HAMILTON TO GOVERNOR CLINTON.
February, 24, 1783
Sir:
In my letter of the fourteenth I informed your Excellency, that Congress were employed in devising a plan for carrying the eighth article of the Confederation into execution. This business is at length brought to a conclusion. I inclose, for the information of the Legislature, the proceedings upon it in different stages, by which they will see the part I have acted. But as I was ultimately left in a small minority, I think it my duty to explain the motives upon which my opposition to the general course of the House was founded.
I am of opinion, that the article of the Confederation itself was ill-judged. In the first place, I do not believe there is any general representative of the wealth of a nation, the criterion of its ability to pay taxes. There are only two that can be thought of, land and numbers.
The revenues of the United Provinces (general and particular) were computed, before the present war, to more than half as much as those of Great Britain. The extent of their territory is not one-fourth part as great; their population less than a third. The comparison is still more striking between those Provinces and the Swiss Cantons; in both of which, extent of territory and population are nearly the same; and yet the revenues of the former are five times as large as those of the latter; nor could any efforts of taxation bring them to any thing like a level. In both cases, the advantages for agriculture are superior in those countries which afford least revenue in proportion. I have selected these examples because they are most familiar; but whoever will extend the comparison between the nations of the world, will perceive that the position I have laid down is supported by universal experience.
The truth is, the ability of a country to pay taxes depends on infinite combinations of physical and moral causes, which can never be accommodated to any general rule; climate, soil, productions, advantages for navigation, government, genius of the people, progress of arts and industry, and an endless variety of circumstances. The diversities are sufficiently great, in these States, to make an infinite difference in their relative wealth; the proportion of which can never be found by any common measure whatever.
The only possible way, then, of making them contribute to the general expense, in an equal proportion to their means, is by general taxes imposed under Continental authority.
In this mode, there would, no doubt, be inequalities, and, for a considerable time, material ones; but experience, and the constant operation of a general interest, which, by the very collision of particular interests, must, in the main, prevail in a Continental deliberative, would at length correct those inequalities, and balance one tax that should bear hard upon one State, by another that should have proportional weight in others. This idea, however, was not, at the period of framing the Confederation, and is not yet, agreeable to the spirit of the time. To futurity we must leave the discovery, how far this spirit is wise or foolish. One thing only is now certain; that Congress, having the discretionary power of determining the quantum of money to be paid into the general treasury towards defraying the common expenses, have, in effect, the constitutional power of general taxation.
The restraints upon the exercise of this power, amount to perpetuating a rule for fixing the proportions, which must of necessity produce inequality, and, by refusing the Federal Government a power of specific taxation and of collection, without substituting any other adequate means of coercion, do, in fact, leave the compliance with Continental requisitions to the good will of the respective States. Inequality is inherent in the theory of the Confederation; and, in the practice, that inequality must increase in proportion to the honesty or dishonesty of the component parts. This vice will either, in its consequences, reform the Federal Constitution, or dissolve it.