FEDERALIST No. 12

The Utility of the Union In Respect to Revenue

From the New York Packet.

Tuesday, November 27, 1787.

HAMILTON

To the People of the State of New York:

THE effects of Union upon the commercial prosperity of the

States have been sufficiently delineated. Its tendency to promote

the interests of revenue will be the subject of our present inquiry.

The prosperity of commerce is now perceived and acknowledged by

all enlightened statesmen to be the most useful as well as the most

productive source of national wealth, and has accordingly become a

primary object of their political cares. By multipying the means of

gratification, by promoting the introduction and circulation of the

precious metals, those darling objects of human avarice and

enterprise, it serves to vivify and invigorate the channels of

industry, and to make them flow with greater activity and

copiousness. The assiduous merchant, the laborious husbandman, the

active mechanic, and the industrious manufacturer,--all orders of

men, look forward with eager expectation and growing alacrity to

this pleasing reward of their toils. The often-agitated question

between agriculture and commerce has, from indubitable experience,

received a decision which has silenced the rivalship that once

subsisted between them, and has proved, to the satisfaction of their

friends, that their interests are intimately blended and interwoven.

It has been found in various countries that, in proportion as

commerce has flourished, land has risen in value. And how could it

have happened otherwise? Could that which procures a freer vent for

the products of the earth, which furnishes new incitements to the

cultivation of land, which is the most powerful instrument in

increasing the quantity of money in a state--could that, in fine,

which is the faithful handmaid of labor and industry, in every

shape, fail to augment that article, which is the prolific parent of

far the greatest part of the objects upon which they are exerted?

It is astonishing that so simple a truth should ever have had an

adversary; and it is one, among a multitude of proofs, how apt a

spirit of ill-informed jealousy, or of too great abstraction and

refinement, is to lead men astray from the plainest truths of reason

and conviction.

The ability of a country to pay taxes must always be

proportioned, in a great degree, to the quantity of money in

circulation, and to the celerity with which it circulates.

Commerce, contributing to both these objects, must of necessity

render the payment of taxes easier, and facilitate the requisite

supplies to the treasury. The hereditary dominions of the Emperor

of Germany contain a great extent of fertile, cultivated, and

populous territory, a large proportion of which is situated in mild

and luxuriant climates. In some parts of this territory are to be

found the best gold and silver mines in Europe. And yet, from the

want of the fostering influence of commerce, that monarch can boast

but slender revenues. He has several times been compelled to owe

obligations to the pecuniary succors of other nations for the

preservation of his essential interests, and is unable, upon the

strength of his own resources, to sustain a long or continued war.

But it is not in this aspect of the subject alone that Union

will be seen to conduce to the purpose of revenue. There are other

points of view, in which its influence will appear more immediate

and decisive. It is evident from the state of the country, from the

habits of the people, from the experience we have had on the point

itself, that 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. The popular system of

administration inherent in the nature of popular government,

coinciding with the real scarcity of money incident to a languid and

mutilated state of trade, has hitherto defeated every experiment for

extensive collections, and has at length taught the different

legislatures the folly of attempting them.

No person acquainted with what happens in other countries will

be surprised at this circumstance. In so opulent a nation as that

of Britain, where direct taxes from superior wealth must be much

more tolerable, and, from the vigor of the government, much more

practicable, than in America, far the greatest part of the national

revenue is derived from taxes of the indirect kind, from imposts,

and from excises. Duties on imported articles form a large branch

of this latter description.

In America, it is evident that we must a long time depend for

the means of revenue chiefly on such duties. In most parts of it,

excises must be confined within a narrow compass. The genius of the

people will ill brook the inquisitive and peremptory spirit of

excise laws. The pockets of the farmers, on the other hand, will

reluctantly yield but scanty supplies, in the unwelcome shape of

impositions on their houses and lands; and personal property is too

precarious and invisible a fund to be laid hold of in any other way

than by the inperceptible agency of taxes on consumption.

If these remarks have any foundation, that state of things which

will best enable us to improve and extend so valuable a resource

must be best adapted to our political welfare. And it cannot admit

of a serious doubt, that this state of things must rest on the basis

of a general Union. As far as this would be conducive to the

interests of commerce, so far it must tend to the extension of the

revenue to be drawn from that source. As far as it would contribute

to rendering regulations for the collection of the duties more

simple and efficacious, so far it must serve to answer the purposes

of making the same rate of duties more productive, and of putting it

into the power of the government to increase the rate without

prejudice to trade.

The relative situation of these States; the number of rivers

with which they are intersected, and of bays that wash there shores;

the facility of communication in every direction; the affinity of

language and manners; the familiar habits of intercourse; --all

these are circumstances that would conspire to render an illicit

trade between them a matter of little difficulty, and would insure

frequent evasions of the commercial regulations of each other. The

separate States or confederacies would be necessitated by mutual

jealousy to avoid the temptations to that kind of trade by the

lowness of their duties. The temper of our governments, for a long

time to come, would not permit those rigorous precautions by which

the European nations guard the avenues into their respective

countries, as well by land as by water; and which, even there, are

found insufficient obstacles to the adventurous stratagems of

avarice.

In France, there is an army of patrols (as they are called)

constantly employed to secure their fiscal regulations against the

inroads of the dealers in contraband trade. Mr. Neckar computes the

number of these patrols at upwards of twenty thousand. This shows

the immense difficulty in preventing that species of traffic, where

there is an inland communication, and places in a strong light the

disadvantages with which the collection of duties in this country

would be encumbered, if by disunion the States should be placed in a

situation, with respect to each other, resembling that of France

with respect to her neighbors. The arbitrary and vexatious powers

with which the patrols are necessarily armed, would be intolerable

in a free country.

If, on the contrary, there be but one government pervading all

the States, there will be, as to the principal part of our commerce,

but ONE SIDE to guard--the ATLANTIC COAST. Vessels arriving directly

from foreign countries, laden with valuable cargoes, would rarely

choose to hazard themselves to the complicated and critical perils

which would attend attempts to unlade prior to their coming into

port. They would have to dread both the dangers of the coast, and

of detection, as well after as before their arrival at the places of

their final destination. An ordinary degree of vigilance would be

competent to the prevention of any material infractions upon the

rights of the revenue. A few armed vessels, judiciously stationed

at the entrances of our ports, might at a small expense be made

useful sentinels of the laws. And the government having the same

interest to provide against violations everywhere, the co-operation

of its measures in each State would have a powerful tendency to

render them effectual. Here also we should preserve by Union, an

advantage which nature holds out to us, and which would be

relinquished by separation. The United States lie at a great

distance from Europe, and at a considerable distance from all other

places with which they would have extensive connections of foreign

trade. The passage from them to us, in a few hours, or in a single

night, as between the coasts of France and Britain, and of other

neighboring nations, would be impracticable. This is a prodigious

security against a direct contraband with foreign countries; but a

circuitous contraband to one State, through the medium of another,

would be both easy and safe. The difference between a direct

importation from abroad, and an indirect importation through the

channel of a neighboring State, in small parcels, according to time

and opportunity, with the additional facilities of inland

communication, must be palpable to every man of discernment.

It is therefore evident, that one national government would be

able, at much less expense, to extend the duties on imports, beyond

comparison, further than would be practicable to the States

separately, or to any partial confederacies. Hitherto, I believe,

it may safely be asserted, that these duties have not upon an

average exceeded in any State three per cent. In France they are

estimated to be about fifteen per cent., and in Britain they exceed

this proportion.1 There seems to be nothing to hinder their

being increased in this country to at least treble their present

amount. The single article of ardent spirits, under federal

regulation, might be made to furnish a considerable revenue. Upon a

ratio to the importation into this State, the whole quantity

imported into the United States may be estimated at four millions of

gallons; which, at a shilling per gallon, would produce two hundred

thousand pounds. That article would well bear this rate of duty;

and if it should tend to diminish the consumption of it, such an

effect would be equally favorable to the agriculture, to the

economy, to the morals, and to the health of the society. There is,

perhaps, nothing so much a subject of national extravagance as these

spirits.

What will be the consequence, if we are not able to avail

ourselves of the resource in question in its full extent? A nation

cannot long exist without revenues. Destitute of this essential

support, it must resign its independence, and sink into the degraded

condition of a province. This is an extremity to which no

government will of choice accede. Revenue, therefore, must be had

at all events. In this country, if the principal part be not drawn

from commerce, it must fall with oppressive weight upon land. It

has been already intimated that excises, in their true

signification, are too little in unison with the feelings of the

people, to admit of great use being made of that mode of taxation;

nor, indeed, in the States where almost the sole employment is

agriculture, are the objects proper for excise sufficiently numerous

to permit very ample collections in that way. Personal estate (as

has been before remarked), from the difficulty in tracing it, cannot

be subjected to large contributions, by any other means than by

taxes on consumption. In populous cities, it may be enough the

subject of conjecture, to occasion the oppression of individuals,

without much aggregate benefit to the State; but beyond these

circles, it must, in a great measure, escape the eye and the hand of

the tax-gatherer. As the necessities of the State, nevertheless,

must be satisfied in some mode or other, the defect of other

resources must throw the principal weight of public burdens on the

possessors of land. And as, on the other hand, the wants of the

government can never obtain an adequate supply, unless all the

sources of revenue are open to its demands, the finances of the

community, under such embarrassments, cannot be put into a situation

consistent with its respectability or its security. Thus we shall

not even have the consolations of a full treasury, to atone for the

oppression of that valuable class of the citizens who are employed

in the cultivation of the soil. But public and private distress

will keep pace with each other in gloomy concert; and unite in

deploring the infatuation of those counsels which led to disunion.

PUBLIUS.

1 If my memory be right they amount to twenty per cent.