Although the state was unable successfully to collect the direct tax, two events relieved the government of a major portion of the debt and placed it in possession of a large amount of wealth. The first of these was the seizure of the proprietary estates in 1779, *39 which gave the state possession of practically all the unsettled area within its borders. The proprietors were allowed an amount in payment less than a quarter of a million pounds.

As has been said, the second circumstance that caused a complete change in the financial condition of the state was the assumption of the war debt of the commonwealth by the United States. This act lifted a burden of $777,983. *48 from the shoulders of Pennsylvania taxpayers. *40 How great a proportion of the total indebtedness of the state, unredeemed paper money included, was thus taken over by the federal government cannot be accurately stated. On January 1, 1791, it appears41 that the total obligations of the commonwealth amounted to about $2,000,000, but the amount due the proprietors, the bills of credit of 1785, and perhaps several smaller items were not eligible for subscription and could not, therefore, be shifted to the national government. Hamilton stated in 1792, after $675,101.33 had been subscribed, that the remaining state debt amounted to about $500,000; *42 but this estimate must have been much too low if he meant to include all the liabilities of the state. It would be more nearly correct to place the remaining debt of the state at about $1,200,000. Assumption enabled the state to drop the direct taxes, a step that would probably have been taken without assumption when the land sales began to return large revenues. But relief from over $777,000 of debt enabled the central government to put the land-sales receipts to other uses, and thus paved the way for small irregular subventions during the period before 1826.

89 Shepherd, History of Proprietary Government in Pennsylvania. Shepherd states that the Divestment Act of 27 November, 1779, provided for the payment of 130,000 to the heirs of William Penn as compensation for the lands thus seized.

40 Statement in Relation to Foreign and Domestic Debt, February 24,1794.

Due Jan. 1, 1791

Bills of credit of 1785............................................................

50,862

365,000

36,500

5,787

14,328

704

210,895

52,217

13,796

s

8

0

0

15

18

0

6

10

0

d

5

Funded state debt including depreciation certificates Unfunded depreciation debt..................................................

0 0

"Dollar Money" in circulation............................................

"Shilling Money" in circulation..........................................

State-Island money................................................................

Due the proprietors................................................................

Certificates issued for interest, etc......................................

Floating indebtedness (various sorts)..................................

0

2 0 0 11 3

Total Indebtedness2..............................................

750,091

18

9

1 From the Journal of the House of Representatives (1791), Report to the House, Feb. 8,1791, by a committee. (From records of Register General).

2 Does not include 8,000 estimated outstanding warrants of the Governor and the old Executive Council.

42 American State Papers, Finance, I, p. 150.

The local governmental units derived their revenues at this time chiefly from taxes on real and personal estates and from various unimportant sources. Their expenditures were light and no extensive revenue systems were, therefore, necessary. But it is important to note that they retained possession of the tax on real and personal property, and that after the repeal of the state tax on those objects they enjoyed the exclusive use of it.