Whiskey Rebellion - Whiskey Tax

Whiskey Tax

A new U.S. federal government began operating in 1789, following the ratification of the United States Constitution. The previous government under the Articles of Confederation had been unable to levy taxes; it had borrowed money to meet expenses, accumulating $54 million in debt. The states had amassed an additional $25 million in debt. Alexander Hamilton, the first Secretary of the Treasury, sought to use this debt to create a financial system that would promote American prosperity and national unity. In his Report on Public Credit, he urged Congress to consolidate the state and national debts into a single debt that would be funded by the federal government. Congress approved these measures in June and July 1790.

A source of government revenue was needed to pay the bond holders to whom the debt was owed. By December 1790, Hamilton believed import duties, which were the government's primary source of revenue, had been raised as high as was feasible. He therefore promoted passage of an excise tax on domestically distilled spirits. This was to be the first tax levied by the national government on a domestic product. Although taxes were politically unpopular, Hamilton believed the whiskey excise was a luxury tax that would be the least objectionable tax the government could levy. In this, he had the support of some social reformers, who hoped a "sin tax" would raise public awareness about the harmful effects of alcohol. The whiskey excise act, sometimes known as the "Whiskey Act", became law in March 1791. George Washington defined the revenue districts, appointed the revenue supervisors and inspectors, and set their pay in November 1791.