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