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 multiplying 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 imperceptible 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.
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 multiplying 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 imperceptible 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.
| FEDERALIST NO. 12 The Utility of the Union In Respect to Revenue - Alexander Hamilton |
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