The Federalist Papers (1787-1789)
Federalist Essay No.30 - No.36
The power of the government to act on behalf of the national security should only be bounded by the needs of the nation and the resources. Since this is partially determined through the amount of revenue available, the ability of the government to gain revenue must not be hindered by anything except for the power of the people represented in the legislative branch.
A serious flaw of the Articles of Confederation was that although it gave Congress the responsibility for managing the needs of the confederacy, it did not provide the means to do so. The government did not have the power to directly collect taxes. Relying on requisitions and quotas from the state did not fill the national treasury, and threatened to ruin the public credit.
The government's authority to tax should not be limited. The government should know the full extent of its resources and then judge the necessity of taking loans. This allows a nation to plan proactively for its prosperity and defense. Creditors are also more likely to loan to a country that has full authority to summon resources on its own, rather than being subject to the authority of 13 other decisions about the feasibility and speed of repaying those loans.
Critics claim that internal taxation should be the sole authority of local government, and that revenues collected from trade should go to the federal government. However, this policy not only places the federal government in subordinate position to the states, but forces them to either be in a continual state of not having enough money to provide for security and prosperity or to be continually relying on the states.
Other critics have suggested that the federal government should be limited to taxing only certain objects. However, these objects would bear an unfair burden, the industry that is focused on would be unfairly taxed and the taxes would fall unfairly amongst society and the separate states. For example, if the national government could only tax imports, not only would this be an unfair burden on the merchant class, but also an unfair advantage to the manufacturing states. New York would especially suffer under this set of circumstances.
The current plan of government includes a concurrent tax system, in which both the federal and the state governments maintain the authority to tax, except in the case of imports and exports which are exclusively restricted from state's authority.
Critics state that local governments have as great a need to provide for exigencies as the national government. By relying on the national government to meet those needs, the national government could take advantage of their power by establishing such laws that make state taxation laws illegal--thereby destroying the states by depriving them of their sustenance.
This could not happen, because the strength is always on the side of the people, and they are most closely aligned with the state governments. It is less likely that the national government will encroach upon the states as the other way around. We must have faith in the people that they will always serve to balance the power between the state and national government.
Furthermore, the state governments will never have a bigger burden of expenses than the national government, because history and experience shows that the biggest financial burden is the expense of wars. Since state governments do not have the burden of paying for common defense, their need to tax will be limited to paying the salaries of their civil servants.
The advantage of concurrent powers is that both the state and the national government have an unlimited authority to collect revenue, without either being subordinated to the other. It would be a good idea for the two organizations to develop an understanding of what items are state taxable and what are federal taxable. This will be mutually beneficial and will eliminate the possibility of redundancy.
Critics claim that the federal government cannot levy effective internal taxes due to being unfamiliar with local circumstances. They overlook that a well- educated group of representatives from many localities have the same advantage enacting taxes as if they were legislating for their own locality.
Although direct taxes vary the most from state to state, the federal government will legislate only the process by which the taxes are to be assessed, while the local people will choose the assessors of the land. Furthermore the national census will eliminate any fear of bias in counting population.
Critics worry that extra taxes will pose a burden to the people in the form of many collections agents. The collector of imposts will be the only national agent, and the national government will use as much as it can, the local tax collection agent. Additionally, there should be no fear that the amount of taxes will increase, as the expenditures are the same, just distributed differently.
Some critics express concern over clauses in the U.S. Constitution that imply limitless powers to the federal government. For example, the power of the federal government to lay taxes must be accompanied by a power to pass all laws necessary and proper to execute that power. This does not give any extra powers to the federal government, only attributes to them the necessary powers to tax the people. The ultimate judge of what is necessary and proper is the federal government in the first instance and its constituents, the people, in the last. The people will not allow the federal government to overstep its bounds.
Additionally, the phrase "supreme law of the land" is nothing more than stating that the federal laws will be supreme to all other. Furthermore, it only allows laws to be supreme that have been made within the guidelines of the U.S. Constitution. Therefore a law that attempts to stop a state government for collecting taxes, does not go against the federal governments authority to tax, but it is not supreme because it is not allowed for by the U.S. Constitution.
Some critics object to federal taxation on the grounds that the House of Representatives is not large enough to represent all the different classes of citizens, and therefore, taxation will be class-biased. The idea of a representative body comprised of delegates from each occupation is entirely visionary and unrealistic, and not likely to occur. The mechanics and manufacturers are more likely to select a merchant than one of their own kind because despite their confidence in their own abilities, they know that the merchant class will better serve their interests.
If the votes of the people are free, they will never vote in such a way that each of their occupations and class is represented. The government will be composed of merchants, learned professions and land holders -- each reflecting the interests of the group it represents, and the learned professions serving as arbiter. The nature of re-election insures that the representative acts in a way to represent his constituents, regardless of their class or occupation.
The delegates who understand the principles of taxation the best will design the most productive systems of taxation. Let each citizen be the judge of who he thinks the most qualified person with an understanding of taxation is.
The most heralded quote from the American Revolution was "no taxation without representation." By the time the people of the country began the business of devising a plan for their own self-government, this quote had been altered to imply no taxation by a strong central government, period. Unfortunately, the inability of the central government to levy taxes under the Articles of Confederation was one of the biggest weaknesses, and was changed by the new plan of government.
American colonists received an awful shock in the aftermath of the French and Indian War when the King and Parliament not only began to regulate their affairs more closely than ever, but also raised taxes on the colonists to assist in paying the war debts. Colonists reacted violently against the Sugar Act, the Stamp Act, the Townshend Acts and others because as British citizens they believed that taxes could only be levied on them through a body that included their representation.
Parliament had the power of the purse over British citizens living in England, but no representative of the colonies sat in Parliament. Colonists were being taxed without their authority and this was a terrible abuse of their rights in a representative government.
It is no surprise then, that in the Articles of Confederation, the Confederation Congress is restricted from levying taxes of any kind. The people felt they could only be fairly taxed by a representative government close to home, namely in their state government. Their refusal to empower the central government with the authority to raise its own revenue nearly crippled the war effort and destroyed the viability of the confederacy.
During the American Revolution, soldiers became nearly mutinous on at least two occasions, during the Newburgh Conspiracy and when they forced Congress to flee from Philadelphia to Princeton. Both incidents rested on soldiers' frustrations with not being paid. And, in both cases, the congress was unable to do anything about it. Subject to the contributions of individual states for its source of revenue, Congress had no control over its budget and could not effectively plan for its expenses.
The financial situation worsened after the war ended and individual states saw little need to continue to supply the Confederation Congress with additional revenue. But, without the power to tax the Congress was unable to carry out its other duties that included repayment of debts and continued support of the common defense. These weaknesses threatened not only the physical security of the nation, but the financial security and public credit of the nation as well.
The U.S. Constitution marks a return to the idea expressed prior to the Revolution about taxation and representation. Instead of prohibiting a strong central government from levying taxes, the Constitution places the power of taxation strongly in the hands of the branch of the central government that is closest to the people. The justification is that as representatives of the people, Congress will naturally guard against unfair taxation. Furthermore by allowing both the state and the federal government to levy taxes, each retains its own authority to establish a budget and determine spending based on its own needs.