We left off with the Whiskey Rebellion, which more or less blew up in Alexander Hamilton’s face. The tax he pushed through congress on whiskey that triggered the entire affair was shortly thereafter repealed and it was a while before the federal government tried to impose internal taxes. One of the stated goals of the revolution was to end taxation without representation, but in practical terms this meant an end to taxation, period.
The federal government used tariffs and land sales to pay off the debt incurred by the revolutionary war. Jefferson’s purchase of Louisiana was still done by a combination of the two plus borrowing. Generally, tariffs were kept low, to encourage volume of trade. Some high tariffs were employed in the 1820s and 1830s as protectionist measures to level the field with Britain, which was in the midst of its “workshop of the world” period. The South hated these tariffs because it raised the price of manufactures and shipping, which impacted on their trade which was almost entirely agricultural.
It was different in the states. Property taxes early became a source of state revenue. The definition of “property” for the purposes of such taxes stretched far beyond the bounds we would recognize or accept today and under Jackson came to include just about anything a person owned. Local reaction to such impositions varied by city and state, but rarely rose to the level of rebellion.
Federal internal taxes did not come into play until the Civil War. The need to raise revenue in huge amounts and quickly necessitated the creation of the first income tax, among others, including a vast array of excise taxes and licensing.  There were special corporate taxes, stamp taxes for legal documents, and inheritance taxes.
Most of these were phased out after the Civil War. Interestingly, the Republicans—a new party formed just before the Civil War which became the second national party, supplanting the archaic Whigs—kept two elements of the new tax system: high tariffs and taxes on liquor and tobacco. High tariffs were protectionist measures. The excises on liquor and tobacco were not greatly challenged because they coincided with the growing Temperance Movement, which was becoming politically significant.
(Also interestingly, calls for reform led to a new income tax in 1894. However, the Supreme Court, in Pollock vs Farmers Loan and Trust Co. ruled it unconstitutional. The income tax became a popular movement and led to the passage of the Sixteenth Amendment, legalizing a federal income tax, which was ratified and passed in 1913.)
With World War I, taxes were passed for the first time on corporate income and taxes on wage earners were rejected. The balance seemed then to be in favor of taxing wealth.
So what changed?
Let’s back up for a bit and look at the aftermath of the Founding Generation.
With the election of Thomas Jefferson as president, Federalism seemed to be in retreat. The swift program inaugurated under Washington, by Hamilton, and continued under Adams of centralizing national affairs in a strong federal government was denounced and Jeffersonianism embraced. Federalists were seen as partners with industrialists and corporations, the party of money, in opposition to the small freeholder. After the debacle of the Whiskey Rebellion, internal taxes on the federal level were seen as tools to corral independent artisans, farmers, and small merchants under a corporate umbrella and establish a tyranny. New lands opening to the west gave the impression that no one need bow to central authority, not even on the local level, if they had the wherewithal to pick up and move.
During this period, two things were going on that fed directly into the American obsession with wealth. The first one is easy enough to understand—the relative ease with which it was possible to make a great deal of money here, because of the complete absence of legal class boundaries. That and the extremely open economic policies of the early republic—laissez-faire capitalism, which suffered no government constraint. Among the positive effects of this, of course, came down-sides, namely the rise of speculation, initially in land deals through various companies with their roots back before the French and Indian Wars.
Speculation was then and continued to be a scourge, and yet it seems to be ineradicable, mainly because it’s tied inextricably with our ideas of market freedom. Nor is it always a bad thing. Speculation can concentrate attention, organize work, and produce a desired effect by calling attention to a project that needs funding and supporters. But it just as often destroys individual aspirations, damages communities, and artificially creates divisions which can sometimes linger for generations, especially when it comes to land.
Arguments and court fights over claims for tracts of land almost defined the migrations into the Ohio Valley and Kentucky, then later into Georgia and Alabama. Settlers moved into lllinois in such numbers that almost 75% of it was claimed by squatters, making it a fait accompli that took decades more to undo. Federalist jurists favored large, single landowners who could then sell small tracts and generate profits that could be used for further expansion along lines that fell into step with Manifest Destiny sentiments. It was in the interests of the federal government to unload land to large purchasers rather than get into the business of becoming a banker for thousands upon thousands of individual buyers, many of whom might find it difficult to pay in specie. Questions of currency from state to state and in the territories complicated any such arrangement and in this the federal government became collusive with speculators for perfectly understandable reasons. The federal government was using the sale of tracts to augment funding sources and for that a reliable payment schedule and solid currency was required.
But the principle of “Improvement” was very much at the fore in everyone’s mind and this is what drove national policy even from the earliest Colonial days. It was the idea of Improvement that determined the fate of the native peoples. Improvement was bound up with Christian principles of moral behavior and fed into the second of the two trends I’m examining in this essay.
The idea of Improvement was the conviction that a moral man should take wilderness and turn it into productive land, for the good of the family, the community, possibly the country, but also because this was the charge given by God to Adam. Wilderness was viewed as a test, as the raw material to build a christian community. To find yourself in the midst of wilderness and do nothing to “improve” it—cut down the trees, put the land to the plow, build houses, roads, etc—was sinful. Hence the native Americans were viewed as “fallen” because they didn’t improve the land.
(A good deal of missionary work was done all through the Colonial and into the post-Colonial period to teach Indians how to do this and there was considerable success. Many tribes, seeing the writing on the wall, quite ably adapted themselves and built towns and turned to intensive agriculture. That these efforts were mostly ignored and later destroyed—the worst example being what happened to the Cherokee in Georgia and Alabama—is the consequence of whites refusing to admit that simple Improvement was ever the point. If the money did not flow into white hands, if the power remained vested in the townships, then the work had to be denied and eradicated. Proof that the Indians could do what they were told was expected of them had to be denied at every turn. Their inability to adapt was maintained, even in fictional form, as evidence that whites had to have the control. To be sure, this did not simply fall on the Indians—many small, isolationist white communities ended up similarly destroyed by syndicates and large-scale speculators when these tiny efforts stood in the way of large-scale profiteering.)
The land companies formed before and after the French and Indian War were vested in moving Indians off the land and selling it to settlers. The federal government became the “owner” of these lands and sold huge parcels to these companies or even to individual speculators. Local battles staged by individual settlers or groups of settlers who could afford to hire attorneys raged against these essentially absentee landlords and various accommodations were made based on varying degrees of improvements. One basic complaint was the right of the person living on the land and working it in opposition to the man who simply “owned” it on paper. This evolved eventually into fights between individuals and cartels, fights we still see playing out today.
But in this way, speculation and the federal government grew into a symbiotic relationship that proved awkward at times but maintained a momentum throughout much of the 19th Century. Andrew Jackson belatedly tried to disrupt this relationship with his war on the United States Bank, with the result that the one good thing the bank was doing—stabilizing currency—was ended and whole regions of the country slipped into depression due to an inability to maintain stable currency on their own. Jackson was an opponent of the centralized role the government was playing in dispossessing small landholders through support of blanket policies favoring big concerns, banks primarily.
It was during this period that sectional conflicts began to grow into serious threats to the Union. Morality aside, this went directly to the matter of property. Slavery had been a subject of intense division from the very beginning, the north largely opposed to it, the south claiming it a necessity. Southern states had threatened to leave the Union should any move be made to outlaw slavery—which could only be done federally if the states were not willing to do. Some states did ban it, but mostly such states had not relied much on it for labor in the first place.
Using the rhetoric of individual liberty, southern slaveholders became more and more strident in their denunciations of northern “interference” in the presumed rights of property owners in the south. The fact that the south was engaged mostly in plantation agriculture complicated matters, because this type of farming—mostly for cotton—was incredibly debilitating to the soil. As the soil was exhausted, plantations had to move west to new fields. The question of how new states would enter the union—slave or free—became an issue of life and death for southern plantation owners and fueled the conflict. As western lands were opened by the federal government to more settlement, small landowners were faced with the prospect of competition from large slave-owning concerns that could potentially outcompete them (in the short run) and buy them out. (Something similar happened later in the range wars over cattle.) Also, most new settlers, who were buying land from speculators in the north, carried with them a religious conviction that slaveholding was wrong. The companies selling them the land were anxious to assure them they would be settling in land that would be free, otherwise land values might plummet.
All this was further exacerbated by the railroads that were getting tremendous quantities of federal land as leeways, which often cut through communities or just as often bypassed them, which lent another layer of life and death to the equation.
In every respect, the federal government drew some fire from just about everyone. Washington favored the railroads over and above settlers’ rights. Washington was becoming aligned with the north against the agrarian south because of industrial influences that challenged southern economies and controlled shipping costs. Washington supported slavery because it refused to do anything legislatively about it. In just about all viewpoints, Washington was in the center of what was wrong.
What was wrong was simply that the industrial revolution and capitalism were gaining irresistible momentum and eventually the nonindustrial south would find itself isolated, bought out, and dominated by Yankee corporations. The only tool they possessed to fight it was through Congress and the only advantage they possessed was the five-eights rules which allowed slaveholders to vote their slaves as representing five-eights of a man each (which included the women, coincidentally, making a profound irony in a country that still denied free women the right to vote). The south fought every national project that came before Congress, seeing such things as blows against them. They lost as often as they won, but the lines were drawn. It was becoming increasing difficult, though, to move legislation through Congress and the south’s position threatened infrastructure projects.
The south saw itself as the proper heirs of the revolution, the Jeffersonian version. But the yeoman freeholder had grown into bloated plantation owners who not only lorded it over their slaves but also made it very difficult for the true individual landowner to make a living. Even so, southern politicians successfully drew a connection between plantations and small farmers to make the case that all of their lifestyles were in danger from northern aggression, making the impoverished southern farmer a patriotic ally to the master of Tara in confronting Washington federalist domination.
In this were the seeds of modern anti-federal sentiment. When the Civil War broke out, these sentiments grew into deep philosophical resentments, which Reconstruction cemented in place. Washington D.C. became evil incarnate, to be fought at every turn, and the fiascoes of Reconstruction congresses fed the divisions with continually filibustered legislatures and the presumed corruption under Ulysses S. Grant.
But if the Civil War was the flower of national unity in action on behalf of the citizens—and to large extent it was—then what happened to eventually turn even the north against the federal government?
Well, it didn’t happen right away. After the Civil War and with the completion of the transcontinental railroad, private enterprise and federal policy marched in lock-step as never before until the end of the Gilded Age and the days of Teddy Roosevelt’s trust busting. It was after WWII that the problems began again and to understand that we have to look at the Second Great Awakening and the “christianization” of wealth-building. Next time.
