In the course of the session I shall probably have occasion to request you to provide indemnification to claimants where decrees of restitution have been rendered and damages awarded by admiralty courts, and in other cases where this government may be acknowledged to be liable in principle and where the amount of that liability has been ascertained by an informal arbitration.

The proper officers of the Treasury have deemed themselves required by the law of the United States upon the subject to demand a tax upon the incomes of foreign consuls in this country.  While such a demand may not in strictness be in derogation of public law, or perhaps of any existing treaty between the United States and a foreign country, the expediency of so far modifying the act as to exempt from tax the income of such consuls as are not citizens of the United States, derived from the emoluments of their office or from property not situated in the United States, is submitted to your serious consideration.  I make this suggestion upon the ground that a comity which ought to be reciprocated exempts our consuls in all other countries from taxation to the extent thus indicated.  The United States, I think, ought not to be exceptionally illiberal to international trade and commerce.

The operations of the Treasury during the last year have been successfully conducted.  The enactment by Congress of a national banking law has proved a valuable support of the public credit, and the general legislation in relation to loans has fully answered the expectations of its favorers.  Some amendments may be required to perfect existing laws, but no change in their principles or general scope is believed to be needed.

Since these measures have been in operation all demands on the Treasury, including the pay of the Army and Navy, have been promptly met and fully satisfied.  No considerable body of troops, it is believed, were ever more amply provided and more liberally and punctually paid, and it may be added that by no people were the burdens incident to a great war ever more cheerfully borne.

The receipts during the year from all sources, including loans and balance in the Treasury at its commencement, were $901,125,674.86, and the aggregate disbursements $895,796,630.65, leaving a balance on the 1st of July, 1863, of $5,329,044.21.  Of the receipts there were derived from customs $69,059,642.40, from internal revenue $37,640,787.95, from direct tax $1,485,103.61, from lands $167,617.17, from miscellaneous sources $3,046,615.35, and from loans $776,682,361.57, making the aggregate $901,125,674.86.  Of the disbursements there were for the civil service $23,253,922.08, for pensions and Indians $4,216,520.79, for interest on public debt $24,729,846.51, for the War Department $599,298,600.83, for the Navy Department $63,211,105.27, for payment of funded and temporary debt $181,086,635.07, making the aggregate $895,796,630.65 and leaving the balance of $5,329,044.21.  But the payment of