by Carol Berkin
Hamilton wove these themes and arguments into his call for an excise tax on alcohol. “The consumption of ardent spirits,” he wrote, “no doubt very much on account of their cheapness, is carried to an extreme, which is truly to be regretted, as well in regard to the health and the morals, as to the economy of the community. Should the increase of duties tend to a decrease of the consumption of those articles, the effect would be, in every respect desirable.” Despite a concern about the terrible effects of these “pernicious luxuries,” Hamilton did not lose sight of the practical benefits of a tax on alcohol. Raising the duties on foreign alcohol, he argued, would benefit American agriculture because domestically produced cider and malt liquors would slowly replace imported distilled spirits. Of course, Hamilton did not actually expect the decrease in consumption to be so great that no revenue would be raised. “Experience has shewn,” he conceded in his report, “that luxuries of every kind, lay the strongest hold on the attachments of mankind, which, especially when confirmed by habit, are not easily alienated from them.”10
Hamilton anticipated many of the concerns his call for a tax on alcohol would raise—and managed to turn them to his advantage. He conceded, for example, that the collection of the new, higher duties on foreign alcohol would be difficult, and he predicted “extensive frauds,” even if customs collectors were vigilant and penalties were high. His solution to this problem was to establish a second tier of inspection once the goods were delivered to the merchants and dealers. Honest merchants would be eager to report any irregularities reflected in the delivery of the products, and a second inspection would make fraud far riskier for dishonest importers.
This was a bureaucratic solution, but, as usual, Hamilton’s agenda went beyond mere efficiency. In fact, there was a third motive for introducing all these new taxes, a motive more political than fiscal or moral. Throughout his public career, Alexander Hamilton was ready to seize any opportunity to expand federal power at the expense of state power, for he believed that only a strong, active national government could unlock the productive capacities of America and make it equal in prosperity and influence to the great nations of Europe. By establishing a federal excise tax on liquor, he would effectively cut off a potential revenue source for the states. And, by introducing a system of internal customs inspection, he would expand the federal government’s reach and authority. Like his proposed assumption of the states’ Revolutionary War debts, these policies would bolster the authority and power of the nation and diminish the power of the states.
Having made his case for the new taxes, Hamilton proceeded to lay out the duties he recommended Congress impose. For imported alcohol, the duties should range from thirty-five cents a gallon on higher-quality Madeira to twenty-five cents on sherry and twenty cents on other wines. The strength of the imported ardent or distilled spirit determined the tax on each item. Hamilton introduced a sliding scale of duties on other imported stimulants as well; thus, the elegant hyson tea was to be taxed over three times more than bohea, and coffee, less popular than any variety of tea, would bear only a five-cent tax.
Hamilton then turned to domestically produced spirits. He carefully distinguished between spirits distilled from “Molasses, Sugar, or other foreign materials” (rum) and those distilled from materials grown or produced within the United States (grain whiskeys), yet this proved a distinction without a difference, as the fees he recommended for the two were nearly the same. He also distinguished whiskey produced on farms for local or home consumption from whiskey produced for the market, yet he made it clear that both should be taxed. To ensure that home brew did not escape the excise, he placed an additional tax on stills not located in a city, town, or village.
Hamilton anticipated the likely objections to this part of his plan. He knew that memories of British customs abuses were still raw in the minds of many Americans, and he took pains to assure Congress that misconduct by revenue collectors would not be tolerated. He pledged that criminal charges would be brought against any customs man guilty of abuse and stipulated that even when seizures of goods were made with probable cause, a distiller or a seller found innocent of an infraction would be compensated.
The secretary of the treasury’s report—long, detailed, and with multiple moving parts—left representatives the task of figuring out how all the elements of his proposed program fit together. Doubts about the need for an excise tax soon surfaced. Without the assumption of state debts, some argued, an excise tax would not be necessary. Others expressed doubts that a tax on alcohol would bring in enough revenue to make a dent in the government’s fiscal obligations. Yet, by May 1790, many representatives had reluctantly conceded the inevitability of a federal excise tax. On May 25, one of Hamilton’s strongest allies, the gifted orator Fisher Ames of Massachusetts, summed up their dilemma: “What revenues are left you if the excise is rejected?” No one had an answer to his question.11
The second session of Congress ended in August, leaving Ames’s question hanging in the air. Before adjourning, the House asked the secretary of the treasury to submit another report on public credit. On December 13, 1790, Hamilton delivered a second report on the subject of an excise tax. This time, he was less focused on a justification for the excise and more concerned with defending his proposed method for its collection. There were, he said, only two possible approaches: the first, to make the security of the revenue depend chiefly on the vigilance of the public officers; the second, to make it depend upon the integrity of the individuals who would be interested in avoiding payment of the duties imposed. Hamilton put his confidence in the former. He trusted Congress would do the same.12
Hamilton urged Congress to pass legislation based on his report as soon as possible. Congress, which was proving itself disinclined—or unable—to rush passage of any legislation, moved remarkably quickly. The debates, which began on January 5, 1791, took less than a month, although they were as lively and colorful as others that dragged on for much longer. Southerners were the most vocal opponents of the bill, for they were rarely producers of liquor or wine. As consumers of these “pernicious” but widely desired luxuries, southern gentlemen would pay a high price for their continued enjoyment.13
In the end, the most compelling argument against the excise tax was that it would be deeply unpopular with most Americans. Timothy Bloodworth, a representative from North Carolina, worried that public disapproval of the tax could lead to violence. How would the government handle such an uprising? “Suppose,” he asked, “the people should not consent to the law, is one part of the people to be marched against another?” His concern was genuine, and, as it turned out, it was prescient.14
Despite the impassioned pleas of opponents like James Jackson, the bill passed the House by a vote of 35 to 21 on January 27, 1791. The nay votes were primarily sectional, coming from Virginia, the Carolinas, Georgia, and Maryland. But hints of a second division, this one on an east-west axis, could be seen in the three negative votes from Pennsylvania’s representatives. After some amendments by the Senate, the statute was recorded on March 3, 1791.15
An Act Repealing, After the Last Day of June Next, the Duties Heretofore Laid upon Distilled Spirits Imported from Abroad, and Laying Others in their Stead, and Also upon Spirits Distilled within the United States and for Appropriating the Same was as lengthy as its title suggests, with sixty-two separate sections, detailing, among other things, the items to be taxed, both foreign and domestic, the scale on which the fees would be set, the mechanisms for collection, and the penalties for failure of compliance. Despite its formal title, the act quickly became known simply as “the whiskey tax.” Just as quickly, it became apparent that there were men willing and eager to defy the federal government and its new excise law.16
Hamilton had been prepared to protect against evasion of the duties on foreign spirits by smugglers. He had been careful to add a second ring of inspectors to ensure that merchants could not defraud the government. But the challenge to the federal government d
id not come from the shippers of foreign wine or the sellers of New England rum. It did not come from tavern keepers or middlemen who sold the Madeira and Caribbean rum that entered through the port cities along the Atlantic. It did not come from the urban working men and women who saw the price of their domestic rum or whiskey go up so much that a gallon consumed a full day’s wages. Instead, it came from the West, from the Pennsylvanians across the Allegheny Mountains and from settlers in the region of Virginia soon to become Kentucky. These farmers mounted the first major domestic challenge to the authority and sovereignty of the new federal government.
3
“The law is deservedly obnoxious to the feelings and interests of the people.”
Minutes of the meeting at Pittsburgh, Pennsylvania, September 7, 1791
HAD HAMILTON BEEN too sanguine about compliance by American whiskey producers? Perhaps he might have anticipated a problem if he had known more about the circumstances of life on the frontier. He had assumed that the farmers of western Pennsylvania, like all other producers of spirits, could pass along the cost of the excise taxes to the consumer. But in the Pennsylvania counties of Westmoreland, Fayette, Allegheny, and Washington and in the Virginian interior of Kentucky, that was not an option. These frontier farmers faced problems and complications that set them apart from eastern producers.
Grain was the primary crop of the region, but getting it to market in its natural state was expensive and risky—virtually impossible—because the nearest major overland market, Philadelphia, was almost three hundred miles away. No water route was available because the Spanish refused to open the Mississippi River to Americans. This was a source of intense frustration to backcountry farmers, who had pressed both the older Confederation government and the new federal government to negotiate a treaty with Spain that would open navigation of the river. Yet, as of 1791, no real progress had been made. With little firsthand knowledge of diplomacy, westerners had seen the failure as nothing more than a neglect of their needs. Bowing to the reality that their grain could not easily reach a market, these Pennsylvanians had turned to the production of whiskey from their harvests. These distilled spirits were not just marketable. Unlike grains, they did not spoil but improved with age, and they could be carried overland to Pittsburgh and on to Philadelphia in jugs on the backs of mules. Despite the costs of transportation and competition from foreign liquors, farmers who chose to produce whiskey for the market could make a profit. Many farmers, however, chose not to pursue distant markets but settled instead for using their whiskey locally to pay for their dry goods or farming supplies. By the time Hamilton proposed his tax on both the distilleries and the whiskey they produced, whiskey was well established as the major medium of exchange in this region that rarely saw cash. It was used to celebrate weddings and bring solace to mourners, but it was also used to pay off debts, the minister’s salary, and the farmer’s rent. The farmers who used their whiskey as a substitute for currency would not be able to pass the cost of running their distilleries along to consumers.
Whether they were commercial or noncommercial whiskey producers, western Pennsylvania farmers resented the new tax and the circumstances that had prompted it. What, they asked, would they gain from compliance? Why should they support a government that did not fight for navigation rights to the Mississippi? Why support a government that did not rid their landscape of hostile Indians? Why accept a tax imposed so that the government’s creditors could profit from the payment of the public debt? After all, few if any of those creditors were their neighbors.
Even those who might accept the need for the tax were likely to resent its many requirements. It was not simply that, in their mind, the duties were too high. It was not just that those duties had to be paid before the liquor left the distillery, an upfront expense that weighed heavily on cash-poor westerners. Nor was it that the law required every distiller, even those who were illiterate, to keep a daily record of production and to make his account available to inspectors. It was not even that the law gave unfair advantage to large-scale urban distillers who were to be taxed according to proof as well as quantity and who were capable of producing high-proof whiskey, which was taxed at a lower rate. It was the insult added to all these injuries: the law forbade the payment of the tax in the only ready resource they had, whiskey.
These frontier farmers considered the penalties for infractions draconian. If a distiller was caught with a cask of spirits that lacked an inspection certificate, he would lose more than the liquor. The fine or penalty imposed on him might end up costing him his horses, cattle, carts, and tackle as well. And if he failed to pay the annual tax of sixty cents per gallon of still capacity, he could be forced to sell all his personal goods to pay the fines. An arrest for any of the many infractions meant a trial, and by 1792 that meant attending a court in Philadelphia rather than a local one. The expense of a trip to Pennsylvania’s capital city almost equaled the value of the average westerner’s farm.17
The farmers watched with resentment as the jobs of inspectors of the stills and collectors of the whiskey tax were filled through social connections and outright nepotism. When an old friend of the president and the secretary of the treasury, Edward Carrington, was made supervisor of revenue for the state of Virginia, he wasted little time appointing Colonel Thomas Marshall, a family connection, as the chief revenue officer for the region of Virginia that would soon become Kentucky. In Pennsylvania, one of the wealthiest distillers, General John Neville, was appointed as inspector of federal revenue for the Western District. Neville had been popular in the Allegheny County community despite his background as a Federalist, an Episcopalian, and a transplanted Virginian, but affection for him cooled as he began to appoint members of his family to excise-related posts. Neville went from being a respected neighbor to a highly visible target for anger against the whiskey tax.18
Western Pennsylvanians wasted little time mobilizing resistance to the excise tax. Their fellow distillers in Kentucky, however, took a completely different tack: they chose to simply ignore the tax. Here in what was still western Virginia until June 1792, local distillers simply refused to keep the required records and did not bother to register their stills. Their passive resistance was helped by the fact that no one was willing to serve, as John Neville had done, as a revenue collector. It was helped even more by the refusal of local courts to acknowledge the existence of the federal excise law. Despite the almost universal evasion of the excise, the local federal prosecutor did not bring a single action to the courts. It was just as well, for grand juries showed no interest in charging anyone with breaking this law. When the prosecutor resigned in 1792, no one came forward to replace him. The excise was so universally rejected that not a single lawyer could be found to take up the government’s cause.19
Both Hamilton and his assistant secretary of the treasury Tench Coxe were aware of—and embarrassed by—the situation in Kentucky, but neither was certain what to do about it. They made a few efforts to see the offenders punished in the courts. Coxe, for example, tried authorizing Colonel Marshall to offer generous fees to any private attorneys willing to prosecute the lawbreakers. But no one volunteered. The Treasury then tried a carrot-and-stick approach, offering to forgive all arrears for the past period if Kentucky distillers promised to pay the taxes in the future. No one accepted the offer. Hamilton finally made a far more radical concession, proposing that the distillers be allowed to pay their taxes by providing whiskey to the federal government’s western army. That, too, failed. All Hamilton could do was hope news of the Kentucky resistance did not become widely known.20
The Washington administration was clearly frustrated by the situation in Kentucky, but it viewed the organized protests and the eruption of violence in Pennsylvania far more seriously. Washington, Hamilton, Adams, and their fellow Federalists understood that a nation born in revolution carried a collective memory that violence was sometimes justified. The 1786 Shays’ Rebellion, led by a veteran of the war for independence
, had frightened those who hoped that the creation of a representative government would make a resort to arms an unacceptable means to redress grievances. Even the Revolution’s most celebrated radical, Samuel Adams, had called for the execution of the Shays’ Rebellion leadership, insisting that citizens of a republic had no justification to rebel. The fear that the revolution was not, and might never be, over meant that few political leaders shared Thomas Jefferson’s acceptance of occasional rebellion.21
The worries of the president and his colleagues were founded not only on memory but on the whiskey rebels’ use of techniques a rebel like Samuel Adams would immediately recognize. On July 27, 1791, they organized a planning session at Redstone in Fayette County. Soon committees had formed in Washington, Fayette, Westmoreland, and Allegheny Counties. On August 23, the Washington County committee passed a series of resolutions strongly censuring the tax. More ominously, its resolutions included a warning: any person who accepted an excise office would be considered inimical to his neighbors. In the interests of alliance building, the Washington County committee deputized three members to meet with delegates from the other three counties on the first Tuesday of September. And, finally, it arranged for its resolutions to be printed in the Pittsburgh Gazette. Suddenly Timothy Bloodworth’s scenario seemed more reality than rhetoric.22
