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.