In this paper, Hamilton defends the constitution’s provisions authorizing the national government to impose taxes on the people directly. Under the Articles of Confederation, Congress could only request funds from the states. Although the states were legally obligated to submit the funds, they often failed to do so, leaving the national government, according to Hamilton, unable to govern effectively.
Hamilton argues that the national government must have sufficient resources to govern the country. He further warns that if the national government cannot raise revenue in a reliable fashion, then the national credit will suffer, since lenders will not trust the US government to pay back its loans. Unable to borrow money in times of crisis, especially wartime, the government would be unable to protect the interests of the United States.
This paper fits within one the broader theme of the Federalist Papers: the need for the national government to have sufficient powers, or energy, to govern effectively. In this paper, Hamilton is applying this concept to the topic of taxation. As in other papers, Hamilton illustrates a hypothetical nightmare situation in which the government, at a time of national crisis, is unable to raise sufficient funds to defend the nation. As evidence, Hamilton points to the recent history of the US in which states routinely refused to contribute funds to the national government.
The anti-federalists were very concerned about granting the federal government authority to impose taxes directly on the people. They feared that such authority would enable the federal government to burden the people with oppressive and unreasonable taxes. In fact, throughout American history, many politicians and organizations have equated the power to tax with the power to oppress. Without money, people cannot purchase life essentials, let alone participate actively in society. Theoretically, the government could impose such a high tax burden that the people must spend all their time working just to fulfill their tax obligations. This would leave them with few opportunities to participate in public life and advocate for change. Similarly, locating all the financial resources of the state in the government is akin to making the government all-powerful.
However, Hamilton contends that in order for government to be effective, it must have revenue. He does not deny that granting the federal government the power to tax runs the risk of that power later being abused. However, other papers demonstrate how the proposed constitution will impose checks on the power of the government and ensure that tyrannical government is never established in America.