Essay Read By Constituting America Founder, Actress Janine Turner
Alexander Hamilton responded in numerous essays in The Federalist to the charges that Congress might impose excessive taxation. Among his efforts to calm the torrents of dissent was essay No. 21, where he opined that imposts, excises, and other duties on articles of consumption were preferable to other types of taxes. Consumption taxes were unlikely to be excessive, as they had a built-in safety valve. The higher the tax, the less of the article would be consumed, which would result in less revenue collected. “This forms a complete barrier against any material oppression of the citizens, by taxes of this class, and is itself a natural limitation of the power of imposing them.”
As a supporter of the wealthy merchant class, Hamilton might have been supportive of consumption taxes for another reason. In England as well as North America, the tendency was for legislative majorities to impose most taxes on other than their own class. As the historian Forrest McDonald describes the matter of taxes as “gifts” to the government in his book Novus Ordo Seclorum, “When deciding whether to give away one’s own property or somebody else’s, humankind—being imperfect—has a disposition to give away somebody else’s. Hence, for several centuries, the landed gentry in the House of Commons elected to have as much of the tax burden as possible fall either upon their tenants or upon gentlemen of trade. When the latter gained influence and power proportionate to their wealth, this trend was altered; but the costs of government rose astronomically during the eighteenth century, and country and city gentlemen tended to meet these costs by multiplying the kinds and amounts of taxes upon consumer necessities. They volunteered as many of the ‘gifts’ as possible from the unrepresented poor.”
In the American colonies, according to McDonald, legislatures were mostly controlled by the landed gentry, elected by the broad proportion of the adult male population which owned sufficient land to meet the property qualifications for voting. “The American colonists developed an aversion to taxation for which they were to become celebrated. What was less celebrated, they tended to place the main burden of taxation, insofar as was possible, on merchants and on the well-to-do. The euphemism for this practice was requiring the most taxes from those who were best able to pay; again the reality was requiring somebody else to make the gift.” James Madison, in his 1792 essay, “Property,” was making that same point when he wrote, “A just security to property is not afforded by that government under which unequal taxes oppress one species of property and reward another species: where arbitrary taxes invade the domestic sanctuaries of the rich, and excessive taxes grind the faces of the poor.” Those attributes of taxation remained, although mainly in the form of income taxes, which grind the middle and upper middle class.
Thomas Jefferson, on the other hand, rather predictably supported taxes on merchants and manufacturers. In April of 1811, in a letter to General Thaddeus Kosciusco, Jefferson wrote of his ideas about restraining the tendency for manufacturing to concentrate wealth and encourage corruption, dependence, and servility among the population. “…. [W]e shall soon see the final extinction of our national debt, and liberation of our revenues for the defence and improvement of our country. These revenues will be levied entirely on the rich, the business of household manufacture being now so established that the farmer and laborer clothe themselves entirely. The rich alone use imported articles, and on these alone the whole taxes of the General Government are levied. The poor man who uses nothing but what is made in his own farm or family, or within his own country, pays not a farthing of tax to the general government, but on his salt; and should we go into that manufacture also, as is probable, he will pay nothing. Our revenues liberated by the discharge of the public debt, and its surplus applied to canals, roads, schools, etc….” Jefferson did not take into account the imposition of tariffs on imported goods, which increased the influence and wealth of domestic manufacturers at the expense of the landed yeomanry, raised the prices of domestic goods, and caused frequent sectional conflicts between the South and West on the one hand, and the Northeast on the other.
Other than proceeds from the sale of western lands, the most common source of revenue for the early United States was import duties. Those were generally acceptable during the first several decades, because they involved voluntary purchases and were often seen, as Jefferson’s remarks show, as luxury taxes paid by the wealthy. Attempts to tax the fruits of labor, such as the Whiskey Tax of 1791, precipitated significant political opposition and a drawn-out period of unrest from 1791 to 1794. There were incidents of violence against federal tax collectors and the property of federal officials. That unrest, dubbed the Whiskey Rebellion, ended only after a show of military force by federalized militia, the arrest and trial of a handful of participants, and, eventually, the repeal of the tax.
A later tax on labor, the 1894 federal peacetime income tax, was struck down as unconstitutional by the Supreme Court in 1895 in Pollock v. Farmers’ Loan and Trust Co. It took another couple of decades and a constitutional amendment before a one percent tax on income above $3000, affecting only about three percent of the population of the United States, was enacted. Since then, the federal government has relied primarily on taxes on production and labor, such as excise taxes on products and income taxes, rather than on import duties and tariffs.
Another threat to the rights in property was expropriation and redistribution of land. Many Revolutionary War era state legislatures found it impossible to resist the lure of seizing property owned by British subjects and American Loyalists and reselling it to American Patriots, either settlers or speculators. But, in general, there probably was nothing that more viscerally frightened and repelled most Americans than redistribution of property. As noted earlier, many Americans reacted in shock to the alleged goal of Daniel Shays and his followers to force a redistribution of land. There was no less opposition to a peaceful redistribution of land through what were called “agrarian laws.” Hamilton, Washington, Adams, Madison, Jefferson, and John Taylor of Caroline County might view agrarian republicanism with lesser or greater degree of favor, but all rejected such interference with a person’s rights in property.
Even Taylor, the foremost American theorist and defender of agrarian republicanism, declared that redistributions of property were grotesque infringements of liberty. He noted that government was instituted primarily to protect private property, the “acquisitions of private people, which no law can transfer to other private people.” On a curious note, Taylor assured his readers that, as a practical matter, it would be futile to support such laws, because the political system was rigged against them: “My fellow laborers, mechanical or agricultural, let us never be deluded into an opinion, that a distribution of wealth by the government or by law, will advance our interest.” The mechanics and farmers may constitute the majority of nations, but “a minority administers governments and legislates.”
The judiciary also placed themselves firmly in categorical opposition to such laws, using both specific constitutional restrictions and more abstract political theory. A clear statement to that effect came from Justice Samuel Chase in 1798 in Calder v. Bull. In language similar to that of Taylor, Chase insisted that “a law that takes property from A. and gives it to B.” would “take away that security for personal liberty or private property for the protection whereof the government was established” and would be “contrary to the great first principles of the social compact.” Presumably, even an exercise of eminent domain through which government compensated the property owner for the land seized was unconstitutional if the land was transferred to another private person. For better or worse, that strictness was not always observed as states condemned land for private canal and turnpike operations. Not unexpectedly, given the breeziness with which rights in property are infringed today, the Supreme Court no longer sees forced transfers of property from one person to another as fundamentally objectionable, as long as the original owner is compensated, and the transfer achieves some vague public purpose.
In Vanhorne’s Lessee v. Dorrance, a federal circuit court case in 1795, Justice William Paterson, a leading figure at the Philadelphia Convention, struck down as an unconstitutional taking of property a Pennsylvania law that vested title to tracts of land after the land had previously been granted to another claimant. Using both the Constitution’s text and natural law reasoning Chief Justice John Marshall and Justice William Johnson wrote opinions in Fletcher v. Peck in 1810 striking down a similar Georgia law as a violation of vested rights in property. Johnson, a Jeffersonian republican, went so far as to announce that such laws went against a general principle which binds all legislatures, “the reason and nature of things; a principle which will impose laws even on the deity.” Setting aside theological disputation about the last part of that assertion, Johnson’s opinion recognized the fundamental nature of rights in property.
The final threat to property and the fruits of one’s labor in the early United States came in the form of laws which interfered with duly made contracts. State legislatures in the 1780s, responding to depressed economic conditions, repeatedly meddled in debtor-creditor relations with a plethora of laws designed to assist debtors. Most notorious were state laws making depreciated paper currency legal tender for the payment of debts. Neither state constitutional guarantees nor the frail central government created by Articles of Confederation proved able to halt these legislative abuses. State courts were simply unable to uphold the rights of creditors in the face of public pressure. “Americans,” Forrest McDonald concluded, “were not as secure in their property rights between 1776 and 1787 as they had been during the Colonial period.”
When discussing the destructive influence of political factions in essay No. 10 of The Federalist, Madison described the types of pernicious laws that have resulted from factions gaining majority control of legislatures. He was obviously referring to the laws enacted through the tumultuous factional politics of the state governments of his time: “…a rage for paper money, for an abolition of debts, for an equal division of property, or for any other improper or wicked project, will be less apt to pervade the whole body of the Union than any particular member of it, in the same proportion as such a malady is more likely to taint a particular county or district, than an entire State.” Such laws, too, interfered with the legitimate expectations of people to have the fruits of their labor protected, because funds lent in good faith could be repaid in worthless scrip and contracts for goods and services performed in good faith could be undone on legislative whim. The Constitution sought to remedy this problem by prohibiting state laws which impaired the obligations of contract and frustrated rights vested under such contracts. Unfortunately, over the past century, the Supreme Court has effectively neutered that clause.
Justice Stephen Field, the most influential American judge of the latter part of the 19th century, put it succinctly in 1890 in an address on the occasion of the centenary of the Supreme Court: “It should never be forgotten that protection to property and persons cannot be separated. Where property is insecure the rights of persons are unsafe. Protection to the one goes with protection to the other; and there can be neither prosperity nor progress where either is uncertain.”
Joerg W. Knipprath is an expert on constitutional law, and member of the Southwestern Law School faculty. Professor Knipprath has been interviewed by print and broadcast media on a number of related topics ranging from recent U.S. Supreme Court decisions to presidential succession. He has written opinion pieces and articles on business and securities law as well as constitutional issues, and has focused his more recent research on the effect of judicial review on the evolution of constitutional law. He has also spoken on business law and contemporary constitutional issues before professional and community forums, and serves as a Constituting America Fellow.