Federalist 32: With the Sole Exception of Duties on Foreign Imports and Exports, States Retain Full Taxing Authority

SOME STATE GOVERNMENTS MISAPPREHEND A DANGER from a perceived power of the Federal government to control their levies of money.  A complete barrier to the oppressive use of such a power, however, exists due to the extreme hazard of (1) provoking the resentments of State governments, and (2) the sense of the People of the utility and necessity of local administrations for local purposes.  Individual States possess an independent and uncontrollable authority to raise their own revenues for the supply of their own wants.  Under the Constitution, the States retain that authority in the most absolute and unqualified sense, with the sole exception being duties on imports and exports. Any attempt on the part of the Federal government to abridge that right would be a violent assumption of power, unwarranted by any article or clause in the Constitution.

The Constitution has no aim towards an entire consolidation of the State governments into one complete national sovereignty.  Such a plan would imply an entire subordination of the States, with all remaining powers dependent on the general will.  But as the Constitution aims only at a partial union or consolidation, the State governments clearly retain all the rights of sovereignty they had before its adoption.  

The Three Areas in which the Federal Government Has Exclusive Authority

The only aspects of State governmental sovereignty passing to the Federal government are those rights the States have exclusively delegated to the United States. Viewed another way, this exclusive delegation amounts to an exclusive alienation of certain State rights.  It exists in three cases only:

1.   Where the Constitution in express terms grants an exclusive authority to the Federal government.  

2. Where the Constitution in one instance grants an authority to the Federal government, and in another prohibits State governments from exercising the like authority. 

3.  Where the Constitution grants an authority to the Federal government, to which a similar authority in State governments would be absolutely and totally contradictory and repugnant.  (This situation should be distinguished from those where the exercise of a concurrent federal and state jurisdiction might produce occasional interferences in the policy of any branch of administration, but not involve any direct contradiction or repugnancy in point of constitutional authority.)

These three cases of exclusive jurisdiction in the Federal government may be exemplified by the following instances:  

1.  Where the Constitution in express terms grants an exclusive authority to the Federal government. The Constitution expressly provides the Federal government shall exercise “exclusive legislation” over the district to be appropriated as the seat of government, to wit: the District of Columbia. Art. I, § 8, cl. 17. By this grant of exclusive authority, the States alienate any authority to legislate over the District of Columbia. 

2. Where the Constitution in one instance grants an authority to the Federal government, and in another prohibits the States from exercising the like authority.  For instance, the Constitution empowers the Federal government “to lay and collect Taxes, Duties, Imposts and Excises,” Art. I, § 8, cl. 1, while another clause declares: “No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing its inspection laws.” Art. I, § 10, cl. 2.  These clauses result in an exclusive Federal power to lay duties on imports and exports, with the particular exception of State inspection laws. This exclusive power in the Federal government to lay duties on imports and exports is abridged by another clause, which declares that no tax or duty shall be laid on articles exported from any State.  In consequence, the exclusive power in the Federal government to lay duties on imports and exports extends only to imports.  

3.  Where the Constitution grants an authority to the Federal government, to which a similar authority in State governments would be absolutely and totally contradictory and repugnant. This third case of an alienation of State sovereignty is found in that clause which declares the Federal government shall have power “to establish a uniform rule of Naturalization . . . throughout the United States.” This must necessarily be exclusive, for if each State government had the power to prescribe a distinct rule, there could be no uniform rule.

The Federal power “to lay and collect Taxes, Duties, Imposts and Excises” Art. I, § 8, cl. 1, also raises the distinct concept of dual Federal and State sovereignty with respect to that power. This is manifestly a concurrent and coequal authority in the Federal government and State governments. The power “to lay and collect taxes, duties, imposts and excises” contains no expression making that power exclusive in the Federal government, aside from taxes on imports and exports. Nor does the Constitution include any independent clause or sentence prohibiting State governments from laying and collecting taxes on items other than imports or exports. The inclusion of a restriction on imports and exports implicitly admits that State governments would otherwise possess the power the restriction excludes. It further implies the authority of State governments to impose all other taxes remains undiminished. The restriction in question amounts to a negation of one thing, and an affirmance of another.  It is a negation of the authority of State governments to impose taxes on imports and exports, and an affirmance of their authority to impose them on all other articles. 

The Federal and State Powers of Taxation Are Complementary 

There is no repugnancy between the Federal and State powers of taxation. No construction of the Constitution would work an exclusion on State governments. It is possible a State government might lay a tax on a particular article which might render it inexpedient that a further tax should be laid on the same article by the Federal government, but it would not imply the constitutional inability to impose a further tax. The quantity of the imposition – and the expediency or inexpediency of an increase on either side – would be questions of mutual prudence, but there would be no direct contradiction of power. The particular policy of the Federal and State systems of finance might now and then not exactly coincide, and might require reciprocal forbearance, but the mere possibility of inconvenience in the exercise of powers cannot alienate and extinguish a pre-existing right of sovereignty. Only an immediate constitutional repugnancy can by implication alienate and extinguish a preexisting right of sovereignty.

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The Federal power “to lay and collect taxes, duties, imposts and excises” also raises the distinct concept of dual Federal and State sovereignty with respect to that power. This is manifestly a concurrent and coequal authority in the Federal government and State governments. The power “to lay and collect taxes, duties, imposts and excises” contains no expression making that power exclusive in the Federal government, aside from taxes on imports and exports. Nor does the Constitution include any independent clause or sentence prohibiting State governments from laying and collecting taxes on items other than imports or exports.

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Dual (Concurrent) Sovereignty Can and Will Exist between the Federal Government and State Governments 

The necessity of a concurrent jurisdiction in certain cases results from the division of the sovereign power. Any State authority which the Constitution does not explicitly divest in favor of the Federal government remains with the State governments in full vigor. This is not a theoretical consequence of that division, but is clearly admitted by the whole tenor of the Constitution. We there find – in those cases where it was deemed proper to have exclusive Federal authority – the most pointed care was expended to insert negative clauses prohibiting the exercise of those authorities by the States. Article I, section 10, consists altogether of such provisions.  Its three paragraphs provide: 

“No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

“No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing its inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Control of the Congress.

“No State shall, without the Consent of Congress, lay any Duty of Tonnage, keep Troops, or Ships of War in time of Peace, enter into any Agreement or Compact with another State, or with a foreign Power, or engage in War, unless actually invaded, or in such imminent Danger as will not admit of delay.”

These expressions are clear indications of the sense of the Constitutional Convention.  It furnishes a rule of interpretation which justifies the position I have advanced and refutes every hypothesis to the contrary.

Hamiltonoriginal Federalist 32