The Same Subject Continued (No. 35)

In Federalist number 35, Mr. Hamilton continues his dissertation on the federal taxing power. He was a finance guy, at heart, so I guess we shouldn't be surprised when he dwells so much upon the issue of taxation. Still, I understand that most of my readership are not tax attorneys or accountants. So, if you're still reading these blog posts, I thank you for your perseverance.

That said, let's see what A-Ham has to say about Uncle Sam taking your money. He addresses first the idea that the feds should only be able to tax certain things, such as imports from foreign lands. The problem with that, he says, is that a disproportionate share of tax would fall on one industry or one geographic area. The Southern states were much bigger importers of foreign good in those days than the Northern states, and would carry a heavier burden under such a system. He also notes that high tariffs would encourage smuggling, as everyone in America knew, since colonists were constantly smuggling stuff to get around British tariffs and the dreaded Navigation Act.

Hamilton is correct, I think, that broadening the tax base is fairer. Plus, as Chief Justice Marshall would later write, "the power to tax involves the power to destroy." Although tax policy was not the point of his opinion in that case, logic suggests that if you tax something, people will do it less. Booze taxes mean less drinking, but if they get high enough, people will find it profitable to make their own moonshine and take the risk of being caught. This is why I hate taxation as an influence on social policy: people will do stuff anyway, they just won't pay the tax. If something is so bad you want to stamp it out, don't tax it; make it a crime. But that's another issue.

Hamilton then addresses a completely different point: class representation in the house of Representatives. That is, he addresses the idea he calls "altogether visionary" that the representation in the House should be proportional by social class "in order to combine the interests and feelings of every part of the community, and to produce a due sympathy between the representative body and its constituents." Hamilton finds that the idea is "very specious and seducing" and "nothing but fair-sounding words."

To be honest, I was not even aware people considered this sort of thing in the eighteenth century. I think Italy had such a system under Mussolini, but I'm not certain. At any rate, until the division by social class is so stark that people could be easily divided into constituencies, it would be impossible to effect, not even addressing the problems with dividing Americans class-on-class, a vestige of the European system that our Founding Fathers sought to leave behind.

"It is said to be necessary," he writes, "that all classes of citizens should have some of their own number in the representative body, in order that their feelings and interests may be the better understood and attended to. But we have seen that this will never happen under any arrangement that leaves the votes of the people free." It is enough, I suppose, that people of any class may run for office. To require people to only vote for a member of their own income-group or profession would be a coercive and complicated system, far worse than the Constitutional system Hamilton was defending.

I don't know what any of that has to do with tax, but I don't get to choose the topics, only to discuss them.

The Same Subject Continued (No. 34)

This latest essay from our pal Hamilton actually is the same subject continued, carrying on the discussion from Federalist papers number 31 and 32 about the federal taxing power.

First, Hamilton briefly addresses some abstract concerns that a power to tax cannot be divided between the federal and state governments. Using some obscure historical analysis, he asserts that this is untrue.

Next, Hamilton returns to the idea, addressed earlier, that even if the feds don't need all that much tax now, they might need it later. "There ought to be a capacity," he says, "to provide for future contingencies as they may happen; and as these are illimitable in their nature, it is impossible safely to limit that capacity." As before, this creeps too closely toward unlimited government to suit me, but ideas on limiting the size of government were different back then. In Hamilton's day, the Founding Fathers thought that separation of powers and guarantees in the Constitution's text would limit government's power. Having seen those fail, many modern lovers of liberty would rather "starve the beast," and use the reduction of taxes to force government to get smaller. From this point of view, Hamilton's big-tax theories seem like an invitation to arbitrary government, but it is important to place these arguments in the context of their time: in the 1780s, people assumed that the government would abide by the restrictions of the Constitution, or else face revolution from a freedom-loving people.

He then discusses why governments need money. "The expenses arising from those institutions which are relative to the mere domestic police of a state, to the support of its legislative, executive, and judicial departments, with their different appendages, and to the encouragement of agriculture and manufactures ... are insignificant in comparison with those which relate to the national defense. " True, war is expensive, but in our modern society domestic expenditures of a type and scale unimagined by Hamilton and his associates dwarf our war spending in most years.

Hamilton goes on to discuss the high cost of the Revolution, and warns that no matter how good the nation's intentions, some day we will be involved in another war. Limiting the federal power to raise funds, therefore, is foolhardy and dangerous. His point is well taken -- the power must exist to defend the nation from its enemies, and that means raising money to pay our soldiers in time of war. But as to how to convince our politicians only to use this power when actually necessary, neither Hamilton nor I have the answer.

The Same Subject Continued (No. 33)

Federalist number 33 brings us to another analysis of the federal power to tax. Yes, I know these are the ones you all skipped back in school, but seriously what affects you more in your daily life: the role of factions, or the amount Uncle Sam takes out of your paycheck? That's what I thought: so pay attention!

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This essay actually is, despite it's title, not a continuation of the previous essay on taxation. Indeed, Hamilton spends most of his time discussing the so-called "necessary and proper clause" of the Constitution. Anti-Federalists were scared silly over the idea that the federal government might "make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States...."

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As Hamilton explains, this is no big deal. "This is so clear a proposition, that moderation itself can scarcely listen to the railings which have been so copiously vented against this part of the plan, without emotions that disturb its equanimity." In fact, he writes, it wouldn't even matter if the clause was removed altogether. After all, the Constitution grants certain powers, and therefore implicitly grants the government the power to pass laws to carry out the powers it has been granted. This clause just makes the implicit explicit.
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Maybe so, but if it's so innocuous, why bother to include it at all? Hamilton has an answer there, too. "The answer is," he writes, "that it could only have been done for greater caution, and to guard against all cavilling refinements in those who might hereafter feel a disposition to curtail and evade the legitimate authorities of the Union. The Convention probably foresaw, what it has been a principal aim of these papers to inculcate, that the danger which most threatens our political welfare is that the State governments will finally sap the foundations of the Union; and might therefore think it necessary, in so cardinal a point, to leave nothing to construction."
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So, they were just making sure. But what it the feds, ignoring the restrictions of "necessary" and "proper," make laws that are unnecessary and improper? What then, Hamilton?
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No worries, he says, the people won't allow it. Remember that in those days the Constitution's authors had no idea that courts would some day strike down legislation as "unconstitutional." No, judicial review was not yet a twinkle in John Marshall's eye. What Hamilton had in mind instead was that "[i]f the federal government should overpass the just bounds of its authority and make a tyrannical use of its powers, the people, whose creature it is, must appeal to the standard they have formed, and take such measures to redress the injury done to the Constitution as the exigency may suggest and prudence justify."
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You're probably thinking "isn't it better that we can go to court now instead of having to rise up in rebellion everytime the government oversteps its constitutional bounds?" Well, if you trust the courts to protect you, let me refer you to the judicial farce called Wickard v. Filburn. In this case, the government thought it was a necessary and proper use of its powers under the Interstate Commerce Clause to require that a farmer be banned from growing wheat on his farm, which he fed to his animals. The Court found that this was quite necessary and proper. I wonder what the people would say.
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So, I think Hamilton's pretty much right on this one. The necessary-and-proper clause isn't the problem. The problem is a government that has forgotten the meaning of the words "necessary and proper," and a people that has forgotten how to remind them.