James Madison Papers

To James Madison from Thomas Law, [ca. 1 June] 1813

From Thomas Law

[ca. 1 June 1813]

Congress now meets for the most important of considerations vizt How to raise a contribution for the general defence with the least inconvenience to the community.

Those who have amply benefited by the security of life & property ought from gratitude to afford the greatest aids & can also spare portions of their fortunes for the preservation of the remainder.

There are three kinds of wealth arising from industry.

The first is that which is produced by capital already created by the accumulation of ancestors. It consists of houses, estates lots, bank stock, road & bridge stock, governments funds, bonds &ca. These may be called Old Capital.

The second is that which is produced by factories, wharves &ca lately built, perhaps on credit, to establish manufactories, &ca.

The third is that which manual labor daily produces.

Having much deliberated on the subject of taxation, I am induced to believe, that a tax on Inheritances in a direct and collateral line & on Legacies, would be a very equitable, productive, & popular one.

Mr Gibbon in his Roman History states, that Augustus Cæsar levied 5 per cent upon Inheritances, which was, almost the only levy to support the armies of that great Republic. “The Nobles of Rome” he observes “were more tenacious of property than of freedom. Their indignant murmurs were received by Augustus with his usual temper; he candidly referred the whole business to the Senate, & exhorted them to provide for the public service, by some other expedient of a less obvious nature. They were divided and perplexed. He insinuated to them that their obstinacy would oblige him to propose a general land tax & capitation; they acquiesced in silence. Such a tax, plentiful as it must prove in every wealthy community, was most happily suited to the situation of the Romans &ca.”1

The heirs to an Estate or the receivers of a Legacy could not complain of a portion being taken for the public, as 15 per cent is now paid out of prizes drawn in a Lottery.

I propose that 2 per cent should be taken from the heirs to an Estate being Sons & Daughters & 3 per cent from heirs in a collateral line & 4 per cent from those succeeding to Legacies.

In every country Letters of Administration are taken out & wills are recorded, so that simplicity & regularity are easily attainable & consequently cheapness in the mode of collection.

By this means the Government would acquire a perfect knowledge of the rising resources of every part of the Union, & would have a rapidly encreasing Revenue from augmenting population & the dissemination of all kinds of improvements in Agriculture & in manufactures.

What the amount will at first be, must be very conjectural.

Mr Pitt many years ago estimated the annual income of British Capitalists at 125 Millions sterling or above 600 millions of Dollars, which at 5 per cent would make the principal 12,000 millions of Dollars. In the United States the 8 millions of persons consume more than any equal number of persons as the price of labor is higher. The quantity of Land occupied in Great Britain by England & Scotland is about 72 millions of acres; but in the United States as much is produced for exportation in a raw state of the products of the soil & as much wood is required for fuel fence rails, & domestic purposes, I think that the eight millions required at least 20 acres per head, which would make the Estates of all amount to 160 millions of acres & suppose them worth 20 Dollars on an average per acre, the whole capital in land would be 3200 millions of dollars & two per cent on that would amount to 12 millions of Dollars; but as only 5 per cent may be estimated to retire from this life annually the inheritance tax on Land would only realize 2,400,000 per annum. I will not enter into details of the value of houses, cattle, furniture, funds &ca &ca. the statistical accounts already extant may afford some data for a probable calculation of the amount which may be expected.

Property under 500 Dollars or thereabouts should I conceive be exempted & Land not enclosed should pay only one half. Perhaps it may be deemed expedient to raise the contribution in an ascending scale, by encreasing on sums above 10,000 Dollars. It would be easy to induce every one to come forward with his portion, as an inheritance might be declared forfeited, if the tax be not punctually paid within a limited time & very easy remedies might be devised to prevent frauds.

The Stamp tax in Great Britain is a very productive one, & operates as a tax on inheritances and Legacies. In the year 1811 it amounted to 5,396,882 & was very cheap in collecting

£ s  d 
The Customs cost 7..14.. 9 
Exice 3.. 6..11 
Stamps 2..14.. 3 
& the repayments were
Customs 1,271,780
Excise 997,338
Stamps  160,962

An Income tax has been ably recommended & much may be urged for it in preference to many other sources of Revenue, but in my mind the inheritance & Legacy tax would be the least vexatious to payer & receiver of any that can be suggested. Every successor to a fortune would contribute in fair proportions according to the value of what he had acquired. The tax would not diminish the capitals of persons in existence productively occupied to augment the wealth of the community.

Here after the amount of the tax might be diminished, as too much flowed into the public Treasury.

I do not hesitate in expressing my opinion that the tax here suggested would produce more the very first year than the whole amount expected from the thirteen taxes recommended last year, which would have caused a host of Collectors & most troublesome details, with numerous murmurs & complaints.2

Should objections arise which have not occurred to me, I hope to be excused at least for venturing to submit a proposition of this kind to superior judgements.

Note, by a reference to the detailed Stamp income, I find that the amount from

Legacies is in England 429392. 10 2¼
Probates & administrations do 434,633, 2.10¼

RC (DLC). Unsigned; in a clerk’s hand, except for the closing note, which is in Law’s hand. Docketed by JM, with his note: “Anon. (Mr. Law) mode of revenue.” Undated in the Index to the James Madison Papers; date assigned here on the assumption that Law wrote his memorandum shortly before Congress began consideration of war taxes on 10 June 1813.

1Edward Gibbon, The Decline and Fall of the Roman Empire, ed. J. B. Bury (3 vols.; New York, 1995), 1:127–28.

2Albert Gallatin’s report to Congress of 10 Jan. 1812 proposed thirteen taxes: a direct tax on property; indirect taxes on refined sugar, auction sales, carriages, and stamps; and eight categories of indirect taxes on distilled spirits and retail liquor licenses (ASP description begins American State Papers: Documents, Legislative and Executive, of the Congress of the United States … (38 vols.; Washington, 1832–61). description ends , Finance, 2:525–26).

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