Federalist 36: The Power of Taxing within States Is One of the Most Important Powers of the Federal Government

Representation in Congress will consist almost entirely of proprietors of land, of merchants, and of members of the learned professions, all of whom will truly represent the different interests and views of the various classes of the community, as I explained in Federalist 35.  While variations do exist in local legislatures, they are exceptions to the rule, and not in sufficient number to influence the general complexion or character of the government.

There are strong minds in every walk of life that rise above the disadvantages of situation. They will command the tribute due to their merit, not only from the classes to which they belong, but from the society in general.  The door ought to be equally open to all. To the credit of human nature, I trust we shall see examples of such vigorous plants flourishing in the soil of Federal as well as of State legislation. Occasional instances of this sort, though, do not render less conclusive the reasoning founded upon the general course of things. 

Merchants Will Well Represent Manufacturers and Mechanics

Even if the subject of representations is viewed in different lights, the same aspect appears.  There is no greater affinity or relation of interest between the carpenter and blacksmith, the linen manufacturer or stocking weaver, than there is between the merchant and all of them. It is well known there are great rivalries between different branches of the mechanic or manufacturing arts as there are between any of the departments of labor and industry.  Unless the representative body of Congress were to be far more numerous than would be consistent with any idea of regularity or wisdom in its deliberations, it is impossible that representation of all classes would ever be realized in practice.  Those who suggest or demand otherwise have fitted their argument with too loose a garb to admit even of an accurate inspection of its real shape or tendency.

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There are strong minds in every walk of life that rise above the disadvantages of situation.  They will command the tribute due to their merit, not only from the classes to which they belong, but from the society in general. The door ought to be equally open to all.

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Congress Will Comprehend the Nuances of State Tax Matters 

The word “tax” appears several times in the Constitution, with two of the most prominent occasions in Article I, governing the power of Congress. 

Article I, section 2, clause 3, provides that “direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, . . . .”       

Section 8 of the same article adds:  “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for  the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States . . . .”

Opponents of the Constitution asserted the Federal power of internal taxation cannot be exercised with advantage, from a supposed lack of sufficient knowledge of local circumstances, as well as an interference between the revenue laws of the United States and of the particular States.  

The supposition of a want of proper knowledge in the Federal legislature is entirely destitute of foundation.  If a State legislature demands a knowledge of local details, undoubtedly it acquires the information from county or municipal members. A like knowledge will be obtained in Congress from the representatives of each State.  We ought to presume the individuals sent to Congress will be possessed of the necessary degree of intelligence to be able to communicate that information. As applied to taxation, the knowledge of local circumstances does not require a minute topographical acquaintance with all the mountains, rivers, streams, highways, and bypaths in each State. It more properly requires a general acquaintance with situation and resources of a State, its agriculture, commerce, manufactures, with the nature of its products and consumptions, and the different degrees and kinds of its wealth, property, and industry. 

Committees or Individuals Compose Most Initial Taxation Plans

Nations in general – even under governments of the more popular kind – usually commit the administration of their finances to a single individual or to boards composed of a few individuals, who initially digest and prepare the plans of taxation, which are afterwards passed into laws by the authority of the sovereign or legislature.

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The supposition of a want of proper knowledge in the Federal legislature is entirely destitute of foundation. If a State legislature demands a knowledge of local details, undoubtedly it acquires the information from county or municipal members.  A like knowledge will be obtained in Congress from the representatives of each State. We ought to presume the individuals sent to Congress will be possessed of the necessary degree of intelligence to be able to communicate that information.

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Inquisitive and enlightened statesmen are everywhere deemed the best qualified to make a judicious selection of the objects proper for revenue.  This is a clear indication – as far as the sense of mankind can have weight in the question – of the extent of knowledge of national and local circumstances requisite to the purposes of taxation.

The Power to Impose Federal Taxes within States Is Essential 

Federal taxes imposed within States are both direct and indirect. As for indirect taxes – that is, duties and excises on articles of consumption – I am at a loss to conceive the nature of any perceived difficulties.  The knowledge relating to these items is of a kind suggested by the nature of the article itself, or which can easily be procured from any well-informed individual, especially of the mercantile class.  

The circumstances that distinguish one State’s situation from another are few, simple, and easily comprehended.  The principal thing to attend to would be avoiding those articles which had been previously appropriated as a revenue source by a particular State. These items are determinable by ascertaining the revenue system of each State, it code of laws, and from information of the members from the several States.  Direct taxes seemed to draw the most opposition.  

Taxation of Realty and Structures

The objection based on lack of knowledge of local circumstances initially appears to have more foundation when applied to real property or to houses and lands, but even in this view it does not bear a close examination.  Land taxes are commonly laid in one of two modes.  The first is by actual valuations, either permanent or periodical.  The second is by occasional assessments, at the discretion (or according to the best judgment) of officers whose duty it is to make them.  In either case, the execution of the business must be devolved upon persons in the character of commissioners or assessors, elected by the people or appointed by the government for the purpose.  All that the law can do is to name the persons or to prescribe the manner of their election or appointment, to fix their numbers and qualifications, and to draw the general outlines of their powers and duties.  There is nothing in all this that cannot be performed by Congress as by a State legislature. The attention of either can only reach to general principles.  As just noted, local details must be referred to those who are to execute the plan.

Congress Can Use State Systems to Collect Federal Taxes

A complete answer to all objections based on want of local knowledge is that Congress can lay and collect this species of taxes within each State by using the system of each State within that State. 

Federal Taxes Will Be Collected Proportionally from Each State

The proportion of taxes collected within each State is not left to the discretion of Congress.  It will be determined by the numbers of each State, based on the actual census (or enumeration) of the People. Art. I, § 2, cl. 3.  Guarded circumspection guided the Convention to shut the door to partiality, oppression, or abuse.  In addition to this precaution, there is the provision that ‘all duties, imposts, and excises shall be uniform throughout the United States.”  Art. I, § 8, cl. 1. 

Congress Can Adjust Ineffective Taxation

Those in favor of the Constitution very properly observed in speech and by pen that the system of requisitions from States could be revived if the use of internal taxation of State citizens proved ineffective.  As if admitting the existence of a fallback fortress amounts to a concession of anything, opponent of the Constitution triumphantly asked, “Why not omit the power to tax within States in the first instance, and rely solely upon requisitions?”  First, as these papers frequently note, the former system of Federal requisitions from States as States almost failed during the Revolution.  The power of taxing individual State citizens also will be preferable because it will be more effectual. Furthermore, the existence of such a power in the Constitution will have a strong influence in giving efficacy to requisitions should they be needed. When each State knows the United States may apply itself without their agency, it will be a powerful motive for exertion on their part.

The Interaction of Federal and State Taxation

We have already seen there can be no clashing or repugnancy of authority between the revenue laws of the United States and of its members. In a strictly legal sense, their laws cannot interfere with each other.  It also is far from impossible to avoid an interference even in the policy of their different systems. An effective expedient for this purpose will be the mutual abstention from those objects to which either side may have had recourse to first.  As neither  can control the other, each will have an obvious and sensible interest in this reciprocal forbearance. And where there is an immediate common interest, we may safely count upon its operation. When the particular debts of the States are paid, and their expenses come to be limited within their natural compass, the possibility of interference almost will vanish. A small land tax will answer the purpose of the States, and will be their most simple and most fit resource.

Double Taxation of the Same Revenue Is Unlikely

To excite the apprehensions of the People, many specters were raised out of the power of internal taxation.  Double sets of revenue officers, a duplication of their burdens by double taxation, and the frightful forms of odious and oppressive poll-taxes, have been played off with all the ingenious dexterity of political legerdemain.  I will expose the fallacious phantoms in turn. 

Double Sets of Officers Collecting the Same Revenue Is Unlikely 

There are two cases in which there can be no room for double sets of officers: where the right of imposing the tax is exclusively vested in the United States (which applies to the duties on imports), and where the object has not fallen under any State regulation or provision (which may be applicable to a variety of objects).  In all other cases, the probability is that the United States will either wholly abstain from the objects preoccupied for local purposes, or will make use of the State officers and State regulations for collecting an additional imposition. This practice will save expense of collection, and best avoid any occasion of disgust to the State governments and to the People. It is a practicable expedient for avoiding these inconveniences, and nothing more can be required than to show that the predicted evils do not necessarily result from the Constitution itself.  

State Revenue Officers Can Collect Federal Taxes 

As to any argument derived from a supposed system of Federal influence over the States, it is sufficient to say that it ought not to be presumed. And if such a spirit should infest the councils of the United States, its most certain road to success would be employment of State officers as much as possible, and to attach them to the Federal government by an accumulation of their emoluments. This would result turn the tide of State influence into the channels of the Federal government, instead of making Federal influence flow in an opposite and adverse current.  All suppositions of this kind are invidious, however, and answer no other end than to cast a mist over the truth.

Double Taxation Is Illusory

As to the suggestion of double taxation, the answer is plain: the revenue needs of the United States will be supplied in one way or another. If done by the authority of the Federal government, it will not be done under the authority of State governments.  The quantity of taxes to be paid by the community will be the same in either case. The capital resource of commercial imposts and duties – the most convenient branch of revenue – can be prudently improved to a much greater extent under Federal than State regulation.  This will render it less necessary to recur to more inconvenient methods, like requisitions from States.  A further advantage is its tendency towards a disposition of greater care in the choice and arrangement of taxation. Commercial imposts are a rich tributary to the public treasury, and will diminish the necessity of those impositions which might create dissatisfaction in the poorer and most numerous classes of the society.  Happy it is when the interest the government has in the preservation of its own power coincides with a proper distribution of the public burdens, and tends to guard the least wealthy part of the community from oppression!

Poll Taxes Are an Anachronism, though Lawful

I, without scruple, confess my disapprobation of poll taxes, which are typically collected on adults prior to voting.  As a government revenue stream, they have prevailed from an early period in the States of New England, which have uniformly been most tenacious in defense of their rights. Every State has power to impose taxes of this kind, although in several States poll taxes are unknown in practice.  State governments are not stigmatized as tyrannies because they possess this power.  

I should lament to see them introduced into practice under the Federal government, but the power ought to exist. If they are lawful in the States, with what propriety can a like power in the Federal government be urged as an obstacle to its adoption?  

There are certain emergencies of nations – in which expedients that in the ordinary state of things ought to be forborne – become essential to the public weal.  From the possibility of such emergencies, the government always ought to have the option of using them. At present, there is a real scarcity of objects in this country which may be considered as productive sources of revenue. This circumstance is reason enough not to abridge the discretion of the Federal government in this respect. As I know of nothing exempting this portion of the globe from the common calamities that have befallen other parts of it, a poll tax may become an inestimable resource during certain critical and tempestuous conjunctures. 

I acknowledge my aversion to every project calculated to disarm the Federal government of a single weapon which might be usefully employed for the general defense and security in any possible contingency.

The Judiciary Will Be Examined Separately, in Federalist 79 through Federalist 81 

I have now completed examination of the powers vested in the United States which may be considered as having an immediate relation to the energy of the government, and endeavored to answer the principal objections made to them. I have passed over in silence those minor contentions either too inconsiderable to have been thought worthy of hostilities by the opponents of the Constitution, or of too manifest propriety to admit of controversy.  

The mass of judicial power might have claimed an investigation under this heading, but its organization and extent may be more advantageously considered separately, in Federalist 78 through Federalist 81.

Hamiltonoriginal Federalist 36