Concerning Taxation

The federal government must fund the national forces: troops, fleets, and every military operation. It must also fund civil officers, our debts present and future, and every charge on the treasury. A general power of taxation, as far as our resources allow, must be woven into the government. Without it, the people are plundered or the government withers and dies.

The Ottoman sovereign, though absolute, may lay no new tax, so his governors plunder the people in his stead. A like cause has left the Union decaying toward ruin. The Confederation meant to supply that want, but on a false principle. Congress calls for what it judges necessary; the states, though bound to pay, in practice refuse. They will keep refusing while the Union’s revenue passes through them. The only remedy is to drop quotas and requisitions and let the national government raise its own revenue by ordinary taxation.

The abler opponents grant this, then split taxes: internal for the states, import duties for the Union. That breaks the maxim that power should match its object, and keeps the Union dependent on the states. Import duties alone cannot meet even present needs, given our debts. Future needs cannot be calculated, so that power must be as unconfined. A nation’s necessities, I take it, usually run at least equal to its resources.

Filling deficiencies by requisitions admits the system cannot be trusted, and still leans on it. Require less of the states and they have proportionally less means to answer. Requisitions also weaken the Union and sow discord between the federal head and the states, and among the states themselves. A half-supplied, always needy government has neither energy nor credit.

Suppose import duties just cover the public debt; then our first war breaks out. Unable to trust requisitions or raise money itself, would the government not divert those appropriated funds into defense? That step could hardly be avoided, and it would destroy public credit just when safety demanded it. Modern war forces even wealthy nations to borrow, and ours more. Who would lend to a government just shown unable to pay? Its loans would be few and burdensome.

One might fear that even with full taxing power, scanty resources would still force diversion. Two things quiet that: the whole country’s resources would serve the Union, and loans supply any shortfall. Taxing on its own authority, the government could borrow what it needed, and foreigners and citizens alike could trust its engagements. Without that power it must depend on thirteen other governments to meet its contracts, and trusting it would take a credulity rare in money matters. Dreamers may slight this; those who expect the common trials of nations will not.

In every inquiry certain first principles command assent on their own. Where they fail, the fault lies in faulty senses, or in interest, passion, or prejudice. Geometry has such maxims, and men accept even its paradoxes; in morals and politics they are far harder to convince. Yet these sciences have maxims too: the means suited to the end, and every power matched to its object. A power meant for a purpose that admits no limit can carry no limit itself. The confusion lies oftener in the reasoner’s passions than in the subject.

How, if the objectors are sincere, could so plain a need as a general power of taxation be opposed? (1) A government must hold every power its trust requires, checked only by the public good and the people’s will. (2) Defense and the public peace face dangers that admit no limit, so their provision is bounded only by the nation’s needs and resources. (3) Revenue is the engine of that provision, so the power to raise it comes with it. (4) Taxing the states collectively fails in theory and practice, so the Union must hold unqualified power to tax in the ordinary modes.

The opponents fight hardest against this part of the plan. Their objection: the Union’s needs may admit no limit, but its taxing power need not be unconfined. The states need revenue as much as the Union, and matter as much to the people’s happiness. An indefinite federal power might, and probably would in time, strip them of it, leaving them at the national legislature’s mercy. The Union’s laws are supreme, and it may pass all laws necessary to execute its powers. So it might abolish a state tax as interfering with its own. By degrees all taxation would become a federal monopoly, destroying the state governments.

Their reasoning sometimes supposes usurpation, sometimes only the lawful working of the powers proposed; only the second is fair. Guesses about usurpation put us beyond all reasoning. I repeat that fears of usurpation belong to a government’s structure, not to the extent of its powers. The states hold complete sovereignty, yet our security lies in how they are formed and in their officers’ dependence on the people. If the federal government affords the same security, such fears should be discarded.

Encroachment by the states on the Union is as likely as the reverse. In republics strength always lies with the people, and weighty reasons suggest the states will hold most influence over them. Such contests would tend against the Union. But conjectures of this kind are vague and fallible. The safest course is to weigh only the powers the Constitution draws, leaving the rest to the people. Holding the scales, they will, it is hoped, preserve the constitutional balance between the general and the state governments. On this ground the objections to an indefinite power of taxation fall away.

I see no real danger to the states from a federal power over their revenue. Still, I grant them an independent, uncontrollable power to tax. Save duties on imports and exports, they keep it whole; a federal move to abridge it would be a violent usurpation. The plan aims only at a partial union, so the states keep every sovereign right not exclusively delegated. This happens in three cases. (1) The Constitution expressly grants the Union exclusive authority, as over the seat of government. (2) It grants a power and bars the states from the like, as with import duties. (3) A like state power would flatly contradict it, as with a uniform rule of naturalization.

Taxes on everything but imports and exports are concurrent and coequal in the Union and the states. No clause makes that power exclusive, and none bars the states from it. In fact the restraint laid on them as to imports and exports proves the reverse. Lawyers call this a negative pregnant: it denies the states one tax and affirms them all the rest.

A state tax may make a further Union tax unwise, but never unconstitutional. Only a flat contradiction of power, not mere inconvenience, can extinguish a standing right of sovereignty. The Constitution itself shows this care: where a power was thought unfit for the states, the convention inserted a clause forbidding it. The tenth section of the first article is nothing but such clauses. That rule of reading refutes every claim to the contrary.

The rest of the argument against the taxing power rests on two clauses. One lets Congress make all laws necessary and proper for carrying the government’s granted powers into execution. The other makes the Constitution, the federal laws made under it, and treaties the “supreme law of the land,” over contrary state law. They have been called engines to destroy our local governments. Yet the government would work exactly the same with them struck out as repeated in every article. They only declare what must follow from creating a federal government and vesting it with certain powers.

What is a power but the ability to do a thing, and with it the means to do it? A legislative power is a power of making laws, and laws are its means. The power to lay and collect taxes is legislative, so its proper means are necessary and proper laws. The clause complained of declares no more than that, and the same holds for every power the Constitution names. The sweeping clause exists expressly to execute them. Any objection must lie in those powers, not in a declaration that is at worst redundant and harmless.

But suspicion asks why it was put in at all. Only from caution, against those who might later curtail and evade the union’s lawful powers. The Convention probably foresaw what these papers keep urging. The danger that most threatens our political welfare is that the state governments will sap the foundations of the union. On so key a point, it may have left nothing to construction. The outcry against it proves the precaution wise, for it betrays a wish to question the truth the clause declares.

But who judges the necessity and propriety of laws executing the union’s powers? I answer, first, that the question arises as fully on the bare grant of those powers as on this clause. Second, the national government judges its own powers in the first instance, and its constituents in the last. If it turns tyrannical, the people, whose creature it is, must appeal to the standard they formed and redress the injury. Propriety turns on the powers a law rests on. Suppose Congress voided a state land tax, pleading harm to its revenue: that plainly invades the concurrent jurisdiction the Constitution supposes in the states.

But the union’s laws, it is said, are to be supreme. A law by its meaning includes supremacy: a rule those bound by it must obey. When political societies form a larger one, the laws it enacts under its constitution must be supreme over them and their members. Otherwise it is a mere treaty, not a government. But acts not made under those powers, invading what is left to the states, are not supreme law; they are usurpations. So this clause too declares only a necessary truth. It expressly confines that supremacy to laws made under the Constitution. I mention that only as an instance of the convention’s caution; the limit would have been understood anyway.

A federal tax law is therefore supreme and cannot lawfully be opposed. But a law wiping out a state tax, unless on imports or exports, would be no supreme law, but usurpation. If taxes heaped on the same object make collection hard, that is unwise use of power, not want of it. So the states keep an independent and uncontrollable authority to raise all the revenue they need, by every kind of taxation except duties on imports and exports. The next paper will show this concurrent jurisdiction the only workable substitute for putting state taxing authority wholly under the union.

I showed in my last paper that the states keep a taxing power equal to the Union’s, except duties on imports. That leaves them the greatest part of the community’s resources, enough for their wants. To say two coequal authorities cannot exist is to set theory against fact. Rome’s lawmaking long rested in two independent legislatures, patrician and plebeian, each able to annul the other’s acts. They coexisted for ages while the republic rose to greatness. Here neither side can annul the other, and little trouble is to be feared. The states’ wants will soon shrink, and the Union will probably avoid the objects they would use.

The Union’s objects of revenue are unlimited; a state’s are moderate. A constitution is framed not on present needs alone, but on those joined with the probable needs of ages. So the capacity to meet emergencies cannot safely be limited, for emergencies have no limit. We could compute what our present debts and a peace establishment require. To stop there would be folly, leaving the government unable to guard against foreign war or domestic convulsion. A commercial people must one day defend its commerce, and naval wars baffle all arithmetic.

Even barred from offensive war, the government must guard us against other nations’ ambition. Peace or war will not always be our choice. However moderate we are, we cannot count on the moderation of others. The passions of war rule men more than the sentiments of peace. To model our politics on lasting calm is to trust the weaker springs of character.

What are the chief costs of government, and of Europe’s huge debts? Wars and rebellions. The ordinary business of a state costs little beside national defense. Great Britain pays for all the show of monarchy, yet barely a fifteenth of its yearly income goes to such domestic business. The other fourteen fifteenths pay interest on war debts and keep up fleets and armies. A monarchy is no fair standard for a republic. But its extravagance at home offsets a republic’s frugality, so the proportion may still hold.

Consider the great debt we ran up in a single war. Count on only a common share of the events that disturb nations’ peace. Federal expense must then always dwarf state expense. The states’ war debts cannot recur under the proposed system. Once discharged, a state’s only call for revenue is its civil list, with all contingencies well under two hundred thousand pounds. By what logic may a state claim an exclusive fund beyond that sum forever? It would take resources from hands that need them and give them to hands that do not.

Suppose the convention had divided revenue between Union and states by proportional need. No fund would fit the states: too little for their present wants, too much for their future ones. Split external from internal taxes. The states then hold two thirds of the community’s resources to meet a tenth to a twentieth of its expenses. The Union holds one third to meet nine tenths to nineteen twentieths. Leave them only houses and lands, and they still hold a third of the resources for a tenth of the wants. A fund cut exactly to the object could not pay their old debts, leaving them dependent on the Union.

This justifies a position laid down elsewhere. Concurrent jurisdiction in taxation was the only admissible substitute for subordinating state authority to the Union. Any separation of revenue objects would sacrifice the Union’s great interests to the power of the states. The convention preferred it, reconciling an indefinite federal power to tax with an adequate, independent power in the states. A few other views of taxation remain.

Restrict the federal revenue power to certain objects, and two evils follow. Particular industries are oppressed, and taxes fall unevenly among the states and among citizens of one state. Confine that power to import duties, and the government, lacking other resources, would often be tempted to push them to excess. Such duties breed smuggling, which hurts the honest trader and the revenue itself. They make other classes depend on the manufacturers, handing them an early monopoly. They force industry out of its natural channels. And they oppress the merchant, who often pays them himself.

The consumer usually pays, so import duties fairly go into a common stock; but they cannot be the only national fund. When the merchant pays them, they tax his importing state besides. Imposts also bear unequally on manufacturing and other states: those that supply their own wants buy fewer imports and pay less than their wealth warrants. Excises would correct that. New York, an importing state not soon to manufacture, would suffer doubly. I admit the revenue’s own interest guards against excess while other resources stay open. Close them, and necessity would beget schemes and penalties that work only until men elude them. Even without that excess, these uneven burdens would still follow, though in a lesser degree.

The objection most repeated is that the House of Representatives is too small to hold every class and combine every interest in the community. Dissected, it is fair-sounding words: what it asks cannot be done, and as urged it is not needed. The question of numbers I reserve for another place. No class will send its own members unless the Constitution requires it. Mechanics and manufacturers, with few exceptions, prefer merchants to men of their own trade. They know the merchant is their patron, whose weight and knowledge better resist any spirit unfriendly to trade. Merchants are therefore their natural representatives.

The learned professions form no distinct interest; all trust and choose them alike. Only the landed interest remains, and in taxes I take it perfectly united, from richest landlord to poorest tenant. No land tax spares the owner of one acre while striking the owner of millions, so all want land taxes low. Under free votes the House will hold landholders, merchants, and men of the learned professions, and these three understand the rest. The landholder guards the interest of land; the merchant, the mechanic and manufacturing arts allied to his trade. The learned man, neutral between rival industries, judges fairly.

Is a man of wide inquiry a worse judge of the people’s moods than one who sees only his neighbors? A candidate who depends on their votes will learn their leanings and heed them. That dependence, and being bound by the laws he makes, are the strong chords of sympathy between representative and constituent.

No part of government demands a knowledge of political economy like taxation. The man who understands those principles best is least likely to use oppressive means or sacrifice any class for revenue. It can be shown that the most productive system of finance is always the least burdensome. To tax wisely, a man must know the people’s habits and thinking and the country’s resources. Let every citizen judge for himself where that fitness lies.

We have seen that those elected will be almost entirely landowners, merchants, and learned professionals, who truly represent those interests. Other sorts sit in the local legislatures, too few to change the government’s character. Trades rival one another too, so no legislature of workable size could represent each. I forbear to press so loose an objection.

A more precise objection: internal taxation cannot work well, for want of local knowledge, and because the two revenue systems would interfere. The want of knowledge has no foundation. A state legislature learns a county’s details from its members; the Union can learn each state’s from its representatives. The knowledge wanted is not every mountain and byroad, but a state’s situation, resources, and trade. Nations everywhere trust their finances to a few enlightened statesmen, which shows what knowledge taxation needs. Internal taxes are direct or indirect. The objection is made to both, though the reasoning touches only the direct. Indirect taxes are duties and excises on what people consume. The article itself suggests what one must know, or a well-informed merchant supplies it. The chief care is to avoid what a state has already taken, which its laws and its members make known.

The objection looks stronger for houses and lands, but not on examination. Land taxes are laid by actual valuations, permanent or periodic, or by discretionary assessments. Either way the execution, which alone needs local detail, falls to commissioners or assessors. The law only frames their appointment and duties, which a national legislature can do as well as a state one. Simpler still, the Union can adopt each state’s own way of laying and collecting within that state.

The share is not left to the legislature; the Constitution fixes it by each state’s numbers. An actual census must furnish the rule, shutting the door to partiality or oppression. All duties, imposts, and excises must be uniform throughout the United States. If the power proves inconvenient, requisitions remain. Why not omit it and rely on those? Two answers. Where convenient the power is more effectual, and only trial can prove otherwise. Its existence also spurs the states, who know the Union can act without them.

Union and state revenue laws cannot clash in authority, and in policy each can abstain from what the other took first. Neither can control the other, so each gains by that forbearance. As the states’ debts are paid and their expenses shrink, interference will almost vanish; a small land tax will serve them. Spectres have been raised to frighten the people: double officers, doubled burdens, odious poll taxes. Two cases admit no double officers: a tax the Union alone may lay, as import duties, and an object no state rule has touched. Elsewhere it will probably abstain, or use the state’s own officers, which saves expense and gives no offense.

A supposed system of influence ought not to be presumed, but it admits a closer answer. If such a spirit infested the councils of the Union, its surest road would be to employ state officers and raise their pay. That would turn state influence into national channels, not federal influence the other way. Such suppositions only cast a mist over the truth.

The Union’s wants must be supplied somehow. If the federal government supplies them, the states need not, and the community pays the same. Import duties, the most convenient revenue, go further under federal than state regulation, so harsher methods are less needed. Any real difficulty will impose greater care in choosing the means. It must tend to make taxing the luxury of the rich a fixed policy, sparing the poorer and more numerous classes.

I disapprove of poll taxes and would be sorry to see them under the national government. But does the power to lay them mean they will be laid? Every state holds that power, and several never use it; are those states tyrannies? If not, the same power cannot condemn the federal government. Little as I favor it, the power ought to exist: emergencies make such expedients essential, and revenue sources are scarce here.

I have gone through the powers that give the Union its energy. I flatter myself the candid part of the community now sees that the loudest objections to the Constitution have no substance. Had they shaped the plan, it would have defeated the great ends of public happiness. Happy will it be for us, and more honorable for human nature, if we have wisdom and virtue enough to set so glorious an example to mankind.