Federalist #12 - Alexander Hamilton - Federalist Fridays
In Federalist #12 Alexander Hamilton discusses the best means for a government to raise revenue.
Hamilton goes on to discuss why the Constitution is the best solution for the United States to be financially secure.
If you have missed any previous Federalist Articles, you can find them all here.
Federalist #12
Alexander Hamilton
November 27, 1787
The Utility of the Union In Respect to Revenue
After three days of silence, Alexander Hamilton returns to the New York Packet to publish Federalist #12.
In Paper #12, Hamilton turns his attention to revenue.
Specifically, Alexander discusses the proper way for the Government to raise money and why a Union under the Constitution is the most effective way to go about that task.
Revenue
Hamilton begins his discussion by insisting that a strong Government needs to raise revenue, and the only possible way to do that is to have an active commerce. Agriculture may feed a people, but it does not circulate enough money to keep a nation afloat. This is an interesting point, as it seems to preempt Jefferson’s ‘agrarian society’ which the two men would argue about in the years to come.
Alexander continues by discussing how to raise revenue from the lively commerce of the nation. Everyone’s favorite…taxes.
Though it might seem hypocritical for him to promote taxes (after the whole Tea Party/American Revolution ordeal), the truth is the Founders knew taxes were necessary. They were really upset with Britain because they were not given a say.
No one had an issue regarding taxation WITH representation.
Direct Taxes
First, Hamilton discusses direct taxes (AKA income taxes). He states:
“…it is impracticable to raise any very considerable sums by direct taxation. Tax laws have in vain been multiplied; new methods to enforce the collection have in vain been tried; the public expectation has been uniformly disappointed, and the treasuries of the States have remained empty.”
Hence, Hamilton did not necessarily think income taxes were unjust, but they were a waste of time. Unlike today, where a handful of major companies pay wages and send reports to the Government, the late 18th century simply had no reasonable way to tax individuals directly.
Due to this situation, Hamilton feels justified to claim that the only efficient way to raise revenue for the Government is consumption.
Most specifically, import taxes.
Import Taxes
Having decidedly proven that import taxes are the best way for the Government to increase revenue, Hamilton focuses on why a Union of the States will improve the collection of funds.
He demonstrates that European nations have large, expensive patrols on their borders to make sure people are not dodging the import duties. The American States, having more extensive borders, would not be able to function the same way. This would leave import taxes nearly impossible for individual States to enforce.
The Nation Government, on the other hand, would only have to focus on guarding the Atlantic Coast. This, Hamilton asserts, could be done cheaply and easily with just a handful of armed vessels outside the major ports.
The Anti-Federalist Argument
Truthfully, Hamilton does a good job of verifying why import duties are the best means of a government to raise revenue.
However, Anti-Federalists would have one very strong argument against the National Government controlling the import taxes: how would the States raise money?
If the National Government is collecting revenue through the best, most lucrative means, how are the individual States supposed to raise revenue to support their local governments?
To learn about some of the Founders who helped Hamilton create and implement his tax plan, check out my articles on Nicholas Eveleigh and Tench Coxe.
Instead of just recommending the Federalist Papers again, I decided to use this opportunity to let you know what I’m reading now. Though irrelevant to this article, I am in the middle of ‘First Founding Father’ about Richard Henry Lee. It actually speaks a lot regarding the entire Lee Family and gives an interesting perspective on George Washington in the days leading up to the Revolutionary War. Pick it up through the affiliate link below and support this site while paying Amazon’s standard cost.
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