To the Senate:
I herewith return without approval Senate bill No. 139, entitled "An act to credit and pay to the several States and Territories and the District of Columbia all moneys collected under the direct tax levied by the act of Congress approved August 5, 1861."
The object of this bill is quite clearly indicated in its title. Its provisions have been much discussed in both branches of Congress and have received emphatic legislative sanction. I fully appreciate the interest which it has excited and have by no means failed to recognize the persuasive presentation made in its favor. I know, too, that the interposition of Executive disapproval in this case is likely to arouse irritation and cause complaint and earnest criticism. Since, however, my judgment will not permit me to assent to the legislation proposed, I can find no way of turning aside from what appears to be the plain course of official duty.
On the 5th day of August, 1861, a Federal statute was passed entitled "An act to provide increased revenue from imports, to pay interest on the public debt, and for other purposes."
This law was passed at a time when immense sums of money were needed by the Government for the prosecution of a war for the Union, and the purpose of the law was to increase in almost every possible way the Federal revenues. The first seven sections of the statute were devoted to advancing very largely the rates of duties on imports, and to supplement this the eighth section provided that a direct tax of $20,000,000 should be annually laid and that certain amounts therein specified should be apportioned to the respective States. The remainder of the law, consisting of fifty sections, contained the most particular and detailed provisions for the collection of the tax through Federal machinery.
It was declared, among other things, that the tax should be assessed and laid on all lands and lots of ground, with their improvements and dwelling houses; that the annual amount of said taxes should be a lien upon all lands and real estate of the individuals assessed for the same, and that in default of payment the said taxes might be collected by distraint and sale of the goods, chattels, and effects of the delinquent persons.
This tax was laid in execution of the power conferred upon the General Government for that purpose by the Constitution. It was an exercise of the right of the Government to tax its citizens. It dealt with individuals, and the strong arm of Federal power was stretched out to exact from those who owed it support and allegiance their just share of the sum it had decreed should be raised by direct taxation for the general good. The lien created by this tax was upon the land and real estate of the "individuals" assessed for the same, and for its collection the distraint and sale of personal property of the "persons delinquent" were permitted.
But while the direct relationship and responsibility between the individuals taxed and the Federal Government were thus created by the exercise of the highest attribute of sovereignty, it was provided in the statute that any State or Territory and the District of Columbia might lawfully "assume, assess, collect, and pay into the Treasury of the United States" its quota of said tax in its own way and manner and by and through its own officers, assessors, and collectors; and it was further provided that such States or Territories as should give notice of their intention to thus assume and pay or to assess, collect, and pay into the Treasury of the United States such direct tax, should be entitled, in lieu of the compensation, pay, per diem, and percentage in said act prescribed and allowed to assessors, assistant assessors, and collectors of the United States, to a deduction of 15 per cent of the quota of direct tax apportioned to such States or Territories and levied and collected through their officers.
It was also provided by this law and another passed the next year that certain claims of the States and Territories against the United States might be applied in payment of such quotas. Whatever may be said as to the effect of these provisions of the law, it can hardly be claimed that by virtue thereof or any proceedings under them the apportioned quotas of this tax became debts against the several States and Territories, or that they were liable to the General Government therefor in every event, and as principal debtors bound by an enforceable obligation.
In the forty-sixth section of the law it is provided that in case any State, Territory, or the District of Columbia, after notice given of its intention to assume and pay or to levy, collect, and pay said direct tax apportioned to it, should fail to pay the amount of said direct tax, or any part thereof, it should be lawful for the Secretary of the Treasury to appoint United States officers as in the act provided, whose duty it should be to proceed forthwith to collect all or any part of said direct tax "the same as though said State, Territory, or District had not given notice nor assumed to levy, collect, and pay said taxes or any part thereof."
A majority of the States undertook the collection of their quotas and accounted for the amount thereof to the General Government by the payment of money or by setting off claims in their favor against the tax. Fifteen per cent of the amount of their respective quotas was retained as the allowance for collection and payment. In the Northern, or such as were then called the loyal States, nearly the entire quotas were collected and paid through State agencies. The money necessary for this purpose was generally collected from the citizens of the States with their other taxes, and in whatever manner their quotas may have been canceled, whether by the payment of money or setting off claims against the Government, it is safe to say, as a general proposition, that the people of these States have individually been obliged to pay the assessments made upon them on account of this direct tax and have intrusted it to their several States to be transmitted to the Federal Treasury.
In the Southern States, then in insurrection, whatever was actually realized in money upon this tax was collected directly by Federal officers without the interposition of State machinery, and a part of its quota has been credited to each of these States.
The entire amount applied upon this tax, including the 15 per cent for collection, was credited to the several States and Territories upon the books of the Treasury, whether collected through their instrumentalities or by Federal officers.
The sum credited to all the States was $17,359,685.51, which includes more than $2,000,000 on account of the 15 per cent allowed for collecting. Of the amount credited only about $2,300,000 is credited to the insurrectionary States. The amount uncollected of the twenty millions directed to be raised by this tax was $2,646,314.49, and nearly this entire sum remained due upon the quotas apportioned to these States.
In this condition of affairs the bill under consideration directs the Secretary of the Treasury "to credit to each State and Territory of the United States and the District of Columbia a sum equal to all collections, by set-off or otherwise, made from said States and Territories and the District of Columbia, or from any of the citizens or inhabitants thereof, or other persons, under the act of Congress approved August 5, 1861, and the amendatory acts thereto." An appropriation is also made of such a sum as may be necessary to reimburse each State, Territory, and the District of Columbia for all money found due to it under the provisions of the bill, and it is provided that all money still due to the United States on said direct tax shall be remitted and relinquished.
The conceded effect of this bill is to take from the money now in the Treasury the sum of more than $17,000,000, or, if the percentage allowed is not included, more than $15,000,000, and pay back to the respective States and Territories the sums they or their citizens paid more than twenty-five years ago upon a direct tax levied by the Government of the United States for its defense and safety.
It is my belief that this appropriation of the public funds is not within the constitutional power of the Congress. Under the limited and delegated authority conferred by the Constitution upon the General Government the statement of the purposes for which money may be lawfully raised by taxation in any form declares also the limit of the objects for which it may be expended.
All must agree that the direct tax was lawfully and constitutionally laid and that it was rightfully and correctly collected. It can not be claimed, therefore, nor is it pretended, that any debt arose against the Government and in favor of any State or individual by the exaction of this tax. Surely, then, the appropriation directed by this bill can not be justified as a payment of a debt of the United States.
The disbursement of this money clearly has no relation to the common defense. On the contrary, it is the repayment of money raised and long ago expended by the Government to provide for the common defense.
The expenditure can not properly be advocated on the ground that the general welfare of the United States is thereby provided for or promoted. This "general welfare of the United States," as used in the Constitution, can only justify appropriations for national objects and for purposes which have to do with the prosperity, the growth, the honor, or the peace and dignity of the nation.
A sheer, bald gratuity bestowed either upon States or individuals, based upon no better reason than supports the gift proposed in this bill, has never been claimed to be a provision for the general welfare. More than fifty years ago a surplus of public money in the Treasury was distributed among the States; but the unconstitutionality of such distribution, considered as a gift of money, appears to have been conceded, for it was put into the State treasuries under the guise of a deposit or loan, subject to the demand of the Government.
If it was proposed to raise by assessment upon the people the sum necessary to refund the money collected upon this direct tax, I am sure many who are now silent would insist upon the limitations of the Constitution in opposition to such a scheme. A large surplus in the Treasury is the parent of many ills, and among them is found a tendency to an extremely liberal, if not loose, construction of the Constitution. It also attracts the gaze of States and individuals with a kind of fascination, and gives rise to plans and pretensions that an uncongested Treasury never could excite.
But if the constitutional question involved in the consideration of this bill should be determined in its favor, there are other objections remaining which prevent my assent to its provisions.
There should be a certainty and stability about the enforcement of taxation which should teach the citizen that the Government will only use the power to tax in cases where its necessity and justice are not doubtful, and which should also discourage the disturbing idea that the exercise of this power may be revoked by reimbursement of taxes once collected. Any other theory cheapens and in a measure discredits a process which more than any other is a manifestation of sovereign authority.
A government is not only kind, but performs its highest duty when it restores to the citizen taxes unlawfully collected or which have been erroneously or oppressively extorted by its agents or officers; but aside from these incidents, the people should not be familiarized with the spectacle of their Government repenting the collection of taxes and restoring them.
The direct tax levied in 1861 is not even suspected of invalidity. There never was a tax levied which was more needed, and its justice can not be questioned. Why, then, should it be returned?
The fact that the entire tax was not paid furnishes no reason that would not apply to nearly every case where taxes are laid. There are always delinquents, and while the more thorough and complete collection of taxes is a troublesome problem of government, the failure to solve the problem has never been held to call for the return of taxes actually collected.
The deficiency in the collection of this tax is found almost entirely in the insurrectionary States, while the quotas apportioned to the other States were, as a general rule, fully paid; and three-fourths or four-fifths of the money which it is proposed in this bill to return would be paid into the treasuries of the loyal States. But no valid reason for such payment is found in the fact that the Government at first could not, and afterwards, for reasons probably perfectly valid, did not, enforce collection in the other States.
There were many Federal taxes which were not paid by the people in the rebellious States; and if the nonpayment by them of this direct tax entitles the other States to a donation of the share of said taxes paid by their citizens, why should not the income tax and many other internal taxes paid entirely by the citizens of loyal States be also paid into the treasuries of these States? Considerations which recognize sectional divisions or the loyalty of the different States at the time this tax was laid should not enter into the discussion of the merits of this measure.
The loyal States should not be paid the large sums of money promised them by this bill because they were loyal and other States were not, nor should the States which rebelled against the Government be paid the smaller sum promised them because they were in rebellion and thus prevented the collection of their entire quotas, nor because this concession to them is necessary to justify the proposed larger gifts to the other States.
The people of the loyal States paid this direct tax as they bore other burdens in support of the Government, and I believe the taxpayers themselves are content. In the light of these considerations I am opposed to the payment of money from the Federal Treasury to enrich the treasuries of the States. Their funds should be furnished by their own citizens, and thus should be fostered the taxpayer's watchfulness of State expenditures and the taxpayer's jealous insistence upon the strict accountability of State officials. These elements of purity and strength in a State are not safely exchanged for the threatened demoralization and carelessness attending the custody and management of large gifts from the Federal Treasury.
The baneful effect of a surplus in the Treasury of the General Government is daily seen and felt. I do not think, however, that this surplus should be reduced or its contagion spread throughout the States by methods such as are provided in this bill.
There is still another objection to the bill, arising from what seems to me its unfairness and unjust discrimination.
In the case of proposed legislation of at least doubtful constitutionality and based upon no legal right, the equities which recommend it should always be definite and clear.
The money appropriated by this bill is to be paid to the governors of the respective States and Territories in which it was collected, whether the same was derived through said States and Territories, or directly "from any of the citizens or inhabitants thereof or other persons;" and it is further provided that such sums as were collected in payment of this Federal tax through the instrumentality of the State or Territorial officials, and accounted for to the General Government by such States and Territories, are to be paid unconditionally to their governors, while the same collected in payment of said tax by the United States, or, in other words, by the Federal machinery created for that purpose, are to be held in trust by said States or Territories for the benefit of those paying the same.
I am unable to understand how this discrimination in favor of those who have made payment of this tax directly to the officers of the Federal Government, and against those who made such payments through State or Territorial agencies, can be defended upon fair and equitable principles. It was the General Government in every case which exacted this tax from its citizens and people in the different States and Territories, and to provide for reimbursement to a part of its citizens by the creation of a trust for their benefit, while the money exacted in payment of this tax from a far greater number is paid unconditionally into the State and Territorial treasuries, is an unjust and unfair proceeding, in which the Government should not be implicated.
It will hardly do to say that the States and Territories who are the recipients of these large gifts may be trusted to do justice to its citizens who originally paid the money. This can not be relied upon; nor should the Government lose sight of the equality of which it boasts, and, having entered upon the plan of reimbursement, abandon to other agencies the duty of just distribution, and thus incur the risk of becoming accessory to actual inequality and injustice.
If in defense of the plan proposed it is claimed that exact equality can not be reached in the premises, this may be readily conceded. The money raised by this direct tax was collected and expended twenty-seven years ago. Nearly a generation has passed away since that time. Even if distribution should be attempted by the States and Territories, as well as by the Government, the taxpayers in many cases are neither alive nor represented, and in many other cases if alive they can not be found. Fraudulent claims would often outrun honest applications and innumerable and bitter contests would arise between claimants.
Another difficulty in the way of doing perfect justice in the operation of this plan of reimbursement is found in the fact that the money to be appropriated therefor was contributed to the Federal Treasury for entirely different purposes by a generation many of whom were not born when the direct tax was levied and paid, who have no relation to said tax and can not share in its distribution. While they stand by and see the money they have been obliged to pay into the public Treasury professedly to meet present necessities expended to reimburse taxation long ago fairly, legally, and justly collected from others, they can not fail to see the unfairness of the transaction.
The existence of a surplus in the Treasury is no answer to these objections. It is still the people's money, and better use can be found for it than the distribution of it upon the plea of the reimbursement of ancient taxation. A more desirable plan to reduce and prevent the recurrence of a large surplus can easily be adopted-one that, instead of creating injustice and inequality, promotes justice and equality by leaving in the hands of the people and for their use the money not needed by the Government "to pay the debts and provide for the common defense and general welfare of the United States."
The difficulties in the way of making a just reimbursement of this direct tax, instead of excusing the imperfections of the bill under consideration, furnish reasons why the scheme it proposes should not be entered upon.
I am constrained, upon the considerations herein presented, to withhold my assent from the bill herewith returned, because I believe it to be without constitutional warrant, because I am of the opinion that there exists no adequate reasons either in right or equity for the return of the tax in said bill mentioned, and because I believe its execution would cause actual injustice and unfairness.