The fatal defect of these notes was the promise to pay on demand. How could they be paid? In what kind of money? They could not be paid out of the current revenue, for that was insufficient to meet current expenses. No reserve was provided for their payment, and, when paid, there was no authority for their re-issue. All other forms of securities bore interest, and these notes, not bearing interest, were convertible into bonds and that was the end of them. If that was the process why issue them at all? They did not prevent, but rather expedited, the disappearance of gold. Of American silver dollars there were none. Even the new fractional silver coins rose to a premium, and were hoarded or exported. Still, the necessity existed for some form of paper money that would be available for circulation. The solution of this problem was properly left to the next regular session of Congress. Congress did not act upon the recommendations for internal taxes, but this subject was also left over until the next session. It did provide, however, for a large increase of revenue from imports, mainly upon articles that were then free from taxation and upon articles regarded as luxuries; also for a direct tax on the states of $20,000,000, and for a graded tax, from and after the first day of January, 1862, upon the annual income of every person residing in the United States, from whatever source the income should be derived; if such annual income should exceed the sum of $800 a tax of three per cent. on the excess above that limit. A provision was made reducing the tax on incomes from treasury notes and other securities of the United States one-half. The tax on incomes of citizens of the United States residing abroad was placed at five per cent., except on that portion derived from interest on treasury notes and other securities of the United States, which was taxed one and one-half per cent.