Guest Blogger: Joerg Knipprath, Professor of Law at Southwestern Law School

In various essays, the reader has met Alexander Hamilton, polemicist; in Federalist No. 32, Alexander Hamilton, constitutional lawyer, takes a turn. The topic is whether the power to tax granted to the national government under Article I, Section 8, clause 1, of the Constitution deprives states of the power to tax. In a logical and (mostly) clear progression of premises and conclusions rooted in classic exegesis of the Constitution, Hamilton lays out the argument that the state and national governments have concurrent powers to tax. The matter of “exclusive” and “concurrent” powers is an exploration of the mechanics of our federalism.

From the perspective of government, the power to tax is an essential aspect of sovereignty and self-determination. Our personal experience tells us that dependence on others for funds makes one less fully autonomous and in control of one’s life. Just as an invigoration of Congress’s power to tax was an essential part of the Philadelphia Convention’s mission, retaining the power to tax is essential to state sovereignty, and Hamilton seeks to assuage concerns on that point.

Powers granted to the national government are exclusive only if the Constitution says so (such as the power to make laws for the District of Columbia), if the power is expressly prohibited to the states in some manner (such as the states’ lack of power to tax imports and exports), or if a reservation of the same power to the states would be “absolutely and totally contradictory and repugnant” [italics in original] to the national government’s exercise of the power. All other powers are concurrent, and any conflict between the governments over whether one should tax an activity that the other is already taxing is merely a matter of pragmatic policy. Based on the language of the clause that grants the power to tax to the national government, and the clause in Article I, Section 10, that expressly prohibits the states from taxing imports and exports without Congress’s assent, Hamilton concludes that the power to tax is concurrent, not exclusive.

Today, interpreting powers as concurrent is preferred. That maximizes the residual sovereignty of the states. But, since it does nothing to reduce the powers of the national government, reading a power as concurrent merely multiplies the layers of (often duplicative) government regulations, as, for example, applicants for many types of permits know well.

Hamilton’s argument seems so clear, one wonders why he even made the effort. The answer lies in the sophisticated attacks from the Antifederalists that foretell of political conflict over the practical ability of both the national government and the states to seek tax revenues from the same sources, and over the broader issue of overlapping powers in this novel federal system.

The opponents, led by “Brutus,” see a deeper constitutional problem rooted in an inevitable grab for power by a national government that will seek ever-greater amounts of revenue, to the detriment of the states.“The power to tax is the power to destroy,” as Chief Justice Marshall would write later in McCulloch v. Maryland. Ultimately, the individuals or assets taxed will bear no further assessments. At that point, Brutus predicts, the national government will use the taxing power, the necessary and proper clause, and the supremacy clause to pass laws to gain pre-eminent access to available revenues and to preclude the states from gaining revenues needed to maintain their governments.

While one may question whether such a dire scenario will ever play itself out at a constitutional level through explicit federal legislation to prohibit state taxes (or whether such a law would even be constitutional), it is already happening indirectly. The national government’s hunger for tax revenues is becoming more voracious as ever more aspects of individual lifestyle choices are transferred to national bureaucracies. That leaves the states increasingly hard-pressed to find sources for taxes not yet tapped to the hilt by Congress, though it must be recognized that California politicians, at least, seem to be very creative in finding new turnips from which to squeeze figurative blood.

The national government has long exercised control over the states by distributing to them grants subject to conditions intended to induce state compliance with federal mandates. Those grants are funded through taxes that, if the national government did not levy them, would be available to the states, which could spend the revenues raised without needing to comply with federal mandates. This creeping control over state sovereignty through the taxing and spending powers is one aspect of the lawsuit by various state attorneys-general against the recently-adopted health care reform law.

Hamilton also contrasts the situation of an exclusive federal power where no state participation in the area is constitutionally permitted, with the case where, though the states have concurrent power constitutionally with the national government to legislate, there are “occasional interferences in the policy [italics in original] of any branch of administration [that] would not imply any direct contradiction…of constitutional authority.” A slightly modified version of the latter is the current interpretation of Congress’s expansive power to regulate interstate commerce. That power is concurrent, and the states are able, within broad limits, to regulate interstate commerce through, for example, inspection laws and truck weight regulations.

Congress also can pass laws under its constitutional powers that, under the supremacy clause, override (“preempt”) the states’ otherwise proper concurrent regulations. It was precisely this type of scenario that Brutus raised in his alarm about the effect of the Congress’s taxing power on the states’ power to raise revenue. Hamilton has not directly addressed that argument in Federalist No. 32. He attempts a response in the next essay.

An expert on constitutional law, Prof. Joerg W. 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.  Prof. Knipprath has also spoken on business law and contemporary constitutional issues before professional and community forums.  His website is

Thursday, June 10th, 2010

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