Report on a Letter from the Speaker
of the Rhode Island Assembly
[Philadelphia] December 16, 1782
The Committee1 to whom was referred the letter from The Honorable William Bradford2 Esquire speaker of the lower house of Assembly of the state of Rhode Island containing under three heads the reasons of that state for refusing their compliance with the recommendation of Congress for a duty on imports and prize goods,3 after having maturely considered the same beg leave to report.
That your Committee flatter themselves the State on a reconsideration of the objections they have offered, with a candid attention to the arguments which stand in opposition to them, will be induced to retract their dissent, convinced that the measure is supported on the most solid grounds of equal justice, policy and general utility. The following observations contrasted with each head of the objections successively will furnish a satisfactory answer to the whole.
“That the proposed duty would be unequal in its operation, bearing hardest upon the most commercial states, and so would press peculiarly hard upon that state, which draws its chief support from Commerce.”
The most common experience joined to the concurrent opinions of the ablest commercial and political observers have established, beyond controversy, this general principle, “That every duty on imports is incorporated with the price of the commodity and ultimately paid by the consumer; with a profit on the duty itself, as a compensation to the Merchant for the advance of his money.”
The Merchant considers the duty demanded by the state on the imported article in the same light with freight or any similar charge, and adding it to the original cost, calculates his profit on the aggregate sum. It may happen, that at particular conjuctures where the markets are overstocked and there is a competition among the sellers, this may not be practicable, but in the general course of trade the demand for consumption preponderates, and the Merchant can with ease indemnify himself and even obtain a profit on the advance. As a consumer he pays his share of the duty, but it is no further a burthen upon him.
The consequence of the principle laid down is that every class of the community bears its share of the duty in proportion to its consumption; which last is regulated by the comparitive wealth of the respective classes in conjunction with their habits of expence or frugality. The rich and luxurious pay in proportion to their riches and luxury, the poor and parsimonious in proportion to their poverty and parsimony.
A chief excellence of this mode of revenue is, that it preserves a just measure to the abilities of individuals, promotes frugality and taxes extravagance.
The same reasoning in our situation applies to the intercourse between two states. If one imports and the other does not, the latter must be supplied by the former. The duty being transferred to the price of the commodity is no more a charge on the importing state for what is consumed in the other, than it is a charge on the Merchant for what is consumed by the farmer or artificer. Either state will only feel the burthen in a ratio to its consumption, and this will be in a ratio to its population and wealth. What happens between the different classes of the same community internally happens between the two states; and as the Merchant in the first case, so far from losing the duty himself has a profit on the money he advances for that purpose, so the importing state which in the second case is the Merchant with respect to the other is not only reimbursed by the non-importing state but has a like benefit on the duty advanced.
It is therefore the reverse of a just position that the duty proposed will bear hardest on the most commercial states. It will, if any thing, have a contrary effect, though not in a sufficient degree to justify an objection on the part of the non importing states; for it is as reasonable they should allow an advance on the duty paid as on the first cost, freight or any incidental charge. They have also other advantages in the measure fully equivalent to this disadvantage. Over-nice and minute calculations in matters of this nature are inconsistent with national measures, and in the imperfect state of human affairs would stagnate all the operations of government. Absolute equality is not to be attained; to aim at it is pursuing a shadow at the expence of the substance, and in the event we should find ourselves wider of the mark, than if in the first instance we were content to approach it with moderation.
“That the recommendation proposes to introduce into that and the other states, officers unknown and unaccountable to them, and so is against the constitution of the state”
It is not to be presumed that the constitution of any state could mean to define and fix the precise numbers and descriptions of all officers to be permitted in the state, excluding the creation of any new ones, whatever might be the necessity derived from that variety of circumstances, incidental to all political institutions. The Legislature must always have a discretionary power of appointing officers, not expressly known to the constitution, and this power will include that of authorising the Fœderal government to make the appointments in cases where the general welfare may require it. The denial of this would prove too much; to wit, that the power given by the confederation to Congress to appoint all officers in the post-office was illegal and unconstitutional.
The doctrine advanced by Rhode Island would perhaps prove also that the Fœderal government ought to have the appointment of no internal officers whatever, a position that would defeat all the provisions of the Confederation and all the purposes of the union. The truth is that no Fœderal constitution can exist without powers, that in their exercise affect the internal police of the component members. It is equally true that no government can exist without a right to appoint officers for those purposes which proceed from and concenter in itself; and therefore the confederation has expressly declared that Congress shall have authority to appoint all such “civil officers as may be necessary for managing the general affairs of The United States under their direction.” All that can be required is that the Fœderal government confine its appointments to such as it is empowered to make by the original act of union, or by the subsequent consent of the parties. Unless there should be express words of exclusion in the constitution of a state, there can be no reason to doubt, that it is within the compass of legislative discretion to communicate that authority.
The propriety of doing it upon the present occasion is founded on substantial reasons.
The measure proposed is a measure of necessity. Repeated experiments have shown that the revenue to be raised within these states is altogether inadequate to the public wants. The deficiency can only be supplied by loans. Our applications to the foreign powers on whose friendship we depend have had a success far short of our necessities. The next resource is to borrow from individuals. These will neither be actuated by generosity nor reasons of state. ’Tis to their interest alone we must appeal. To conciliate this we must not only stipulate a proper compensation for what they lend, but we must give security for the performance. We must pledge an ascertained fund, simple and productive in its nature, general in its principle and at the disposal of a single will. There can be little confidence in a security under the constant revisal of thirteen different deliberatives. It must once for all be defined and established on the faith of the states solemnly pledged to each other and not revocable by either without a breach of the general compact.
’Tis by such expedients that nations, whose resources are understood, whose reputations and governments are erected on the foundation of ages, are enabled to obtain a solid and extensive credit. Would it be reasonable in us to hope for more easy terms who have so recently assumed our rank among the nations? Is it not to be expected, that individuals will be cautious in lending their money to a people in our circumstances, and that they will at least require the best security we can give?
We have an enemy vigilant, intriguing, well acquainted with our defects and embarrassments. We may expect that he will make every effort to instill diffidences into individuals, and in the present posture of our internal affairs he will have too plausible ground on which to tread. Our necessities have obliged us to embrace measures with respect to our public credit, calculated to inspire distrust. The prepossessions on this article must naturally be against us, and it is therefore indispensable we should endeavour to remove them, by such means as will be the most obvious and striking.
It was with these views Congress determined on a general fund; and the one they have recommended must upon a thorough examination appear to have fewer inconveniences than any other.
It has been remarked as an essential part of the plan, that the fund should depend on a single will. This will not be the case unless the collection as well as the appropriation is under the controul of The United States; for it is evident, that after the duty is agreed upon it may in a great measure be defeated by an ineffectual mode of levying it. The United States have a common interest in an uniform and equally energetic collection; and not only policy but justice to all the parts of the Union designates the utility of lodging the power of making it where the interest is common. Without this it might in reality operate as a very unequal tax.
“That by granting to Congress a power to collect monies from the commerce of these states indefinitely as to time and quantity and for the expenditure of which they are not to be accountable to the states, they would become independent of their constituents, and so the proposed impost is repugnant to the liberty of the United States”
Admitting the principle of this objection to be true, still it ought to have no weight in the present case because there is no analogy between the principle and the fact.
First, the fund proposed is sufficiently definite as to time because it is only coextensive with the existence of the debt contracted and to be contracted in the course of the war. Congress are persuaded that it is as remote from the intention of their constituents to perpetuate that debt as to extinguish it at once by a faithless neglect of providing the means to fulfil the public engagements. Their ability to discharge it in a moderate time can as little be doubted as their inclination, and the moment that debt ceases the duty so far as respects the present provision ceases with it.4
The resolution recommending the duty specifies the object of it to be the5 discharge of the Principal & Interest of the Debts already contracted or which may be contracted on the faith of the united States for supporting the present war.
The rate per Cent is fixed, and it is not at the option of the United States to increase it. Though the product will vary according to the variations in trade, yet as there is this limitation of the rate, it cannot be properly said to be indefinite as to quantity.
By the confederation Congress have an absolute discretion in determining the quantum of revenue requisite for the national expenditure. When this is done nothing remains for the states separately but the mode of raising. No state can dispute the obligation to pay the sum demanded without a breach of the confederation, and when the money comes into the treasury, the appropriation is the exclusive province of the Fœderal government. This provision of the confederation (without which it would be an empty form) comprehends in it, the principle in its fullest latitude, which the objection under consideration treats as repugnant to the liberty of the United States; to wit an indefinite power of prescribing the quantity of money to be raised and of appropriating it when raised.
If it be said that the states individually having the collection in their own hands may refuse a compliance with exorbitant demands, the confederation will answer that this is a point of which they have no constitutional liberty to judge. Such a refusal would be an exertion of power not of right, and the same power which could disregard a requisition made on the authority of the confederation might at any time arrest the collection of the duty.
The same kind of responsibility which exists with respect to the expenditure of the money furnished in the forms hitherto practiced would be equally applicable to the revenue from the imports.
The truth is the security intended to the general liberty in the confederation consists in the frequent election and in the rotation of the members of Congress, by which there is a constant and an effectual check upon them. This is the security which the people in every state enjoy against the usurpations of their internal governments; and it is the true source of security in a representative republic. The government so constituted ought to have the means necessary to answer the end of its institution. By weakening its hands too much it may be rendered incapable of providing for the interior harmony or the exterior defence of the state.
The measure in question if not within the letter is within the spirit of the confederation. Congress by that are empowered to borrow money for the use of the United States, and by implication to concert the means necessary to accomplish the end. But without insisting upon this argument, if the confederation has not made proper provision for the exigencies of the state, it will be at all times the duty of Congress to suggest further provisions; and when their proposals are submitted to the unanimous consent of the States, they can never be charged with exceeding the bounds of their trust. Such a consent is the basis and sanction of the confederation, which expressly in the 13th. article empowers Congress to agree to and propose such additional provisions.
The remarks hitherto made have had referrence principally to the future prosecution of the war. There still remains an interesting light in which the subject ought to be viewed.
The United States have already contracted a debt in Europe and in this country for which their faith is pledged. The capital of this debt can only be discharged by degrees; but a fund for this purpose and for paying the interest annually on every principle of policy and justice ought to be provided. The omission will be the deepest ingratitude and cruelty to a large number of meritorious individuals, who in the most critical periods of the war have adventured their fortunes in support of our independence. It would stamp the national character with indelible disgrace.
An annual provision for the purpose will be too precarious. If its continuance and application were certain it would not afford complete relief. With many the regular payment of interest by occasional grants would suffice; but with many more it would not. These want the use of the principal itself; and they have a right to it: but since it is not in our power to pay off the principal, the next expedient is to fund the debt and render the evidences of it negotiable.
Besides the advantage to individuals from this arrangement, the active stock of the nation would be increased by the whole amount of the domestic debt, and of course the abilities of the community to contribute to the public wants. The national credit would revive and stand hereafter on a secure basis.
This was another object of the proposed duty.
If it be conceded that a similar fund is necessary it can hardly be disputed that the one recommended is the most eligible. It has been already shown that it affects all parts of the community in proportion to their consumption; and has therefore the best pretensions to equality. It is the most agreeable tax to the people that can be imposed, because it is paid insensibly and seems to be voluntary.
It may perhaps be imagined that it is unfavourable to commerce; but the contrary can easily be demonstrated. It has been seen that it does not diminish the profit of the Merchant and of course can be no diminution of his inducements to trade. It is too moderate in its amount to discourage the consumption of imported goods, and cannot on that account abrige the extent of importations. If it even had this effect it would be an advantage to Commerce by lessening the proportion of our imports to our exports6 and inclining the ballance in favour of this country.
The principal thing to be consulted for the advancement of Commerce is to promote exports. All impediments to these either by way of prohibition or by increasing the prices of native commodities, descreasing by that mean their sale and consumption at foreign markets are injurious. Duties on exports have this operation. For the same reason taxes on possessions and the articles of our own growth or manufacture, whether in the form of a land tax excise or any other are more hurtful to trade than import duties. The tendency of all such taxes is to increase the prices of those articles which are the objects of exportation and to enable others to undersell us abroad. The farmer if he pays a heavy land tax must endeavour to get more for the products of his farm: the mechanic and labourer if they find the necessaries of life grow dearer by an excise must endeavour to exact higher wages; and these causes will produce an increase of prices within and operate against foreign commerce.
It is not however to be inferred that the whole revenue ought to be drawn from imports: All extremes are to be rejected. The chief thing to be attended to is that the weight of the taxes fall not too heavily in the first instance upon particular parts of the community. A judicious distribution to all kinds of taxable property is a first principle in taxation. The tendency of these observations is only to show that taxes on possessions, on articles of our own growth and manufacture are more prejudicial to trade than duties on imports.
The observations which conclude the letter on which these remarks are made naturally lead to reflect⟨ions⟩ that deserve the serious attention of every member of the union.7 There is a happy mean between too much confidence and excessive jealousy in which the health and prosperity of a state consist. Either extreme is a dangerous vice; the first is a temptation to men in power to arrogate more than they have a right to—the latter enervates government, prevents system in the administration defeats the most salutary measures; breeds confusion in the state, disgusts and discontents among the people and may eventually prove as fatal to liberty as the opposite temper.
It is certainly pernicious to leave any government in a situation of responsibility, disproportioned to its power.
The conduct of the war is intrusted to Congress and the public expectation turned upon them without any competent means at their command to satisfy the important trust. After the most full and solemn deliberation under a collective view of all the public difficulties, they recommend a measure, which appears to them the corner stone of the public safety: They see this measure suspended for near two years—partially complied with by some of the states, rejected by one of them and in danger on that account to be frustrated; the public embarrassments every day increasing, the dissatisfaction of the army growing more serious, the other creditors of the public clamouring for justice, both irritated by the delay of measures for their present relief or future security, the hopes of our enemies encouraged to protract the war, the zeal of our friends depressed by an appearance of remissness and want of exertion on our part, Congress harrassed, the national character suffering and the national safety at the mercy of events.
This state of things cannot but be extremely painful to Congress and appear to your Committee to make it their duty to be urgent to obviate the evils with which it is pregnant.
Resolved that Congress agree to the said Report8
Whereas it is essential to justice and to the preservation of public credit that whenever a nation is obliged by the exigencies of public affairs to contract a debt, proper funds should be established not only for paying the annual value or interest of the same but for discharging the principal within a reasonable period, by which a nation may avoid the evils of an excessive accumulation of debt—Therefore
Resolved, that whenever the Neat product of any funds recommended by Congress and granted by the states for funding the debt already contracted or for procuring future loans for the support of the war shall exceed the sum requisite for paying the interest of the whole amount of the national debt which these states may owe at the termination of the present war, the surplus of such grants shall form a sinking fund to be inviolably appropriated to the payment of the principal of the said debt and shall on no account be diverted to any other purpose. And9 in Order that the several States may have proper information of the state of their finance it is further resolved that as soon as the publick debt can be liquidated each State be annually furnished with the amount thereof & the interest thereon and also of the proceeds and disposition of the sd. funds for the redemption thereof.
Resolved that the faith of the United States be pledged for the observance of the foregoing resolution, and that if any state shall think it necessary to make it a condition of their grants the same will be10 considered by Congress as consistent with their Resolution of the 3d Febry 1781.
ADf, Papers of the Continental Congress, National Archives.
1. The committee consisted of H, James Madison, and Thomas FitzSimons.
3. The congressional recommendation, dated February 3, 1781 (JCC description begins Journals of the Continental Congress, 1774–1789 (Washington, 1904–1937). description ends , XIX, 112), requested that the several states give Congress the power to levy, after May 1, 1781, a duty of five percent ad valorem on all imports and the same duty on all prizes condemned in state Admirality Courts, the proceeds to be appropriated to the discharge of the national debt.
4. H at this point wrote and then deleted the following paragraph:
“Independent of other provisions for discharging the public debt, the revenue from this duty in the future progress of our trade will afford a surplus beyond the appropriations for interest, which from the express condition of the grant must be applied as a sinking fund to pay off the principal, and by which the supposition of perpetuity is destroyed.”
5. The remainder of this paragraph is not in H’s writing.
6. In MS, H by mistake wrote “exports to our imports.”
7. The observations to which H refers are in the last two paragraphs of Bradford’s letter and read as follows:
“This State may be justly ranked among the foremost in the common cause, having furnished in support of it as many men, and as much money, in proportion to its abilities, as any State in the union, and much more than most of them, and it is still disposed to continue its exertions; but it will raise and collect its quota of public taxes in such a way as shall be judged most proper.
“And it is hoped, that when its resolutions are founded on the great principles of liberty and a general interest, it will not be thought to suspect the public virtue of the present Congress, by withholding from them or their servants, a power of which their successors might make a dangerous use.” (JCC description begins Journals of the Continental Congress, 1774–1789 (Washington, 1904–1937). description ends , XXIII, 788–89.)
8. This sentence is not in H’s writing. At this point H deleted the following:
“Your Committee observing that the apprehension of perpe[t]uity in the duration of the fund recommended has great share in the opposition with which it meets, take the liberty to propose the following resolutions as tending effectually to remove all apprehension on that head.”
9. This sentence is in the writing of Thomas FitzSimons.
10. The words following “be” are not in the writing of H. In JCHW description begins John C. Hamilton, ed., The Works of Alexander Hamilton (New York, 1851). description ends , II, 212–13, the last three paragraphs of this report are printed as a separate resolution dated December 16, 1782, and entitled “Sinking Fund.” The date in the last paragraph is printed in error as “23d February 1781.”
“The answer to the objections of Rho: Island,” James Madison recorded, “passed without opposition, 8 States being present, of which Rho: Isd. was one” (“Notes of Debates in the Continental Congress,” MS, James Madison Papers, Library of Congress).