Report on the Improvement and Better Management
of the Revenue of the United States
[Philadelphia, January 31, 1795
Communicated on February 2, 1795]1
[To the Speaker of the House of Representatives]
The Secretary of the Treasury respectfully makes the following report to the House of Representatives.
According to the present laws imposing duties on articles imported into the United States, not much Short of one third of the whole amount of the duties is derived from articles rated advalorem.
In other nations, where this branch of revenue, as with us, is of principal, or very considerable consequence, and where no peculiarity of situation has tended to keep the rates of duty low, experience has led to contract more and more, the number of articles rated ad valorem, and of course, to extend the number of those rated specifically, that is, according to weight, measure, or other rule of quantity.
The reason of this is obvious. It is to guard against Evasions which infallibly happen in a greater or less degree, where duties are high. It is impossible for the merchants of any country to have manifested more probity, than those of the United States, on this Subject. And it is firmly believed, that there never was one, in which illicit practices, to the disadvantage of the revenue, have obtained So little as hitherto in this. Yet it would be a delusive expectation, that with duties so considerable as those which now exist, a disposition will not be experienced in some individuals, who carry on our import trade, to evade the payment of them, and this to an extent sufficient to make it prudent to guard with circumspection, and by every reasonable precaution against the success of such attempts. It is needless to repeat that this will contribute as much to the interest of the fair trader, as to that of the revenue.
It is believed, that in our System, the method of rating ad valorem could, with convenience, be brought within a much narrower compass; and it is evident, that to do so, will contribute materially to the Security of the revenue.
The Secretary has not hitherto had leisure to digest the details of a plan for this purpose; but if the idea is approved, it can be carried with due accuracy into effect, at a future session, by an order upon the head of this department, to prepare in the mean time, a tariff proportioned to the actual rates of duty.
It may also be found expedient with a similar view, to adjust anew the proportional rates of duty of different kinds or qualities of certain articles. This observation is believed to apply with particular force to teas. It would be, in the opinion of the Secretary, advisable to throw them into three classes; to raise somewhat the lowest rate, and to diminish considerably the higher rates. A persuasion is entertained, founded partly upon observation of the course of importations, that a regulation of this kind, would benefit the revenue. The same thing might be conveniently extended to some other articles.
Advantages will also accrue from a re-adjustment of the rates in certain cases, by combining several rates on the same articles, established by different acts, into one rate, and by dismissing inconvenient fractions, which serve to perplex the calculation of the duties. Some alteration in the terms of credit for duties, may, it is conceived, be made with advantage. Where four months are allowed, three and six months may be substituted; and three, six, nine, twelve and fifteen, to the cases of six, nine and twelve months. This will apportion the course of receipts more according to the course of payments, and prevent inconvenient pressures at particular junctures.
The compensations to inspectors, especially in the ports where the expense of living is great, and to collectors and Surveyors in the less productive parts, urgently demand revision, in order to an increase of them.
The Security of the revenue, in every branch, turns (it will not be strong to say) principally upon the officers of the lowest grade. Hence it is a policy, no less mistaken than common, to leave those officers without such compensations as will admit of a proper selection of character, and prevent the temptation from indigence to abuse the trust. It is certain, that in many places, the present allowance to inspectors, on the most liberal application of it, is inadequate to those important ends.
A similar reasoning will apply to those officers of the principal grades, who being in districts which produce little, are ill compensated by the emoluments to which they are at present entitled. It cannot escape, that the safety of the revenue must depend on equal fidelity and due vigilance in all the districts; else it may become, in many cases, worth the while to resort to particular districts, because there is a deficiency of the one or the other. Besides, that it is in itself just and proper, that all who are in the public service, should receive adequate rewards for their time, attention and trouble.
The aggregate expense of collecting the duties on impost and tonnage, is at present, truly moderate; a circumstance which facilitates the extension of allowances where they are necessary. The System of the revenue cutters needs revision. The utility of every institution depends on the competency of the agents who are to execute it. The present compensations to officers and men, compared with what may be obtained in other similar employment, unaided by collateral motives, creates a degree of embarrassment which very much impairs the usefulness of the thing. It would have been, in the judgment of the Secretary, a great mean of rendering it competent to its object, if, as was early suggested by him, the officers of the customs had had rank in the navy of the United States.2
With regard to that branch of revenue, which is constituted by the duties upon Spirits distilled within the United States, and upon Stills, it is believed that it would be an improvement, and one which could be now made without inconvenience, to abolish the option to pay by the gallon, of the Spirits distilled in the cases where the duties are charged on the Stills. This will leave the alternative of paying by the year, or for less periods upon licenses, at the choice of the party—an alternative which affords sufficient accommodation to the difference of circumstances. The option to pay by the gallon, of the Spirits distilled, according to an account to be rendered on the oath of the party, though expedient in the first experiment of the law, is objectionable as a permanent regulation in a double view.3
The additional discretionary latitude given to compensations to the officers concerned in the collection of those duties, is restricted to a term which will expire at the end of the next Session of Congress.4 It will be essential to extend it, or to fix the compensations which shall have been allowed. It is believed that further experience will still be useful towards a definitive legislative adjustment.
Embarrassments are experienced from the want of a concurrent authority in these officers, similar to that of the officers of the customs, to make seizures within each other’s surveys or divisions.5 On the borders of such as are adjacent, the officers are exposed to hazard in making seizures, and better opportunities are afforded of escaping detection.
The revenue to result from the act of the last session, laying duties upon licenses to retailers of wines and distilled Spirits,6 may be improved, favorably to proportional equality, by changing the form.
One licence for selling one or more kinds of wines, puts the greatest and the Smallest dealer upon the same footing, and is so far inequitable. To class wines into a few obvious and strongly marked discriminations, and to render a licence necessary for each class, with a duty upon each licence, would favor a just distribution of the tax among great and small dealers, and would, at the same time, benefit the revenue. The classes may be as follow: 1st. Madeira wine. 2d: Sherry wine. 3d: port wine. 4th: Other wines.
To secure the defect of the discrimination in favor of small dealers, who may be in the practice of selling and sending out different kinds of wines in small quantities, it may be provided, that not more than one licence shall be necessary to any dealer, who never sells or sends out at one time, more than three gallons. And suitable penalties may be annexed to guard the condition of the exemption.
Similar observations are applicable to licenses to retailers of spirituous liquors. These may be thrown into three classes: 1st: Spirits distilled from the grape, commonly called brandy. 2d: Spirits distilled from the produce of the Sugar Cane, commonly called rum. 3d: Other distilled Spirits: and there may be a like provision in favor of dealers who never sell or send out more than three gallons at one time.
Distillers may be put in this respect, as to the spirits they distil, upon the same footing with importers; that is, they may be exempt from the licence duty; but it would seem proper to annex these conditions to the exemption, that they shall not sell and send out a less quantity in one cask, vessel or package, than ten gallons; and that they shall not deal in the selling at retail, of any other Spirits than those they themselves distil.
Or another rule may be adopted, for proportioning the tax to the extent of the dealing; which is, to add to the present rate of the licence, certain supplemental rates, according to the yearly rent or yearly value, by appraisement of the house or building in which the retailer of wines or spirituous liquors shall carry on the business.
This has been found in practice, a convenient, and, upon the whole, an equitable rule of proportion; evidently more so than one licence, with the same duty to all dealers indiscriminately.
It is a general and a wise national policy, to make these articles of wine and spirits as contributory to the revenue as they can be made, which can only be effected by subdividing the duties upon them, in the different stages of their passage to the consumer. The branch under consideration, might be an important one. As it is now regulated, it is feared that it may prove of inconsiderable consequence. The confining of the licences for selling spirituous liquors to foreign Spirits, must give great facility to evasions. And it has an unequal operation upon different portions of the community.
It would promote the object of the Act which imposes duties on sales at auction,7 to allow two and a half per centum to each auctioneer, in lieu of the one per centum allowed by the ninth Section of that Act. It is believed, that the present allowance is insufficient to defray the expense of clerkship incident to a compliance with the requisitions of the law, which cannot be rendered less particular or exact, without prejudice to the revenue.
The tax upon Snuff,8 according to a rate per pound will be liable to very great evasions, without regulations for a close inspection of the course of the business. Dispensing with these, it seems advisable to modify the tax upon a different plan. The proposition to lay it upon the mortar, is as good a substitute as has occurred. It appears, upon evidence which is credited, that a Snuff mill usually works about one half the year; that is, one hundred and fifty six working days in a year, and yields per mortar of the whole number of mortars contained in a mill, an average of forty five pounds of snuff per day. It follows, that five hundred and sixty one dollars and sixty cents per mortar, per annum, is the equivalent of the present duty of eight cents per pound. There are objections to this form of the tax, but as it appears to be generally desired by the manufacturers,9 it seems advisable to forego them; especially, as the present plan demands far more rigorous precautions for the effectual collection of the duty, than now exist, or than would be expedient.
A similar difficulty attends the tax upon refined sugar.10 But a proper substitute for the present plan, is not perceived. It will fortify the revenue, and produce no undue inconvenience to the manufacturer, if he be required to annex a ticket or tickets to each loaf of sugar, specifying the weight in pounds; and to each cask, barrel, key, box or other package of refined Sugar, specifying the contents, and weight in pounds—Corresponding certificates or tickets to accompany imported refined sugar. The kinds of tickets to be furnished by the respective supervisors, and accounted for to them. The observance of this regulation to be secured by proper penalties.
The Act which lays a duty on carriages for the conveyance of persons,11 exempts from the duty carriages usually and chiefly Employed in husbandry, and in carrying commodities. It is a material defect in this Act, as has been already experienced, that it provides no summary mode for determining what carriages are within the exempting description.12 Now, every disputed case must be the subject of a suit in all the legal forms; which is equally objectionable on the score of delay and expense. It is not perceived, that any insurmountable difficulty lies in the way of providing a remedy consistently with a due reference in the last resort to the judiciary authority.
In revenue laws, too much is as great a fault as too little Simplicity. It leaves them unprovisional; incapable of execution in a manner convenient either to the public, or to individuals.
The Acts imposing duties on licences for selling wines and Spirituous liquors, at retail, and upon Sales at auction, authorize allowances not exceeding two and a half per cent for compensation to officers, and for incidental expenses. The Acts laying duties upon carriages for the conveyance of persons, and upon snuff and refined sugar, makes no provision for such compensations, or other expenses of collection. It is the opinion of the Secretary, that the rate of two and a half per cent in the two first mentioned Acts, is inadequate—that it ought to be extended to five per cent; and that an equal provision should be made for the expense of collection, under the two last mentioned Acts.
The restrictions upon Officers of the Customs, and upon the Supervisors and other officers of inspection, with regard to the public funds,13 appear to the Secretary, unnecessary and inconvenient; unnecessary, because those officers having no concern whatever, with any branch of public business, that respects the management of the funds, can have no official influence upon the policy or execution of the measures which regard them, further than by a punctual collection of the revenues; inconvenient, because it deprives them of a mean of investing any little sums they may save or acquire, in a mode very convenient to men, who, from situation, are less able to avail themselves of other opportunities. If the being Stock-holders, can have any influence upon them, as officers, it must be of a kind favorable to the public Service, by increasing their personal interest in the exact collection of the revenue. If the idea which dictated the restrictions, was, that they might use the public money in speculations in Stock, the answer is, that this is not in their power, from the rapidity with which it is transferred to the Treasury; and if it were practicable for them to divert the public money, and a disposition to do it should in any case exist, it might operate through other channels. In lieu of the restrictions concerning the funds, the employment of public money for private purposes, may, if thought necessary, be still further guarded against, by penalties. Those restrictions in reference to the immediate officers of the Treasury department, and the Commissioners of Loans, are entirely proper, and ought to be maintained; but it is believed, that it is not only useless, but injurious to give them greater extension. The multiplication of restrictions on the public officers will render greater compensations necessary, and be a source of expense to the public.
All which is respectfully submitted,
Secretary of the Treasury.
January, 31, 1795.
☞ Note. Since the conclusion of this report, the Secretary has learnt, that a bill (the progress of which his peculiar situation had prevented his observing) had actually passed the two Houses, for changing the terms of six, nine and twelve months, into eight, ten and twelve.14 This bill, besides interfering disadvantageously with arrangements of the Treasury, founded upon the existing provisions of the laws, will, it is apprehended, tend to increase an inconvenience, which the above suggestions were meant to lessen—the too great concentration of mercantile payments. Any accidental derangement of the mercantile body, from overtrading or other cause, would, in this situation, endanger consequences to the Treasury, which it might be difficult to meet by other expedients; whereas a subdivision into Shorter and more numerous periods, by diminishing the effect, would admit in such cases, of an easy substitute. The merchants themselves are particularly interested in this question, for the re-action upon them of any embarrassment of the Treasury, might render that a general and lasting mischief, which might otherwise have been only a partial and transient disorder.
Copy, RG 233, Reports of the Secretary of the Treasury, 1784–1795, Vol. IV, National Archives.
1. Journal of the House description begins Journal of the House of Representatives of the United States (Washington, 1826), I, II, III, IV. description ends , II, 312. A letter of transmittal, dated January 31, 1795, may be found in RG 233, Reports of the Secretary of the Treasury, 1784–1795, Vol. IV, National Archives. See also H to Frederick A. C. Muhlenberg, January 30, 1795.
3. This is a reference to Section 1 of “An Act concerning the Duties on Spirits distilled within the United States” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 267–68 [May 8, 1792]).
4. Additional compensation to officers of inspection was provided by Section 13 of “An Act making further provision for securing and collecting the Duties on foreign and domestic distilled Spirits, Stills, Wines and Teas” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 380 [June 5, 1794]).
6. “An Act laying duties on licenses for selling Wines and foreign distilled spirituous liquors by retail” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 376–78 [June 5, 1794]).
7. “An Act laying duties on property sold at Auction” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 397–400 [June 9, 1794]).
8. “An Act laying certain duties upon Snuff and Refined Sugar” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 384–90 [June 5, 1794]).
9. See “The Manufacturers of Snuff in Philadelphia Remonstrate,” December 26, 1794, printed as an enclosure to Coxe to H, December 26, 1794.
10. See note 8.
11. “An Act laying Duties upon Carriages for the conveyance of Persons” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 373–75 [June 5, 1794]).
13. “An Act making alterations in the Treasury and War Departments” forbade “all officers of the United States concerned in the collection or disbursement of the revenues thereof” from dealing in the funds or debts of the United States or of any state (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 281 [May 8, 1792]).
14. This is a reference to “An Act supplementary to the several acts imposing duties on goods, wares and merchandise imported into the United States” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 411 [January 29, 1795]). Section 4 of this act reads: “That the duties upon all goods, wares and merchandise imported into the United States, after the said last day of March, (where the sum payable by one person or copartnership shall amount to more than fifty dollars,) shall be payable upon all articles, the produce of the West Indies (salt excepted), the one half in three, and the other half in six calendar months; and on all goods, wares and merchandise imported from Europe, (wines, salt and teas excepted,) one third in eight months, one third in ten months, and the remaining third in twelve months, from the time of each respective importation.”