I remember wondering a while back whether states violate the Dormant Commerce Clause when offering business tax breaks to lure them into their local economies. I’d be interested in some back and forth on whether tax incentives are good. I’ll leave it that simple.
July 31, 2008
June 2, 2008
Damned if you do and don’t, Ham (thanks Lily) must have reckoned one day in the new 19th century. As Lily points out below, the Cato Institute’s ancestor organization was apparently chock full of early American members not much wanting to toss coin to the government’s perception of the common good.
F12 appeared just as the skirmishes of Shays’ Rebellion were ending. Shays led the rebellion against the Massachusetts’s attempt at paying off war debts with a direct tax that most notably hurt subsistence farmers. Lesson learned, Ham notes, “from the experience we have had on the point itself, … it is impracticable to raise any very considerable sums by direct taxation.” And figuring he has the proper alternative, “far the greatest part of the national revenue is derived from taxes of the indirect kind, from imposts, and from excises.”
As Lily pointed out, Ham offers an item on which the government could levy a duty:
The single article of ardent spirits, under federal regulation, might be made to furnish a considerable revenue. Upon a ratio to the importation into this State, the whole quantity imported into the United States may be estimated at four millions of gallons; which, at a shilling per gallon, would produce two hundred thousand pounds. That article would well bear this rate of duty; and if it should tend to diminish the consumption of it, such an effect would be equally favorable to the agriculture, to the economy, to the morals, and to the health of the society. There is, perhaps, nothing so much a subject of national extravagance as these spirits.
A couple years after Publius smiled on the ratified Constitution, Treasure Secretary Hamilton (shed momentarily from Latin pseudonyms) persuaded Congress to take up the war debt. And to help pay it, Congress approved a tax on spirits, as more-or-less suggested in F12. As in the tax that spurred the Shays Rebellion, though, this one hit the small boys; while the big boy producers enjoyed a flat rate, small time producers paid by the gallon, and, frequently using the spirits as a bartering item, had little cash to actually pay anyway. So, eight years after Shays, the Whiskey Rebellion popped up to provide America some notable trivia answers: the first sitting president (an old Washington) leading first American use of military force against its own citizens, and accompanied by Hamilton and Robert E. Lee’s daddy; all of this forcing the Whiskey rebels from western Pennsylvania into Kentucky and Tennessee (outside the scope of the spirits tax) where the easy corn growth spurred corn whiskey, which in turn developed into America’s brown entry into the world of distinctive whiskeys: bourbon.
So, Hamilton must have wondered after the lessons of Shays and Whiskey: what kind of taxes can we slip passed these wee Catos?
