The Revolutionary War was sparked in part by the British imposing taxes on the American colonists without their permission or consent.
Once the colonists had freed themselves from British rule, it was time to establish a government that could pay the debts it had incurred during the conflict.
1777 – Articles of Confederation
This was the first constitution of the newly formed United State. It favored decentralization of power, which means that Congress was not given the power to tax.
1781 – Report on Public Credit
Robert Morris, Superintendent of finance, wanted the federal government to own the debt it incurred then issue interest-bearing debt certificates while imposing tariffs and internal taxes.
His proposal was shut down by numerous states over the next few years.
1787 – Ratification of the Constitution
The ratification of the Constitution shifted the focus of power to the federal government and away from individual states.
This gave the federal legislature the power to impose tariffs and coin money, along with the flexibility to collect excises and levy taxes directly on individual citizens.
1789 – Tariff of 1789
This tax bill included the original 5% duty on imports, as well as a list of special items that would be taxed at specific amounts.
1790 – Report on Public Credit
This new tax plan worked on two basic principles:
Redemption – Congress would redeem at face value all the securities issued by the Confederation government. These old notes would be exchanged for new government securities with interest of about 4%. This plan aimed to intertwine the wealthy Americans who had financed the initial government with the new government.
Assumption – The national government would take on outstanding war debts of the states. This would concentrate the nation wealth into the hands of the wealthy merchant class so they would be able to invest in the nation’s economy and other critical innovations.
1791 – Whiskey Excise Tax
This was a tax specifically for spirit distillers and imposed a 7 cents to 18 cent per gallon tax. This was not a popular tax, as spirits were often used as a form of currency out west.
1794 – Uprising Quelled
North Carolina and Western Pennsylvania were in a state of civil unrest after being cited by the federal government for dodging taxes.
The federal government forced the states to send militia to occupy these territories and take down any organized resistance.
President Madison appealed to Congress for a Declaration of War against Britain as the tension between the two countries reached a head.
There was a lot of conflict over fundraising for the war, but Congress eventually settled on doubling the tariff schedule.