By Joshua Mawhorter *
It may be surprising – but it shouldn’t be – that one of the very first acts of the new Congress, under the Constitution, was a fiscal program at least as important as that imposed on the colonies by the Great Britain. Brittany. It turned out that taxation with representation could be just as oppressive as taxation without representation or worse.
It is the supreme irony that the very first major act of the new Congress was taxation to a level that would have made Britain proud. The only thing that happened on June 1, 1789, contained in the first chapter of the First Session was an act setting a time for U.S. government officials – senators, members of the House, judges, etc. – take an oath. The real business took place the following month, and a new bill was enacted by George Washington on July 4, 1789.
During the first session of Congress taxes were imposed on the states in the Tariff Act of 1789. It is recognized that the new Constitution was given the power to tax and that this was one of the main differences between it and government under the Articles of Confederation. It should be noted, however, that the Constitution spelled out specific reasons why the thermal government could tax the people. These stipulations are found in the Constitution of the United States, Article I, Section 8. These powers include the payment of war debts and other specific purposes. The powers of taxation in the Constitution, however, were limited to what is enumerated in this article, and its supporters said that the powers of taxation were few and clearly defined.
The Tariff Act of 1789 contains taxation for constitutional purposes and taxation for unconstitutional purposes in the same statute. This is a government tactic common at all ages to justify excessive taxation. For Example, the National School Lunch Act of 1946, which has been extended to this day, mixes the goal of children’s well-being and nutrition with the encouragement and artificial subsidization of certain agricultural enterprises. In the introduction to the Tariff Act of 1789, officially called An Act for the Imposition of a Duty on Goods, Merchandise and Merchandise Imported into the United States, we can read the reason why these taxes were created,
SECOND. 1. Considering that it is necessary for the support of the government, for the discharge of the debts of the United States and the encouragement of manufactures, that duties be imposed on goods, merchandise and imported goods …
Those familiar with Article I, Section 8 of the Constitution will be able to recognize which section is provided for in the Constitution and which is not, but a hint will be given below to take stock:
SECOND. 1. Considering that it is necessary for the support of the government, for the discharge of the debts of the United States, and the encouragement of manufactures, that duties be imposed on goods, merchandise and imported goods… (emphasis added)
The section in bold is an objective mentioned in the Constitution for which the government can levy a legitimate tax.
SECOND. 1. Whereas it is necessary for the support of the government, for the discharge of the debts of the United States, and encouragement of manufactures, that duties be imposed on goods, merchandise and imported goods … (emphasis added)
The bold section underlined in the second quote is not a legitimate constitutional reason for the government to tax the people. This kind of thinking — that domestic businesses need government protection from foreign competition, and infant industries cannot survive without government help — is the product of an economic system called mercantilism. Protectionist tariffs – taxes on foreign imports that raised prices for domestic consumers – allowed domestic firms to sell to the population at higher prices.
This was the position of Alexander Hamilton, who gave us our modern government through his theories of protectionism. This was picked up by Lincoln and the Republican Party, whose platform had always been built around tariffs – at the disproportionate expense of the South – in order to protect northern manufacturing industries from foreign competition and to fund government projects. It was in reaction to this of the populists of the South that the Sixteenth Amendment, the income tax, in 1913. The farmers of the South, overloaded with tariffs which benefited the industry of the North, thought that the tax on the income would only affect the rich in the North. What was the result ? The charges for tariffs and income tax have increased for everyone.
Commercialism and protectionism are rife with corruption and allow the government to choose favorite companies to give special treatment at the expense of the taxpayer. Conversely, companies can improperly involve themselves in government by obtaining and using political power. This system also takes root because it protects – in a perverse way – jobs.
Less choice and higher prices make us poorer, not richer. This was the first major decision taken by the constitutional government, to tax the items listed below:
- Jamaican Proof Distilled Spirits – 10 per gallon
- Other distilled spirits — 8 per gallon
- Molasses — 2.5 ¢ per gallon
- Madeira Wine — 18 ¢ per gallon
- Other wines — 10 ¢ per gallon
- Beer, ale or porter in kegs – 5 ¢ per gallon
- Cider, beer, ale, or bottled porter — 20
- Malt — 10 a bushel
- Brown sugars — 1 per pound
- Sugarloaf – 3 a pound
- Other sugars – 1.5 per pound
- Coffee — 2.5 ¢ per pound
- Cocoa — 1 per pound
- Tallow candles – 2 a pound
- Wax or spermaceti candles – 6 per pound
- Cheese — 4 a pound
- Soap – 2 per pound
- Boots — 50 ¢ per pair
- Leather shoes, slippers or galoshes — 7 a pair
- Silk shoes or slippers — 10 per pair
- Cables — 75 ¢ per 112 pounds
- Tarred rope — 75 by 112 pounds
- Rope and wire unpaved — 90 ¢ per 112 lbs.
- Twine or wrapping wire — 200 by 112 pounds
- Raw steel — 56 by 112 pounds
- Nails and tacks – 1 ¢ per pound
- Salt — 6 a bushel
- Manufactured tobacco — 6 per pound
- Snuff — 10 a pound
- Indigo – 16 pound
- Wool and cotton cards — 50 ¢ per dozen
- Coal — 2 ¢ a bushel
- Marinated fish — 75 per barrel
- Dried fish — 50 ¢ per quintal
Teas from China or India:
- Bohea tea — 6 a pound
- Souchong or black teas – 10 per pound
- Hyson teas – 20 per pound
- Other green teas – 12 per pound
Teas imported from Europe:
- Bohea tea — 8 a pound
- Souchong or black teas – 13 ¢ a pound
- Hyson teas — 26 ¢ a pound
- Other green teas – 16 ¢ per pound
Teas imported otherwise:
- Bohea tea — 15 ¢ a pound
- Souchong or black teas – 22 ¢ per pound
- Hyson teas — 45 per pound
- Other green teas — 27 per pound
Goods, merchandise and merchandise (other than tea) imported from China or India:
- Mirrors and panes and other glasses (with the exception of one-quarter black bottles): 10% of the price
- China, stone and earthenware: 10% of the price
- Gunpowder — 10% of the price
- Oil paintings — 10% of the price
- Shoe and knee buckles — 10% of the price
- Gold and silver lace – 10% of the price
- Gold and silver leaves — 10% of the price
- Blank books — 7.5% of the price
- Writing, printing or wrapping paper: 7.5% of the price
- Paper and cardboard hangings — 7.5% of the price
- Cabinetmaking items — 7.5%
- Buttons — 7.5%
- Stool — 7.5%
- Leather gloves — 7.5%
- Hats of beaver fur, fur, wool or a blend — 7.5%
- Ready-to-use breadcrumbs — 7.5%
- Castings of cast iron, slit and rolled — 7.5%
- Leather (tanned or tagged or manufactured) —7.5%
- Rods, canes and whips — 7.5%
- Ready-to-wear — 7.5%
- Brushes — 7.5%
- Gold, silver, plated articles, jewelry and dough work — 7.5%
- Anchors, articles of wrought iron, pewter and pewter — 7.5%
- Playing Cards — 10 per pack
- Coaches — 15%; tanks — 15%; other four-wheeled cars – 15%; Lounge, solo or two-wheeled cars – 15%
- On all other goods, merchandise and merchandise, five percent of their value at the time and place of import …
- From December 1, 1790: hemp: 60 ¢ for 112 pounds; cotton — 3 ¢ per pound (section 4)
- Dried fish — 5 cents per quintal; Pickled fish — 5 cents a barrel; Salt provisions – 5 cents per barrel (section 5)
Section 5 provided for a 10% discount on the aforementioned duties if the ships on which these goods traveled were built in the United States and were wholly owned by United States citizens or were built in foreign countries but owned in the United States after May 16, 1790.
Article 6 stipulated that the law would continue until June 1, 1796.
All of these items, including tea, were taxed by the United States government. Ironically, the act was signed on July 4, 1789, exactly thirteen years after the signing of the Declaration of Independence. Thirteen years after the colonies split from Britain to become independent states due (among other things) to an unfair tax burden and monopoly trade restrictions, the new government constitutionally formed between them followed the same model.
This shouldn’t come as a surprise. What ultimately drew George Washington to the Philadelphia Convention (1787) – when so many earlier plans to revise the articles had failed – was the alarm raised by a tax revolt called the Shays Rebellion. Washington itself – with the exhortation of Alexander Hamilton – set a precedent in using the federal force (thirteen thousand men) to suppress a local tax revolt during the whiskey rebellion of 1791. The whiskey rebellion was, in fact, a direct result of the tariff of 1789.
This precedent invariably led to the war that claimed the lives of more Americans than any war from that era until the 1990s – the Civil War. While slavery cannot be ruled out, it does not seem accurate to ignore the fiscal issue of the Civil War. Lincoln’s priorities, if we follow his First inaugural speech– were the will to negotiate on the issue of slavery but the reluctance to negotiate on tax revenues. Lincoln was willing to submit on the tax and income issue, and it has been since the standard of the US federal government. It can be argued, however, that the fault lies with the Constitution, which gave the US government its greatest power: the power to tax.
This article was published by the MISES Institute