been elsewhere laid down, that "A CONCURRENT JURISDICTION in the
article of taxation was the only admissible substitute for an entire
subordination, in respect to this branch of power, of State authority to
that of the Union." Any separation of the objects of revenue that could
have been fallen upon, would have amounted to a sacrifice of the great
INTERESTS of the Union to the POWER of the individual States. The
convention thought the concurrent jurisdiction preferable to that
subordination; and it is evident that it has at least the merit of
reconciling an indefinite constitutional power of taxation in the
Federal government with an adequate and independent power in the States
to provide for their own necessities. There remain a few other lights,
in which this important subject of taxation will claim a further
consideration.
PUBLIUS
FEDERALIST No. 35
The Same Subject Continued (Concerning the General Power of Taxation)
For the Independent Journal. Saturday, January 5, 1788
HAMILTON
To the People of the State of New York:
BEFORE we proceed to examine any other objections to an indefinite power
of taxation in the Union, I shall make one general remark; which is,
that if the jurisdiction of the national government, in the article of
revenue, should be restricted to particular objects, it would naturally
occasion an undue proportion of the public burdens to fall upon those
objects. Two evils would spring from this source: the oppression of
particular branches of industry; and an unequal distribution of the
taxes, as well among the several States as among the citizens of the
same State.
Suppose, as has been contended for, the federal power of taxation were
to be confined to duties on imports, it is evident that the government,
for want of being able to command other resources, would frequently be
tempted to extend these duties to an injurious excess. There are persons
who imagine that they can never be carried to too great a length; since
the higher they are, the more it is alleged they will tend to discourage
an extravagant consumption, to produce a favorable balance of trade,
and to promote domestic manufactures. But all extremes are pernicious
in various ways. Exorbitant duties on imported articles would beget a
general spirit of smuggling; which is always prejudicial to the fair
trader, and eventually to the revenue itself: they tend to render
other classes of the community tributary, in an improper degree, to the
manufacturing classes, to whom they give a premature monopoly of the
markets; they sometimes force industry out of its more natural channels
into others in which it flows with less advantage; and in the last
place, they oppress the merchant, who is often obliged to pay them
himself without any retribution from the consumer. When the demand is
equal to the quantity of goods at market, the consumer generally
pays the duty; but when the markets happen to be overstocked, a great
proportion falls upon the merchant, and sometimes not only exhausts
his profits, but breaks in upon his capital. I am apt to think that
a division of the duty, between the seller and the buyer, more often
happens than is commonly imagined. It is not always possible to raise
the price of a commodity in exact proportion to every additional
imposition laid upon it. The merchant, especially in a country of small
commercial capital, is often under a necessity of keeping prices down in
order to a more expeditious sale.
The maxim that the consumer is the payer, is so much oftener true than
the reverse of the proposition, that it is far more equitable that the
duties on imports should go into a common stock, than that they should
redound to the exclusive benefit of the importing States. But it is not
so generally true as to render it equitable, that those duties should
form the only national fund. When they are paid by the merchant they
operate as an additional tax upon the importing State, whose citizens
pay their proportion of them in the character of consumers. In this view
they are productive of inequality among the States; which inequality
would be increased with the increased extent of the duties. The
confinement of the national revenues to this species of imposts would
be attended with inequality, from a different cause, between the
manufacturing and the non-manufacturing States. The States which can
go farthest towards the supply of their own wants, by their own
manufactures, will not, according to their numbers or wealth, consume so
great a proportion of imported articles as those States which are not
in the same favorable situation. They would not, therefore, in this mode
alone contribute to the public treasury in a ratio to their abilities.
To make them do this it is necessary that recourse be had to excises,
the proper objects of which are particular kinds of manufactures. New
York is more deeply interested in these considerations than such of
her citizens as contend for limiting the power of the Union to external
taxation may be aware of. New York is an importing State, and is not
likely speedily to be, to any great extent, a manufacturing State.
She would, of course, suffer in a double light from restraining the
jurisdiction of the Union to commercial imposts.
So far as these observations tend to inculcate a danger of the import
duties being extended to an injurious extreme it may be observed,
conformably to a remark made in another part of these papers, that the
interest of the revenue itself would be a sufficient guard against such
an extreme. I readily admit that this would be the case, as long as
other resources were open; but if the avenues to them were closed, HOPE,
stimulated by necessity, would beget experiments, fortified by rigorous
precautions and additional penalties, which, for a time, would have the
intended effect, till there had been leisure to contrive expedients to
elude these new precautions. The first success would be apt to inspire
false opinions, which it might require a long course of subsequent
experience to correct. Necessity, especially in politics, often
occasions false hopes, false reasonings, and a system of measures
correspondingly erroneous. But even if this supposed excess should not
be a consequence of the limitation of the federal power of taxation, the
inequalities spoken of would still ensue, though not in the same degree,
from the other causes that have been noticed. Let us now return to the
examination of objections.
One which, if we may judge from the frequency of its repetition, seems
most to be relied on, is, that the House of Representatives is not
sufficiently numerous for the reception of all the different classes of
citizens, in order to combine the interests and feelings of every
part of the community, and to produce a due sympathy between the
representative body and its constituents. This argument presents itself
under a very specious and seducing form; and is well calculated to lay
hold of the prejudices of those to whom it is addressed. But when we
come to dissect it with attention, it will appear to be made up of
nothing but fair-sounding words. The object it seems to aim at is,
in the first place, impracticable, and in the sense in which it
is contended for, is unnecessary. I reserve for another place the
discussion of the question which relates to the sufficiency of the
representative body in respect to numbers, and shall content myself
with examining here the particular use which has been made of a contrary
supposition, in reference to the immediate subject of our inquiries.
The idea of an actual representation of all classes of the people, by
persons of each class, is altogether visionary. Unless it were expressly
provided in the Constitution, that each different occupation should
send one or more members, the thing would never take place in
practice. Mechanics and manufacturers will always be inclined, with few
exceptions, to give their votes to merchants, in preference to persons
of their own professions or trades. Those discerning citizens are well
aware that the mechanic and manufacturing arts furnish the materials
of mercantile enterprise and industry. Many of them, indeed, are
immediately connected with the operations of commerce. They know that
the merchant is their natural patron and friend; and they are aware,
that however great the confidence they may justly feel in their own good
sense, their interests can be more effectually promoted by the merchant
than by themselves. They are sensible that their habits in life have not
been such as to give them those acquired endowments, without which, in
a deliberative assembly, the greatest natural abilities are for the
most part useless; and that the influence and weight, and superior
acquirements of the merchants render them more equal to a contest with
any spirit which might happen to infuse itself into the public
councils, unfriendly to the manufacturing and trading interests. These
considerations, and many others that might be mentioned prove, and
experience confirms it, that artisans and manufacturers will commonly
be disposed to bestow their votes upon merchants and those whom
they recommend. We must therefore consider merchants as the natural
representatives of all these classes of the community.
With regard to the learned professions, little need be observed; they
truly form no distinct interest in society, and according to their
situation and talents, will be indiscriminately the objects of
the confidence and choice of each other, and of other parts of the
community.
Nothing remains but the landed interest; and this, in a political view,
and particularly in relation to taxes, I take to be perfectly united,
from the wealthiest landlord down to the poorest tenant. No tax can be
laid on land which will not affect the proprietor of millions of acres
as well as the proprietor of a single acre. Every landholder will
therefore have a common interest to keep the taxes on land as low as
possible; and common interest may always be reckoned upon as the surest
bond of sympathy. But if we even could suppose a distinction of interest
between the opulent landholder and the middling farmer, what reason is
there to conclude, that the first would stand a better chance of being
deputed to the national legislature than the last? If we take fact as
our guide, and look into our own senate and assembly, we shall find that
moderate proprietors of land prevail in both; nor is this less the case
in the senate, which consists of a smaller number, than in the assembly,
which is composed of a greater number. Where the qualifications of the
electors are the same, whether they have to choose a small or a
large number, their votes will fall upon those in whom they have most
confidence; whether these happen to be men of large fortunes, or of
moderate property, or of no property at all.
It is said to be necessary, that all classes of citizens should have
some of their own number in the representative body, in order that their
feelings and interests may be the better understood and attended to.
But we have seen that this will never happen under any arrangement
that leaves the votes of the people free. Where this is the case, the
representative body, with too few exceptions to have any influence
on the spirit of the government, will be composed of landholders,
merchants, and men of the learned professions. But where is the danger
that the interests and feelings of the different classes of citizens
will not be understood or attended to by these three descriptions of
men? Will not the landholder know and feel whatever will promote or
insure the interest of landed property? And will he not, from his own
interest in that species of property, be sufficiently prone to resist
every attempt to prejudice or encumber it? Will not the merchant
understand and be disposed to cultivate, as far as may be proper, the
interests of the mechanic and manufacturing arts, to which his commerce
is so nearly allied? Will not the man of the learned profession, who
will feel a neutrality to the rivalships between the different branches
of industry, be likely to prove an impartial arbiter between them, ready
to promote either, so far as it shall appear to him conducive to the
general interests of the society?
If we take into the account the momentary humors or dispositions which
may happen to prevail in particular parts of the society, and to which
a wise administration will never be inattentive, is the man whose
situation leads to extensive inquiry and information less likely to be
a competent judge of their nature, extent, and foundation than one
whose observation does not travel beyond the circle of his neighbors and
acquaintances? Is it not natural that a man who is a candidate for
the favor of the people, and who is dependent on the suffrages of his
fellow-citizens for the continuance of his public honors, should take
care to inform himself of their dispositions and inclinations, and
should be willing to allow them their proper degree of influence upon
his conduct? This dependence, and the necessity of being bound himself,
and his posterity, by the laws to which he gives his assent, are
the true, and they are the strong chords of sympathy between the
representative and the constituent.
There is no part of the administration of government that requires
extensive information and a thorough knowledge of the principles of
political economy, so much as the business of taxation. The man who
understands those principles best will be least likely to resort to
oppressive expedients, or sacrifice any particular class of citizens
to the procurement of revenue. It might be demonstrated that the most
productive system of finance will always be the least burdensome. There
can be no doubt that in order to a judicious exercise of the power of
taxation, it is necessary that the person in whose hands it should be
acquainted with the general genius, habits, and modes of thinking of the
people at large, and with the resources of the country. And this is
all that can be reasonably meant by a knowledge of the interests and
feelings of the people. In any other sense the proposition has either
no meaning, or an absurd one. And in that sense let every considerate
citizen judge for himself where the requisite qualification is most
likely to be found.
PUBLIUS
FEDERALIST No. 36
The Same Subject Continued (Concerning the General Power of Taxation)
From the New York Packet. Tuesday, January 8, 1788.
HAMILTON
To the People of the State of New York:
WE HAVE seen that the result of the observations, to which the foregoing
number has been principally devoted, is, that from the natural operation
of the different interests and views of the various classes of the
community, whether the representation of the people be more or less
numerous, it will consist almost entirely of proprietors of land, of
merchants, and of members of the learned professions, who will truly
represent all those different interests and views. If it should be
objected that we have seen other descriptions of men in the local
legislatures, I answer that it is admitted there are exceptions to the
rule, but not in sufficient number to influence the general complexion
or character of the government. There are strong minds in every walk of
life that will rise superior to the disadvantages of situation, and will
command the tribute due to their merit, not only from the classes to
which they particularly belong, but from the society in general. The
door ought to be equally open to all; and I trust, for the credit
of human nature, that we shall see examples of such vigorous plants
flourishing in the soil of federal as well as of State legislation; but
occasional instances of this sort will not render the reasoning founded
upon the general course of things, less conclusive.
The subject might be placed in several other lights that would all lead
to the same result; and in particular it might be asked, What greater
affinity or relation of interest can be conceived between the carpenter
and blacksmith, and the linen manufacturer or stocking weaver, than
between the merchant and either of them? It is notorious that there are
often as great rivalships between different branches of the mechanic or
manufacturing arts as there are between any of the departments of labor
and industry; so that, unless the representative body were to be far
more numerous than would be consistent with any idea of regularity or
wisdom in its deliberations, it is impossible that what seems to be the
spirit of the objection we have been considering should ever be realized
in practice. But I forbear to dwell any longer on a matter which has
hitherto worn too loose a garb to admit even of an accurate inspection
of its real shape or tendency.
There is another objection of a somewhat more precise nature that claims
our attention. It has been asserted that a power of internal taxation
in the national legislature could never be exercised with advantage, as
well from the want of a sufficient knowledge of local circumstances, as
from an interference between the revenue laws of the Union and of the
particular States. The supposition of a want of proper knowledge seems
to be entirely destitute of foundation. If any question is depending
in a State legislature respecting one of the counties, which demands
a knowledge of local details, how is it acquired? No doubt from the
information of the members of the county. Cannot the like knowledge be
obtained in the national legislature from the representatives of each
State? And is it not to be presumed that the men who will generally be
sent there will be possessed of the necessary degree of intelligence
to be able to communicate that information? Is the knowledge of
local circumstances, as applied to taxation, a minute topographical
acquaintance with all the mountains, rivers, streams, highways,
and bypaths in each State; or is it a general acquaintance with its
situation and resources, with the state of its agriculture, commerce,
manufactures, with the nature of its products and consumptions, with the
different degrees and kinds of its wealth, property, and industry?
Nations in general, even under governments of the more popular kind,
usually commit the administration of their finances to single men or
to boards composed of a few individuals, who digest and prepare, in the
first instance, the plans of taxation, which are afterwards passed into
laws by the authority of the sovereign or legislature.
Inquisitive and enlightened statesmen are deemed everywhere best
qualified to make a judicious selection of the objects proper for
revenue; which is a clear indication, as far as the sense of mankind
can have weight in the question, of the species of knowledge of local
circumstances requisite to the purposes of taxation.
The taxes intended to be comprised under the general denomination of
internal taxes may be subdivided into those of the DIRECT and those
of the INDIRECT kind. Though the objection be made to both, yet the
reasoning upon it seems to be confined to the former branch. And indeed,
as to the latter, by which must be understood duties and excises on
articles of consumption, one is at a loss to conceive what can be the
nature of the difficulties apprehended. The knowledge relating to them
must evidently be of a kind that will either be suggested by the nature
of the article itself, or can easily be procured from any well-informed
man, especially of the mercantile class. The circumstances that may
distinguish its situation in one State from its situation in another
must be few, simple, and easy to be comprehended. The principal thing
to be attended to, would be to avoid those articles which had been
previously appropriated to the use of a particular State; and there
could be no difficulty in ascertaining the revenue system of each. This
could always be known from the respective codes of laws, as well as from
the information of the members from the several States.
The objection, when applied to real property or to houses and lands,
appears to have, at first sight, more foundation, but even in this view
it will not bear a close examination. Land taxes are commonly laid in
one of two modes, either by ACTUAL valuations, permanent or periodical,
or by OCCASIONAL assessments, at the discretion, or according to the
best judgment, of certain officers whose duty it is to make them. In
either case, the EXECUTION of the business, which alone requires the
knowledge of local details, must be devolved upon discreet persons in
the character of commissioners or assessors, elected by the people or
appointed by the government for the purpose. All that the law can do
must be to name the persons or to prescribe the manner of their election
or appointment, to fix their numbers and qualifications and to draw the
general outlines of their powers and duties. And what is there in all
this that cannot as well be performed by the national legislature as by
a State legislature? The attention of either can only reach to general
principles; local details, as already observed, must be referred to
those who are to execute the plan.
But there is a simple point of view in which this matter may be placed
that must be altogether satisfactory. The national legislature can make
use of the SYSTEM OF EACH STATE WITHIN THAT STATE. The method of laying
and collecting this species of taxes in each State can, in all its
parts, be adopted and employed by the federal government.
Let it be recollected that the proportion of these taxes is not to
be left to the discretion of the national legislature, but is to be
determined by the numbers of each State, as described in the second
section of the first article. An actual census or enumeration of the
people must furnish the rule, a circumstance which effectually shuts the
door to partiality or oppression. The abuse of this power of taxation
seems to have been provided against with guarded circumspection. In
addition to the precaution just mentioned, there is a provision that
"all duties, imposts, and excises shall be UNIFORM throughout the United
States."
It has been very properly observed by different speakers and writers
on the side of the Constitution, that if the exercise of the power of
internal taxation by the Union should be discovered on experiment to be
really inconvenient, the federal government may then forbear the use of
it, and have recourse to requisitions in its stead. By way of answer to
this, it has been triumphantly asked, Why not in the first instance
omit that ambiguous power, and rely upon the latter resource? Two solid
answers may be given. The first is, that the exercise of that power, if
convenient, will be preferable, because it will be more effectual;
and it is impossible to prove in theory, or otherwise than by the
experiment, that it cannot be advantageously exercised. The contrary,
indeed, appears most probable. The second answer is, that the existence
of such a power in the Constitution will have a strong influence in
giving efficacy to requisitions. When the States know that the Union
can apply itself without their agency, it will be a powerful motive for
exertion on their part.