that in practice it would be found otherwise.

The Bank (like the Broker) would sell its stock directly to the real stockholder whenever a small profit could be made, and from its Branches, and the extent of its connections, and transactions, at home, and abroad; its capacity in this respect would far transcend that of any combination of speculators.

Thus it may in the course of the year sell the greater part if not the whole of its stock and subscribe an equal amount the ensuing year, as those individuals who subscribe to the Loans on speculation calculate upon doing, but with much less capacity and certainty.

But in other respects it is conceived that a national Bank is essential and indispensable to the public interest in collecting & transmitting the public monies as the exegencies of the public service may require.

Look at the situation in which our Treasury is placed by the stoppage of specie payments by the principal Banks of the middle states.2 I do not mean to condemn the measure. I believe it was inevitable. If however you have no money in Boston though you may have enough in New York Philada or Balto you cannot pay a cent—the notes of these places will not pass in Boston and you cannot draw the specie.

Even among those Banks which have stopped payment in specie the same difficulty exists, you cannot remit to Philada or New York, the notes of Baltimore or of this district.

This could not be the case were a National Bank in existance. Its own notes would be current every where, because payable at any of its Branches; while those of the latter would maintain their local credit and circulation, and the resource of the public deposits would enable it successfully to combat the hostility of other Banks.

These are the uses of a national Bank and I have no doubt its abuses may be restrained by proper regulations, and particularly by reserving the power to create another in due time before the expiration of its charter, and to withhold from it the public deposits.

The present system of Bank operations with the Treasury is exceptionable in the highest degree. The multiplicity of Banks the complication of accounts, the local difficulties and consequent indulgence required of the Treasury is extremely inconvenient and embarrassing to the public interest. In a national Bank the whole revenue would be brought to a focus, in it, and its Branches, and subject to the demand of the Treasury in any quarter. Now you have to calculate and transfer and accommodate for every warrant of considerable amount; and besides this, the several nestegg balances in the numerous Banks connected with the Treasury which in practice it is found necessary to forbear drawing for, forms a considerable aggregate which is useless to the Government. The following sources of revenue are suggested as indispensable and it is believed the aggregate amount of expenditure for the year 1815 ought not to be computed at less than sixty millions of dollars.

1st. An efficient, prompt and productive system of additional war taxes to the reasonable extent of the capacity of the community embracing as well the present objects of taxation as other the most prominent equal and convenient sources of revenue.

2d. A national Bank with a capital of fifty millions of dollars to go into operation immediately and Loan to government twenty millions at 6 PCt. redeemable in 12 Years

3d. A loan at 8 PCent redeemable in 6 years.

4th. Treasury notes at 7 PCent redeemable in two or three years—these and the notes of the national Bank and none other to be received in payment of all monies due to the public.

Scheme of Additional War taxes.
Estimate of the taxes & internal duties
for the year 1815 as now established.
} Present. Proposed
  Direct taxes 3.000000. 6.000000.
  Stills 1.200000. 1.200000.
  Carriages 240000. .480000
  Retailers 650000. 1.300000
  Auctions 150000. .300000
  Refined sugar 150000. .150000
  Stamps 510000. .510000
  Distilled Spirits estimated at 40. millions of Gallons 6.000000
  @ 15 Cents $ 15,940,000

Other objects of taxation not estimated viz

Breweries—tanneries—water and Steam mills & Engines, except saw mills, to be taxed according to their estimated horse power.

Waggons, Carts, and all other wheeled Carriages, usually employed on hire, in transportation, and drawn by more than two horses; to be taxed according to the number of horses employed.

Dividends on the stock of all Banks & Insurance Companies.

Private Bankers according to the average amount of their notes in circulation each quarter of the year.

Brokers who deal in money, Stocks, exchange or Lotteries.

Lotteries according to the extent of their schemes.

Sales of foreign produce or merchandize other than at auction or by retail or by or on account of the original importer. This may be made very productive and will be paid by what may be called “middle men” between the importer and the retailer or consumer. In other words it will be a tax upon speculators. This tax would have a good moral effect for much collusion is practised by the great speculators in our cities by sham sales and other artifices to favor their designs and enhance the price upon the consumer.

Many other objects might be enumerated but a judicious use and apportionment of these would produce a very large revenue and I see no rational objection to any of them.

Breweries are now without foreign competition and grain is low in price and likely to continue so.

Tanneries are flourishing, are also without foreign competition, the price of leather is enhanced by the war and it is believed can well bear a reasonable tax.

The mills enumerated it is also believed may bear a reasonable tax, as well as many objects which are already taxed.

Waggons and other carriages employed in transportation upon hire and drawn by more than two horses it is believed are proper & productive subjects of taxation. Agricultural carriages as well as those owned by the poorer class of Citizens will be exempt. This kind of transportation during the war will be lucrative and no reason occurs why they should not pay to the state a small portion of their freight as well as the coasting Bay and river craft.

With respect to the remaining objects it is presumed no objection can reasonably be made. It will be perceived that all these objects are conspicuous and are capable of being well defined, so as to prevent fraud in the assessment and collection of the tax.

RC and enclosure (DLC); FC (PHi: William Jones Papers). RC undated; dated October 1814 in the Index to the James Madison Papers; date supplied here from the FC. Enclosure docketed by JM.

1For an example of the problems to which Jones referred, see George W. Campbell to JM, 4 May 1814, PJM-PS, description begins Robert A. Rutland et al., eds., The Papers of James Madison: Presidential Series (8 vols. to date; Charlottesville, Va., 1984–). description ends 7:454–55 and n. 1.

2For the causes of the suspension of specie payments in the fall of 1814, see ibid., 310 n. 4.

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