SMITH. We have come to that part of the system wch. requires great attention and careful invest[igation]— The powers with which this govt. is vested shd. be precisely defined and limited to their proper objects, as far as is consistent wt. human foresight— Bounds shd. be set to it over wch. it shd. not pass— This is necessy. in all govts.—but peculiarly so in the one before us—Because it is to form part of a complex plan—the State govts. are to exist for certain local purposes, the general govert. for certn. national purposes—the latter is to rest on the former—It must do so if we mean to retain in any degree the features of a federal govt.—It must do so not only for its organizn. but in some degree for its exercise— It is therefore highly necessary that the Line of jurisdn. shd. be accurately drawn between them that there be no interfering claims or clashing jurisds.—For if this be not the case, the compl. parts of our system will not harmonize—they will not move to the same point—but will be constantly contendg. wt. each other, retarding one anothers operations &counteracting each others views, until one or the other is destroyed and perhaps the Liberties or at best the peace & happs. of the Country will fall in the Conflict—
1 In nothing is it more necessary to mark that Line, than in matters of Revenue— Money is the vital principle of government—with[ou]t [it] no govt. can exist— To raise it, is the most delicate thing in govt.—the feelings of the people are sooner touched in the exercise of it—oppression is most com[mo]nly exercised in this way— Both govts. must raise money—or they cannot exist—both therefore must have the power to raise it, or else, the one will exist at the will of the other— If it is possible, each shd. be conf[ine]d to certain objts.—this will prevent clashing of Laws—contention of power, and perpetual interferences of officers &c—This ought to be in that govt., if its aim is to maintn. the system in its complex form and not to redirect it to a simple one—how far it departs from this shall be the subject of our future enquiry.— I shall not expatiate on the extent of the powers given by this clause—or trace its operation, in all its [—] of extent—in all its windings & [turns?]. It is sufft. to say, what will not I presume be denied, that it comprehends every mode of raising money, whether by direct or indirect taxes under whatever name described—and that the Legisl. are limittd. in its exercise by no restrict. other than their own discr. wh. discr. ought to be guided by a regd. to the general welfare— The next clause restricts the power, not to lay a tax or duty on exports— Here then is a power in the genl. govt. over every k[in]d of Revenue—in a followg. Sect—the indvd. States are prohibd. from raisg. a Revn. from imposts, or fm. Tonnadge—The state of the matter between the govts. then, stands thus—The genl. govt. has a power to raise a revenue in every way, and an exclusive right by impost & Tonnage—the indivd. States have no exclusive right to raise money in any way—but a concurrent right to raise it by Taxes excises & duties—
2 3 The genl. govt. has moreover the superior advantages—that in all cases of interference—their Laws are supreme—their courts are to determine—
4 5 Let us enquire then whether it can fail, that the State govts. must be supplanted— It is to be recolld. that the power of laying direct taxes is co-ordinate—there will certainly be a contest between them, unless the demands of each shd. be limitted within the conven[ien]ce of the people to pay, or an agreement shd. take place to divide these [resources?]— This position is generally true that the wants of every govt. will be equal to their
means of getting it Revenues—they generally exceed it—and lead them to run in debt—they will not theref[o]re be prevented from interfg. because they will not want it—It is not likely they will accomodt. on that point—they will interfere—Two powers of taxation acting with[ou]t limit. on the same object—They must interfere—they must act in opp.—become hostile & finally the weaker submit to the Stronger—trace this power in its operation, this will appr. more clear—two sets of officers to lay &collect—of courts to try &c—On the one day the collector of Congress calls, the next of the State—The one seizes the other replevins—the Courts of Law called upon—Like two men having a comml. Interest in one plantation—unless they agree to divide, or to improve—it by turns there wd. be eternal jarring between them— In that jarring of Int. wh. wd. prevail—the genl. govt. certainly would—this wd. be armed at all points, while the State defenceless—
The genl. govt. will have a certain & very productive revenue from impost & post office—
6 The State govts. no exclusive source at all—Every source from which they can raise money will be those with which there will be a contest in the gener Govt—they must yield in the conflict—
I have hitherto gone on the supp[ositio]n that the one govt. will have no constitut control over other.—but this is not the Case—The Law of the union supreme—when disputes arise about jurisn. the courts of the union to decide—
7 According to the common course of things, if we contempl the opert. of causes to produce effects—the genl. govt. will prevail— It will do it by slow & imperceptible degrees— The power over the revenues, will move gradually if they move prudently It will act with caution—but the effect will not be the less certain— The people for a while will retain their attachment for the State govts—The genl. governt. must consult their inclins—But the attachment of the people will lessen, as the State govts. lessen—and when it is perc[eive]d that to provide for their existence, involves them in diffs.—exposes them to taxes &c—they will turn from them with disgust—It will become a mere empty form— No one will wish an office in it—the people will wish it demolished—and if that govt. if it is adopted w[i]th[ou]t amends. and succeeds in its exercise—will be followed by this event— Some, I know consider such an event as a desireable one—For my part, I contemplate it with apprehn—that it will be the period of our Liberties— I know that we are very liable to err in theoretical reasonings on political questions—when we have [no] Experience is for a guide—On this subject we have no example—no Republic that we know off. of the extent of this Country.—The ancient ones, of small extent compared—variant in their forms—The Roman territories extensive, but their form of govt. did not extend— Modern Republics not like ours—less extensive— If we consult authorities, they are again[st] the practicability— generally agree that a Republic must be of moderate extent— It may be said these auths. apply to democratic republics not to Represent[ative]