y, 1867, Mr. Morrill, from the
Committee of Ways and Means, reported a bill for the further reduction
of taxes, which became a law on the 2d of March. The taxes removed
were returning a yearly revenue of more than $36,000,000 to the
National Treasury. The principal reductions were $19,500,000 from the
income tax; $4,000,000 from clothing; $3,500,000 from woolens;
$3,250,000 from leather; $1,000,000 from engines; $600,000 from
sugar-refiners; $600,000 from tinware; $500,000 from castings; $500,000
from doors, sashes and blinds; with many others yielding less sums.
All these formed a part of what were termed war taxes, and the steady
purpose of Congress was to remove them as rapidly as the obligations
of the Treasury would permit. As matter of fact they were removed long
before such action was expected by the people, and before the special
interests subjected to the burden had time to petition for relief or
even to complain of hardship.

During the winter of 1866-67 there was a prolonged discussion in
Congress over an Act finally passed March 2, 1867, authorizing the
Secretary of the Treasury to exchange three per cent certificates of
indebtedness for compound-interest notes, and allowing these
certificates to be counted as a part of the reserve of National Banks.
The first proposition was to allow interest at 3-65/100 per cent. The
exchange of notes not bearing interest for those bearing compound
interest was proposed by Mr. Stevens, and at first supported by a
majority, but on reconsideration it was defeated. Objections was made
to the bill that it was a scheme for giving to the banks interest on
their reserves, which they could not otherwise receive when the
compound-interest notes should be retired. Of these notes the banks
held $90,000,000 and the limit proposed for the certificates was
$100,000,000. Congress finally limited the amount of certificates to
$50,000,000 at three per cent, and allowed them to stand for two-fifths
of the reserve of any bank.

While this arrangement was an obvious advantage to the National banks,
no such motive inspired Congress in passing the bill. Quite another
object was aimed at in its enactment. The influence of contraction,
which had gone into operation by the Act of the preceding summer, was
already felt in the business of the country. The real significance
of the Act just passed was that to a certain degree it checked and
even neutralized the operation of the statute whi