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113 During the particularly fraught summer of 1791—that season in which speculation in Bank of the United States scrip brought the young republic’s first financial panic to Philadelphia—treasury secretary Alexander Hamilton received an alarming piece of news from Boston. William Lowder, the chairman of the town’s board of assessors, wrote an open letter to the secretary asking to see the federal government’s “public books of loans,” the Treasury’s record of US bondholders. Lowder requested the names and valuation of Boston-area federal securities holders because the town had levied a tax on its residents’ personal property, which included the interest income earned on US bonds.1 This news could hardly have been worse for the secretary, who had only managed to launch the major components of his fiscal program within the last year.2 Now the town of Boston sought to tax the lucrative product of Hamilton’s assumption scheme—the highly liquid, in-demand 6 percent, deferred 6 percent, and 3 percent securities issued to domestic holders of the newly nationalized war debt—and in response, the treasury secretary strenuously denied Lowder’s request, citing the levy’s harmful effects on the public credit. Despite the threat Boston’s tax posed to his fiscal statecraft, Hamilton offered no legal or constitutional arguments to support his opinion, choosing instead to defend his position on policy, rather than legal, grounds. Developing the Jurisprudence of Federalism: Hamilton’s Defense of Federal Fiscal Powers four x 114 chapter four Contrast Hamilton’s reticence with Chief Justice John Marshall’s bold assertions in Weston v. Charleston, an 1829 tax case adjudicated before the US Supreme Court.3 The facts of Weston are nearly identical to the 1791 Boston incident: in February 1823, the city council of Charleston, South Carolina, passed an ordinance to raise revenue that taxed all sorts of personal property, including “all personal estate, consisting of bonds, notes, insurance stock, six and seven percent stock [bonds] of the United States, or other obligations upon which interest has been or will be received during the year.”4 (Note that when speaking of securities in the eighteenth and nineteenth centuries, Hamilton and his contemporaries often referred to bonds as “stock.”) Yet nearly four decades after Boston sought to levy a similar local tax on federal securities, Marshall pronounced that Charleston’s attempt to do the same was unequivocally unconstitutional. The chief justice cited a number of legal arguments to bolster his argument: he pointed out that US bonds taxed by the ordinance were direct manifestations of the federal government’s enumerated power to borrow, and that those securities represented an inviolable contract made between the federal government and its creditors. Therefore, the state had no authority to infringe on the national government’s sovereign, and supreme, authority to borrow money, nor to interfere with the terms of its contracts. Furthermore, Marshall thought that Charleston’s tax impaired the federal government’s implicit responsibility to maintain the public credit. Why did Hamilton and Marshall, both nationalists who opposed the city taxes levied on US bonds, offer such different responses to Boston’s and Charleston’s assessments? During the years separating the Boston tax from Plowden Weston’s lawsuit against Charleston, American constitutional law developed the legal tools necessary to justify and to defend the federal government ’s power to tax and to borrow. Though he invoked no constitutional arguments to Lowder in 1791, Alexander Hamilton was the pivotal figure in the development of this fiscal jurisprudence, as he articulated, then put to use, the key constitutional principles that enabled jurists like Marshall to mount a legal defense of the federal government’s fiscal powers. Hamilton’s fiscal jurisprudence—the legal strategy he employed to defend the federal government’s taxing and borrowing powers—also became part of the early republic’s jurisprudence of federalism. It had two main components. First, Hamilton sought to realize the potential of the expansive taxing and borrowing powers permitted to the federal government under the Constitution. Whereas the states exercised their considerable powers to Developing the Jurisprudence of Federalism 115 tax and to borrow since declaring their independence in 1776, the national government had only enjoyed its theoretically concurrent, but not yet realized , fiscal authority with the states since ratification in 1788. To this end, Hamilton was the single most important figure in the early republic: when he joined the Washington administration, he quickly refinanced outstanding foreign loans and engineered the assumption...


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