Federalist #31

Concerning the General Power of Taxation (cont.)  (Hamilton)

If Hamilton, in Federalist Papers #30, argued in favor of the Federal Government to raise sufficient revenue for its enormous responsibilities, in Federalist Papers #31, he presents the primary argument against giving the Federal government unlimited power to tax in order to preserve an equilibrium between the power of the States and that of the Federal Government. He advances his argument by making the case that there are unassailable truths in geometry and mathematics, and although not as definitive, there are also fundamental truths in politics. In politics, however, there are biases which lead to doubters even of the truths known from experience concerning the need for the national government to have taxing authority. Hamilton thus seems to take a middle ground in the issue of taxation by the national government.

For Hamilton, an indefinite power of taxation in the national government might, and “probably would in time” deprive the state governments of the means of providing for their own necessities, and would subject them to the mercy of national legislature.

In fact, the argument against this unbounded power given by the antagonists to the proposed constitutions is essentially that States also need revenue raised by taxation and over time the federal government may use its unlimited “abolish the taxes imposed for State objects upon the pretense of an interference with its own. “It might allege a necessity of doing this in order to give efficacy to the national revenues. “And thus all the resources of taxation might by degrees become the subjects of federal monopoly, to the entire exclusion and destruction of the State governments.” More importantly, the counter argument claimed this would only happen through the federal government usurpation of the rights of the States, but that discussion leads to “an unfathomable abyss and fairly puts us out of reach of all reasoning. Also, another counter argument is that the people being closer to the State governments would cause the States to be victors in any conflict of this type.

That said, Hamilton raises the question as to which argument is correct. While he recognizes that many States clearly in budget difficulties, and perhaps, because the Federal Government over taxes many of the same sources that the States tax thereby not leaving enough for the states, he underlines some issues that the States may face vis-à-vis the general population. If the Federal Government taxes income, profits and consumption less, can the States tax more without raising the anger of the population? “It should not be forgotten that a disposition in the State governments to encroach upon the rights of the Union is quite as probable as a disposition in the Union to encroach upon the rights of the state governments. What side would be likely to prevail in such a conflict, must depend on the means which the contending parties could employ toward ensuring success,” According to Hamilton, the passage of time indicates that the argument against giving the Federal Government unbounded taxing power may have been correct. It will not be, in other words, “difficult to obviate the objections which been made an indefinite power of taxation in the United States.”

Shortly, Hamilton implicitly suggests a proper balance that must take place between the States governments and the Federal Government. His hope is that the citizens of the United States will try preserving the constitutional equilibrium between these two entities.