Federalist #32

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

Federalist No. 32 discusses the powers of the states and the federal government to impose taxes on the people.  Hamilton begins the discussion by stating that state governments must maintain the power to raise money independently from any power the Union might have to do the same.  Inherent in this claim is the notion of concurrent and exclusive powers were taxation is concerned.  Hamilton is clearly claiming that both states and the federal government shall have the power to raise revenue through taxes (concurrent power) but that states shall be able to do so without interference from the federal government (exclusive power).  

A sense of this dual nature of taxation can be apprehended from the following quote from No. 32, “An entire consolidation of the States into one complete national sovereignty would imply an entire subordination of the parts; and whatever powers might remain in them, would be altogether dependent on the general will. But as the plan of the convention aims only at a partial union or consolidation, the State governments would clearly retain all the rights of sovereignty which they before had, and which were not, by that act, exclusively delegated to the United States.”

The only restriction on the authority of the state governments to levy taxes relates to duties on imports and exports.  Hamilton points out that Congress can levy such taxes as per the Constitution, and this makes the taxing of imports and exports an exclusive power of the federal government.  That being said, Hamilton acknowledges that taxes in all other matters are “manifestly a concurrent and coequal authority in the United States and in the individual States.”

Hamilton concedes that the dual concurrent/exclusive nature of taxation within a federal system may result in “inexpedient” instances in which the same item is taxed by both the state and federal governments.  Hamilton further concedes that a consequence of a preservation of the strength and sovereignty of the states while at the same time imbuing the Union with strength and sovereignty as well would mean that such double taxation would not result in a constitutional conflict between states and the federal government as the result of such a conflict could only be the erosion of sovereignty of either the state or federal government.  Hamilton concludes that the new nation will simply have to rely on prudence in navigating these types of situations as they will inevitably arise.