This section of the book is from the "Introduction To Public Finance" book, by Carl Copping Plehn.
1 The writer knows of an instance where a farmer has to travel fifty miles to pay his State and county taxes, while the local taxes are collected within two miles of his home. This is not an extreme case.
The transfer of the public funds from one part of the country to another is, in modern times, attended with little risk. It is most conveniently done by means of the banks or the post office. If the country is sparsely populated and insecure, the collector's officeshould be at or near the bank or vault place, in which the money is to be stored. In large countries, as, for example, the United States, it is convenient to have a number of branch treasuries scattered about the country, at which collections can be made, and through which money for expenditure can be distributed to the disbursing officers.1
The storage or safe-keeping of the funds is accomplished in one of three ways. (1) As in England, a great State Bank is made custodian of the funds which are sent to it from the various collectors who deposit with its branches. (2) As in France and the United States, the treasury and the sub-treasuries are the chief custodians of the funds.2 (3) As in the commonwealths of the United States, where (except in Indiana, Ohio, California, Kansas, Mississippi, Nevada, and Texas) private or other banks are made the depositories of the public moneys. When protected by proper safeguards, such as the giving of personal bonds and collateral, the bank depository system has proved itself far safer and more economical than the independent treasury, which is only to be defended on political grounds, if at all.
1 Sub-treasuries are at Baltimore, Boston, Chicago, Cincinnati, New Orleans, New York, Philadelphia, St. Louis, and San Francisco.
2 According to law, the Treasurer and disbursing officers of the United States may make deposits in the National Banks. About $14,000,000 are regularly so deposited.
The experience of the United States federal government in the early days with " pet banks " points to the political difficulties of the bank depository system. The bank deposit system prevents the periodic disturbance of the circulation by the withdrawal or storage of money. If the independent treasury system were used by all the departments of the government, this disturbance would undoubtedly be serious enough to affect prices.1