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The Federalist Papers: No. 36

On this day in 1788, Federalist Paper No. 36 is published. The Federalist Papers are a collection of essays that were published in New York newspapers in late 1787 and early 1788. They argued FOR the new Constitution, then being considered for ratification by the states.

Alexander Hamilton (a.k.a. “Publius”) continues to discuss taxes, but this essay should leave you wondering just *what* Hamilton would think of the modern-day IRS!

Hamilton discusses several remaining objections to the power of taxation in the national government: Will the national government lack “sufficient knowledge of local circumstances,” thus causing “interference between the revenue laws of the Union and of the particular States”? Hamilton thinks not: Such information can be gained from congressmen or well-informed local merchants, as needed. States’ codes of laws will also provide information about items already appropriated.

But here is where it gets interesting.

Hamilton seems to think that states will benefit from another aspect of tax collection: A separate federal bureaucracy for collecting taxes will not always be needed.

Instead, the national legislature will rely on the states for the collection of some types of taxes. Indeed, Hamilton thinks that the national government may “abstain from the objects preoccupied for local purposes.” If it chooses not to abstain from taxing something already taxed by the state, then it “will make use of the State officers and State regulations for collecting the additional imposition.” Such a move, Hamilton thinks, simply makes sense: It saves money (only one tax collection bureaucracy to finance) and it “will best avoid any occasion of disgust to the State governments and to the people.”

Hamilton also thinks that the states and the national government will choose to avoid situations where both are taxing the same item. He thinks that each side will have “an obvious and sensible interest in this reciprocal forbearance.” Matters will be made still easier, Hamilton thinks, because the states will have low expenses once their wartime debts are paid off. Thus, a “small land tax will answer the purpose of the States, and will be their most simple and most fit resource.”

Well, that didn’t quite work out, did it?! We get taxed on everything, as best I can tell. Sometimes by multiple levels of government, all simultaneously. Sigh.

Mostly, this all goes to show just how different our world is from what the Founders expected. They trusted states first and the national government last. They thought government would handle only truly necessary items, keeping the cost of government low and the problems of tax collection to a minimum.

Makes you miss the good ol’ days, doesn’t it?!

My post with more background on the Federalist Papers and their authorship can be found in the Federalist Paper No. 1 summary (see October 27 history post, HERE).