Federalist No.34

The Same Subject Continued

(Concerning the General Power of Taxation)

Saturday, January 5, 1788

Alexander Hamilton


Having addressed specific sections of the Constitution in the previous two papers, Hamilton now returns to a more generalised discussion about the fairness of the taxation laws between States and the Union. The overall argument in this paper is that the States are left with the greater proportion of revenue with the lesser financial burden. This argument is made in defence of the Constitutional Convention’s decision to give the Union and States concurrent jurisdiction rather than entire subordination … of State authority to that of the Union. Hamilton’s purpose is to show that far from being an imposition upon State power, the Constitution has found a fair balance between State and Federal authority to address the needs of the nation which is fair to the States.


Hamilton first turns to history and the model of the Roman Republic to argue that concurrent jurisdiction is not unworkable. He points out that the Comitia Centuriata, which favoured the Patrician class and the Comitia Tribute, which represented Plebeian interests, each had the power to legislate as well as annul laws, yet these two legislatures coexisted for ages, and the Roman republic attained to the utmost of human greatness. In the case of the United States, Hamilton points out that neither the State or Federal government will have the power to annul each other’s laws (although, according to previous papers, state laws would be subservient when in conflict with Federal law).


The primary argument in this paper is that State expenditure has natural limits both at present and in the foreseeable future, while the expenditure of the Federal government is large and cannot be predicted for the future. This argument is based upon the different responsibilities of the States and the Union. State governments are only responsible for State matters: the encouragement of agriculture and manufactures and the mere domestic police of a state. Against the responsibilities and expenditure of Federal government, Hamilton ranks State responsibilities and expenditure as insignificant.


His primary reason for this is that the Federal government is responsible for the defence of the nation, and while America may not have any militaristic designs upon its neighbours, it has no control over the designs of other nations and the threatening cloud … over the European world which threatens to break forth into a storm.


Hamilton uses Britain as an example faced by the burden of military expenditure. He claims that only about one fifteenth of Britain’s expenditure is allocated to what is classed as state responsibility in the American system: the other fourteen fifteenths he claims, are absorbed in the payment of the interest of debts contracted for carrying on the wars in which that country has been engaged, and in the maintenance of fleets and armies.


This seems exorbitant to me, but I have no evidence to the contrary. The point he is making, however, is that America’s War of Independence created debts under which the Union and some States still struggled. In fact, it was the Union’s inability to directly tax in order to pay off this debt which was a prime reason for the new constitution being instituted.


It is the uncertainty of the future – that is a political future which almost inevitably threatens more wars – which leads Hamilton to claim that the Federal government’s expenditure is susceptible of no limits, while in the coin of the day, State government needs could be met for an annual sum of about two hundred thousand pounds. This is key to Hamilton’s argument for the powers of the new Constitution which do not subordinate State powers but give them concurrent jurisdiction. Prior to the new Constitution the States enjoyed exclusive powers of taxation. Hamilton argues that this was not sustainable and that the new constitution is a fair rework of taxation arrangements rather than an unfair imposition.


Having calculated Britain’s costs, Hamilton now calculates America’s. He suggests the new arrangements will leave States with the command of two thirds of the resources of the community to defray from a tenth to a twentieth part of its expenses; and to the Union, one third of the resources of the community, to defray from nine tenths to nineteen twentieths of its expenses.


What this leaves America with, according to Hamilton’s argument, is a fairer and much needed balance between the great interests of the Union to the power of the individual States.

12 September 2018