USA > Massachusetts > Commonwealth history of Massachusetts, colony, province and state, volume 2 > Part 20
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The colonial government, however, was involved too deeply in its own issues of bills of credit and loan bills, and again the proposal was neglected. In 1733 some Boston merchants formed an unincorporated company and without legislative authority emitted £110,000 of notes, redeemable after ten years in silver at 19 shillings per ounce. These were known as
209
PRIVATE EFFORTS TO FLOAT NOTES
merchants' notes, and accustomed the community to the use of credit based neither upon public faith nor upon any specific private capital. The security of the notes depended solely upon the solvency of the merchants. Inasmuch as silver rose rapidly in value compared to paper on account of the continued large governmental emissions of paper currency, the mer- chants' notes went to a premium and were soon hoarded.
In 1740 the date approached on which all public credit bills must be retired according to the command of the English government. Colman again brought forward his project of 1714 and 1720 and quickly secured four hundred subscribers to a company for the emission of bills based upon real estate. Incorporation was sought, but without waiting for legislative sanction the company began the issue of notes. The sub- scribers to the capital stock agreed to receive the bills as equivalent to money, on the basis of a silver valuation at 6sh. 6d. an ounce. Redemption of notes was promised at the end of twenty years in produce or in manufactured commodities, as hemp, flax, cordage, and iron. The volume of notes to be issued was limited to £150,000. Many towns voted to receive the notes in payment of local taxes, and the number of subscribers increased to a thousand.
The scheme naturally was not acceptable to Governor Belcher and the Council which he controlled. The House of Representatives was divided; the supporters of the bank, although unable to secure its incorporation, were, however, strong enough to prevent a vote of condemnation. Belcher announced open war on the plan and ordered all office-holders holding commission under the Crown, as justices of the peace and military officers, not to encourage the passing of land bank notes on pain of removal from office. Resignations and dismissals followed, and for a brief time there was fear of violent resistance to the government. The storm soon blew over, for popular confidence in the notes diminished. The English government also showed its disapprobation of private individuals engaging in floating stock undertakings without express statutory authority, and extended the Bubble Act of 1720 in its application to the colonies.
By far the larger part of the bills of the Land Bank were redeemed, but owing to the dishonesty and insolvency of some
210
FINANCE AND PAPER MONEY
of the holders, the accounts were never satisfactorily settled. For more than twenty-five years, there was litigation, legisla- tion, and meetings of committees devoted to the consideration of this troublesome affair.
EFFECT OF THE BANK PROJECT (1740-1755)
A more conservative group of Boston merchants lacked con- fidence in bills based upon land and its produce, and founded what is known as the Silver Bank. The subscribers agreed to emit bills which should have the value expressed in silver at a given rate per ounce, to refuse bills of other colonies not redeemable in gold or silver, except at a discount, and not to receive the notes of the Land Bank. The notes were made payable in 1755, in silver, on the basis of 20 shillings for an ounce of silver and on a sliding scale upward if redeemed before that date. The redemption rate in 1741, for example, was on a valuation of silver at 28sh. 4d. per oz. For a time there was a bitter rivalry between the supporters of the Land Bank and the Silver Bank. The latter, though ostensibly in the interest of a sounder currency, met with the same fate as the Land Bank. Parliament would not tolerate the issue of notes of any sort by a private corporation without its own sanction.
The suppression of the Land and Silver Banks had more far-reaching results than checking a foolish financial experi- ment. By many it was regarded as an unjustifiable interfer- ence with local liberties, and helped to develop discontent with government by England. A majority of the House of Repre- sentatives were abettors of the Land Bank scheme; and while many in the colony recognized the possible evils of the project, the arbitrary extension of the Bubble Act, originally designed for England and Ireland, excited so general a feeling of hos- tility at English interference that any good from efforts in the way of educating the people to sounder ideas was largely lost. Franklin in 1766 told England that one of the reasons for the ill feeling in America toward her authority was the prohibition of paper money.
211
EFFORT FOR REFORM
SHIRLEY'S EFFORT FOR REFORM (1741-1748)
In 1741, a new governor, Shirley, had the responsibility of solving the currency problem. By royal instructions, out- standing bills were to be immediately retired; thereafter the amount in circulation was to be limited to £30,000, used solely for annual expenses in anticipation of taxes. The situation indeed was desperate. More than £320,000 of taxes, which had previously been authorized for the redemption of notes, had never been collected; and there were outstanding £105,525 in bills which were not supported by any authorized taxation.
The legislature endeavored to meet the wishes of the Gover- nor, and passed an act providing for a levy of taxes in 1742-43 to retire the bills for which no support had previously been given. It also authorized the issue of £30,000 permitted by the English government, assigning to these the same value as the new tenor bills-the twenty-shilling note being equal to three ounces of silver.
In recognition, however, of the further depreciation of the old tenor notes, it was ordered that the new note should be equal to four of the old instead of three. This introduced still greater confusion and embarrassment in trade. There were now three classes of bills in circulation. The new bills took the name of new tenor, and the former new tenor bills were called middle tenor or first new tenor. These had the same value in silver, but a difference in their exchange value for old tenor notes. The legislature, however, was lax in its requirements for the redemption of the new notes. Taxation for retirement was spread over several years, and it was per- mitted to offer commodities for redemption of notes.
Whatever progress might have been made in the next few years to restore a sound currency was destroyed by the re- newal of hostilities between France and England in 1744, lasting until 1748. The colonies had to assume no inconsider- able amount of the expense of military operations in America. Royal instructions removed all restrictions upon the issue of bills in so far as they were necessary for the defense of the province. It would be tedious to enumerate the emissions made in the next few years; they amounted to approximately £700,000 sterling, or £2,800,000 in old tenor bills, converted at
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FINANCE AND PAPER MONEY
the rate of four to one. Some retirements were made, but the total amount outstanding rose from £305,000 in 1744 to £2,100,000 old tenor in 1749. Depreciation rapidly followed with the succession of issues; in 1744 an ounce of silver was valued at 30 shillings in old tenor bills ; in 1749 at 60 shillings. It was in this contest with France that the Massachusetts troops under William Pepperell were so fortunate as to capture Louisbourg on Cape Breton Island (June, 1745). This victory aroused great enthusiasm, both in the colony and in Eng- land (as appears in other chapters in this volume) ; and the colonists were quick to take advantage of it in their financial affairs.
RESUMPTION OF SPECIE PAYMENTS (1745-1750)
In July, 1745, the House of Representatives petitioned the English government for financial assistance to meet the heavy expenditures occasioned by the Cape Breton expedition; but nearly three years elapsed before the House of Commons voted (April, 1748) in favor of reimbursement to the amount of £183,649. Further delay then arose in England over the method of payment. To what colonial agent should it be paid and what security should he give? In the colony there was sharp dispute on another facet of the discussion-how was the indemnity to be used? Should the bills be redeemed at once, or by installments over a period of years? Not only the paper money party, but merchants who feared embarrass- ments from a too sudden shift to a metallic currency, advo- cated the latter course. The conservatives, in favor of immedi- ate resumption, won; and early in 1749 the legislature voted that after March 31, 1750, the treasurer should redeem out- standing bills in silver at the following rates: for every 45 shillings in old tenor bills, one piece of eight; and for every 11 shillings, 3 pence in middle tenor and new tenor bills, one piece of eight. One year was given for redemption. All sub- sequent contracts were payable in coined silver.
In September, 1749, the Boston colonists witnessed a novel sight. The silver freighted from England arrived in Boston; seventeen trucks laden with 217 chests of Spanish silver coins and ten trucks with 100 casks of copper coin were hauled up
213
RESUMPTION OF SPECIE
King Street and delivered at the office of the provincial treasurer. The £183,649, however, granted by Parliament was not quite sufficient to liquidate all the outstanding paper money; and a colonial tax was therefore laid, payable in new and middle tenor notes. Approximately the paper currency was redeemed at the rate of 71/2 paper to 1 specie.
Resumption was effected without any serious shock to trade and industry. John Adams, who was a boy during this transi- tion period, wrote in later life : "I am old enough to have seen a paper currency annihilated at a blow in Massachusetts in 1750, and a silver currency taking its place immediately, and supplying every necessity and every convenience."
In some of the country towns where there were numerous advocates of paper money and many former friends of the Land Bank, at first a disposition appeared to oppose the opera- tion of the resumption act; but it came to naught. Affection for paper was humorously expressed in the following extracts from a ballad published in 1750.
"A mournful lamentation for the sad and deplorable death of Mr. Old Tenor, a native of New England, who after a long confinement, by a deep and mortal wound which he received about twelve months before, expired on the 31st day of March, 1750.
"Yea, good OLD TENOR, fare thee well, Since thou art dead and gone We mourn thy fate, e'en while we tell The good things thou hast done. Since the bright beams of yonder sun Did on New England shine, In all the land there ne'er was known A death so mourn'd as thine.
"Of every rank are many seen, Thy downfall to deplore; For 'tis well known, that thou hast been A friend to rich and poor. We'll o'er thee raise a SILVER tomb,
Long may that tomb remain, To bless our eyes, for years to come, But wishes, ah ! are vain."
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FINANCE AND PAPER MONEY
THE GENERAL POLICY ON PAPER MONEY
The resumption of specie payments also marked the initia- tion of sound public credit. When in need of funds, the treasurer borrowed money at interest for brief periods of time, repaying the loans by taxes when received. The French War (1756-1763) nearly wrecked this policy; but, at the be- ginning of the campaign, Governor Shirley loaned to the prov- ince £30,000. In 1756, Parliament granted £115,000 to the New England colonies, of which nearly half (£54,000)' fell to Massachusetts, and from this Shirley was reimbursed. Later, in 1761, Parliament made a further grant of £200,000 to all the colonies, of which Massachusetts again received a substantial share. These grants made it possible for the prov- ince to avoid financial errors such as characterized the finance of previous wars.
The policy of issuing credit money which involved Massa- chusetts in a half-century of embarrassment must not be judged as an isolated case of error. Other colonies were equally at fault. The neighboring colonies, New Hampshire, Rhode Island, Connecticut and New York, all issued notes previous to 1711. Especially did the Massachusetts colony resent the flood of bills which flowed in from Rhode Island. Competing currencies provided Massachusetts an easy excuse for issuing notes on her own account, both for self-defense and in retaliation. Pennsylvania (1723), Maryland (1734), Delaware (1739) and South Carolina (1712), though not so prompt in adopting a paper money policy for meeting the ex- penses of government, quickly followed the example of Massa- chusetts, and thus gave support to the inflationists.
PROPERTY TAXATION (1692-1769)
As has already been stated, the development of a proper fiscal policy through taxation was held up in large part because of the easy reliance upon promissory notes, and above all be- cause of the unyielding opposition to making any concession to the English government, which might be interpreted as ac- knowledging a change in the privileges of the original charter. The point at issue was not the burden of taxation, for that
215
PROPERTY TAXATION
burden was not great when compared with the increasing population and increasing wealth. In the closing years of the seventeenth century, the Province of Massachusetts paid an annual average tax of £12,000; in 1740 when the population was more than twice as great, the tax was about double (£25,800). Beginning with the provincial period (1692) the average annual tax levied was approximately as follows by decades :
1692-99
£12,000
1730-39
£25,000
1700-09
18,000
1740-49
39,000
1710-19
15,000
1750-59
48,000
1720-29
16,000
1760-69
53,000
In the first period, assuming a population of 60,000, the annual per capita tax amounted to only four shillings; in 1765, when a census returned a population of 225,000, the per capita burden was only a trifle higher, notwithstanding that the public needs of government were far greater. However, the province tax was not the only tax which the colonists had to pay. With the growth of community life and towns, local taxes assumed an increasing importance; and by the middle of the century, they were greater than those paid into the provincial treasury. Colonial taxation was undertaken somewhat more energetically after 1740, when Governor Shirley had received instructions to prevent any further issues of paper money ; and additional effort was made after redemption was effected in 1751. Even then the burden of taxation for the support of the provincial government was not great.
In 1692 Boston paid about 15 per cent of the colony's tax, followed by Ipswich, 6 per cent; in 1742 the metropolis paid 18 per cent, and Salem was the next richest town, con- tributing 3 per cent. After the middle of the century, the proportion of Boston declined, owing to the growth and pros- perity of other towns; in 1761 its share in taxation was only 11 per cent, and in 1772 but 9 per cent.
The tax on property was practically uniform after 1692 at the rate of one penny per pound. The colonial valuation of property for purposes of taxation was arbitrary; and, from the point of view of modern practice, scandalously low.
216
FINANCE AND PAPER MONEY
Although prices rose, the valuation of staple produce and com- modities subject to taxation rarely changed. Cows, for ex- ample, in 1694 were listed at £1, 10sh. each, and this valuation was continued through successive tax bills throughout the entire provincial period. Swine likewise were uniformly listed at 8sh., and the valuation of sheep, which remained at 4sh. each until 1731, was then reduced to 3sh.
Undervaluation of all property was the common practice in town valuations. An assessment list of Haverhill for the year 1767 lists 281 dwelling houses at the uniform rate of £5 each; 19 mills at £6 each; trading stock was assessed at 6 per cent of its real value. Money at interest was also listed at only 6 per cent of the true amount. Reckonings of this sort naturally gave an insignificant, low valuation; and attempts to raise taxes by raising assessments would tend to create a hostile attitude to sound revenue procedure.
POLL AND EXCISE DUTIES (1692-1765)
The poll tax, however, varied greatly, ranging from two shillings, from 1704 to 1713, to £1 in 1725; and it was through this tax rather than the levy on property that flexibility was introduced into the revenue system. In this respect, the tax system was exactly the reverse of modern practice : the poll tax is now a fixed sum per person, while the property rate varies.
As stated in a previous paragraph, excise duties were levied at the beginning of the provincial period, as they had been throughout the seventeenth century, upon innkeepers and re- tailers of wine, rum, ale, beer and cider. These taxes were im- posed in the interest of morals as well as revenue. As the colonists became more sophisticated in their use of liquors, excise duties were imposed in 1737 upon lemons and limes used by innkeepers in the making of punch, and later (1751) oranges were included.
In the same year (1737) taxes were placed on the use of a coach, chariot, chaise, calash and chair, the rates varying from 50 shillings on a coach or chariot to 20 shillings on a chair. Similar duties, though at lower rates, were tried between 1753- 57, the proceeds to be used for the promotion of domestic
217
REVENUES FROM LOTTERIES
manufactures. Here again the yield was insignificant, for comparatively few of these vehicles were in use at the time. According to returns of the treasurer there were less than twenty coaches and chariots, and about 1200 chaises and chairs.
Of more importance, considering the subsequent legislation of the English Parliament, was the imposition of excise duties by the Massachusetts General Court upon tea, coffee, arrack, snuff, and chinaware. The first attempt (1749) in this direc- tion was unsuccessful, for the act was disallowed on the ground that it interfered with British trade. A few years later (1756) when there was a pressing need for maintaining two armed vessels, the legislature again turned to these luxuries as fit subjects for taxation; and on this occasion, war being in progress, there was apparently no objection. The rates were: tea, 6 pence per pound ; coffee, 2 pence per pound; and china- ware, 5 per cent ad valorem. Later (1763), though the war was over, these duties were continued.
REVENUES FROM LOTTERIES (1745-1765)
A minor source of revenue in the middle half of the eight- eenth century was through the use of public lotteries. Private lotteries were frowned upon both in England and in the Massa- chusetts province. Laws for their suppression were passed in 1719 and 1733, on the ground that children and servants, merchants and traders, and "other unwary people have been drawn into a vain and foolish expense of money which tended to the utter ruin and impoverishment of their families." A public lottery, however, regulated by governmental authority, was regarded in a different light; and urgent fiscal needs after 1740, when recourse to bills of credit was denied by the home government, broke down any scruples which legislators may have possessed. In 1745, £7,500 was raised by a lottery to meet the current needs of the treasury, including the protection of the frontier. This was followed by a second lottery in 1751 to raise £26,700; by a third in 1758 for a military expedition against Canada; and a fourth in 1760 to retire the still out- standing bills of the Land Bank. The last three were not attended with success. Between 1749 and 1761, fourteen local lotteries for the benefit of towns in building roads, bridges,
218
FINANCE AND PAPER MONEY
and other public works were authorized, but these were small affairs, planned to raise from £400 to £2,000 each. These latter in particular aroused the criticism of the Board of Trade in London, and the governor was instructed not to approve any further financial schemes of that nature. The raising of revenue through lotteries, therefore, almost disappeared until the Revolution. A striking exception was the permission given in 1765 for a lottery to raise £3,200 for a dormitory at Harvard College, on the ground that that institution had ren- dered a special service to the government. As late as 1812 the same method was authorized for a Harvard building.
DUTIES ON IMPORTS (1733-1765)
The raising of revenue by duties on imports was a compli- cated problem. England regarded the colonies as a market for her own trade and, by the Navigation Acts and other laws, endeavored to control commerce and manufactures in the American settlements. It was, however, difficult to supervise shipping ; and smuggling was a common practice both in Eng- land and the colonies. Above all, the home government cher- ished its prerogatives as to trade. For this reason, the insig- nificant provincial import duty on English goods (less than one per cent) was withdrawn in 1719 at the request of the Board of Trade.
A notable example of the English point of view as to con- trol of trade was seen in the Molasses Act of 1733. The sugar colonies of England were in sharp competition with the colo- nies of France and Spain; and Parliament endeavored to suppress the increasing imports to the colonies from foreign settlements, by placing duties on rum, sugar, and molasses from non-British ports. These duties were moderate : on rum, 9 pence per gallon; molasses, 6 pence per gallon; and sugar, 5 shillings per 100 pounds. As these duties had to be paid in silver into the treasury of the English government, the levy meant a constant drain of specie. This was regarded by the colonists as an intolerable burden, in view of the scarcity of silver and its high price as measured by current paper money. The payment of duties was evaded by wide-spread smuggling, and for thirty years the home government did little to enforce the act.
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This Bill of Twenty Shillings, due from the Mafrachufett Colony to the gofiction hall be in value equal to Money, and shall be accordingly Accepted by the greaturer an Receivent fuboninate to him, in all publick Payments, and for any stock at any time in the Treasury. Detde Botton in New England Decemb 10 1690 By order of the gene Court
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From Massachusetts Archives
ROUGH DRAFT FOR THE FIRST PAPER MONEY IN ENGLISH-SPEAKING AMERICA
[No.
THE Poffeffor of this Ticket [No. 7 fhall be intitled to any Prize drawn againft faid Number, in a LOTTERY granted by an Act of the General Court of the Province aforefaid, paf- fed in April 1758, towards fupplying the Treafury with a Sum of Money for the intended Expedition againft Canada, fubject to no Deduction." D
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Maffachufetts-LOTTERY, (No. One.) May 1758.
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fhall be intitled to any Prize drawn againft faid Number, in a LOTTERY granted by an Act of the General Court of the Province aforefaid, paf- fed in April 1758, towards fapplying the Treafury with a Sum of Money for the intended Expedition againft Canada, fubject to no Deduction. E
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Mafachufetts-LOTTERY, (No. One.) May 1758.
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THE Poffeffor of this Ticket [No.
fhall be intitled to any Prize drawn againft faid Number in a LOTTERY granted by an Act of the General Court of the Province aforefaid, paf- fed in April 1758, towards fupplying the Treafury with a Sum of Money for the intended Expedition againft Canada, fubject to no Deduction. F
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From the Massachusetts Archives
MEANS OF FINANCE IN THE FRENCH AND INDIAN WARS
Maffachufetts-LOTTERY, (No. One.) May 1758.
219
DUTIES ON IMPORTS
In 1764, however, when peace had been concluded with France, the English government determined that the time had come for a more strict supervision of the colonies. Not only should trade be regulated but it was "just and necessary that a revenue be raised" in America "for defraying the ex- penses, protecting and securing" the colonies. The rates of duties in this new Sugar Act of 1764 were not oppressive; on molasses imported from British colonies, the rate, indeed, was lowered, but new duties were imposed upon coffee, indigo, wines, silks, calicoes, and cambric, save when imported direct from Great Britain. Administrative agencies for checking smuggling were also established. It is possible that this act might have been quietly accepted if there had been an abun- dance of specie in the colony, making payments for imports convenient and regular ; but this was far from the case. Re- sumption upon a specie basis had been only recently effective. In the same year that Parliament levied these duties, it again showed its disapproval of bills of credit in any of the colonies.
Within two years the Royal Government abandoned its efforts to enforce the Sugar Act, but turned to a new form of revenue, which could not be balked by smuggling. The Stamp Act of 1765 placed duties upon various legal papers, business documents, marriage certificates, and newspapers, the duties being collected through the use of stamped paper. This was again followed by the Revenue Act of 1767, levying import duties upon glass, painters' supplies, paper and tea. The po- litical effect is discussed elsewhere in this volume.
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