condition is it bought? It is not cut for the purpose of smoking. It is not manufactured in any way. Step into any little grocery store in the West and ask for smoking-tobacco and the keeper produces a roll of ordinary leaf twisted up, weighs it out and hands it over the counter at ten cents a pound. It is carried away by the purchaser and cut at his own house with a common knife or rubbed to pieces and smoked, and no revenue whatever is derived from it. The effect, therefore, of the existing law, or of any law which charges more than something like ten cents a pound upon this product, will inevitably prevent any revenue, and at the same time deprive the people of the advantage of the use of it in this country. [Here the hammer fell.] Mr. MORRILL. I have no question but what it is the purpose of the House to leave the law so that we shall obtain a large revenue from this source, but I very much doubt whether when we get through with this bill the law will be such as to accomplish that object. As it now stands the law is more effective than we have ever had. We are receiving a larger amount of revenue than we have ever before received from this source. The present law in relation to this particular article perhaps is somewhat oppressive in this: that the manufacturers are not able to dispose of their stems, and these to a large amount are now on hand. And in order to accommodate the trade and not to be oppressive in any quarter, the committee have, after hearing gentlemen from all parts of the country, West as well as North and South, come to the conclusion that it would be better to fix the tax so as to embrace smoking-tobacco in one description, so as to include stems or not, as the parties might choose, and let the price regulate that matter. As the law now stands the tax on smoking-tobacco of all kinds and imitations thereof, not otherwise provided for, is thirty-five cents per pound. On smokingtobacco made exclusively of stems it is fifteen cents a pound. The committee came to the conclusion, after a long and patient investigation, that to impose one rate was better for all interests and perhaps might give the Government an equal amount of revenue. They therefore agreed upon the rate of twenty cents per pound instead of thirty-five, only five cents more than it now is on smoking-tobacco made exclusively of stems, and fifteen cents less than under any other provision in the law as it now stands. We believe that that will be satisfactory. Certainly, if we expect to derive any considerable amount of revenue, it ought not to be reduced below that. The amount of revenue received from all kinds of tobacco in the three quarters of the present fiscal year is almost nine million dollars. The amount received for the whole of the year 1865 was only $8,000,000, and in 1864 $7,000,000, showing that the law as it now stands is better at any rate than any laws heretofore enacted. I trust the committee will reach the conclusion that we ought not to change this provision as reported by the Committee of Ways and Means. MESSAGE FROM THE SENATE. The committee rose informally for the purof receiving a message from the Senate, pose by Mr. FORNEY, its Secretary, informing the House that the Senate had passed House bill No. 85, for the disposal of the public lands for homestead actual settlement in the States of Alabama, Mississippi, Louisiana, Arkansas, and Florida, with an amendment, in which he was directed to ask the concurrence of the House. Also, that the Senate had passed, without amendment, House bill No. 193, for the relief of Mrs. William L. Herndon. TAX BILL AGAIN. Mr. LAWRENCE, of Ohio. I move to amend the amendment by inserting "five cents." The bill under consideration is designed to amend the internal revenue laws of the United States in many respects, and especially to furnish relief to the great mechanical and indus Estimate of receipts for the fiscal year ending June 30, 1867. Customs Internal revenue. Increase on cotton. Increase on spirits..... Miscellaneous Requirements of the Secretary of the Treasury........... .$125,000,000 260,000,000 15,000 900 15,000,000 10,000,000 425,000,000 350,000,000 Available for reduction of taxation... $75,000,000 The internal revenue for the fiscal year ending June 30, 1867, if the present revenue laws should continue in force, with the proposed increase on cotton, is estimated at $260,000,000. The bill now under consideration is designed to reduce this $75,000,000, and to that extent relieve mechanical industry, employments, and labor from the burdens which now to some extent oppress them. A few illustrations will show this By the law as it now stands a tax is levied as follows: "On ready-made clothing, boots and shoes, gloves, mittens, and moccasins, caps, hats, and bonnet, or other articles of dress not otherwise assessed and taxed as such, for the wear of men, women, or children, six per cent. ad valorem: Provided, That any tailor, boot or shoe maker, hat, cap, or bonnet maker, milliner, or dress-maker, exclusively engaged in manufacturing any of the foregoing articles to order as custom work and not for sale generally, who shall make affidavit to the assessor or assistant assessor, that the entire amount of such manufactures so made does not exceed the sum of $1,000 per annum, shall be exempt from duty." The bill now under consideration changes all this and reduces the tax as follows: On boots and shoes, two per cent. ad valorem; to be paid by every person making, manufacturing, or producing for sale boots and shoes, or furnishing the materials or any part thereof, or employing others to make, manufacture, or produce them: Provided, That any boot or shoe maker making boots or shoes to order as custom work only, and not for general sale, and whose work does not exceed annually in value $1.000, shall be exempt from this tax. On ready-made clothing, and on gloves, mittens, moccasins, caps, and other articles of dress for the wear of men, women, and children, not otherwise assessed and taxed, one per cent. ad valorem; to be paid by every person making, manufacturing, or producing for sale clothing, gloves, mittens, moccasins, caps, and other articles of dress, or furnishing the materials or any part thereof, or employing others to make, manufacture, or produce them: Provided, That any tailor, or any maker of gloves, mittens, moccasins, caps, and other articles of dress to order as custom work only, and not for general sale, and whose work does not exceed annually in value $1,000, shall be exempt from this tax; and articles of dress made or trimmed by milliners or dress-makers for the wear of women and children shall also be exempt from this tax. Then by this bill there is a large list of artiThis cles entirely exempt from taxation. exemption will give great satisfaction to the people and encouragement to productive industry. Among these are plows, cultivators, harrows, straw and hay cutters, planters, seeddrills, horse-rakes, winnowing-mills, and many others, generally articles of necessity or the products of mechanical industry. These articles, heretofore taxed, but now exempt, with the other reductions in taxes made by the bill, would have produced $75,000,000 annually, if the present law had continued in force. But I cannot now enumerate the changes in detail. While I am free to concede the great improvement which this bill will introduce revenue system, I desire to point out briefly some changes in the bill which it seems to me should be made. Our The law now in force levies a tax"On all cigars, cheroots, and cigarettes, made wholly of tobacco, or of any substitutes therefor, ten dollars per thousand cigars. On smoking-tobacco of all kinds, and imitations thereof, not otherwise herein provided for, thirtyfive cents per pound. On smoking-tobacco made exclusively of stems, and so sold, fifteen cents per pound." There are other provisions affecting imported, New England, and southern tobacco, but as they do not materially affect western tobacco, I do not propose to allude to them now. The bill now before us changes the present law as follows: On smoking-tobacco of all kinds, including that made of stems or in part of stems, and imitations thereof, a tax of twenty cents per pound. On cigarettes, or small cigars, made of tobacco, inclosed in a wrapper, or binder, and not over three and a half inches in length, the market value of which (tax included) is not over six dollars per thousand, a tax of two dollars per thousand; when the market value is over six dollars and not over ten dollars per thousand, (tax included,) and on cheroots, and cigars known as short-sixes, and on any cigars made with or without pasted or twisted heads, the market value of which (tax included) is not over ten dollars per thousand, a tax of four dollars per thousand. On all other cigars, cheroots, and cigarettes, made wholly of tobacco, or of any substitute therefor, a tax of ten dollars per thousand. My colleague [Mr. SCHENCK] proposes to amend this by levying ten only instead of twenty cents per pound on smoking-tobacco and imitations thereof, and by striking out the provis ions as to cigarettes and cigars, and by inserting in lieu thereof a provision as follows: On cigarettes or small cigars made of tobacco, inclosed in a wrapper or binder and not over three and a half inches in length, and on cigars made with twisted heads, the market value of which, exclusive of the tax, is not over six dollars per thousand, a tax of two dollars per thousand. On cheroots and cigars known as short sixes, and cigars made with pasted heads, the market value of which, tax included, is not over twelve dollars per thousand, and on all cigarettes and cigars, the market value of which, exclusive of the tax, is over six dollars and not over twelve dollars per thousand, a tax of four dollars per thousand. On all cigarettes, cheroots, and cigars, the market value of which, exclusive of the tax, is over twelve dollars and not over twenty dollars per thousand, a tax of ten dollars per thousand. On all cigarettes, cheroots, and cigars, the market value of which, exclusive of the tax, is over twenty dollars and not over forty dollars per thousand, a tax of twenty dollars per thousand. On all cigarettes, cigars, and cheroots, the market value of which, exclusive of the tax. is over forty dollars per thousand, a tax of forty dollars per thousand. The tobacco raised in Ohio and other western States generally known as "seed-leaf" is used mainly for smoking-tobacco (cut and dry) and common cigars. It is not employed in the manufacture of chewing-tobacco or fine cigars," which are made from the more expensive Havana and Connecticut tobacco. The present law was not only oppressive but ruinous and destructive to the growth and manufacture of western tobacco. The reason of this is presented in a preamble and resolution of the General Assembly of Ohio, adopted February 13, 1866, as follows: "Whereas by enactment of the Congress of the last session, the excise upon cigars is levied at the uniform rate of ten dollars per thousand; and whereas this rule compels Ohio seed-leaf-worth in the market ten cents per pound-to pay a tax of four hundred and fifty per cent. ad valorem, while Connecticut tobacco-the market price of which is twenty cents per pound-pays only two hundred and twenty-five per cent., and imported Havana tobacco-rated at $1 50 per pound-pays only thirty-three per cent.; and whereas this discrimination against the product of Ohio and other western States has cut off the demand for and if continued is likely to put a stop to the growing of tobacco in these States; and whereas this rule levies the heaviest per cent, of taxation on that kind of tobacco mainly used by the class least able to pay, and touches but lightly the high-priced luxury of the richer class: Therefore, Be it resolved by the General Assembly of the State of Ohio, That the present rule of assessing the internal revenue on cigars is unequal, unjust, and oppress ive to the agricultural interest of this State; and that our Senators and Representatives in Congress be, and hereby are, earnestly requested to use their influence to secure such a change in the law as shall levy a tax ad valorem, or such other modification as in their judgment will remove the objection herein urged against the present law." The result of the law has been that as it requires nearly the same labor to make a thousand cigars from tobacco of high or low price, while the tax is the same on all alike, the latter or western tobacco is effectually driven out of the market. This is by no means an insignificant branch of industry. The report of the commissioner of statistics of Ohio for the year 1864 shows a product of tobacco as follows: mention that, by the same change, that tax on Con- The present bill is a great improvement on Pounds. 1,319,943 1,045,154 1.761.569 3,364,603 4,399,168 1,114,029 1,400,516 1,546,516 887.441 528,499 869,282 334,194 321,421 242.445 268,512 683,370 283,695 119,203 11,121,209 .37,022,323 There are a number of other counties that produce large amounts. One of the most intelligent men of my district, who fully understands this subject, writes me: "Your own district loses money to the amount of $200,000 this year by this single enactment, while Ohio, Indiana, Illinois, and Michigan, all States that grow low-priced tobacco lose millions of dollars. Give us an ad valorem tax on cigars, and immediately the low-priced tobacco of the West (now excluded by the product of New England and the South, which have had a common interest) will come into market. Now it is rotting in our fields and tobacco-houses. More than this, the Government, by this change, will get more revenue, because the amount of cigars consumed will be much greater. Now low-priced cigars, always used in the greatest number, are almost excluded, but under an ad valorem tax they will again be freely manufactured and largely consumed." One effect of the law has been that large amounts of western tobacco have been used for smoking in the leaf unmanufactured. In this form it has been sold and extensively consumed, thus affording no revenue to the Government. An ad valorem tax properly adjusted would permit the manufacture into cut-and-dry smoking-tobacco, and thus a large revenue would be derived. The Tobacco Cutters' Association, of Michigan, in their memorial to Congress say: "From facts ascertained, we find that farmers and others have been (owing to the high price of smoking caused in consequence of the high rate of tax) largely engaged in growing and preparing tobacco for their own use, thereby lessening the amount of revenue the Government would otherwise derive from that source, besides tending, in a great degree to injure the business of the manufacturers." And the effect of the law has been well described by the memorial of an Ohio Tobacco Growers' Association, as follows: "In addition to this unhappy feature in the present law, an equally injurious change was made in making the tax on smoking, cut of stems fifteen cents, while on all other kinds thirty-five cents was placed. By this unfortunate stroke, all smoking cut out of anything else than stems, was effectually prohibited, and all home demand for lugs and common Ohio seed out of which the article had been cut before, was killed; and cutters, that before run from one to three machines, and used from one to three hogsheads of lugs per day in smoking, have not run a machine or cut a hogshead since, and are now accumulating much capital of unavailable 'shorts' that necessarily grow out of the making of chewing-cut. By these changes in the previous law, seed leaf declined from eighteen and twenty cents to six and eight, and lugs from eleven and thirteen to six and seven, entailing losses on the districts producing these styles and grades of several million dollars. Home demand being thus cut off, our growers of the styles named were bound hand and foot, and turned over to the tender mercies of Europe for a market. "As a set-off to this picture of depression, we merely I But the present law, so far as it relates to common cigars, is equally destructive to the production of western tobacco. Under the present law the tax per cent., as paid by three distinct kinds of tobaccos, is as follows, allowing twenty pounds of tobacco for one thousand cigars: twenty pounds Havana, at $1 55, equals thirty-one dollars, which, at ten dollars tax, is equal to thirty-three per cent.; twenty pounds Connecticut, at twenty-two and a half cents, equals $4 50, which, at ten dollars tax, is equal to two hundred and twenty per cent.; twenty pounds New York, Pennsylvania, and Ohio, at eleven cents, equals $2 20, which, at ten dollars tax, is equal to four hundred and fifty per cent. I object to the present law so far as it relates to western tobacco, because 1. It is unjust in principle. Western tobacco is worth from six to eleven cents per pound, while Connecticut is worth twenty-two. Το require the same tax on all alike is a discrimination against the low-priced article. 2. It has operated practically to destroy the product of western tobacco. The Ohio association, before referred to, in their memorial say: "The particular depression for which we think the law clearly responsible relates to Ohio seed leaf and Kentucky lugs. By making the tax on all grades of cigars ten dollars, cigars made of Ohio seed leaf, which were dear before at thirteen dollars, had seven dollars additional tax put on them, and with it a complete extinguisher on their sales. And as the manufacture of these cigars furnished demand for the bulk of the Ohio seed used in the United States, with the destruction of this trade almost all demand for Ohio ceased, and not one case of Ohio seed has been used since, where before a hundred found consumption; and prices of the article went down accordingly." The inequality and injustice of this tax is readily seen, and were it not for the fact that all sales of Ohio seed, for home consumption, had entirely ceased, perhaps our people, with their boundless resources, might still rest satisfied, making a virtue of necessity, change their farm products, let their tobacco houses go to destruction.' 3. The destruction of the western product diminishes the national revenue from tobacco. It will be seen the bill of the Committee of Ways and Means proposes to remedy the injustice of the present law by levying a tax of four dollars per thousand on all cigars the market value of which, tax included, is not over ten dollars per thousand, and on all other cigars a tax of ten dollars per thousand. Only two grades of tax are proposed. Now, let us inquire what will be the effect of this. Cigars made of Connecticut tobacco || will cost less than ten dollars per thousand and will pay a tax of four dollars per thousand. Cigars made of Ohio and other western tobacco will cost less than ten dollars per thousand and they will pay a tax of four dollars per thousand. Western tobacco worth from seven to ten cents per pound will pay as much tax as Connecticut worth twenty-two. The tax will fall on the producer mainly, for it will require nearly the same labor to manufacture common cigars of western tobacco as the finer cigars of Connecticut tobacco. This unequal tax will enable eastern manufacturers to sell the finer cigars so nearly the price of those made of western tobacco that common cigars of western tobacco will be driven from the market, or produced only to be consumed unmanufactured, or cut and dry, or exported at ruinous rates. 66 Will any gentleman tell me why this discrimination should be made against western or low-priced tobacco? Or why should common cigars pay as much tax as the fancy "cigarettes" or the cigars "inclosed in a wrapper or binder?" The amendment proposed by my colleague will remedy all this inequality. It proposes to adopt the rule of equality by classifying cigars and thus approximating an ad valorem tax. It will tax common cigars two dollars per thousand; a finer article four Still finer classes respectively ten, twenty, and forty dollars per dollars per thousand. thousand; these last classes being generally manufactured by Havana fillers and Connecticut wrappers. The general scope of the amendment is to protect the home article and to give the western product a living chance along with the eastern. now. There are some other particulars in which I hope the bill reported by the committee will be changed, though I cannot advert to them all It proposes to tax manufactures of flax, hemp, jute, and silk five per cent. ad valorem. The manufactures of flax, jute, and hemp are in their infancy and cannot bear tax at all. „A tax is equivalent to their destruction. The production of flax and hemp is one of the agricultural interests of the West which should not be destroyed by taxation, but rather encouraged. Silk is a luxury and can bear a tax higher than ordinary articles which enter into daily consumption. By this bill diamonds, emeralds, precious stones, and jewelry are only taxed five per cent., while thread, candles, leather, screws, and many other articles are taxed an equal rate. This, in my judgment, is wrong. Let diamonds, jewelry, and all articles of unnecessary ornament or luxury bear at least double the tax if not still more, as I would make it, than that imposed on articles of ordinary consumption or necessity. By the present law the tax on incomes over $600 and under $5,000 is five per cent., and on incomes over $5,000 the tax is greater. The bill now before us levies one uniform rate on all incomes over $1,000, I have two objections to this. I would tax incomes over $5,000 greater than those of a less sum. The discrimination is founded on the greater capacity of the wealthy to pay and not on any hostility to capital. The amount of income exempt from tax should not be fixed at a uniform sum but should depend on the number and age of children each head of a family might have to support. The exemption is designed for the support of families, and the amount of it should be made to depend on the number of the family. A man like John Rogers, with "nine small children and one at the breast," needs and should have a greater sum exempt than one who has rendered the country no such service and has no equal need for income exempt. There are some axioms of political economy which should not be overlooked. Taxation should mainly be levied upon wealth realized in the form of property or incomes rather than upon the sources of productive wealth, the means by which wealth is created. Hence it has always been regarded unwise to cast onerous burdens on useful labor or industry in any form, upon the, mechanic, the producer, the artisan, and the laborer. A tax upon the implements or products of useful labor discourages industry and impairs the production of wealth. The necessities of a nation may be such as to require a resort to taxes of this description to a limited extent, but when this may be so they should be levied with great discrimination. There is a class of products which may, under these or other circumstances, be properly taxed, and sometimes heavily taxed. Mere articles. of expensive luxury or indulgence, from which England derives the larger part of her revenue, may be appropriate subjects of taxation. This bill has kept these principles in view, and though by no means perfect, it is a great improvement upon the law as it stands, and with the modifications which time and experience may suggest, will contribute much to wipe out an immense national debt entailed upon us by treason, rebellion, and traitors, their aiders and abettors. As the people annually make their contributions of national taxes let them remember that traitors and their allies rendered them necessary, and let them at the polls see to it hat they shall no more be intrusted with political power. I withdraw my amendment to the amend ment. The question being taken on the amendment offered by Mr. SCHENCK to strike out "twenty cents" on smoking-tobacco and insert "ten cents, no quorum voted. Tellers were ordered; and the Chairman appointed Messrs. SCHENCK and ANCONA. The committee divided; and the tellers reported-ayes 48, noes 46. So the amendment was agreed to. the Government. Besides, we shall get a Who, then, will object to this species of tax? Mr. MYERS. I offer an amendment to come in after all these paragraphs. The CHAIRMAN. There is but one graph under consideration at this time. Mr. MYERS. Then I offer it to that. I move to strike out the paragraph and to insert in lieu thereof what I send to the desk. The Clerk read the amendment, as follows: That on and after the 1st day of July, 1866, in lieu of the duties on manufactured tobacco and cigars now imposed by the several acts to provide internal revenue to support the Government, there shall be paid by the producer, owner, or holder, upon all tobacco produced within the United States and upon which no tax has been levied or collected, a tax of twenty cents per pound upon the said tobacco in the leaf or unmanufactured; and such tax shall remain a lien thereon and be levied and collected as provided for in this act in the case of cotton; that all tobacco of domestic growth shall be bonded in Government warehouses, and shall be weighed and marked, and on permits given, as in the case of cotton, may be removed from the district in which it has been produced to any other district without prepayment of the tax due thereon upon the execution of bonds or giving security, as shall be prescribed by the Secretary of the Treasury: Provided, That there shall be an allowance or drawback on all tobacco equal in amount to the duty paid thereon, and no more, when exported; no drawback, however, to be allowed for such duties if less than ten dollars. Mr. MYERS. Mr. Chairman, in the last Congress I stood almost alone in the advocacy of a tax such as I have proposed by this amendment. In the present Congress upon my motion a resolution was adopted instructing the Committee of Ways and Means to report upon the expediency of such a tax. Now, sir, I have scarcely a hope that such an amendment will pass this House with the committee against it, but I think it due to the manufacturers of tobacco in the United States, who have held conventions in all our great cities and unanimously asked that this tax may be made specific and uniform in order to protect the Government and themselves against fraud, that their proposition shall not be passed by in silence. Mr. HOOPER, of Massachusetts. I would inquire of the gentleman whether these were conventions of manufacturers or producers of tobacco. from one collection district to another in bond twisted heads, the market value of which (tax included) is not over eight dollars per thousand, a taxof two dollars per thousand; when the market value is over eight dollars and not over twelve dollars per thousand, (tax included,) and on cheroots, and cigare known as short-sixes, and on any cigars, the market value of which (tax included) is not over twelve dol lars per thousand, a tax of four dollars per thousand. The amendment was agreed to. Mr. SCHENCK. For the paragraph as now amended we are very thankful, so far as it goes, because so far as it does go it rights a great wrong. But still, as it is not sufficient for all the purposes of justice, I will move to strike out this paragraph as amended, and substitute the following: On cigarettes, or small cigars, made of tobacco, inclosed in a wrapper or binder, and not over three and a half inches in length, and on cigars made with twisted heads, the market value of which (exclusive of the tax) is not over six dollars per thousand, a tar of two dollars per thousand. On cheroots and cigars known as short-sixes, and cigars made with pasted heads, the market value of which (exclusive of the tax) is not over eight dollars per thousand, and on all cigarettes and cigars, the market value of which (exclusive of the tax) is over six dollars and not over twelve dollars per thousand, a tax of four dollars per thousand. On all cigarettes, cheroots, and cigars, the market value of which (exclusive of the tax) is over twelve dollars and not over twenty dollars per thousand, a tax of ten dollars per thousand, On all cigarettes, cheroots, and cigars, the market value of which (exclusive of the tax) is over twenty dollars and not over forty dollars per thousand, a tax of twenty dollars per thousand. On all cigarettes, cigars, and cheroots, the market value of which (exclusive of the tax) is over forty dollars per thousand, a tax of forty dollars per thousand. I had the honor of having printed some time ago an amendment to this bill, which was substantially the same as the one I have just offered, except that I have changed the rate and made it exclusive of the tax instead of inclusive of it. I found that by following the idea introduced by the Committee of Ways and Means, and making the price inclusive of the tax, it would involve us in this absurdity: for instance, when the price of cigars is made up The revenue commission state that 42,809.18 by including the tax, by imposing a tax of pounds of tobacco, "at the present rate of twenty dollars a thousand on cigars over twenty excise, would return an annual revenue of dollars a thousand, you would include the cigars $15,736,795." At twenty cents per pound the originally costing six dollars a thousand in the consumers would pay but little over $8,000,000, higher classes. But the whole matter is made and even adding twenty-five per cent. for losses fair by leaving the tax entirely out of the comin the manufacture only $12,000,000, the addi-putation of the price, and making the tax rest tional tax being necessary under the present system to make up for the amounts which escape the tax. The manufacturers are nearly prostrated at present and ask for redress. The legitimate consumption of tobacco is not more than half what it was, Government being a loser equally with the honest manufacturer. The Louisville Board of Trade reported sales of but 35,112 hogheads of tobacco for the first ten months of 1865 against 63,332 for the same months of 1864. For the year 1865 the decrease in the returns of chewing-tobacco was fifty-eight per cent., and of smoking-tobacco sixty-two per cent., and all this time many thousand employés have been thrown out of busi ness. The excise on tobacco in the leaf is found to work well in other countries and I hope will yet be adopted here. Mr. MORRILL. I trust the gentleman from Pennsylvania [Mr. MYERS] will not deem me ungracious or unkind if I do not take time to reply to what he has said. I will merely say that I hope the amendment will not be adopted. The amendment of Mr. MYERS was not agreed to. The Clerk read as follows: On cigarettes, or small cigars, made of tobacco in closed in a wrapper or binder, and not over three and Mr. MYERS. They were conventions of the Mr. MORRILL. I move to amend this On cigarettes, or small cigars, made of tobacco inclosed in a wrapper or binder, and not over three and a half inches in length, and cigars made with upon the price of the cigars exclusive of the tax, and while the same result is arrived at we are not involved in the absurdity I have stated. Now, sir, to go back to the subject and purpose of this amendment generally, I might repeat to some extent what I said before in regard to smoking-tobacco. It is needless, however, to do so. It is sufficient to state that by the existing law, putting all upon a dead level, making all cigars pay ten dollars a thousand, you have utterly crushed out the whole western interest in the production of tobacco and its manufacture into cigars. I live in Day; ton, Ohio, a little city of some thirty thousand inhabitants. Before you put your tax on as you have done, we were making there nine million cheap cigars. Now we do not make one. The whole interest has been destroyed. With the destruction of the interest in the manufacture of these common twisted-head cigars, the interest connected with the growth of the tobacco has likewise been destroyed. In the district which I represent we raise nearly one half of all the tobacco raised in Ohio; and the tobacco raised in that district, in that State, in in Pennsylvania, is a tobacco from which are all the western States, in the Northwest, and manufactured cigars of this cheap character. By imposing a level tax, putting the same burden upon the cheap cigars used by the poor man as upon the finest cigar made of Connecticut or other leaf, you have crushed out completely the western interest; so that you are at present getting no revenue from us, while you are at the same time depriving our people of the opportunity of indulging this practice, which I do not advocate myself personally, any more than my friend from Oregon, [Mr. HENDER SON,] but which my people are interested in, because they cannot now obtain cigars at all at a price within their reach. am not a manufacturer of cigars, but deal in them quite largely, and I noticed when we had the graduating tax that it made no difference what price we paid for the cigars the stamps were always the three dollar stamp. I am opposed in toto to a graduating tax. Whatever tax you put on have it uniform. If you adopt the graduated tax you will make a mistake. I believe cigars will pay a ten dollar tax easier than any other." Now, sir, my own impression is that it might be better, if it were practicable, to levy your tax upon the leaf. Without, however, a system of domiciliary visitation all over the country and a numberless swarm of office-holders, you could not collect the tax if levied in that Now, gentlemen may suppose I am adherway. Therefore the Committee of Ways and ing a little too closely to the bill in not allowMeans perhaps properly decided not to attempting or consenting to further exemptions and taxation on the leaf. The next best thing, probably, would be to levy your tax altogether ad valorem, making every cigar, everything connected with this interest, pay taxation in proportion to the value invested and the price at which the article might be sold. That not being done, I propose, by a system of gradation and classification, to reach as nearly as possible what would be something like an ad valorem duty. Gentlemen of the Committee of Ways and Means and others connected with the legislation upon this subject say that you cannot resort to an ad valorem duty for fear of the numberless frauds which will be committed. I do not know how strong that argument ought to be considered. They say the same thing with reference to classification, that it opens the door for more frauds. I think, however, that by a little wholesome legislation we might prevent frauds in either case. But certainly, as a question of principle, just in proportion as you approach the levying of taxation according to the value of the articles taxed, you approach that principle of justice which every man will feel ought to be regarded in apportioning the burdens of the Government. [Here the hammer fell.] Mr. MORRILL. Mr. Chairman, we are all fully aware of the ability and the tenacity of purpose of the gentleman from Ohio, [Mr. SCHENCK.] He does not yield a hair's breadth even when the committee are disposed to accommodate him. I rather think, however, that the Committee of Ways and Means have investigated this subject more extensively than the gentleman from the Dayton district of Ohio, [Mr. SCHENCK,] who appears to have looked at it only on the side of the lowestpriced tobacco. It is an old subject, and one which has been investigated at every session of Congress for the last four years, and one not without its perplexities. But having tested. various provisions of law, tried each in turn, we ought now to profit by experience and hold fast to that which proves the best. The gentleman's colleague [Mr. LAWRENCE] stated that the revenue commission, who had made a report on this subject, had not visited the West. The gentleman was mistaken. The revenue commission did not make any report on this subject, not having the time to devote to it. If they had had more time they doubtless would have fully investigated this question, as they did others. They commenced upon the subject, and took considerable testimony, which will doubtless be of value hereafter, if opportu nity shall be given for the complete investigation of the whole question. The gentleman from Ohio proposes to go back to a system of legislation which we have already tried and found it almost an entire failure. The universal testimony of all the assessors, collectors, inspectors, and other revenue officers here at Washington is against the proposition. Let me, as an illustration, show what the result was when we had a gradation of tax upon cigars. Take the year 1864. The tax upon cigars at three dollars yielded about $1,200,000; at eight dollars, $1,108,743 78; at fifteen dollars, $386,978 42; at twenty-five dollars, $73,442; and at forty dollars, $9,462. This shows conclusively the result of grading the tax will be that almost every cigar taxed will be taxed at the lowest duty. I have a letter from a tobacco manufacturer at Detroit asserting the same fact. He goes on to say: "When I called on you Tuesday last on the tobacco tax I forgot to say a word regarding the cigar tax. I go further reductions. Let me read a letter from a western collector. He says, in effect, that at the next session of Congress we shall have to back to the old rates of taxation, and declares our bill will produce much less revenue than is anticipated. He advises that we move slowly. He also says that the Commissioner is now making a far less stringent enforcement of the law this year than last, and that this will make a wide difference in the revenue. Now, Mr. Chairman, I am opposed entirely to the rate offered by the gentleman from Ohio, and to his whole system of estimating the amount of tax on the value of cigars excluding the tax, on the market value. There is no market value except upon cigars which have paid a tax. It is against the law that they shall be offered in market except those which have paid the tax. Therefore the gentleman's absurdity rests upon his own shoulders entirely. [Here the hammer fell.] Mr. PAINE. I differ altogether with the chairman of the Committee of Ways and Means as to the experience which the Government has had under the late law and under the law now in force. He has told you, and others have told me twenty times since this discussion commenced, that the old cigar tax was a failure, and that the system now in force is far preferable to that or any other. Now I say, sir, that the experience under the law enacted in 1864, and in force for a great part of 1865, and the experience of the country since the law of 1865 went into force, all go to show that the old law is better than the new one. I will refer to the figures. Let us refer to the taxes collected on cigars during the fiscal year ending June 30, 1865. For the first three quarters these taxes were collected under the old and not under the new law, and I call the attention of the committee to the result. The following are the figures which come to us in the report of the Commissioner of Internal Revenue, and from the assertions reiterated again and again in this House I appeal to the figures of that report. In the fiscal year ending June 30, 1865, the old law yielded, from cigars alone, a revenue of $3,048,127 66. That law was replaced by the law now in force, which took effect April 1, 1865, that is to say, at the commencement of the fourth quarter of the fiscal year 1865. But the new law, which was in force during the last quarter, yielded only $24,348 90. Gentlemen will see that the old law was twofold more productive than the new law during the same period of time. values, it was, as a matter of course, necessary that there should be a vast amount of machinery suggested and perfected by experience, and put in force by well prepared regulations. But such machinery was utterly wanting. That system had to run alone, so far as regulations were con cerned. It only ran three quarters of a year, and there was no perfection in the instrumen talities for working out its results. [Here the hammer fell.] Mr. LAWRENCE, of Ohio. The distinguished chairman of the Committee of Ways and Means has reminded us that my colleague [Mr. SCHENCK] adheres to all his purposes with great tenacity. Sir, it is a virtue that he has learned, or might have learned, from the chairman of the Committee of Ways and Means himself. If the revenue commission had made a report upon this subject of the taxation of cigars and tobacco, and if that report had been in accordance with the views of the Committee of Ways and Means, I should have hesitated somewhat before asking this committee to change it. But, as I learn from the chairman of the Committee of Ways and Means, that commission did not investigate this subject at all. They made no report upon it; and I beg this committee, therefore, to remember that in voting down the recommendation of the Committee of Ways and Means they are not voting down the recommendation of the revenue commission. The single question now presented to the committee is this: shall cigars, which are manufactured out of the low-priced tobacco raised in Ohio and other western States, pay an equal amount of tax with cigars manufactured from the more expensive and valuable tobacco raised in Connecticut? That is the question presented for the consideration of the committee, and it seems to me that, as a question of naked justice, the proposition is so bold as to strike the conscience and the judgment of every man who hears me. Mr. Chairman, the value of Ohio tobacco is generally from seven to ten cents per pound; that of Connecticut is twenty-two cents per pound. Now, if you levy the same tax on the cigars made from Connecticut tobacco that you do upon cigars made from Ohio tobacco, each costing an equal amount of labor, the result will be, as it has been under the existing law, that you give a monopoly of the market to the manufacturer of the Connecticut tobacco and drive out of the market the product of the Ohio tobacco. That has been the result under the present law. I can give a single instance in my own district, which, I apprehend, is but an illustration of what occurred elsewhere all over the western States. A farmer raised a small crop of tobacco, and during the winter went to work and manufactured it into cigars himself. When he came to hunt up the assessor, to pay the tax on the cigars, he found that he could not sell the cigars for a sufficient sum to pay the tax. The result was that he was compelled to destroy them. Now, that is to be the result of this bill, if you levy the same tax on cigars manufactured from Connecticut tobacco and those manufactured from Ohio tobacco. The chairman of the Committee of Ways and Means tells us that he is opposed to the whole system of discrimination, to the whole ad valorem system. Why, sir, this very bill makes two grades of cigars, and taxes one two dollars per thousand and the other four dollars. If the principle be correct, extend it a little further, to all grades of tobacco. Now, when we come down to the fiscal year ending the 30th of June, 1866, and contrast the revenue yielded by the new law, for the first three quarters ending on the 31st day of March last, with the revenue yielded in the fiscal year 1865 by the old law, which expired at the end of the first three quarters of 1865, we find the following results, which I read from a statement furnished me by the Commissioner of Internal Revenue. The old law yielded $3,048,126 66, and the new law only $2,556,518 70. From all these figures I say it cannot be demonstrated that the old law was a total failure and the new law a complete success. I appeal from the assumptions and assertions of those who clamor so loudly against an ad Mr. STEVENS. Imove to amend the amendvalorem or a graded tax to the facts and figuresment of the gentleman from Ohio [Mr. SCHENCK) of the Commissioner himself. On the contrary, sir, considering the disadvantages under which that law operated, I declare my conviction that it unmistakably demonstrated the superiority of an ad valorem or graded tax to this dead level duty of the committee. For, under that law, where there was a gradation, and where the taxes were assessed on different [Here the hammer fell.] Mr. LAWRENCE, of Ohio, withdrew his amend ment. by striking out the following: On cheroots and cigars known as short-sixes, and cigars made with pasted heads, the market value of which (exclusive of the tax) is not over eight dollars per thousand, and on all cigarettes and cigars the market value of which (exclusive of the tax) is over six dollars and not over twelve dollars per thousand, a tax of four dollars per thousand. On all cigarettes, cheroots, and cigars, the market value of which (tax included) is over twelve dollars and not over twenty dollars per thousand, a tax of ten dollars per thousand. On all cigarettes, cheroots, and cigars, the market value of which (tax included) is over twenty dollars and not over forty dollars per thousand, a tax of twenty dollars per thousand." On all cigarettes, cigars, and cheroots, the market value of which (tax included) is over forty dollars per thousand, a tax of forty dollars per thousand.. And insert in lieu thereof as follows: On all other cigars four dollars per thousand, and forty per cent, ad valorem, exclusive of the tax: Provided, That in assessing the said ad valorem duty the first ten dollar valuation shall not be assessed. Mr. Chairman, I hardly understand why the Committee of Ways and Means, after the experiment of a year, should insist upon imposing the same amount of tax on cigars worth ten dollars and cigars worth ninety dollars. It is downright, clear, bold-faced robbery. The result of the tax which these gentlemen propose is this: they put a tax of ten dollars on all cigars, no matter what their value. Now, in my county they made of what is called Pennsylvania seed leaf-the same tobacco that is raised in Ohio and New York-a cigar which cost, perhaps, $12 50, and was worth about fifteen dollars. In Connecticut, or where they use the foreign leaf, they make cigars ranging from thirty to ninety dollars. The same tax, ten dollars, was imposed on both. What was the result? The year before that tax was laid, my county raised $2,000,000 worth of tobacco; and this year they do not raise $2,000 worth! The whole tobacco interest of Pennsylvania and New York is crushed out for the benefit of Connecticut. I only state this fact that gent'emen may be enabled to determine whether this heavy tax, which is thus destroying the tobacco interest of a large section of country, and building up that of a very small section, should be persevered in. to value, and it had failed. And I also ex- Mr. STEVENS. It never was tried. The Committee of Ways and Means under- Now, what is the result of the system of taxation the committee now urge upon us to adopt? The tax is, say ten dollars on a thousand cigars. It takes about twenty-eight pounds of tobacco to make a thousand cigars. Mr. GARFIELD. Twenty pounds. Mr. SLOAN. From twenty to twenty-five pounds. That would make the tax about forty cents a pound on the tobacco used. If the tobacco from which the cigars are made is worth twelve cents a pound, that would make the price of tobacco when purchased in cigars about fifty-two cents a pound. If the tobacco used was worth six cents a pound, with the tax it would be worth in cigars about forty-six cents a pound. Remember that the cigars that are worth fifty-two cents a pound are made of tobacco worth twice as much as cigars that are worth forty-two cents a pound, for the tax added to the six cent tobacco is the same as the tax added to the twelve cent tobacco. And I do not like the proposition of the gentleman from Ohio, [Mr. SCHENCK.] He makes rests. Everything should pay according to its value. He makes a rest from ten to twenty dollars. There is no reason why cigars at fifteen and nineteen dollars should not pay in But his the same proportion as those at ten. amendment requires those priced at nineteen to pay just the same as those priced at ten. But if the price goes over that to twenty-one dollars, then the tax is doubled. Now, there is no reason for that. It is honest and just to make the article pay tax according to its value. Gentlemen tell us that you cannot enforce such a tax. Why, sir only two pages before this in the bill, there are five articles on which you lay an ad valorem duty. Is there anything so peculiar in cigars that you cannot collect an ad valorem duty as well as you can on diamonds or anything else? Sir, there was never a system of taxation, foreign or domestic, in England or in our own country, which carried out a system of specific taxes. If you cannot make the tax specific on all articles, make it ad valorem. Tell me it is absurd to carry out this system! It was absurd under the old law be cause of the absurd constructions of the Depart-ducer. ment. They made constructions which gave you no tax at all. They said that it must be thirteen dollars before it could pay eight dollars. The result was that the manufacturers sold the material to the journeymen at a price agreed upon, and then the journeymen sold the manufactured article back at a price agreed upon, which price was assumed to be that upon which the tax was to be calculated. [Here the hammer fell.] Mr. SLOAN. I hope the amendment of the gentleman from Ohio [Mr. SCHENCK] will be adopted. In my judgment, upon it depends the question whether the culture of tobacco in this country shall be confined to a few localities or whether it shall extend over a very large portion of the country, as it was extending very rapidly before the last revenue law went into operation. I expected to hear from the chairman of the Committee of Ways and Means, [Mr. MorRILL,] when this amendment was proposed, the assertion which he has made, that we had tried the system of imposing taxes according the difference between six cents and twelve Now, any person will purchase the cigar at Mr. MORRILL. I move to amend the para- The complaints which were made in relation to this matter have, I believe, been fully met by the proposition offered by the Committee of Ways and Means, which was to allow the tobacco made in the district of the gentleman from Ohio to be manufactured into a certain description of cigars at a very low rate of tax. By the proposition as it now stands cigarettes or small cigars, and cigars made with twisted heads-the peculiar kind manufactured in the section of country which the gentleman represents-the market value of which does not exceed eight dollars per thousand, will pay a tax of two dollars per thousand; and where the market value exceeds eight dollars and is not over twelve dollars, the tax will be four dollars. This, I think, meets all the actual wants of the gentleman's district. At any rate the Committee of Ways and Means were so informed by more than one gentleman interested in the manufacture. And the gentleman has already succeeded in reducing the tax on smoking-tobacco-if the House should allow it so to remain, as I hope it will not-from twenty cents to ten cents per pound, while as the law now stands it is twenty-five cents. But the gentleman from Wisconsin [Mr. PAINE] has asserted that this system of taxation which he urges has not proved a failure. I gave the facts connected with the operation of that law, showing that we received a very contemptible and insignificant sum upon all the higher rates; that the only considerable amount of revenue that we did derive from that source was at the lowest rate fixed in the tax bill, three dollars per thousand. I have the statement of the Commissioner of Internal Revenue on this subject up to as late a date as March 5; and by this statement it appears that the amount of increase on cigars is five per cent.; on snuff eighty-seven per cent. ; on tobacco (chewing and smoking) fortyfive per cent. In relation to the amendment of the gentleman from Pennsylvania, I do think that it will create a great amount of difficulty in ascertaining the value. The gentleman is mistaken if he supposes that we have not laws that are identical in principle with levying a uniform tax upon cigars. Take an article manufactured in his own district-old rye--the true "J. B., of which the gentleman so well understands the value, which is made in these little copper stills, and sells for two dollars a gallon without any tax whatever; whereas whisky made from corn in the district of the gentleman from Peoria [Mr. INGERSOLL] will not bring more than fifteen cents per gallon without any tax. Yet we impose a uniform rate of duty upon whisky, whether made in the district of the gentleman from Pennsyl vania or in that of the gentleman from Illinois. Now, Mr. Chairman, all experience is against the system of taxation which it is urged should be applied to the subject of tobacco. The experience of the country which has been cited is directly in the teeth of the arguments, for no matter what the value of the tobacco the same rate of duty is levied. Mr. LAWRENCE, of Ohio. They raise no tobacco in England. Mr. BOUTWELL. Mr. Chairman, I think that the committee upon examination will see that the proposition of the gentleman from Ohio, to levy a tax upon the value of the cigars exclusive of the tax, is a very unwise provision. We tried that system in the beginning of the operation of the internal revenue law upon a great many articles made by manufac turers. Under that system we were expose to every kind of fraud, which we resisted for a time by construction of the statute until the difficulty was remedied by legal enactment, Hence I think that the first thing to be agreed to is that the rule of taxation in the matter of cigars shall be the same that we apply in other cases, a tax upon the article at its value, the tax included. There is no other safe method of proceeding. Under any other system we shall experience all sorts of frauds. Now, the committee propose that upon various kinds of cigars, the market value of which is not over eight dollars per thousand, |