tax of 3 per cent. on the excess of $600 up to $10,000, and a tax of 5 per cent. on the excess of $10,000. The law went into effect in 1863. March 3d, 1865, the law was amended so as to place a five-per-cent. tax on incomes up to $5,000 (exemption being left at $600), and a ten-per-cent. tax on the excess of $5,000 in

come.

In March, 1867, the exemption was raised to $1,000, and a uniform rate of 5 per cent. was substituted for the 5 per cent. and 10 per cent. rates. Three years later the exemption of $1,000 was increased to $2,000, and the rate was reduced to 2 per cent. This law was passed to continue in effect for one year. The last levy under the law was in 1871, and the last tax was collected in 1874.

The income tax collected in the year 1864 was $20,294,733, and the total amount collected from 1863 to 1874 inclusive was $346,908,740.

ISSUING BONDS.-Bonds are written promises by the Government to pay a specified sum of money to the holder, at the end of a certain period of time, with interest at a given rate, payable semi-annually or quarterly. Government bonds are prepared and then sold under certain regulations, at the best rates the Government can command.

Bonds have been issued from time to time by the Government since its formation, but the Civil War made it necessary to issue them in vast sums. They were in denominations of $50, $100, $500, $1,000, etc. One billion one hundred and nine million dollars' worth of bonds were issued between July 1st,

1861, and August 31, 1865 (when our debt was greatest), and the money was used for war purposes. Most of the bonds issued were known as "5-20s." An act was passed authorizing the issue of 10-40s, and other denominations; but these were not popular, and comparatively few were taken.

INTEREST-BEARING TREASURY NOTES.-These notes passed under various names, depending upon the rate of interest and the time for which they were issued. Secretary Chase, making a summary of the Treasury operations in 1861, says: There were paid to creditors, or exchanged for coin at par, at different dates, in July and August, six-per-cent. two-years notes, to the amount of $14,019,036. There was borrowed at par in the same months, upon sixty-days six-per-cent. notes, the sum of $12,877,750; there was borrowed at par, on the 19th of August, under three-years seven-thirty bonds, $50,000,000." This last issue is popularly known as "seven-thirties." By it certain banks furnished $50,000,000 in coin, and received in payment three-year notes bearing interest at 7.30 per cent., convertible in six-per-cent. twenty-year bonds. By 1866, the whole amount of interest-bearing notes was $577,000,000.

NATIONAL BANKING SYSTEM.-Another important feature of our financial system during the Civil War was the inauguration of the National Banking system, which, with little modification, has continued in use to the present. The bill passed in February, 1863. Arguments in support of the bill were given as follows: The banks would furnish a market for bonds; they

would absorb the circulation of State banks, and that without harsh measures; they would create a community of interest between the stockholders of the banks, the people, and the Government, where there now existed a great contrariety of opinions and diversity of interests; adequate safeguards would be established against counterfeiting; the currency would be uniform, and take the place of the notes of 1,600 banks, differing in style, and whose notes were easily imitated and altered; that while the notes of one-sixth of the existing banks had been counterfeited, 1,861 kinds of imitations were afloat, 3,039 alterations extant, in addition to 1,685 spurious notes, in which hardly any care had been taken to show any resemblance to the genuine.

The act of June 3d, 1864, was a substitute for the act of February 25, 1863, and provides for a Bureau of Currency in the Treasury Department, at the head of which is a Comptroller.

In the United States Bank, the Government was a large stockholder, and the officers of the Treasury practically directed the operations of the bank, and sometimes accommodated political friends on easy terms, rendering legitimate banking impossible. Under the National Banking system the Government is not a shareholder, and takes no part in the management of the banks, except to see that the laws controlling them are complied with. Under the system of multiform State banks, the notes were of varying value at different times and in different places. In the disastrous financial influences of the War of 1812, a large majority of these banks were wrecked, their notes never redeemed, and a great financial loss entailed by the people. Under the

present system the bank notes are of uniform value throughout the Nation, and no bill-holder can suffer loss.

The circulation of the banks was at first limited to $354,000,000, and was distributed among the States and Territories according to wealth and population conjointly. The repeal of this provision has made banking free. Any company numbering not less than five, with a capital of not less than $50,000, may form a banking association. The company must purchase United States bonds, and deposit them with the Treasurer of the United States. On receipt of these the Treasurer causes to be printed for the bank an amount of national bank notes in such denominations as the authorities of the bank may name, but the amount of notes shall not exceed nine-tenths of the bonds purchased. The amount varies from 60 per cent. when the capital stock is $3,000,000 or more, to 90 per cent. when not over half a million. The bank receives interest on the bonds it has purchased, and loans the money printed by the Government as well as the deposits of its patrons. It is required to maintain a reserve fund in gold and silver coin equal to about 20 per cent. of its capital. By this provision the holders of the national bank notes may convert them into coin, by presenting them to the bank that issued them. It is also required to set apart 10 per cent. of its profits each year as a surplus fund, until such fund is equal to 20 per cent. of the capital stock of the bank. This surplus provides a means to make good any losses that may

occur.

CHAPTER XXII.

COST OF THE WAR.-NATIONAL DEBT.—

CLOSING EVENTS.

COST OF THE WAR.-THE NATIONAL DEBT.-At the close of the war the National debt was $2,800,000,000 (round numbers). Hundreds of millions of dollars were expended out of the revenues of the Government as the war progressed. Besides this, the incidental losses were innumerable in kind and incalculable in amount. There were heavy expenditures by the States, cities, and towns, amounting to about $458,000,000.

Other nations have made costly sacrifices in the struggle for their existence, or in pursuit of their ambitions; but none has expended, in the same length of time, an amount equal to that expended during the Civil War by our National Government.

The amount of the Confederate debt is unknown. It is estimated that if all the expenditures during the war and debts at the close of it, including the destruction of property, could be added, North and South, it would be equivalent to the sum representing all values in the United States as they were estimated at the beginning of the war.

The total expenditures of Great Britain during the French Revolution and the career of Napoleon, covering a period of twenty-three years, was $4,850,000,000, but the combined expenditures of any four years did not equal the amount spent by the United States in the same length of time. The one grand