INTERNAL REVENUE SYSTEM. 702 from custoius amply supplied all iicptls niul pcr- niittpd a considerable reduetiun in tlic public Uobt. Wlicn the War of 1812 broke out there was nl first no thoufrht that any additional rovcnucs would be needed for current expenses, and it was believed that the costs of the war could be met by loans. Both public revenue and public credit were impaired by such a policy. In 1.S1.3 it became necessary to .seek new sources of revenue, and. by acts of July 24 and August 2. 181.1. those tuxes which had proved most advantnfjeous before the opening of the centurj- were reimposed. Duties on carriages, on sugar refined in the I'nited States, license taxes on the disfillers of spirituous liquors, and on retailers of wines and spirits, with stamp duties on legal instruments, etc., and taxes upon sales at auction, reap])earcd. These taxes were, however, designated as tempo- rary, and the pledge was made that they should be repealed within a year from the close of hos- tilities. ,s it took some time to create the machinery for the collection of these taxes, the actual returns were .slow in coming in. Before any ap))reciable revenue had been derived from this source (.?l.(i(>2.084 being collected in 1814), rates were increased in December, 1814. and new taxes were imposed in .lanuarj-. ISLi. They embraced pig-iron, iron castings, bar and rolled iron, nails, candles, paju'r, leather, ))laying-eards, vellum, hats, umbrellas, saddles, bridles, boots, shoes, beer, ale. tobacco, cigars, and snufT. For the actu:>l conduct of the war these taxes came too late to be available, but in the settling up of accounts they proved of great assistance. The Secretary of the Treasury was unwilling to part with them wholly, and advocated the reten- tion of a part of the excise system, in order to meet any emergency which might arise. Con- gress, however, by net of December 23, 1817, abol- ished these taxes, and no further resort was had to internal taxation until the Civil War. When the great struggle opened it was gen- erally believed that the war would soon Iv termi- nated, and that the expenses of the contest could he entirely provided by loans. As in 1812, there was a delay in the creation of new sources of revenue. A direct Ux of $20,000,000 was levied on the States by act of .August .5. 18C1. but it was not until .July 1. 18f>2. that an act Avas passed to raise any considerable revenue from internal taxation. The law embraced almost every con- ceivable object of taxation. There were taxes on liquors of all kinds, license taxes upon mer- chants, taxes on all manufactured articles, on auction sales, carriages, yachts, billiard-tables, plate, the gross receipts of railroads and other transportation companies, on the dividends of banks, trust, savings and insurance companies, on advertising, on incomes over $000. on le<r!icies. and stamp taxes upon hills of exchange and other mercantile papers. It took some time to establish the m:ichiner- necess:iry to the proper adminis- tration of this system of taxation : it produced in the fiscal year 181.3 only .«37.fi40,7S7. though its advocates had anticipated a revenue of .*100.- 000.000. Tn the following fiscal year these tJixes produced $100,000,000, without any change in rates. The demand for increased revenue led. June 30, 18fi4. to increased rates. Xew objects of taxation were discovered, and rates were con- siderably increased upon articles already taxed. On manufactured products generally the rate INTERNAL REVENUE SYSTEM. changed from 3 to 5 per cent., while on specific articles it was doubled. (Jn liquors rates rose from 00 cents per g:illon, under the law of March 7, 1804, to .fl.oO and $2, while the niaxinuim rale on tobacco rose from ifMiO per thousand to .$40 jicr thousand, the latter rate applying to cigars valued at ijilo per thousand. The revenue rose in the fiscal year IStlo to .$20a,000,000, but it was not in those articles which were so extrava;;antly taxed that the increased revenue was mo«t cun- s|)iiuous. Indeed, the product of the tax on dis- tilled li(piors fell from $30.32!),I4!) to $18,731,- 422, while that of the tobacco taxes rose only from $8,592,098 to $11,401,373. A further in- crease of rates was made by an act of March 3, ISG5, and the fiscal year 1800 with revenues of, $,309,22ti.S13 showed the high-water mark of in- ternal revenue receipts. The increase of revenue resulting from these several acts was rapid, and the aimual deficit grew relatively smaller, as com|>ared with reve- nues, allhough it increased absolutely as the war ))rogressed. Kven more important, perhaps, thai! the actual revenue received was the improvement in public credit, which resulted from these serious efforts to place the revenues on a sound basis. The last act, while raising rates, contem- plated their speedy reduction, and provided for the a|)pointment of a revenue conunissioner charged with the duty of studying the wliole revenue system and proposing suitable modifica- tions. Extraordinary military expenditures were no longer required, hut the general scale of na- tional ex|K'nditure was vastly greater than before the war. The abolition of internal-revenue taxa- tion was not thought of, hut a reduction of the burden and the'rcmoval of some of the more vexa- tious taxes was generally demanded. By a serii- of acts in the years 1800, 1807, and 1808 many taxes were abolished, and rates on manv others diminished. It was estimated that $U1(';,000.000 would be taken fron. the reveinie, but the actual diminution was less than $1,2.50,000. The greater productivity of moderate rates was amply dem- onstrated. In the case of distilled spirits a rale of 50 cents a gallon, enacted .Tulv 20, 1808, produced in the fiscal year 1870 a revenue of $55,000,094. while the maximum levcnue under the .$2 rate in 1807 had been $33,542,951. In 1870 taxes still remained on spirits, to- bacco, fermented liquors, gross receipts, licenses, incomes, legacies, successions, gas, stamps, and some few other articles. The income tax, which in 1870 had produced $37,775,873, was aban- doned in 1872. Few changes have since been made. The tax on spirits was raised to 90 cents in 1875, but elsewhere, especially on tobacco, there was a reduction of rates, and all stamp taxes ceased in 1883. While ultra-protectionists like William D. Kelly urged the abolition of all in- fernal taxes, this ]>lan did not secure any large following, the sentiment in favor of taxing liquor and tobacco, the main supports of the internal revenue, being well-nigh iiniversal. The experi- ence of recent years has. moreover, firmly demon- strated in the minds of the people that such taxa- tion of the internal resources of the nation is an indispensable element in any revenue system, since it is capable of adjusting itself to the needs of a sudden emergency. Xo essential changes were made in the system of internal taxes till 1894, when the Tariff Act of August 28th sought to compensate for the pros-
