Banks are required to
secure their circulation by pledging with the Treasurer of the United
States bonds of the General Government. The interest upon these bonds,
which at the time when the tax was imposed was 6 per cent, is now in
most instances 3-1/2 per cent. Besides, the entire circulation was
originally limited by law and no increase was allowable. When the
existing banks had practically a monopoly of the business, there was
force in the suggestion that for the franchise to the favored grantees
the Government might very properly exact a tax on circulation; but for
years the system has been free and the amount of circulation regulated
by the public demand.
The retention of this tax has been suggested as a means of reimbursing
the Government for the expense of printing and furnishing the
circulating notes. If the tax should be repealed, it would certainly
seem proper to require the national banks to pay the amount of such
expense to the Comptroller of the Currency.
It is perhaps doubtful whether the immediate reduction of the rate of
taxation upon liquors and tobacco is advisable, especially in view of
the drain upon the Treasury which must attend the payment of arrears of
pensions.
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