PAPERS ACCOMPANYING THE borne by those who have the benefit of the circulation. The expense to which the issuing banks are subject is in some degree counterbalanced by the privilege which they have of sending unassorted bank-notes to the Treasury for redemption, and by the repeal of the provision requir ing reserve upon circulation. Letters upon this subject have been received by the Comptroller from the oflicers of many leading banks, and it is their almost universal opinion that the redemption of bank-notes should, at least for the present, be performed by the government and not by private corporations. Section 5173 of the Revised Statutes provides that the expenses of this Office shall be paid out of the proceeds of the taxes or duties assessed and collected on the circulation of the national banks. This tax, from the organization of the system to July 1, 1875, amounts to $30,836,937, while the expenses of the Bureau and of the printing and preparation of the notes have been but $3,689,617.64. The tax on deposits was imposed as a war-tax; and as other similar war-taxes have been repealed, the national banks claim that this tax also should be repealed. The amount of taxation to which the national banks are subject (the average rate, including State and national, being about four per cent. per annum) is much greater than that imposed upon any other capital in the country; and it seems but just that the tax on deposits should be remitted. Under existing law, the assorting, redemption, and destruction of the notes of banks in liquidation, or which are retiring their circulation, is required to be done at the expense of the government. This expense has, during the past year, been borne chiefly by the banks; and the amount of this class of currency to be redeemed during the next year is estimated to be about one-eighth of the whole issue, for which purpose there will probably be on deposit with the government not less than an average of $20,000,000, in addition to the redemption fund of about $16,000,000. If the tax on deposits be not repealed, the Comptroller recommends that Congress authorize an appropriation of an amount sufficient to defray the expenses of redemption, to be paid from the taxes collected from the national banks, now amounting, annually, to more than seven millions of dollars. The banks will then still contribute the greater portion of the expense, through the permanent deposit by them of legaltenders in the Treasury as a redemption fund; while the trifling cost of redemption will be more than counterbalanced by the constant purification of the currency and the permanent reduction of exchange throughout the country to a minimum rate. Under the present system of redemption the Treasurer transmits by express legal-tender notes in payment of unassorted nationalbank notes received by him. Many of the banks prefer that such returns should be placed to their credit with their correspondents in the commercial cities; and if such transfers can be made at the option of the transmitting bank, a large amount of expense will be saved to them, and one of the principal objections to the present system obviated. The following table exhibits the number and amount of national-bank notes, of each denomination, which have been issued and redeemed since the organization of the system, and the number and amount outstanding on November 1, 1875: 95, 401, 692 54, 148, 500 41, 253, 192 | 668, 988, 000 *325, 811, 977 343, 183, 228 30 * Deduct from the amount redeemed $7,205.30, for payments of notes lost or destroyed. The following table exhibits the increase and deorease, by number and amount, of each denomination of national-bank notes issued during the year ending November 1, 1875; from which it will be seen that while the notes of the denominations of ones, twos, and fives have largely decreased during the past year, there has been a considerable increase in the notes of higher denominations, particularly of the tens and twenties: The following table shows the amount of national-bank notes received at this Office and destroyed yearly, since the organization of the system : Prior to November 1, 1865..... $175, 490 1,050, 3×2 During the year ending October 31, 1866.. During the year ending October 31, 1874.. During the year ending October 31, 1875... Additional amount destroyed of notes of banks in liquidation. Total...... TAXATION. 325,804,771 The Comptroller in September last issued a circular addressed to the national banks, requesting returns of State taxation for the years 1874 and 1875. The assessment for 1875 had not generally been made at that time, and the returns for that year were therefore meager. The number of banks in operation during the year 1874 was nineteen hun dred and seventy-seven, forty-one of which paid no State taxes because they were organized after the assessment for the year had been made. and thirty-six failed to reply. Returns were, however, received froz nineteen hundred banks, having a capital of $476,836,031. The thirt six banks which made no returns had a capital of $16,800,000. The returns made to the Treasurer for 1874 were classified by States in this Office, and the following table prepared, giving the amout of United States and State taxes and the rate of taxation in every State in the Union for that year.. * Including the capital of bank. from which returns of the amount of State taxation were pet mont Similar tables will be found in the appendix, giving returns by States for 1867 and 1869. An examination of these three tables will show that the State of Nei York paid the highest bank-taxes of any of the Eastern or Middle States the United States taxes for that State in the years named being respect ively 2.6, 2.6,and 1.9 per cent., and the State taxation 3.5, 2.7, and 2.9: cent.; totals, in 1867, 6.1, in 1869, 5.3, and in 1874, 4.8 per cent. The corresponding totals for New Jersey were, in 1867, 4.2; in 1869, 4.2, and in 1874, 3.6 per cent.; for Pennsylvania, in 1867, 3.; in 1869, 3.2; and in 1874, 2.3; for Massachusetts, in 1867, 4.0; in 1869, 3.7, and in 1874, 3.4; for Maine, 3.5, 3.9, and 3.2; New Hampshire, 3.8, 4.1, and 3.2; Connecti cut, 3.3, 3.4, and 2.9; and in the remainder of the Eastern and Middle States more than 2 per cent. in 1874, with the exception of Delaware, which paid but 1.8 per cent. Of the Western States, the national banks in Ohio paid the following percentage of taxation: in the year 1867, 4.6; in the year 1869, 5.5, and in the year 1874, 3.6. In the State of Indiana for the same years the percentage was 3.7, 4.1, and 3.8. In Illinois it was 4.8, 4.8, and 4.0; in Michigan, 3.5, 3.2, and 2.8; in Missouri, 3.4, 3.7, and 3.3; in Wisconsin, 4.7, 4.9, and 4.1; Minnesota, 3.3, 4.2, and 3.5; Kansas, 4.5, 8.4, and 4.8; Nebraska, 7.1, 6.4, and 5.3. Of the Southern States, South Carolina paid the following percentages: 3.4 in 1869, and 4.7 in 1874; Tennessee, 4.1, 2.7, and 3.7, in the three years named; and the remainder of the Southern States paid in 1874 more than 3 per cent., with the exception of Louisiana and Alabama, which paid 2.9, and of Kentucky, which paid but 1.6 per cent. Returns were also received from the national banks in 1866, which vere not tabulated by States. The United States taxes for that year were $8,069,938; State taxes, $7,949,451; total, $16,019,389. An estimate of the total taxation of the national banks for the ten years ending in 1875 has been made, by assuming the rate of State taxation in the years in which no returns were made to this Office to have been the same as the known rate in the years which immediately preceded them. For the years 1872 and 1873 the necessary allowance has been made in the estimate for the amount of the income and license tax and the stamp-tax on promissory notes, which taxes had then been repealed. Such estimate is shown in the following table: * Capital of banks reporting State taxes, $476,836,031. The Comptroller has heretofore, in his reports, called the attention of Congress to the fact that while the national banks are subject to a tax upon their entire capital (which can be easily ascertained from their books and reports,) and not unfrequently upon the market value of their shares, the capital and shares of other corporations, the amount and value of which can be as readily ascertained by appropriate legislation, are assessed at not one-half of their value; while private firms and individuals are almost wholly exempted from bearing their share of the barden. Letters recently received by the Comptroller from the presidents of two principal banks-one in the East and the other in the West-refer to this greatest of all economical subjects in such plain terms, that he cannot forbear calling the attention of Congress to their suggestions. Many of the shareholders of the national banks depend for their income chiefly upon the earnings of these institutions; and it does not seem just that these thousands of shareholders shall, by any construction of law, be compelled to pay an undue proportion of the taxes of the country. It is submitted that the law, as now interpreted by different State courts and by assessors and collectors, is neitheir equitable nor honest. A national bank in one of the eastern cities recently refused to pay its taxes, on the ground that the shares of a neighboring State bank were assessed at no greater value than its own, though worth several times as much. The court is understood to have held that the bank had no right to complain, since its shares were not taxed above their value; and that it was not for it to consider whether the shares of other banks of much greater value were taxed at the same rate. The tax commissioners of New York city propose to tax the banks of that city, national and State, not only upon the full par value of their shares but on the total amount of their surplus, without any allowance or abatement. In consequence of this purpose a committee, composed of officers of five principal banks in that city, was appointed to confer with the commissioners. The law of New York provides, in substance. that so much of the property of individual stockholders as is held by them in bank-stock is liable to be taxed for the value of the shares; and a penalty is prescribed if any bank allows the transfer of shares after the tax has become due and before it is paid. The banks in New York City, in order to avoid annoyance and vexatious suits, have for several years paid the tax (about three per cent. annually) to the city direct, instead of leaving it for the stockholders to pay; and the chairman of the committee, in his communication, writes as follows: The tax commissioners refuse to allow time either for a decision by the State court of last resort or for appeal to the legislature for redress. They take the ground that, as they must be governed by what the courts say is the law, and as the courts have spoken, they must act, aud act before the 1st of January, 1876. We reply, substantially as follows: 1st. We speak for national banks, and say they owe their existence to the laws of Congress, and not to the legislature of New York. Congress expressly exempts the surplus of national banks from taxation for wise and obvious reasous. It desires to build up strong instead of weak bauks, for the safety and benefit of the public, no less than for the profit and advantage of the stockholders. On the other hand, if local taxation is to be exercised without any restriction on the part of the United States, then national banks may be taxed out of existence, and State banks substituted, with all the concomitant evils that may arise. For it is certain that, if existing profits of banks now held as a surplus fund are to be subject to an additional tax of three per cent., that fund will be divided among the shareholders, for the simple reason that no bank could afford to carry it. 2d. The construction of the State law by the tax commissioners seems to the committee unsound; for the law says the tax is to be levied on the raine of the shares; not the market value, or intrinsic value, but "value." And the practice heretofore has been in accordance with law, on the supposition that, without any qualifying word, par was understood. The tax has been laid accordingly. Again, the rule of taxation, as adopted by the tax commissioners, has been a practical violation of the United States law, which says the capital of banks shall not be taxed at a higher rate than is assessed on other personal property. Whereas the city (not the country) has taxed the shares at $100 each, if that were the par; while other real and personal property was taxed at only sixty dollars on every hundred dollars. A bank, for instance, of $200,000 capital, is taxed on that sum; while an individual worth that would be taxed on $120,000, This is unjust, oppressive, and ought to be illegal. 3d. But we claim that the State has no right whatever to tax national banks, excepting to the extent that such right is explicitly granted by the United States law. This principle is made quite emphatic by the United States Supreme Court in the recent |