#12: Government will take your money

This essay repeats the main point from the past several essays. A big, unified nation will be stronger than a number of smaller ones. Concerning government revenue, Hamilton insists that a unified national government will be able to fund its operations better than several states could.

Suppose each of 13 states contributes a million dollars to the national government budget. That would amount to $13 million in total. Hamilton says a strong federal government could collect more. And, yes, it could indeed accomplish this. All they’d need to do is raise taxes and use government power to collect.

[O]ne national government would be able, at much less expense, to extend the duties on imports, beyond comparison, further than would be practicable to the States separately, or to any partial confederacies. Hitherto, I believe, it may safely be asserted, that these duties have not upon an average exceeded in any State three per cent. In France they are estimated to be about fifteen per cent., and in Britain they exceed this proportion. There seems to be nothing to hinder their being increased in this country to at least treble their present amount.

Hamilton’s vision of a strong central government is founded on greater coercion: taking larger tax payments than the people would wish to pay. I’m not saying the national government shouldn’t collect what it needs to do its work. I’m just saying that Federalist #12 promises coercion. That’s the essence of this essay: if you approve the Constitution, the national government will take your money.

Import duties were a major source of national government revenues in 1787. These were taxes paid on the cargo of any ship bringing goods from any other country for sale in the US. There was some debate and dispute as to who would eventually pay. Since tariffs and duties are laid on goods from other countries, you could say the British and Dutch and French were paying for the privilege of doing business in America. But it was the same back then as it is now. If merchants have to pay a fee to do business, they add that fee to the price of their goods, and the (American) consumer ends up paying.

Hamilton says the government should hike the import fees in order to collect more money. Higher fees might compel the ships bringing the goods to try to sneak past the tax collectors, just as Americans had done zealously while the British were still in control. Then Hamilton makes a ridiculous understatement about how easy it would be to prevent smuggling

The relative situation of these States; the number of rivers with which they are intersected, and of bays that wash there shores; the facility of communication in every direction; the affinity of language and manners; the familiar habits of intercourse; --all these are circumstances that would conspire to render an illicit trade between them a matter of little difficulty.

 [If] there be but one government pervading all the States, there will be, as to the principal part of our commerce, but ONE SIDE to guard--the ATLANTIC COAST. Vessels arriving directly from foreign countries, laden with valuable cargoes, would rarely choose to hazard themselves to the complicated and critical perils which would attend attempts to unlade prior to their coming into port. They would have to dread both the dangers of the coast, and of detection, as well after as before their arrival at the places of their final destination. An ordinary degree of vigilance would be competent to the prevention of any material infractions upon the rights of the revenue. A few armed vessels, judiciously stationed at the entrances of our ports, might at a small expense be made useful sentinels of the laws.

America’s navy today is incredibly powerful, but interdicting drug smuggling is still a challenge. In 1787, patrolling the 2,000 mile long Atlantic coast was far beyond the government’s abilities. A “few armed vessels” was never going to be enough. Establishing a strong taxing authority would do nothing whatever to shorten that coastline, or reduce the number of rivers, or alter the tides and other condition that allows boats of various sizes to sneak ashore. Hamilton’s Federalist #12 is optimistic to the pint of silliness.

Discuss:

• Why do you suppose Americans accepted the “Approve the Constitution so we can tax you more” bargain?

• How much coercive force should government be able and willing to exert to get the money it needs?