Federalist No.36

The Same Subject Continued

(Concerning the General Power of Taxation)

Tuesday, January 8, 1788

Alexander Hamilton


Anti-Federalists wanted power to remain with State governments and distrusted attempts to give the Federal government new powers through the new Constitution. In the case of taxes, this included the question of how taxes would be collected and the means by which revenue would be raised. Hamilton addresses two main arguments in this paper. First, is claim that States could more fairly apply taxes based on knowledge of their constituents than a Federal government could. Second, was the distrust in the scope of taxation powers the constitution theoretically claimed for the Federal government.


Against the first argument, Hamilton initially compares Federal and State differences with State and Local differences. The argument against the provisions of the Constitution that a want of proper knowledge made the Federal government unsuitable to collect certain taxes is called into question by Hamilton. He suggests that the State governments, in many cases, had as much information about specific local conditions (more suited to be dealt with by a local government, assuming the logical conclusion of the anti-Federalist argument) as a Federal government would have. Hamilton argues that a Federal government would find out this detail just as easily as a State government would by the same means: sending intelligent men to ask questions.


Hamilton’s argument is extended to encompass not just the means by which a government acquires information, but the way in which information is used. Information garnered for the purposes of setting taxes is applied in the abstract, not the particular. Hamilton argues that information needed for these purposes is not one of minute local knowledge - a minute topographical acquaintance with all the mountains, rivers, streams, highways, and bypaths in each State - but a general acquaintance with its situation and resources.


Hamilton also applies this argument to the means by which taxes will be enforced in any particular locality. Hamilton argues that the differences in products produced by each State cannot be so great that the general principles of taxation do not apply, and where difference exists local manufacturers and trade are equally affected by the laws of a Federal government as they would be a State government. Besides, it is the business of government to make legislation, not to implement it at a local level. How laws would be applied at a local level would be in the hands of local agents familiar with the circumstances of its population. As a last resort, Hamilton points out, the Federal government would have the option to directly collect taxes if States found it too difficult to manage, but would prefer to leave the power of collection for the purposes of the Federal treasury with the States, since this would save expense, be more efficient and would alleviate the perception in the population of being taxed twice, since the reality would be that State and Federal taxes would be different.


This is an issue already raised in a previous paper; the concern of the duplication of taxes at State and Federal level. In this instance Hamilton argues that it would be against State and Federal governments’ interests to do this. Added to this, many of the financial burdens of States would be alleviated by the new Constitution, leaving them with reduced taxation needs which would likely be covered by land taxes. In addition to this, Hamilton suggests that the payment of taxes would be more equitable - all duties, imposts, and excises shall be uniform throughout the United States - and to go as far as may be practicable in making the luxury of the rich tributary to the public treasury, in order to diminish the necessity of those impositions which might create dissatisfaction in the poorer and most numerous classes of society.


Hamilton’s summation on the matter of taxation is that the Constitution should remain flexible to ensure it is capable of addressing all future exigencies, rather than attempting to proscribe specific areas of authority for State and Federal governments from the start. This, of course, is part of the suspicion of anti-Federalists who wished to maintain State authority and power. They feared the Constitution would whittle away that power if the scope of federal powers were undefined. In answer to this Hamilton uses the example of poll taxes which he says he deplores. These were used in the New England States in their early period. Hamilton points out that every State in the Union has the power to impose poll taxes but they are mostly unused. Yet despite Hamilton’s dislike of poll taxes he would not seek to abolish them because they might provide a means of revenue to State governments in periods of unforeseen emergency. Hamilton argues the same right for the Federal government: that just because it has the power to do something does not mean that it will. Yet it is important to give the Federal government the flexibility to meet emergencies: The real scarcity of objects in this country, which may be considered as productive sources of revenue, is a reason peculiar to itself, for not abridging the discretion of the national councils in this respect.

23 October 2018