he receipts
were $490,634,010 and the expenditures $346,729,129, leaving an
available surplus of $143,904,880. It is estimated that the receipts for
the fiscal year ending June 30, 1868, will be $417,161,928 and that the
expenditures will reach the sum of $393,269,226, leaving in the Treasury
a surplus of $23,892,702. For the fiscal year ending June 30, 1869, it
is estimated that the receipts will amount to $381,000,000 and that the
expenditures will be $372,000,000, showing an excess of $9,000,000 in
favor of the Government.

The attention of Congress is earnestly invited to the necessity of a
thorough revision of our revenue system. Our internal-revenue laws and
impost system should be so adjusted as to bear most heavily on articles
of luxury, leaving the necessaries of life as free from taxation as
may be consistent with the real wants of the Government, economically
administered. Taxation would not then fall unduly on the man of moderate
means; and while none would be entirely exempt from assessment, all, in
proportion to their pecuniary abilities, would contribute toward the
support of the State. A modification of the internal-revenue system, by
a large reduction in the number of articles now subject to tax, would
be followed by results equally advantageous to the citizen and the
Government. It would render the execution of the law less expensive and
more certain, remove obstructions to industry, lessen the temptations to
evade the law, diminish the violations and frauds perpetrated upon its
provisions, make its operations less inquisitorial, and greatly reduce
in numbers the army of taxgatherers created by the system, who "take
from the mouth of honest labor the bread it has earned." Retrenchment,
reform, and economy should be carried into every branch of the public
service, that the expenditures of the Government may be reduced and the
people relieved from oppressive taxation; a sound currency should be
restored, and the public faith in regard to the national debt sacredly
observed. The accomplishment of these important results, together with
the restoration of the Union of the States upon the principles of
the Constitution, would inspire confidence at home and abroad in the
stability of our institutions and bring to the nation prosperity,
peace, and good will.

The report of the Secretary of War _ad interim_ exhibits the operations
of the Army and of the several bureaus of the War Department. The
aggregate str