Federalist 35: Import and Manufacturing Taxes; the Likely and Proper Composition of the House of Representatives
HERE I SHALL DEMONSTRATE why limiting the federal taxing authority to import duties is unwise. I also respond to the sentiment that calls for equal representation of all classes in the national popular assembly.
Federal Tax Revenues Must Not Be Limited to Duties on Imports
Restricting the Federal government’s power of taxation to particular objects would naturally cause an undue proportion of the public burdens to fall upon those objects. Such a restriction also would oppress particular branches of industry and lead to an unequal distribution of taxes among the several States as well as among the citizens of the same State.
The federal power of taxation is indefinite. If that power were confined to duties on imports, the Federal government would extend those duties to an injurious excess due to its inability to command other resources.
Duties Must Be Kept Sufficiently Low to Prevent the Smuggling that Will Undermine Tax Revenue
Some say duties can never be too high because they tend to discourage extravagant consumption, produce a favorable balance of trade, and promote domestic manufactures. The argument favors an extreme – and like all extremes – it tends towards ruin. Exorbitant duties on imported articles naturally beget a general spirit of smuggling. Smuggling always undermines the fair trader, and eventually the tax revenue itself.
High Duties Protect the Manufacturing Classes and Oppress Merchants
High duties result in an improper form of community tribute to the manufacturing classes, who benefit the most from the monopoly of markets excessive tariffs foster. High duties result in artificial price inflation, which oppresses the merchant, who often must pay the duty just to make the sale. While the consumer generally pays the duty when demand equals supply at market, when markets are overstocked, most of the duty falls upon the merchant, who is sometimes forced to exhaust profits and even break in on capital. A division of an import duty between buyer and seller happens more often than commonly imagined. Sometimes it is impossible to raise the price of a commodity in exact proportion to each additional imposition laid upon it. The merchant – especially in a country of small commercial capital – must often keep prices down to expedite a sale. When the merchant is forced to pay the duty to complete a sale, the duty acts as an additional tax upon the importing State.
States Importing Little Would Contribute Less to the National Treasury in Proportion to their Abilities
High duties produce inequalities between States importing much and States importing little, for the citizens of States importing little pay fewer duties, and thereby contribute less to the national treasury in a ratio to their abilities. The higher the duties, the greater the inequality.
Manufacturing States Also Pay Less than their Share Because They Import Less, so Excise Taxes on Their Manufactures Is Appropriate
Confining the federal taxing power to duties or imports only would foster inequality between those States with manufacturing resources and those without. States with manufacturing facilities consume fewer imported articles and thereby contribute less to the public treasury in a ratio to their abilities. To eliminate this disparity, recourse must be had to excises, the proper objects of which are particular kinds of manufactures.
New York is more deeply interested in these considerations than her citizens may be aware. New York, an importing state, is not likely speedily become a manufacturing state. She would suffer doubly by limiting to commercial imposts the jurisdiction of the Federal government.
Necessity often Occasions False Hopes, False Reasoning, and a System of Measures Correspondingly Erroneous
High duties depress consumption and thus the revenue of the taxing authority. This serves as a natural brake on any tendency to raise import duties to an injurious extreme. While this is readily true so as long as other sources of taxation remain open, should those sources be closed – hope – stimulated by necessity, would beget experiments. Fortified by rigorous precautions and additional penalties, these might work at first. But with time comes leisure enough to contrive expedients to elude these new precautions. The first success would be apt to inspire false opinions, requiring a long course of subsequent experience to correct. And the inequalities mentioned above would still ensue even if duties are not raised to injurious excess.
Import Duties Should Be Administered as a Federal Common Fund
My final point regarding duties is they should be shared among the States. As noted above, where duties are normal, the ultimate purchaser usually pays, whether or not said buyer is situated in the importing State. Thus it is far more equitable that the duties on imports to go into a common stock, than to redound them to the exclusive benefit of the importing State.
And now I turn to the important question of the likely composition of the House of Representatives, and whether there ought to be any quotas or restrictions imposed to ensure the body is fairly representative of the People.
For Good Reasons, the House of Representatives Will Never Include Citizens from Every Class
We often hear the House of Representatives is insufficiently numerous to receive all the different classes of citizens. Those who would increase its size – or require representatives from every class – believe the interests and feelings of every part of the community should be combined, thereby producing a due sympathy between the representative body and its constituents.
This argument is seductive initially but ultimately specious. It is well calculated to lay hold of the prejudices of those to whom it is addressed. If one dissects the argument, it vanishes into nothing but fair sounding words.
To begin with, all that can be reasonably meant by a knowledge of the interests and feelings of the People is an acquaintance with the general genius, habits, and modes of thinking of the citizenry at large, and with the resources of the country. In any other sense the proposition has no meaning at all, or an absurd one.
Freedom of electoral choice naturally leads to the selection of landholders, merchants, and those of the learned professions to representative assemblies, with too few exceptions to have any influence on the spirit of the government.
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As for the noble goal of a due sympathy between the represented and the representative, the composition of popular assemblies always tends toward the merchant by the natural choice of those of the lesser arts.
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The idea that all classes of the People should be represented in the House of Representatives by actual members from each of the classes is altogether visionary. For one thing, it would never take place in practice, unless the Constitution expressly required it.
Its object also is impracticable, for it is impossible to construct or enforce a plan to require a representative from each of the classes.
Merchants Are Natural Representatives of their Own Class, and of the Manufacturing and Mechanical Arts as Well
As for the noble goal of a due sympathy between the represented and the representative, the composition of popular assemblies always tends toward the merchant by the natural choice of those of the lesser arts.
Mechanics and manufacturers will almost always be inclined to give their votes to merchants rather than persons of their own professions or trades. Mechanics and manufacturers furnish the materials of mercantile enterprise and industry. Many are immediately connected with the operations of commerce. They know the merchant is their natural patron and friend, and will more effectually promote their interests than they would themselves. And in a deliberative assembly, the talents of the mechanic and manufacturer are little in demand.
The arguments of merchants carry more weight and influence, rendering them more equal in a contest should any spirit unfriendly to their interests infuse itself into the public councils. Our own experience confirms that both artisans and manufacturers commonly bestow their votes upon merchants and those whom they recommend. We must therefore consider merchants as the natural representatives of all these classes of the community.
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The arguments of merchants carry more weight and influence, rendering them more equal in a contest should any spirit unfriendly to their interests infuse itself into the public councils. Our own experience confirms that both artisans and manufacturers commonly bestow their votes upon merchants and those whom they recommend. We must therefore consider merchants as the natural representatives of all these classes of the community.
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The Landed Interests Will Represent All Landholders
The landed interests will be perfectly united from the wealthiest landlord to the poorest tenant, particularly in relation to taxes. Any tax laid on land affects the proprietor of millions of acres down to the proprietor of one. Since common interest is the surest bond of sympathy, every landholder desires to keep the taxes on land as low as possible. Even if we suppose the interests the opulent landholder and the middling farmer are distinct, is there any reason to conclude one would stand a better chance than the other of being elected to the Congress? If we look at the legislature of New York, moderate proprietors of land prevail in both its assembly and senate. Those inspiring the greatest confidence naturally receive the most votes, whether they be individuals of large fortunes, moderate property, or no property at all.
Those of the Learned Professions Will Be Elected According to their Skills
All that remain are members of the learned professions, who truly form no distinct interest in society. They will have confidence in and be the choice of each other – and the community – according to their situation and talents.
Requiring Representatives from Every Class Is Unnecessary, for the Most Likely to Be Elected Will Best Serve the Nation’s Interests
The argument in favor of a system or quota to diversify representation of the various classes in Congress assumes in error that merchants, landholders and the learned professions will not understand or attend to the feelings and interests of the community.
Where is the danger that the interests and feelings of the different classes of citizens will not be understood or attended to by these classes of likely representatives, landholders, and the learned professions?
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The argument in favor of a system or quota to diversify representation of the various classes in Congress assumes in error that merchants, landholders and the learned professions will not understand or attend to the feelings and interests of the community. Where is the danger that the interests and feelings of the different classes of citizens will not be understood or attended to by these classes of likely representatives, landholders, and the learned professions?
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Will not the landholder know and feel whatever will promote or insure the interest of landed property? The landholder is imbued with a self-interest prone to resist every attempt to prejudice or encumber that species of property. The merchant, too, will be disposed to understand and cultivate the interests of the mechanic and manufacturing arts, for their commerce is closely allied. And those representatives drawn from the learned professions will likely prove themselves impartial arbiters of the rivalries among industries, standing ready to promote one or the other as shall appear conducive to the general interests of society.
The individual whose situation leads to extensive inquiry and information is more likely to be a competent judge of the nature, extent, and foundation of the momentary humors and dispositions prevailing in particular parts of the society than one whose observation travels not beyond the circle of neighbors and acquaintances.
A candidate for the favor of the People depends upon the votes of fellow citizens for election to and continuance in office. Such an individual naturally takes care to become informed of the dispositions and inclinations of the citizens, and allows them their proper degree of influence upon his or her conduct. This dependence of the representative upon the constituent – plus their mutual obligation to obey the laws to which the representative gives assent – are the only true and strong chords of sympathy between the electors and the elected.
Proper Administration of the Federal Power to Tax Demands that Representatives Be Chosen from the Citizenry at Large
Finally, no part of the administration of government requires more extensive information and thorough knowledge of the principles of political economy than the business of taxation. The representative who understands that the most productive system of finance is the least burdensome will be the least likely to resort to oppressive expedients or to sacrifice any particular class of citizens to the procurement of revenue. Such individuals are more likely to be drawn from citizenry at large than from a particular class or group.
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The representative who understands that the most productive system of finance is the least burdensome will be the least likely to resort to oppressive expedients or to sacrifice any particular class of citizens to the procurement of revenue.
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For a discussion of the related objection based upon the supposedly insufficient number of members in the House of Representatives, I direct the reader to Federalist 55.
Hamiltonoriginal Federalist 35