Taxation, Confederation


Taxation system under the Articles of Confederation that demonstrated the young nation’s commitment to republican ideology and a decentralized government.

The sole method of government taxation for the fledgling United States was a requisition system. Article 8 of the Articles of Confederation granted the power to levy and collect taxes to the individual states rather than to Congress. Under this system, Congress would send a request for funds to the states, and the state assemblies would then pass legislation that complied with this request. State officials collected the money and forwarded the required amount to Congress. The taxation policy of the Articles of Confederation made the national government completely dependent on the states for revenue.

This fiscal policy reflected the eighteenth-century republican notion of the proper power relationship between the people and their government. In the late 1700s, most Americans believed the power to tax was the right and responsibility of a sovereign state and that the location of this power within the structure of a government determined the nature of society. They argued that popular (or local) control of taxation provided the very foundation of representative government. Jeffersonian Republicans believed that local control of taxation ensured the rights of the citizen and acted as a check on the arbitrary authority of the state.

The political traditions and experiences of the colonies under the British imperial system provided another source of resistance to centralized taxation. In the colonial period, state assemblies operated their own fiscal systems and, in many ways, functioned as independent states. In the conflict that emerged between the colonies and England after 1763, when England began taxing the colonies directly for the first time, colonists argued that the British Parliament did not have the right to tax the colonies because the colonies were not represented in that body. This strong sense and tradition of localism combined with republican ideology to determine the nature of taxation under the Confederation.

Although the requisition system protected the interests and powers of the states, it proved crippling from the perspective of the national government. Congress was regularly short of funds and unable to pay its expenses. Frequently states assemblies either refused to send the full amount of a requisition or completely ignored the request. The Revolutionary War with England exacerbated these faults as Congress grew deeper in debt, fell behind in paying military salaries, and halted interest payments to its creditors. The shortcomings of the requisition system stimulated attempts to amend the Articles of Confederation and the call for a new government.

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