FEDERALIST No. 30

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.