To this must be added the interest upon about
$120,000,000 of 7. 30 notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,760,000
And upon $60,000,000 of 6 per cent. Certificates. . . . . . . 3,600,000
Also the interest upon 8 per cent. bonds and stock,
say about $100,000,000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000,000
This amount shows the lowest figures which should be raised by the tax. The soundest considerations of policy would add as largely to this sums as the people of our country can bear. If the tax be made payable in all kinds of Treasury notes it would absorb so much of the first issues, and by reducing the amount to be funded would abate the force of the objections to the scheme. If $600,000,000 of notes could be thus called in the benefits resulting would fully counterbalance every possible hardship - the currency would promptly recover its value, the bonds would become an object of investment instead of being thrown on the market, and a sure and steady system of finance would be established. A tax of 1 per cent. on property, if it could be made as productive as last year's, would raise twice the amount of the last war tax, say $40,000,000. But inasmuch as portions of the States are in the hands of the enemy it would be proper to make a deduction of probably one-tenth, which would leave the amount at only $36,000,000. This sum would be subject to still further abatement so long as the decision of the Confederate court of South Carolina as to the power of Congress to tax State bonds remains unreversed. The very large amount of money invested in this form was included in the war-tax act of the last year, and the tax thereon was paid everywhere, except by those who raised the question in South Carolina. For the ensuing year the case would be different. If the same tax were laid by Congress it is probable that the holders of State bonds would claim exemption under this decision, and Congress itself might be unwilling to re-enact in the same form a law which had been declared unconstitutional by the co-ordinate branch of the Government until that decision is reversed. The question is of such magnitude and involves such great interests that an appeal was taken. But this appeal cannot be decided until a supreme court shall be organized. It may be worthy, therefore, of the consideration of Congress whether the question should not be raised in another form by taxing the income of the bonds in the hands of the citizens. The taxing power over income in the hands of the citizens for consumption may be distinguished from that over State bonds specifically as property. In my view both are constitutional, and the public interests demand that every proper effort should be made to insure consideration of the question in all its aspects. In either case, however, the tax would probably prove unproductive until the question shall be finally decided.
It is necessary, therefore, to estimate for an abatement on the tax of last year. Assuming $100,000,000 as the probable amount invested in State securities, a tax of 1 per cent. would amount to $1,000,000, and so much must therefore be abated from the estimate. In estimating the rate of a tax on incomes the only basis to which I can refer is the value of the entire property in the eleven Confederate States. It may be assumed that the net income of this property is measured by the average rate of legal interest of the money which represents its value. If the tax were laid upon net income and that income were faithfully returned, it could in this way be estimated with some degree of accuracy. But the devices are so many by which a return of net income can be evaded as to make such returns unreliable. A resort to gross