Federalist 32
I want to remind the reader that The Federalist consists of essays written for average citizens, mostly farmers, many of whom had to have the essays read to them, published in local newspapers. I mention this because the opening sentence of Federalist 32 might pose some problems for the average reader:
ALTHOUGH I am of opinion that there would be no real danger of the consequences which seem to be apprehended to the State governments from a power in the Union to control them in the levies of money, because I am persuaded that the sense of the people, the extreme hazard of provoking the resentments of the State governments, and a conviction of the utility and necessity of local administrations for local purposes, would be a complete barrier against the oppressive use of such a power; yet I am willing here to allow, in its full extent, the justness of the reasoning which requires that the individual States should possess an independent and uncontrollable authority to raise their own revenues for the supply of their own wants.
I publicly challenge the writer Bill Kauffman to parse that sentence. In any case, when engaged in public writing, the writer has an obligation to his audience: you must first know who your audience is, must second have a clear idea what you want to communicate, and in the third place properly tailor your message to your audience. You want my paraphrase of that opening sentence? “The federal government will be limited in its ability to raise revenues because the people as well as state and local governments will oppose federal efforts.”
The states, Hamilton is saying, will have only the limits on the taxation power that they impose on themselves, while the federal government will have limits placed upon it by the states. Any effort of the federal government to restrict a state’s ability to raise revenue would “be a violent assumption of power” not warranted by the Constitution. But recall the Anti-federalist argument: the concurrent power of taxation could result in a double-taxing of citizens (such as the way income is double-taxed), and the federal government could use that concurrent power to weaken the states.
The issue in Federalist 32 remains the central issue involved in ratification of the Constitution: how much sovereignty, if any, will the states retain under the new plan? Remember that the consensus had always been that sovereignty was not capable of division: there had to be a final decision-maker. According to Hamilton, when would state sovereignty be compromised? 1) where the Constitution grants exclusive power to the federal government. 2) Where the Constitution prohibits the states from exercising a power (such as requiring a republican form of government, or in Article I section 10). So far it’s hard to quibble with that. But, 3) where the Constitution “granted an authority to the Union, to which a similar authority in the States would be absolutely and totally CONTRADICTORY and REPUGNANT.” This is where the doctrine of concurrent powers becomes a problem, for, as the Anti-federalists pointed out, who will be the judge of whether the concurrent power was “productive of occasional interferences” in federal policy?
As to the first case, Hamilton also drew attention to immigration policy. The Constitution gave the federal government exclusive authority to set a uniform policy for immigration. Were the states able to set their own policy, the authority of the federal government, and indeed the Constitution itself, would be nugatory. The taxation power, however, is of the third type – a concurrent power. Nothing in the Constitution makes that exclusive to the federal government.
Granted, the Constitution made it so that states could not impose taxes on imports and exports, for were they allowed to do so they could effectively cut off the federal revenue pipeline, as well as create economic competition between the states (something Congress would effect later, such as with the Tariff of Abominations, when sectional conflicts intensified), but the states would remain otherwise free to tax anything and everything else. Hamilton emphasized this in response to the Anti-federalist claim that the federal taxation power would overwhelm the state’s ability to raise revenue. No, Hamilton argued in response, the clause in question only narrowly restricted state power.
Hamilton did concede the possibility “that a tax might be laid on a particular article by a State which might render it INEXPEDIENT that thus a further tax should be laid on the same article by the Union; but it would not imply a constitutional inability to impose a further tax.” The extent to which both parties could extract revenues, and what the balance would be, was, Hamilton argued, simply a matter of prudence. He does not consider, however, that the extent of extraction could result in conflict, raising the question, once again, of who would resolve that conflict. Whose “prudence” would prevail?
How would federal taxation affect the fiscal health of the various states. Federal taxes are a constant across all borders. In the amount of money American have to pay in taxes, the state of residence is the variable. If state rates of taxation are too high, residents of that state will move to other states – a phenomenon we see intensifying in the US right now as citizens flee high tax states such as California, New York, and Illinois. But if the federal government appropriates wealth at too high a rate, to where will people flee? One argument for federalism is that it protects the right of exit, but the more centralized power becomes the more the right of exit is threatened. This reversal – that the federal government and not the states has become the constant in taxation authority – stands as the threat to liberty the Anti-federalists feared it would be.
Director of the Ford Leadership Forum, Gerald R. Ford Presidential Foundation
Related Essays
