On this day in 1787, an author writing under the pseudonym “Cato” writes his sixth contribution to the anti-Federalist Papers. These papers argued against the new Constitution, then being considered for ratification by the states.
Cato has several complaints about the “apportionment of representatives and direct taxes,” as it was then being proposed. I am sorry to tell you that at least some of these complaints are because the Constitution departed from the “just and rational principle” that “representation ought to bear a proportion to the number of free inhabitants in a community.” In other words, why are “women, infants, and slaves” being incorporated into the apportionment figures?
You will appreciate his other points about taxation much more.
“The doctrine of taxation is a very important one,” he begins, “and nothing requires more wisdom and prudence” than its regulation. He believes the proposed new government will be very expensive, and its “enormous expence[s]” will leave very little for the people.
He thinks pro-Constitution advocates are being misleading when they claim that taxes will come “almost wholly” from “trade or duties on imports.” Cato makes counterarguments that might sound a bit familiar.
Who do you think pays those taxes? The businesses? No, consumers pay the tax. Thus, high taxes hurt commerce and drive down the government’s revenue. I am going to quote Cato at length, because he says it so well:
“[I]f you reflect one moment, you will find, that if heavy duties are laid on merchandize, as must be the case, if government intend to make this the prime medium to lighten the people of taxes, that the price of the commodities, useful as well as luxurious, must be increased; the consumers will be fewer; the merchants must import less; trade will languish, and this source of revenue in a great measure be dried up; but if you examine this a little further, you will find, that this revenue, managed in this way, will come out of you and be a very heavy and ruinous one, at least—The merchant no more than advances the money for you to the public, and will not, nor cannot pay any part of it himself, and if he pays more duties, he will sell his commodities at a price portionably raised—thus the laborer, mechanic, and farmer, must feel it in the purchase of their utensils and clothing—wages, &c. must rise with the price of things, or they must be ruined, and that must be the case with the farmer, whose produce will not increase, in the ratio, with labour, utensils, and clothing; for that he must sell at the usual price or lower, perhaps, caused by the decrease of trade; the consequence will be, that he must mortgage his farm, and then comes inevitable bankruptcy.”
Cato concludes that, when government is unable to raise money from taxes on commerce, it will seek “recourse to other objects.” The high taxes will be “insupportable.” “I will venture to predict,” he concludes, “without the spirit of prophecy, that you and the government, if it is adopted, will one day be at issue on this point.”
Hmm. You think so?