Chapter XXXI.
Power of Congress to lay Taxes, Duties, &c.; Power to Borrow Money.
§1. Having shown how the legislative department of the general government is constituted, we proceed to consider its powers. It is thought proper, however, first to notice one important characteristic of the general government, in which it differs from the state governments, and the knowledge of which is necessary to a right understanding of the powers of the state and national governments respectively.
§2. The general government is a government of delegated powers; that is, powers which have been intrusted or delegated to it by the states, or the people of the states. Having derived its powers from the states, or the people, it has such powers only as have been conferred by the constitution. Hence it is called a government of limited powers. The states, on the other hand, existing before the general government, and possessing entire sovereignty or supreme power, may exercise all powers which they have not surrendered to the general government. In other words, their powers are unlimited, except so far as they have parted with any of their original powers.
§3. Most of the powers of congress are enumerated in the eighth section of the first article of the constitution. The first in the list is in these words: "Congress shall have power to lay and collect taxes, duties, imposts, and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts, and excises shall be uniform throughout the U. States."
§4. We have already noticed the want of such a power in the old congress. The debt which had been contracted to carry on the war remained unpaid; and congress, as we have seen, had no power to raise money either to pay debts or to defray the current expenses of the government. (Chap. XXVII: §4, 6.) It could neither raise money by direct taxation; that is, by taxing the persons and property of the citizens, nor by indirect taxation, which is by duties.
§5. Duties, or customs, are taxes on goods imported from, or exported to, a foreign country. Imposts are taxes on imported goods only. Duties on exports, however, being deemed inexpedient, are not laid by our government. An excise is a tax neither on imports nor exports, but on articles produced and consumed in the country, and on licenses to deal in certain commodities. The money paid for license to sell spirituous liquors is an excise tax.
§6. Duties are specific and ad valorem. A specific duty is a specified sum of money charged upon every yard, pound, or gallon of any commodity. Thus, a duty of ten cents on a pound of tea, or of one dollar on a yard of cloth, or of fifty cents on a gallon of wine, is a specific duty. Ad valorem is a Latin phrase, signifying according to the value. An ad valorem duty is a certain per centage on the value or price. Thus, thirty per cent, on a yard of cloth costing two dollars, is sixty cents; on a yard costing three dollars, ninety cents; the sum charged being varied by the difference in the price or value.
§7. The power to lay duties is very properly qualified by the provision that "all duties shall be uniform throughout the United States." This was intended to prevent the giving of unjust preference to any one or more states over others. Without this restriction upon the exercise of this power, the representatives of a part of the states might combine, and by laying higher duties upon goods imported into other states, than upon those imported into their own, might turn the trade chiefly into the latter. Or they might in laying duties on exports, impose high duties upon the productions of other states, and low duties, or none at all, upon the products of their own.
§8. Although Congress has power to lay direct taxes, it has seldom been exercised. The duties on foreign goods and on the vessels in which they were imported, have been found sufficient for the payment of the public debt, and for other government purposes. The national debt in 1791 was about $75,000,000, and, in 1804, had risen to $86,000,000; yet chiefly by duties was this debt reduced nearly one-half by the year 1812. By the war which commenced that year, the debt was again increased, being in 1816, $127,000,000. In 1835, this large debt had been, in the manner stated, entirely extinguished.
§9. The next power mentioned is the "power to borrow money on the credit of the United States." Although Congress may, under the power to lay taxes and duties, raise money to any extent, a large amount may sometimes be wanted before it can be raised from the regular income or revenue of the nation, or even before it could be raised by a direct tax, which would be burdensome to the people. Hence the utility of the power to borrow money until it can be reimbursed from the national revenues.