The Same Subject Continued (No. 32)

In Federalist Paper number 32, Hamilton continues his discussion of the taxing power of the federal government. I guess Madison and Jay have left all the financial stuff to Hamilton, which makes sense, I suppose, but seems a bit unfair, as well. At any rate, Hamilton addressed the concern that this new taxing power would eliminate the states' own ability to tax.

Anti-federalists were apparently making noises that these new powers might be interpreted to mean that only the feds can tax. Nonsense, Hamilton says. Because the new Constitution "aims only at a partial union or consolidation, the State governments would clearly retain all the rights of sovereignty which they before had, and which were not, by that act, exclusively delegated to the United States." This important principle was reinforced in 1791 by the Tenth Amendment to the Constitution, and subsequently ignored by the Supreme Court in 1941. So for 153 years, Hamilton was correct -- the Constitution leaves to the states all those powers they already had, unless the Constitution specifically says otherwise, including the power to tax.

This all makes good logical sense, and is kind of the point of the provision. The Framers of the Constitution wanted free trade among the states, with no tariff barriers on goods travelling from state to state, and no variance among the states in tariffs on foreign goods. It's the sort of free-trade zone the EU has created among its member-states, but with a lot less regulation. So, Pennsylvania might tax liquor and gasoline more than New Jersey does (and they do) but Pennsylvania can't tax New Jersey liquor or Canadian liquor more than Pennsylvania liquor.

As an example, Hamilton cites the provision that prevents the states from taxing imports and exports without Congress's permission. Implicit in this prohibition, Hamilton says, is the idea that states can still tax things that aren't imports and exports. They can even tax imported goods once they're here, or exported goods before they leave, they just can use tariffs and taxes to discriminate between foreign and domestic goods; only the federal Congress may do that.

Where the Constitution is silent as to the states' right to tax, Hamilton says they have the same powers they've always had. Where both federal and state government are allowed to tax, both may do so. "It is, indeed, possible that a tax might be laid on a particular article by a State which might render it inexpedient that thus a further tax should be laid on the same article by the Union; but it would not imply a constitutional inability to impose a further tax."