he increase of expenditures over the
previous year was $25,190,360.48. I estimated that the receipts
over expenditures for the fiscal year ending June 30, 1881, would
be $50,198,115.52.

During the period from 1874 to 1879 the United States had failed
to pay on the public debt $87,317,569.21, that being the deficiency
of the sum fixed by law to be paid during those years for sinking
fund. Deducting from this sum the amount paid in excess for the
fiscal year 1880, there was a balance still due on account of the
sinking fund of about $50,000,000. This would be met by the
estimated surplus of receipts over expenditures during the fiscal
year, 1881, thus making good the whole amount of the sinking fund
as required by law.

The estimated revenue over expenditures for the fiscal year ending
June 30, 1862, including the sinking fund, was $48,000,000.

Upon this favorable statement I recommended to Congress that instead
of applying this surplus revenue, accruing after the current fiscal
year, to the extinction of the debt, taxes be repealed or modified
to the extent of such surplus. A large portion of the surplus of
revenue over expenditures was caused by the reduction of the rate
of interest and the payment on the principal of the public debt.
The reduction of annual interest caused by the refunding since
March 1, 1877, was $14,290,453.50, and the saving of annual interest
resulting from the payment of the principal of the public debt
since that date was $6,144,737.50. The interest was likely to be
still further reduced during the following year, to an amount
estimated at $12,000,000, by the funding of the bonds. To the
extent of this annual saving, amounting to $32,000,000, the public
expenditures would be permanently diminished.

In view of this statement, I recommended that all taxes imposed by
the internal revenue laws, other than those on bank circulation
and on spirits, tobacco and beer, be repealed. I urged that the
tax on state banks should be maintained, not for purposes of revenue,
but as a check upon the renewal of a system of local state paper
money, which, as it would be issued under varying state laws, would
necessarily differ as to conditions, terms and security, and could
not, from its diversity, be guarded against counterfeiting, and
would, at best, have but a limited circulation.

The public debt which became redeemable on and after the 1st of
July, 1881, amounted to $687,350,000. I recommended