Americans’ experience under British rule made them deeply suspicious of granting tax power to a centralized government. Parliament’s repeated attempts to tax its American colonies without representation had been a driving force in the movement for American independence. When declaring their independence, Americans were averse to establishing a new imperial government in Philadelphia that would simply replicate the abandoned oppressive one in London. Consequently, when Congress drafted the country’s first constitution—the Articles of Confederation—it did not include a tax provision other than merely allowing Congress to ask the states to pay their share of the federal financial needs. Furthermore, Congress was given no coercive power to collect the unpaid portions of state quotas of the annual federal requisition, which usually amounted to about half of what Congress had requested. Without a specific independent taxing authority, Congress, along with the state governments, began emitting paper money to finance the war—a practice regularly used during wartime by the American colonial governments. However, by 1780, the Continental currency had depreciated so much that Congress abandoned its use and futilely relied on the states to comply with its annual requisitions.
A growing number of members of Congress believed that Congress should have an income of its own independent of the regularly delinquent states. On 7 November 1780, Congress appointed a committee “to prepare and lay before Congress a plan for arranging the finances, paying the debts and economizing the revenue of the United States.” The committee reported on 18 December that Congress should be vested with the “exclusive right to duties arising on certain imported articles,” and that the states should be requested to pass laws granting Congress power to levy duties (i.e., tariffs) upon imported goods after 1 May 1781. Congress debated this proposal, along with other financial measures, for several weeks before it passed an impost proposal on 3 February 1781.
The impost proposal was sent to the states on 8 February accompanied by a resolution of 7 February. The resolution stipulated that if military hostilities prevented any state legislature from convening, the grant of taxing authority would go into effect as soon as the other states ratified. To encourage cooperation, the resolution also specified that any revenue collected from the proposed tariff would be applied to the credit of the ratifying states in meeting their quotas of Congress’ annual requisition of funds.
The ratification of the Articles of Confederation on 1 March 1781, less than a month after Congress submitted the impost to the states, transformed the impost into a de facto amendment to the Articles that required the unanimous ratification of the thirteen state legislatures. Virginia adopted the Impost on 14 June 1781 but six months later, however, on 17 December 1781, the Virginia legislature suspended its ratification until the other states approved the Impost. A year later, on 1 November 1782, Rhode Island became the only state to reject the impost. Just over a month later, on 7 December 1782 the Virginia legislature repealed its ratification altogether. In the preamble to the repeal, the legislature declared that “permitting any power, other than the general assembly of this commonwealth, to levy duties or taxes upon the citizens of this state within the same, is injurious to its sovereignty, may prove destructive of the rights and liberty of the people, and so far as congress might exercise the same is contravening the spirit of the confederation in the eighth article thereof,” which provided that congressional taxes be apportioned among the states based on land values. The repeal came as a complete surprise to Virginia’s delegation in Congress, particularly to James Madison. Because amendments to the Articles of Confederation needed the unanimous approval of the state legislatures, the Virginia and Rhode Island rejections killed this first attempt to establish a federal revenue through tariffs. The final blow came on 15 March 1783, when New York officially rescinded its earlier ratification of the Impost of 1781.
Shortly thereafter, Congress began a long debate on the subject of finance and the means of securing an income independent of the states. On 21 February 1783, Congress appointed a “special committee” consisting of Nathaniel Gorham (chairman, Mass.), Alexander Hamilton (N.Y.), James Madison (Va.), Thomas FitzSimons (Pa.), and John Rutledge (S.C.). The committee reported on 6 March that a five percent tariff should be levied on all imports except for a specified list of foreign goods that were to be individually taxed at different rates. Congress ordered the report printed and distributed to its members. A few days later Congress referred parts of the report back to the committee, which delivered a revised second report on 18 March. During the debates, Hamilton and James Wilson of Pennsylvania moved that land and houses should be taxed, but this proposal was defeated. The modified report was adopted on 18 April 1783, with nine states voting in favor and Rhode Island again standing in opposition.
The power to levy the tariff was described as “indispensibly necessary to the restoration of public credit, and to the punctual and honorable discharge of the public debts.” The impost was to remain in effect for a limited duration of twenty-five years and its revenue was earmarked exclusively to pay the principal and interest on the war debt. To assuage state concerns about federal overreach, individual states retained the authority to appoint revenue collectors, but those officials, once appointed, were to “be amenable to and removeable by the United States in Congress assembled, alone.” If any state failed to appoint a collector, Congress could make the appointment.
All of the states ultimately adopted the Impost of 1783. On 14 April 1785, however, the New York State Senate rejected the measure. With the reopening of New York City’s port to American commerce following the British evacuation in November 1783 and the passage of a state impost in November 1784, the state began reaping significant tariff revenue that amounted to about half of the state’s annual revenue. New Yorkers did not want to surrender this lucrative revenue to the Confederation government because it enabled the state to maintain relatively low property taxes. Several years later, State Senator John Williams asked “What hath kept the taxes so low in this state—the reason is obvious, our impost duties. This is a privilege Providence hath endowed us with; our landed property will ever sell according to the conveniency of it; the lighter the tax, the higher the land; the nigher to market, the greater profits arising from our produce. Let our imposts and advantages be taken from us, shall we not be obliged to lay as heavy taxes as Connecticut, Boston, &c.” (Albany Federal Herald, 25 February 1788).
Other New Yorkers also opposed the Impost for more ideological reasons. Congress should be provided with necessary funds, but it should not have the power to raise a revenue independent of the states. The states should retain the exclusive power of the purse themselves and grant Congress the funds that it needed. Congress, it was feared, would misuse its taxing power to create a powerful and oppressive bureaucracy reminiscent of the prewar imperial harassment. It would appoint “collectors, deputy-collectors, comptrollers, clerks, tide-waiters, and searchers.” Ships and soldiers would be maintained in port towns to enforce the tariff. Special courts would be created to try offenders. Opponents of the impost also argued that when the federal government augmented its power, Congress’ voracious appetite for authority would be satiated only when it had “swallowed entirely the sovereignty of the particular states.” (“A Rough Hewer” [Abraham Yates, Jr.], New York Journal, 17 March 1785). Similar fears surfaced in other states. Consequently, when some states ratified the Impost of 1783, they provided in their acts of ratification that prosecutions for violations of the impost would take place only in state courts where state constitutional protections would be accorded their citizens.
On 15 February 1786, Congress formally requested New York to re-consider its rejection of the Impost. In response, New York ratified the measure on 4 May 1786. However, the state’s approval came with significant restrictions: it reserved the right to collect the revenue itself and stipulated that payments to Congress could be made in New York paper money. Congress appointed a committee to examine the state approvals of the Impost and determine their conformity with the original proposal. Although all of the state ratifications contained restrictions, Congress rejected only New York’s ratification because of the state’s unacceptable restrictions. On 27 July 1786 Congress’ committee reported that New York’s act “so essentially varies” from Congress’ system that it could not “be considered a compliance.” On 11 August 1786 Congress asked New York’s governor to call a special session of the legislature to re-consider the Impost. Refusing to call a special session, Governor George Clinton on 13 January 1787 submitted Congress’ concerns to the legislature at its regular session. The Assembly re-considered its restricted approval, but on 15 February the Assembly voted 38 to 19 to retain its previous restrictions, which in essence killed the Impost of 1783. Six days later, James Madison then attending Congress in New York City, informed George Washington that the Assembly’s action “put a definitive veto on the Impost.”
The failure of the Impost of 1783 had a profound impact on the constitutional history of the United States. Had the Impost been accepted and implemented, the Articles of Confederation might have continued to function evolving into a stronger parliamentary system of government and the Constitutional Convention probably would not have been called.