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of the Bank of England notes during the Napoleonic wars, it is reasonable to suppose that the war might have been carried on for six months or a year longer and possibly to the end; provided also that the Secretary of the Treasury had made a proper construction of section 2 of the Act of February 25, which authorized him to dispose of the 500 millions 5–20 six per cents at their market value for coin or for Treasury notes. Chase construed market value to mean par, the result of this construction being very different from what would have been obtained if the bonds had been sold in the market for what they would fetch. The difference of the plans was the difference between a forced loan without interest and a voluntary loan secured by selling the bonds at their real market value. Our financiers who carried through their scheme were victims of the illusion that to make money by legislation was cheaper and better than to obtain it by bargaining. 1 4 Congress at this session 2 authorized the President to take possession of the railroads and telegraph lines when necessary for the public safety, 3 and it created a comprehensive and searching scheme of internal taxation, which became a law by the President’s approval on July 1 and may be briefly described as an act taxing everything, framed on the principle, “Whenever you find an article, a product, a trade, a profession or a source of revenue tax it.” 4 This Congress was further notable in imposing for the first time in our history a graduated federal income tax. A tax of three per cent on incomes less than $10,000 and of five per cent on incomes over $10,000, with an exemption of $600

Note 1. Spaulding; III; Dewey; Fessenden, I; J. Sherman Rec., I; Hart’s Chase. [back]

Note 2. 2d Sess. 37 Cong. lasting from Dec. 2, 1861 to July 17, 1862. [back]

Note 3. Approved Jan. 31. [back]

Note 4. Wells, Dewey, 301. [back]

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