share of public attention. These taxes realized $8,695,908 for the past fiscal year, apportioned as follows: Amount of tax collected from capital and deposits of banks for year ended May 31, 1877...... Value of stamps imprinted on checks..... Amount of tax collected from matches...... $3,824, 299 $1,277,776 1,889, 334 2,982, 275 If the financial interests of the government would warrant so great a reduction in its revenues, it seems to me that in selecting objects to be relieved from taxation these would commend themselves strongly to the law-making power. If, however, in view of the falling off of the receipts from customs it is deemed inexpedient to reduce the revenues by so large an amount, it occurs to me that if any reduction be made from the above sources, the law taxing matches could with very great propriety be repealed. This tax is levied upon an article that enters into universal consumption, and more than doubles the cost of the article taxed in the hands of the manufacturers. It will be seen by the tables heretofore given, that the taxable capital and deposits of banks and bankers are $774,077,269, and that the tax is one-half of one per cent. on that amount. I apprehend that no object could be selected for taxation that could more easily bear the burdens imposed upon it than the capital and deposits of banks and bankers. The tax of $1,889,334 realized from stamps upon checks is collected at very inconsiderable cost to the government, and as it is realized from nearly ninety-four and a half millions of transactions it is not burdensome to those who pay it. RATE OF TAXATION ON SPIRITS AND TOBACCO. I have given considerable attention to the question of changing the rate of taxation on spirits and tobacco, and have come to the conclusion that the interests of the government and of the manufacturers and dealers will be subserved by allowing the rates of taxation to remain undisturbed. Any proposition in Congress to change the rate of taxation operates as a disturbing element in the due course of business of distillers and manufacturers, and I think I am stating the sentiments of the great majority of persons who are interested in the production of such taxable articles when I say that they prefer that the rate of taxation shall not be disturbed. The business of the country has adjusted itself to the changes made by the act of March 3, 1875, and I think it would be a serious embarrassment to the interests involved to either change the rate of taxation or even to make a serious effort to do so in Congress. In this connection I will state, in my opinion it would be a great mistake to relieve from taxation brandy produced from apples, peaches, or grapes. From the 1st of January to the 30th September of this year the sum of $854,710.95 has been collected from these sources, and it is probable that by the time the fruit-brandy season is over this sum will be augmented to $1,250,000. The fact that so large a sum would be subtracted from the current receipts by such legislation would seem to be sufficient reason why an act of the kind should not be passed, but I am satisfied that this sum does not represent the true amount that would be lost to the government by such an act. If fruit-brandies could legally be placed upon the market free of tax, the production of such spirits would, in my opinion, be increased from 1,390,000 gallons to 20,000,000 gallons per annum, and at great advantage be brought into competition with spirits produced from grain, which would very seriously impair the production of such spirits, and necessarily reduce the amount of taxes derived from that source. With such a crop of fruit as has been produced during the present season, in the absence of a tax upon fruit-brandies, I should expect to see the tax upon distilled spirits fall off at least ten or twelve millions of dollars. Besides, wherever illicit spirits could be produced from grain, large quantities would be thrown upon the market in the shape of a spurious article of fruit-brandy, with the expectation of avoiding the tax. The law and regulations now in force in respect to the production of fruit-brandy and the payment of the tax thereon are sufficiently liberal to enable persons who wish honestly to pursue the business of producing the same to do so without serious embarrassment. I would, therefore, recommend that no change be made in the law in respect to the tax upon fruit-brandy. SUPPRESSION OF FRAUDS UPON THE REVENUE. I desire to call your special attention to the fact that for a number of years the illicit manufacture and sale of spirits and tobacco have been carried on very extensively in portions of the following-named districts: First and second Alabama; third Arkansas; second and third Georgia; second, fifth, eighth, and ninth Kentucky; fourth Maryland; second Missouri; twenty-third Pennsylvania; fourth, fifth, and sixth North Carolina; second, fifth, and eighth Tennessee; third Texas; second, fourth, fifth, and sixth Virginia; and first and second West Virginia. The extent of these frauds would startle belief. I can safely say that during the past year not less than three thousand illicit stills have been operated in the districts named. These stills are of a producing capacity of from ten to fifty gallons per day. They are usually located at inaccessible points in the mountains, away from the ordinary lines of travel, and are generally owned by unlettered men of desperate character, armed and ready to resist the officers of the law. When occasion requires, they come together in companies of from ten to fifty persons, gun in hand, to drive the officers out of the country. They resist as long as resistance is possible, and when their stills are seized and they themselves are arrested, they plead ignorance and poverty, and at once crave the pardon of the government. The illicit tobacco mauufacturers are of a different class. They are usually educated and intelligent men of property. The most extensive frauds brought to light in this branch of business were perpetrated in the fifth district of North Carolina, where, in the spring of 1877, fourteen factories were seized and twenty-three persons arrested. Careful estimates place the amount of tax out of which the government is annually defrauded by the illicit manufacture and sale of spirits and tobacco at not less than $2,000,000. These frauds had become so open and notorious, and were of such an extensive character, that I became satisfied extraordinary measures would be required to break them up. Collectors were enjoined to observe increased vigilance and were each authorized to employ from five to ten additional deputies, and were directed to thoroughly police their respective districts and seize all illicit distilleries and tobacco factories. Experienced revenue agents of perseverance and courage were assigned to duty to co-operate with the collectors. United States marshals were called upon to co operate with the collectors and to arrest all persons known to have violated the laws, and district attorneys were enjoined to prosecute all offenders. In certain portions of the country many citizens, not guilty of violating the law themselves, were in strong sympathy with those who did violate it, and the officers in many instances found themselves unsupported in the execution of the laws by a healthy state of public opinion. The distillersever ready to forcibly resist the officers-were, I have no doubt, at times treated with considerable harshness. This occasioned much indignation on the part of those who sympathized with the law-breakers, and the officers were repeatedly threatened with prosecution under State laws. In North Carolina, after the arrest of a number of illicit distillers and tobacco manufacturers, some fifty or more warrants were issued by trialjustices for the arrest of internal revenue officers and revenue agents for alleged violations of State laws, and a number of indictments were preferred against them in the State courts. These proceedings were designed to intimidate the United States officers from further operations against violators of the law, and from appearing as witnesses against those charged with the illicit manufacture and sale of spirits and tobacco, and if they had proved successful, would have effectually prevented the prosecution of the violators of the internal revenue laws. The offenses charged against the government officials having been committed, if at all, under color of their offices, applications were made for the transfer of the cases to the United States courts. One of the State judges held that such cases could be so transferred, while another judge held that they could not be so transferred, from which latter decision an appeal was taken to the supreme court of the State. Upon an able presentation of the case by the assistant United States district attorney, the supreme court held that such cases were properly transferable to the United States circuit court. The rendition of this decision greatly discouraged those who had leagued together for the prosecution of the officers of internal revenue, and virtually ended this determined effort to prevent the enforcement of the internal revenue laws in the State of North Carolina. At the October term of the United States court held at Greeusboro', fourteen of the illicit manufacturers of tobacco entered pleas of guilty to indictments preferred against them, and proceedings for the forfeiture of their factories are still pending in the courts. I understand that the principal grounds upon which prosecutions of internal revenue officers under State laws were based were that some persons caught in the act of running illicit stills had been arrested without warrant. That there may be no misunderstanding in future of the right of a marshal to make such arrests, I respectfully recommend that a law be passed expressly providing that where a person is caught in the act of operating an illicit still, he may be arrested without warrant and forth with taken before a proper tribunal for examination. The following table will show the seizures of stills and tobacco factories and the arrests of persons accused of violating the internal revenue laws for the period therein stated, together with the number of officers killed and wounded in the performance of their duties: Statement of illicit distilleries seized, arrests made, and officers killed or wounded in the execution of their duty. Two serious obstacles to the enforcement of the internal revenue laws have been: First, the insufficiency of the appropriation for the employ ment of an adequate number of deputy collectors in the districts where frauds in the manufacture and sale of spirits and tobacco have mostly prevailed; and, secondly, the want of funds in the Department of Justice to pay the necessary expenses in the prosecution of violators of the law. The spirit of forcible resistance to law seems to accompany the illicit manufacture of whisky at all times and in all countries, and can only be broken and overborne by the earnest and courageous endeavor of the officers of the law, strongly supported by the courts. At this time not only are the United States defrauded of its revenues and its officers openly resisted, but when arrests are made it often occurs that prisoners are rescued by mob violence,and officers and witnesses are often at night dragged from their homes and cruelly beaten, or waylaid and assassinated. In my judgment this great evil, namely, the illicit manufacture of whisky, should be extirpated, and its accompanying lawless spirit subdued. To that end I earnestly recommend that suitable appropriations be made to strengthen the hands of collectors and marshals throughout the infected districts, to enable them to make seizures and arrests. Then, if the courts will inflict upon the ringleaders punishment commensurate with their offenses, the time is not distant when officers of the law will be safe in their persons in all parts of the coun try, and well-meaning citizens will rejoice at the suppression of an occupation that demoralizes all who have any connection with it, and which fills the country with outlawry and crime. I am glad to be able to report that I perceive a better state of public opinion in respect to the enforcement of the internal revenue laws throughout some of the districts enumerated. I take pleasure in recording the fact that in Lee County, Virginia, Henry County, Tennessee, and Cleburne County, Alabama, public meetings of prominent cit izens have been held in the interest of law and order, where violations of the revenue laws of the United States were condemned, and a determined spirit was manifested to aid the constituted authorities in the suppression of frauds and the enforcement of the laws. It is to be hoped that good citizens everywhere will recognize the fact that it is essential to good government that all laws, both State and national, shall be strictly observed and enforced, and that respect for laws in general is weakened whenever any law can be disregarded or resisted with impunity. It is proper to state that with the great majority of large distillers, brewers, and manufacturers of tobacco throughout the country, a commendable disposition to observe the laws and regulations thrown around their respective occupations has been manifested, and in the main they have conducted their operations with a degree of integrity and fairness that merits acknowledgement. I am satisfied that at this time there are no extensive combinations among these classes of manufacturers to defraud the government of its revenues. REVENUE AGENTS. I had the bonor some time since of recommending an appropriation for the employment of ten additional revenue agents for the balance of the present fiscal year, and I now renew said recommendation. I also earnestly recommend that a suitable appropriation be made for thirtyfive revenue agents for the fiscal year ending June 30, 1879. The present corps of revenue agents is, in the main, composed of men of ability, who have had great experience in the internal revenue service. Twentyfive revenue agents have been employed during the past fiscal year at an aggregate cost for salaries of $58,683, and for expenses, $27,304. |