Concerning the General Power of Taxation



From the New York Packet.



Friday, December 28, 1787.



HAMILTON





To the People of the State of New York:



It has been already observed that the federal government ought to

possess the power of providing for the support of the national forces;

in which proposition was intended to be included the expense of raising

troops, of building and equipping fleets, and all other expenses in any

wise connected with military arrangements and operations. But these are

not the only objects to which the jurisdiction of the Union, in respect

to revenue, must necessarily be empowered to extend. It must embrace a

provision for the support of the national civil list; for the payment

of the national debts contracted, or that may be contracted; and, in

general, for all those matters which will call for disbursements out of

the national treasury. The conclusion is, that there must be

interwoven, in the frame of the government, a general power of

taxation, in one shape or another.



Money is, with propriety, considered as the vital principle of the body

politic; as that which sustains its life and motion, and enables it to

perform its most essential functions. A complete power, therefore, to

procure a regular and adequate supply of it, as far as the resources of

the community will permit, may be regarded as an indispensable

ingredient in every constitution. From a deficiency in this particular,

one of two evils must ensue; either the people must be subjected to

continual plunder, as a substitute for a more eligible mode of

supplying the public wants, or the government must sink into a fatal

atrophy, and, in a short course of time, perish.



In the Ottoman or Turkish empire, the sovereign, though in other

respects absolute master of the lives and fortunes of his subjects, has

no right to impose a new tax. The consequence is that he permits the

bashaws or governors of provinces to pillage the people without mercy;

and, in turn, squeezes out of them the sums of which he stands in need,

to satisfy his own exigencies and those of the state. In America, from

a like cause, the government of the Union has gradually dwindled into a

state of decay, approaching nearly to annihilation. Who can doubt, that

the happiness of the people in both countries would be promoted by

competent authorities in the proper hands, to provide the revenues

which the necessities of the public might require?



The present Confederation, feeble as it is intended to repose in the

United States, an unlimited power of providing for the pecuniary wants

of the Union. But proceeding upon an erroneous principle, it has been

done in such a manner as entirely to have frustrated the intention.

Congress, by the articles which compose that compact (as has already

been stated), are authorized to ascertain and call for any sums of

money necessary, in their judgment, to the service of the United

States; and their requisitions, if conformable to the rule of

apportionment, are in every constitutional sense obligatory upon the

States. These have no right to question the propriety of the demand; no

discretion beyond that of devising the ways and means of furnishing the

sums demanded. But though this be strictly and truly the case; though

the assumption of such a right would be an infringement of the articles

of Union; though it may seldom or never have been avowedly claimed, yet

in practice it has been constantly exercised, and would continue to be

so, as long as the revenues of the Confederacy should remain dependent

on the intermediate agency of its members. What the consequences of

this system have been, is within the knowledge of every man the least

conversant in our public affairs, and has been amply unfolded in

different parts of these inquiries. It is this which has chiefly

contributed to reduce us to a situation, which affords ample cause both

of mortification to ourselves, and of triumph to our enemies.



What remedy can there be for this situation, but in a change of the

system which has produced it in a change of the fallacious and delusive

system of quotas and requisitions? What substitute can there be

imagined for this ignis fatuus in finance, but that of permitting the

national government to raise its own revenues by the ordinary methods

of taxation authorized in every well-ordered constitution of civil

government? Ingenious men may declaim with plausibility on any subject;

but no human ingenuity can point out any other expedient to rescue us

from the inconveniences and embarrassments naturally resulting from

defective supplies of the public treasury.



The more intelligent adversaries of the new Constitution admit the

force of this reasoning; but they qualify their admission by a

distinction between what they call INTERNAL and EXTERNAL taxation. The

former they would reserve to the State governments; the latter, which

they explain into commercial imposts, or rather duties on imported

articles, they declare themselves willing to concede to the federal

head. This distinction, however, would violate the maxim of good sense

and sound policy, which dictates that every POWER ought to be in

proportion to its OBJECT; and would still leave the general government

in a kind of tutelage to the State governments, inconsistent with every

idea of vigor or efficiency. Who can pretend that commercial imposts

are, or would be, alone equal to the present and future exigencies of

the Union? Taking into the account the existing debt, foreign and

domestic, upon any plan of extinguishment which a man moderately

impressed with the importance of public justice and public credit could

approve, in addition to the establishments which all parties will

acknowledge to be necessary, we could not reasonably flatter ourselves,

that this resource alone, upon the most improved scale, would even

suffice for its present necessities. Its future necessities admit not

of calculation or limitation; and upon the principle, more than once

adverted to, the power of making provision for them as they arise ought

to be equally unconfined. I believe it may be regarded as a position

warranted by the history of mankind, that, IN THE USUAL PROGRESS OF

THINGS, THE NECESSITIES OF A NATION, IN EVERY STAGE OF ITS EXISTENCE,

WILL BE FOUND AT LEAST EQUAL TO ITS RESOURCES.



To say that deficiencies may be provided for by requisitions upon the

States, is on the one hand to acknowledge that this system cannot be

depended upon, and on the other hand to depend upon it for every thing

beyond a certain limit. Those who have carefully attended to its vices

and deformities as they have been exhibited by experience or delineated

in the course of these papers, must feel invincible repugnancy to

trusting the national interests in any degree to its operation. Its

inevitable tendency, whenever it is brought into activity, must be to

enfeeble the Union, and sow the seeds of discord and contention between

the federal head and its members, and between the members themselves.

Can it be expected that the deficiencies would be better supplied in

this mode than the total wants of the Union have heretofore been

supplied in the same mode? It ought to be recollected that if less will

be required from the States, they will have proportionably less means

to answer the demand. If the opinions of those who contend for the

distinction which has been mentioned were to be received as evidence of

truth, one would be led to conclude that there was some known point in

the economy of national affairs at which it would be safe to stop and

to say: Thus far the ends of public happiness will be promoted by

supplying the wants of government, and all beyond this is unworthy of

our care or anxiety. How is it possible that a government half supplied

and always necessitous, can fulfill the purposes of its institution,

can provide for the security, advance the prosperity, or support the

reputation of the commonwealth? How can it ever possess either energy

or stability, dignity or credit, confidence at home or respectability

abroad? How can its administration be any thing else than a succession

of expedients temporizing, impotent, disgraceful? How will it be able

to avoid a frequent sacrifice of its engagements to immediate

necessity? How can it undertake or execute any liberal or enlarged

plans of public good?



Let us attend to what would be the effects of this situation in the

very first war in which we should happen to be engaged. We will

presume, for argument’s sake, that the revenue arising from the impost

duties answers the purposes of a provision for the public debt and of a

peace establishment for the Union. Thus circumstanced, a war breaks

out. What would be the probable conduct of the government in such an

emergency? Taught by experience that proper dependence could not be

placed on the success of requisitions, unable by its own authority to

lay hold of fresh resources, and urged by considerations of national

danger, would it not be driven to the expedient of diverting the funds

already appropriated from their proper objects to the defense of the

State? It is not easy to see how a step of this kind could be avoided;

and if it should be taken, it is evident that it would prove the

destruction of public credit at the very moment that it was becoming

essential to the public safety. To imagine that at such a crisis credit

might be dispensed with, would be the extreme of infatuation. In the

modern system of war, nations the most wealthy are obliged to have

recourse to large loans. A country so little opulent as ours must feel

this necessity in a much stronger degree. But who would lend to a

government that prefaced its overtures for borrowing by an act which

demonstrated that no reliance could be placed on the steadiness of its

measures for paying? The loans it might be able to procure would be as

limited in their extent as burdensome in their conditions. They would

be made upon the same principles that usurers commonly lend to bankrupt

and fraudulent debtors, with a sparing hand and at enormous premiums.



It may perhaps be imagined that, from the scantiness of the resources

of the country, the necessity of diverting the established funds in the

case supposed would exist, though the national government should

possess an unrestrained power of taxation. But two considerations will

serve to quiet all apprehension on this head: one is, that we are sure

the resources of the community, in their full extent, will be brought

into activity for the benefit of the Union; the other is, that whatever

deficiences there may be, can without difficulty be supplied by loans.



The power of creating new funds upon new objects of taxation, by its

own authority, would enable the national government to borrow as far as

its necessities might require. Foreigners, as well as the citizens of

America, could then reasonably repose confidence in its engagements;

but to depend upon a government that must itself depend upon thirteen

other governments for the means of fulfilling its contracts, when once

its situation is clearly understood, would require a degree of

credulity not often to be met with in the pecuniary transactions of

mankind, and little reconcilable with the usual sharp-sightedness of

avarice.



Reflections of this kind may have trifling weight with men who hope to

see realized in America the halcyon scenes of the poetic or fabulous

age; but to those who believe we are likely to experience a common

portion of the vicissitudes and calamities which have fallen to the lot

of other nations, they must appear entitled to serious attention. Such

men must behold the actual situation of their country with painful

solicitude, and deprecate the evils which ambition or revenge might,

with too much facility, inflict upon it.



PUBLIUS.









THE FEDERALIST.