This section is from the book "A Financial History Of Texas", by Edmund Thornton Miller. Also available from Amazon: A Financial History Of Texas.
The weight of the tariff lay upon the necessaries of life, such as breadstuffs, meats, sugar, salt, assorted groceries, boots and shoes, dry goods and wearing apparel, household furniture, tools, and farming implements. Distilled spirits were the most important item outside of this list. They were taxed at high specific rates, and from the value of their importations it is to be inferred that they constituted one of the most productive items of the schedule.
Though the average rate of duty was comparatively low, opposition to the tariff was frequently expressed. It was not so much the principle that was objected to, as it was the unequal operation upon the different sections. The western and middle districts obtained their imported goods through Galveston and the other gulf ports of entry, where evasion was difficult. The eastern district, however, bordering as it did on the United States, obtained its supplies overland, and the long stretch of land boundary made smuggling easy. As the eastern was the most populous and wealthy section, the evasion by it of its share of the burden of the tariff was a subject of frequent and bitter complaint.3
1 For the three years ending September 30, 1838, the average rate was 19.3 per cent; for the year ending September 30, 1840, 17 per cent; for the year ending July 31, 1844, 26.6 per cent; for the period from August 1, 1844, to October 31, 1845, 25.7 per cent. The statistics necessary in order to obtain the average of other years are lacking.
2 Inaugural address, December 9, 1844; Executive Record, No. 40. The Telegraph and Texas Register, December 18, 1844, expressed its unqualified disapproval of the president's suggestion.
3 The Telegraph and Texas Register, November 14, 1838; June 9, 1841; October 5, 1842; September 6, 1843; January 3, 1844. Report of the Secretary of the Treasury, November 1, 1842. Report of the House Finance Committee, December 17, 1842; House Journal, 7th Tex. Cong., p. 74. Report of the special committee on a memorial presented by the citizens of Galveston and Houston, January 22, 1845; House Journal, 9th Tex. Cong., p. 272.
Another objection to the tariff was that it drove mercantile capital out of the eastern part of the republic, because farmers found it more profitable to take their products to Shreveport and other Louisiana points and exchange them for supplies than to trade with home merchants who charged prices which included tariff duties.1 Other objections were that it deterred immigration,2 and militated against the recognition by England of Texas independence.3
On the other hand, it was urged in favor of 'the continuance of the tariff that it was the most productive, certain, and least objectionable way of raising revenue,4 and that it was necessary in order to sustain the treasury notes.5 Repeal, it was also said, would be in favor of the commercial interests and to the detriment of the agricultural,6 and would lead to such an increase in importations as to drain the country of the "means requisite to its prosperity." 7
The administration of the customs was under the direction of the treasury department. There were collectors and deputy collectors appointed by the president, and inspectors and clerks appointed by the collector. Collectors were required to give bond, and their compensation varied in accordance with the importance of the port of entry. The act of June 12, 1837, allowed a commission of 2 1/2 per cent until the sum amounted to $2,000, after which the commission was one-half of 1 per cent.1 The retrenchment policy under Houston led to a reduction in compensation, and a maximum salary, including fees, was fixed at $1,200 for the port of Galveston, and at smaller sums for the other points of entry.2 In order that the eastern district might be better administered the sheriffs of the counties that lay in that district were, in 1841, made collectors, and were allowed a commission of 10 per cent upon their collections.3
1 Report of Finance Committee, December 17, 1842; House Journal, 7th Tex. Cong., p. 74.
2 Ibid., p. 75.
3 Report of Special Senate Committee on the Tariff, 1839; in appendix to Senate Journal, 9th Tex. Cong.
4 Report of Finance Committee, December 22, 1838; House Journal, 3rd Tex. Cong., p. 206. Report of Finance Committee, January 21, 1841; House Journal, 5th Tex. Cong., p. 406. Report of the Secretary of the Treasury, November 1, 1842. Veto message of President Houston, February 5, 1844. Message of President Jones, December 16, 1844.
5 Report of Finance Committee, December 22, 1838; House Journal, 3rd. Tex. Cong., p. 209. It did not occur to this committee that if the amount raised by customs duties were raised by a direct tax, the demand for the notes would at least be the same.
6 Report of the Finance Committee, December 22, 1838; House Journal, 3rd. Tex. Cong., p. 208. Houston, also, in his message of December 20, 1841, said that the principal reason he favored reliance upon import duties was that they were more just and equitable. Direct taxation bore, he thought, directly upon the farmer.
7 Report of Finance Committee, January 21, 1841; House Journal, 5th Tex. Cong., appendix, p. 406. This argument was not developed by the committee, but as a suggestion it is fallacious.
The practical absenee of any checks upon collectors made abuses of trust possible. There are no complaints of connivance of officials with smuggling, but smuggling was practiced on a large scale.4
The cost of collection was greater under the commission than under the salary method of payment. For the three years ending September 30, 1838, the cost was 17.2%, and for the nine months ending October 31, 1842, 14.8%; while for the year ending July 31, 1844, it was 11.7%, and for the fifteen months ending October 31, 1845, only 11%.
The tariff was truly the foundation of the finances of the republic.5 Of the total receipts of the entire period, it contributed a little over 58%. From the beginning down to 1842 it contributed 42.5%, while from 1842 to the close of the period its share was 83%. During the first period it was still a question as to whether direct or indirect taxation should prevail, but after 1841 there was a complete breakdown of direct taxation which was due in part to a popular preference for paying taxes indirectly.1 As compared with other sources, customs receipts were also much the most uniform from year to year, and such fluctuations as occurred were due not so much to changes in rates as to the condition of the currency.
1 Section 7; Gammel, op. cit., vol. 1, p. 1313.
2 Section 4 of the act of January 27, 1842; ibid., vol. 2, p. 736.
3 Joint Resolution, February 6, 1841; ibid., vol. 2, p. 623. The act of February 3, 1845, in order to elicit more vigilance on the part of the regular collectors in the eastern district, allowed half of the commission and fees arising, which was in addition to the maximum salary prescribed in the act of January 27, 1842; ibid., vol. 2, p. 1134.
4 Houston, in a message of June 27, 1842, said that the government lost at least one-half of the revenue to which it was entitled because of smuggling. In a message of December 4, 1844, he stated that there had been defalcations of $60,000 by collectors.
5 President Houston, in his address to the First Congress, May 5, 1837, said that the public domain was "the foundation of the finances." But this source, from which he expected so much, contributed only about 14 per cent of the total revenue.
Up to 1843 treasury notes and 8% bonds were receivable at par in payment of duties. After 1843 only specie and exchequer bills, as the treasury notes issued during Houston's second administration were called, were receivable, and the latter were accepted only at the current rate of discount' in the market. As duties were paid upon invoice cost, and as this was based on treasury notes, the depreciation of the notes was reflected in the value of importations. Down to 1842 the years of largest receipts were 1840 and 1841, and these were the years also of largest circulation and greatest depreciation of the notes. The annual average of receipts during 1842, 1843, and 1844 is less than that of any preceding year. The increase in population and the improvement in the general economic situation of the republic would be expected naturally to result in increased imports and duties paid, and the failure of the revenue statistics to show this is due to the improvement in the currency. The red-backs, or old issues of notes, were not receivable for duties after February 1, 1843, and the exchequer bills which succeeded the red-backs, while depreciated considerably at first. never fell as low as the old notes, and were, besides, received only at their current market quotation.2
1 Hhenry Smith, secretary of the treasury, said in a communication to the senate, November 29, 1838, that, as a general rule, direct taxa tion was odious, and that in the situation of Texas it could not be relied upon with certainty. See also Houston's message of December 20, 1841, and the Telegraph and Texas Register, November 30, 1842.
2 After 1843 the customs began to show receipts in par funds. The report for the year ending July 31. 1844, showed $73,299 in specie, and $109,157 in exchequer bills which were worth in specie $95,486 The report for the fifteen months ending October 30, 1845, gave specie receipts at $202,121, and exchequer bills at $140,997, which had a specie value of $135,680.
 
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