FEDERALIST No. 35



The Same Subject Continued

(Concerning the General Power of Taxation)

For the Independent Journal.

Saturday, January 5, 1788



HAMILTON



To the People of the State of New York:



BEFORE we proceed to examine any other objections to an indefinite power

of taxation in the Union, I shall make one general remark; which is,

that if the jurisdiction of the national government, in the article of

revenue, should be restricted to particular objects, it would naturally

occasion an undue proportion of the public burdens to fall upon those

objects. Two evils would spring from this source: the oppression of

particular branches of industry; and an unequal distribution of the

taxes, as well among the several States as among the citizens of the

same State.



Suppose, as has been contended for, the federal power of taxation were

to be confined to duties on imports, it is evident that the government,

for want of being able to command other resources, would frequently be

tempted to extend these duties to an injurious excess. There are persons

who imagine that they can never be carried to too great a length; since

the higher they are, the more it is alleged they will tend to discourage

an extravagant consumption, to produce a favorable balance of trade, and

to promote domestic manufactures. But all extremes are pernicious in

various ways. Exorbitant duties on imported articles would beget a

general spirit of smuggling; which is always prejudicial to the fair

trader, and eventually to the revenue itself: they tend to render other

classes of the community tributary, in an improper degree, to the

manufacturing classes, to whom they give a premature monopoly of the

markets; they sometimes force industry out of its more natural channels

into others in which it flows with less advantage; and in the last

place, they oppress the merchant, who is often obliged to pay them

himself without any retribution from the consumer. When the demand is

equal to the quantity of goods at market, the consumer generally pays

the duty; but when the markets happen to be overstocked, a great

proportion falls upon the merchant, and sometimes not only exhausts his

profits, but breaks in upon his capital. I am apt to think that a

division of the duty, between the seller and the buyer, more often

happens than is commonly imagined. It is not always possible to raise

the price of a commodity in exact proportion to every additional

imposition laid upon it. The merchant, especially in a country of small

commercial capital, is often under a necessity of keeping prices down in

order to a more expeditious sale.



The maxim that the consumer is the payer, is so much oftener true than

the reverse of the proposition, that it is far more equitable that the

duties on imports should go into a common stock, than that they should

redound to the exclusive benefit of the importing States. But it is not

so generally true as to render it equitable, that those duties should

form the only national fund. When they are paid by the merchant they

operate as an additional tax upon the importing State, whose citizens

pay their proportion of them in the character of consumers. In this view

they are productive of inequality among the States; which inequality

would be increased with the increased extent of the duties. The

confinement of the national revenues to this species of imposts would be

attended with inequality, from a different cause, between the

manufacturing and the non-manufacturing States. The States which can go

farthest towards the supply of their own wants, by their own

manufactures, will not, according to their numbers or wealth, consume so

great a proportion of imported articles as those States which are not in

the same favorable situation. They would not, therefore, in this mode

alone contribute to the public treasury in a ratio to their abilities.

To make them do this it is necessary that recourse be had to excises,

the proper objects of which are particular kinds of manufactures. New

York is more deeply interested in these considerations than such of her

citizens as contend for limiting the power of the Union to external

taxation may be aware of. New York is an importing State, and is not

likely speedily to be, to any great extent, a manufacturing State. She

would, of course, suffer in a double light from restraining the

jurisdiction of the Union to commercial imposts.



So far as these observations tend to inculcate a danger of the import

duties being extended to an injurious extreme it may be observed,

conformably to a remark made in another part of these papers, that the

interest of the revenue itself would be a sufficient guard against such

an extreme. I readily admit that this would be the case, as long as

other resources were open; but if the avenues to them were closed, HOPE,

stimulated by necessity, would beget experiments, fortified by rigorous

precautions and additional penalties, which, for a time, would have the

intended effect, till there had been leisure to contrive expedients to

elude these new precautions. The first success would be apt to inspire

false opinions, which it might require a long course of subsequent

experience to correct. Necessity, especially in politics, often

occasions false hopes, false reasonings, and a system of measures

correspondingly erroneous. But even if this supposed excess should not

be a consequence of the limitation of the federal power of taxation, the

inequalities spoken of would still ensue, though not in the same degree,

from the other causes that have been noticed. Let us now return to the

examination of objections.



One which, if we may judge from the frequency of its repetition, seems

most to be relied on, is, that the House of Representatives is not

sufficiently numerous for the reception of all the different classes of

citizens, in order to combine the interests and feelings of every part

of the community, and to produce a due sympathy between the

representative body and its constituents. This argument presents itself

under a very specious and seducing form; and is well calculated to lay

hold of the prejudices of those to whom it is addressed. But when we

come to dissect it with attention, it will appear to be made up of

nothing but fair-sounding words. The object it seems to aim at is, in

the first place, impracticable, and in the sense in which it is

contended for, is unnecessary. I reserve for another place the

discussion of the question which relates to the sufficiency of the

representative body in respect to numbers, and shall content myself with

examining here the particular use which has been made of a contrary

supposition, in reference to the immediate subject of our inquiries.



The idea of an actual representation of all classes of the people, by

persons of each class, is altogether visionary. Unless it were expressly

provided in the Constitution, that each different occupation should send

one or more members, the thing would never take place in practice.

Mechanics and manufacturers will always be inclined, with few

exceptions, to give their votes to merchants, in preference to persons

of their own professions or trades. Those discerning citizens are well

aware that the mechanic and manufacturing arts furnish the materials of

mercantile enterprise and industry. Many of them, indeed, are

immediately connected with the operations of commerce. They know that

the merchant is their natural patron and friend; and they are aware,

that however great the confidence they may justly feel in their own good

sense, their interests can be more effectually promoted by the merchant

than by themselves. They are sensible that their habits in life have not

been such as to give them those acquired endowments, without which, in a

deliberative assembly, the greatest natural abilities are for the most

part useless; and that the influence and weight, and superior

acquirements of the merchants render them more equal to a contest with

any spirit which might happen to infuse itself into the public councils,

unfriendly to the manufacturing and trading interests. These

considerations, and many others that might be mentioned prove, and

experience confirms it, that artisans and manufacturers will commonly be

disposed to bestow their votes upon merchants and those whom they

recommend. We must therefore consider merchants as the natural

representatives of all these classes of the community.



With regard to the learned professions, little need be observed; they

truly form no distinct interest in society, and according to their

situation and talents, will be indiscriminately the objects of the

confidence and choice of each other, and of other parts of the

community.



Nothing remains but the landed interest; and this, in a political view,

and particularly in relation to taxes, I take to be perfectly united,

from the wealthiest landlord down to the poorest tenant. No tax can be

laid on land which will not affect the proprietor of millions of acres

as well as the proprietor of a single acre. Every landholder will

therefore have a common interest to keep the taxes on land as low as

possible; and common interest may always be reckoned upon as the surest

bond of sympathy. But if we even could suppose a distinction of interest

between the opulent landholder and the middling farmer, what reason is

there to conclude, that the first would stand a better chance of being

deputed to the national legislature than the last? If we take fact as

our guide, and look into our own senate and assembly, we shall find that

moderate proprietors of land prevail in both; nor is this less the case

in the senate, which consists of a smaller number, than in the assembly,

which is composed of a greater number. Where the qualifications of the

electors are the same, whether they have to choose a small or a large

number, their votes will fall upon those in whom they have most

confidence; whether these happen to be men of large fortunes, or of

moderate property, or of no property at all.



It is said to be necessary, that all classes of citizens should have

some of their own number in the representative body, in order that their

feelings and interests may be the better understood and attended to. But

we have seen that this will never happen under any arrangement that

leaves the votes of the people free. Where this is the case, the

representative body, with too few exceptions to have any influence on

the spirit of the government, will be composed of landholders,

merchants, and men of the learned professions. But where is the danger

that the interests and feelings of the different classes of citizens

will not be understood or attended to by these three descriptions of

men? Will not the landholder know and feel whatever will promote or

insure the interest of landed property? And will he not, from his own

interest in that species of property, be sufficiently prone to resist

every attempt to prejudice or encumber it? Will not the merchant

understand and be disposed to cultivate, as far as may be proper, the

interests of the mechanic and manufacturing arts, to which his commerce

is so nearly allied? Will not the man of the learned profession, who

will feel a neutrality to the rivalships between the different branches

of industry, be likely to prove an impartial arbiter between them, ready

to promote either, so far as it shall appear to him conducive to the

general interests of the society?



If we take into the account the momentary humors or dispositions which

may happen to prevail in particular parts of the society, and to which a

wise administration will never be inattentive, is the man whose

situation leads to extensive inquiry and information less likely to be a

competent judge of their nature, extent, and foundation than one whose

observation does not travel beyond the circle of his neighbors and

acquaintances? Is it not natural that a man who is a candidate for the

favor of the people, and who is dependent on the suffrages of his

fellow-citizens for the continuance of his public honors, should take

care to inform himself of their dispositions and inclinations, and

should be willing to allow them their proper degree of influence upon

his conduct? This dependence, and the necessity of being bound himself,

and his posterity, by the laws to which he gives his assent, are the

true, and they are the strong chords of sympathy between the

representative and the constituent.



There is no part of the administration of government that requires

extensive information and a thorough knowledge of the principles of

political economy, so much as the business of taxation. The man who

understands those principles best will be least likely to resort to

oppressive expedients, or sacrifice any particular class of citizens to

the procurement of revenue. It might be demonstrated that the most

productive system of finance will always be the least burdensome. There

can be no doubt that in order to a judicious exercise of the power of

taxation, it is necessary that the person in whose hands it should be

acquainted with the general genius, habits, and modes of thinking of the

people at large, and with the resources of the country. And this is all

that can be reasonably meant by a knowledge of the interests and

feelings of the people. In any other sense the proposition has either no

meaning, or an absurd one. And in that sense let every considerate

citizen judge for himself where the requisite qualification is most

likely to be found.



PUBLIUS