In Federalist papers #30, Hamilton argues in favor of a general power of taxation in the frame of the Federal government to raise enough revenue to take care if its responsibilities vis-à-vis the national forces and other important matters. These responsibilities should include not only raising troops, building and equipping fleets and any other expenses concerning military operations, but also provision for the support of civil list, payment for the national debts and all other expenditures that require disbursements out the national treasury. For Hamilton, the life blood of body politics is money, without which the government cannot perform well its functions. Citizens face one of the two choices of evils: “either the people must be subjected to continual plunder, as a substitute for a more eligible mode of supplying the public wants, or the government must sink into a fatal atrophy, and, in short course of time, perish.” Hamilton brings the example of the Ottoman Empire which has no rights to impose new taxes, and which consequently pay the price by letting the governors of provinces pillage the people without mercy. “The present Confederation, feeble as it is intended to repose in the United States, an unlimited power of providing for the pecuniary wants of the Union.” But it is based on an erroneous principle that deems to have frustrated the well and good intention.
In response to critics, who suggest that Union can lay duties on imported goods but all other “internal” taxes are the province of the individual States, Hamilton argues that such an external and internal reasoning can lead to an adequate source to give the national government the power to execute the enumerated responsibilities for now and the future.
As a result, Hamilton poses the following questions with respect to his taxation argument: How is it possible that a government half supplied and always necessitous, can fulfill the purposes of its institution, can provide for the security, advance the prosperity, or support the reputation of the commonwealth? How can it ever possess energy or stability, dignity or credit, confidence at home or responsibility abroad? According to him, a country always in need of additional revenue is always in danger. If we assume, for argument’s sake, that the revenue arising from the imported duties can be adequate enough to answer for the public debt in peace time, we should not presume that such revenue will be so during war time. Funds would be diverted to fighting the war thus neglecting other responsibilities; and more importantly, if no additional taxes can be implemented, the country’s credit would falter. The need to borrow from foreign countries to pursue the war would increase just as our means repaying the debt decreased. Loans if obtained would have enormous premium. “The power to of creating new funds upon new objects of taxations by its own authority would enable the national government to borrow as far as its necessity might require.”
In response to critics, who suggest that Union can lay duties on imported goods but all other “internal” taxes are the province of the individual States, Hamilton argues that such an external and internal reasoning can lead to an adequate source to give the national government the power to execute the enumerated responsibilities for now and the future.
As a result, Hamilton poses the following questions with respect to his taxation argument: How is it possible that a government half supplied and always necessitous, can fulfill the purposes of its institution, can provide for the security, advance the prosperity, or support the reputation of the commonwealth? How can it ever possess energy or stability, dignity or credit, confidence at home or responsibility abroad? According to him, a country always in need of additional revenue is always in danger. If we assume, for argument’s sake, that the revenue arising from the imported duties can be adequate enough to answer for the public debt in peace time, we should not presume that such revenue will be so during war time. Funds would be diverted to fighting the war thus neglecting other responsibilities; and more importantly, if no additional taxes can be implemented, the country’s credit would falter. The need to borrow from foreign countries to pursue the war would increase just as our means repaying the debt decreased. Loans if obtained would have enormous premium. “The power to of creating new funds upon new objects of taxations by its own authority would enable the national government to borrow as far as its necessity might require.”
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