In August 1766, months after the repeal of the Stamp Act, King George III dismissed the Rockingham government and chose William Pitt as the new prime minister. Pitt opposed taxing the colonies, and the colonists widely supported this move. However, Pitt became seriously ill shortly after assuming office, and effective control of the government, and colonial policy, passed to Charles Townshend, the chancellor of the exchequer (treasurer). During this transition of power, tensions arose in New York in regard to the 1765 Quartering Act. The Quartering Act required colonial legislatures to pay for certain goods for soldiers stationed within their borders. The goods were generally inexpensive, and the law only applied to soldiers in settled areas, not on the frontier. Most colonies were not dramatically affected by the payments, but New York, which had more soldiers stationed within its boundaries than any other colony, was more greatly burdened by the Quartering Act, and refused to comply with the law.
Townshend responded to this display of opposition by drafting the New York Suspension Act, which would have nullified any laws passed by New York's colonial legislature after October 1, 1767 unless the assembly voted to pay for the troops' supplies. Aiming to head off future trouble, the assembly caved.
Meanwhile, in Britain, elites were continuously outraged over the high taxes they paid in order to support British debt. In 1767, the elite landowners used their influence in the House of Commons to cut their taxes by one-fourth, leaving the British treasury short 500,000 pounds compared to the previous year. Townshend proposed laws to tax imports into the American colonies to make up for this lost revenue. Parliament passed the Revenue Act of 1767 on July 2, 1767. Popularly referred to as the Townshend duties, the Revenue Act taxed glass, lead, paint, paper, and tea entering the colonies.
The Revenue Act never yielded as much income as Townshend anticipated. Tea was the only major source of revenue, bringing in 20,000 pounds yearly, out of the total of 37,000 pounds the Revenue Act brought in. This high revenue was only possible because the British had lowered the price of British tea so that Americans would purchase it over less expensive smuggled tea. To accomplish this, Parliament had eliminated 60,000 pounds of import fees paid on British East Indian tea coming through Britain before being shipped out to the colonies. Thus the net product of the Townshend duties was a 23,000 pound loss for the British territory. Though ineffective in raising revenue, the Townshend duties proved remarkably effective in stirring up political dissent that had lain dormant since the repeal of the Stamp Act.
The colonists hailed the ascension of William Pitt as the best thing that could have happened to British government, since Pitt was the most respected English politician in America. Pitt, a friend of the colonies, had the potential to steer Anglo-American relations off of the disastrous course they had taken over the past several years. No one knows what might have happened had he not fallen ill so soon. Townshend, in contrast to Pitt, was no friend of the colonies and counted himself among those who were concerned that the colonists were not pulling their weight as British subjects. Townshend's colonial policy convinced the colonists that the Stamp Act had not been an isolated mistake, but rather a small piece in a larger antagonistic plan to undermine colonial efforts at self- governance.
Before New York revived the tension between the colonies and the British government, the conflict had cooled dramatically. However, New York's defiance of what its legislature saw as an indirect tax refueled the cooling fires of anger and bitterness toward the American colonies in the House of Commons. The drafting of the New York Suspension Act demonstrated that British officials would not hesitate to defend parliamentary power by usurping a colony's self- governance, a sobering thought for colonists, which led them to begin to question the justice of British rule.
The Townshend duties called the justice of British rule into even further question. During the Stamp Act crisis, the colonists had made it clear that they objected to internal taxation, but had said very little about taxing imports. Townshend interpreted this to mean that the colonists would not object to any measure of external taxation. A now wiser former Prime Minister George Grenville warned, "they will laugh at you for your distinctions about regulations of trade," but Townshend did not heed this warning, and proceeded with the Revenue Act.
In the past, the colonists had submitted to external taxation as a legitimate regulatory measure. Even the Sugar Act had received only limited opposition due to its tax measures, compared to more serious complaints about impractical restrictions and the denial of a fair trial for offenders. However, the Townshend duties differed from past legitimate taxation in that past duties had been clearly protectionist in nature, excluding foreign goods from the colonial market by raising their cost to consumers. However, the Townshend duties set moderate duties that did not exclude foreign goods, but simply raised their prices within the range of the colonial market. The colonists deduced that the British government wanted the colonists to continue purchasing these goods, thus raising revenue for the British treasury at colonial expense. In this way, the Townshend duties could be construed as taxes similar to those under the Stamp Act.
Townshend claimed that the Revenue Act was intended to help solve the government's budgetary problems, but there were additional ulterior motives for his support of the act. Townshend planned to establish a fund through which to pay the salaries of the colonial royal governors. Traditionally, royal governors had been paid by the colonial assemblies, which thus exerted some measure of control over the actions of the governor. By taking away this power, Townshend hoped to give the royal governors the power to dominate colonial governments, yet another affront to colonial self-government.