And here, previous to the consideration of proper revenues for that amount, it may not be amiss to make a few general observations; the first of which is, that it would be injurious to the United States to obtain money in loans, without providing beforehand the necessary funds. For if those who are now so deeply engaged to support war, will not grant such funds to procure immediate relief, certainly those who come after them will not do it to pay a former debt. Remote objects, dependent on abstract reasoning, never influence the mind like immediate sensibility. It is, therefore, the province of wisdom to direct towards proper objects that sensibility, which is the only motive to action among the mass of mankind. Should we be able to get money from the Dutch, without first providing funds, which is more than doubtful; and should the several States neglect afterwards making provision to perform the engagements of Congress, which is more than probable, the credit of the United States abroad would be ruined forever. Very serious discussions also might be raised among foreign powers, and our creditors might have recourse to arms, we might dishonorably be compelled to do what dishonestly we had left undone.
Secondly, the idea, which many entertain, of soliciting loans abroad to pay the interest of domestic debts, is pregnant with its own destruction. If the States were to grant revenues sufficient only to pay the interest of present debts, we might, perhaps, obtain new credit upon a general opinion of our justice, though that is far from certain. But when we omit paying by taxes the interest of debts already contracted, and ask to borrow for the purpose, making the same promises to obtain the new loans, which had already been made to obtain the old, we shall surely be disappointed.
Thirdly, it will be necessary, not only that revenues be granted, but that those revenues be amply sufficient for the purpose, because (as will presently appear) a deficiency would be highly pernicious, while an excess would be not only unprejudicial, but very advantageous. To perceive this with all necessary clearness, it must be remembered that the revenues asked for on this occasion must be appropriated to the purposes for which they are asked, and in like manner the sums required for current expenditures must be appropriated to the current service. If then the former be deficient the latter cannot be brought in to supply the deficiencies, and of course the public credit would be impaired; but should there be an excess of revenue it could be applied in payment of a part of the debt immediately, and in such case, if the credits should have depreciated they would be raised to par, the offer of payment would induce creditors to lower the interest. Thus in either case, the means of making new loans on good terms would be extended, and the necessity of asking more revenues obviated.
Lastly, the revenues ought to be of such a nature, as naturally and necessarily to increase, for creditors will have a greater confidence when they have a clear prospect of being repaid, and the people will always be desirous to see a like prospect of relief from the taxes. Besides which, it will be necessary to incur some considerable expense after the war, in making necessary establishments for a permanent naval force, and it will always be least objectionable to borrow for that purpose on funds already established.
The requisition of a five per cent impost, made on the 3d of February, 1781, has not yet been complied with by the State of Rhode Island; but as there is reason to believe that their compliance is not far off, this revenue may be considered as being already granted. It will, however, be very inadequate to the purposes intended. If goods be imported and prizes introduced to the amount of twelve millions annually, the five per cent would be six hundred thousand, from which at least one sixth must be deducted, as well for the cost of collection as for the various defalcations which will necessarily happen, and which it is unnecessary to enumerate. It is not safe, therefore, to estimate this revenue at more than half a million of dollars, for, though it may produce more, yet probably it will not produce so much. It was in consequence of this, that on the 27th day of last February, I took the liberty to submit the propriety of asking the States for a land tax of one dollar for every hundred acres of land, a poll tax of one dollar on all freemen and all male slaves between sixteen and sixty, (excepting such as are in the federal army, and such as are by wounds or otherwise rendered unfit for service) and an excise of one eighth of a dollar per gallon, on all distilled spirituous liquors. Each of these may be estimated at half a million, and should the product be equal to the estimation, the sum total of revenues for funding the public debts, would be equal to two millions. What has been the fate of these propositions I know not, but I will beg leave, on this occasion, not only to renew them, but also to state some reasons in their favor, and answer some objections against them.
And first, as to a land tax. The advantages of it are, that it can be reduced to a certainty as to the amount and time. That no extraordinary means are necessary to ascertain it, and that land being the ultimate object of human avarice, and that species of permanent property, which peculiarly belongs to a country as neither to be removed or concealed, it stands foremost for the object of taxation, and ought most particularly to be burdened with those debts, which have been incurred by defending the freedom of its inhabitants. But besides these general reasons, there are some which are in a manner peculiar to this country. The land of America may, as to the proprietors be divided into two kinds; that which belongs to the great landholders, and that which is owned and occupied by the industrious cultivators. This latter class of citizens, is, generally speaking, the most numerous and most valuable part of a community. The artisan may, under any government, minister to the luxuries of the rich, and the rich may, under any government, obtain the luxuries they covet. But the free husbandman is the natural guardian of his country's freedom. A land tax will probably, at the first mention, startle this order of men; but it can only be from the want of reflection, or the delusion must be kept up by the artifice of others. To him who cultivates from one to five hundred acres, a dollar per hundred is a trifling object, but to him who owns a hundred thousand it is important. Yet a large proportion of America is the property of great landholders, they monopolise it without cultivation; they are, for the most part, at no expense either of money or personal service to defend it, and keeping the price higher by monopoly than otherwise it would be, they impede the settlement and culture of the country. A land tax, therefore, would have the salutary operation of an agrarian law without the iniquity. It would relieve the indigent, and aggrandize the State by bringing property into the hands of those who would use it for the benefit of society.
The objections against such a tax are twofold; first, that it is unequal, and secondly, that it is high. To obviate the inequality, some have proposed an estimate of the value of different kinds of lands. But this would be improper; because, first, it would be attended with great delay, expense, and inconvenience. Secondly, it would be uncertain, and therefore improper, particularly when considered as a fund for public debts. Thirdly, there is no reason to believe, that any estimate would be just, and even if it were, it must be annually varied, or else come within the force of the objection as strongly as ever; the former would cost more than the tax, and the latter would not afford the remedy asked for. Lastly, such valuations would operate as a tax upon industry, and promote that land monopoly, which every wise government will study to repress. But further, the true remedy for any inequality will be obtained in the apportioning other taxes, of which there will always be enough to equalize this; besides, the tax being permanent and fixed, it is considered in the price of land on every transfer of property, and that produces a degree of equality, which no valuation could possibly arrive at.
In a word, if exact numerical proportion be sought after in taxes, there would be no end to the search. Not only might a poll tax be objected to, as too heavy on the poor and too light on the rich, but when that objection was obviated the physical differences in the human frame would alone be as endless a source of contention, as the different qualities of land. The second objection, that the tax is too high, is equally futile with the former. Land which is so little worth, that the owner will not pay annually one penny per acre for the defence of it, ought to belong to the society by whom the expense of defending it is defrayed. But the truth is, that this objection arises from and is enforced by those men who can very well bear the expense, but who wish to shift it from themselves to others. I shall close this subject by adding, that as such a tax would, besides the benefits to be derived from the object of it, have the farther advantage of encouraging settlements and population, this would redound not only to the national good, but even to the particular good of the landholders themselves.
With respect to the poll tax, there are many objections against it, but in some of the States a more considerable poll tax already exists without inconvenience. The objections are principally drawn from Europe, by men who do not consider that a difference of circumstances makes a material difference in the nature of political operations. In some parts of Europe, where nine tenths of the people are exhausted by continual labor, to procure bad clothing and worse food, this tax would be extremely oppressive; but in America, where three days of labor produce sustenance for a week, it is not unreasonable to ask two days out of a year as a contribution to the payment of public debts. Such a tax will, on the rich, be next to nothing; on the middling ranks it will be of very little consequence; and it cannot affect the poor, because such of them as are unable to labor will fall within the exception proposed. In fact the situation of America differs so widely from that of Europe as to the matter now under consideration, that hardly any maxim which applies to one will be alike applicable to the other. Labor is in such demand among us, that the tax will fall on the consumer. An able bodied man who demands one hundred dollars to go into military service for three years, cannot be oppressed by the annual payment of one dollar while not in that service. This tax, also, will have the good effect of placing before the eyes of Congress the numbers of men in the several States; an information always important to government.
The excise proposed is liable to no other objection than what may be made against the mode of collection, but it is conceived that this may be such as can produce no ill consequences. Excise laws exist and have long existed in the several States. Of all taxes, those on the consumption of articles are most agreeable, because being mingled with the price, they are less sensible to the people; and without entering into a discussion with which speculative men have amused themselves, on the advantages and disadvantages of this species of taxation, it may be boldly affirmed, that no inconvenience can arise from laying a heavy tax on the use of ardent spirits. These have always been equally prejudicial to the constitutions and morals of the people. The tax will be a means of compelling vice to support the cause of virtue, and like the poll tax, will draw from the idle and dissolute, that contribution to the public service which they will not otherwise make.