Whiskey tax of 1791
The Whiskey Tax of 1791 was a significant early fiscal policy implemented in the United States, aimed at addressing war-related debts from the Revolutionary War. Proposed by Secretary of the Treasury Alexander Hamilton, the tax sought to raise revenue through a levy on distilled spirits, primarily whiskey, with rates set at 7 cents per gallon for domestic products and 10 cents for those distilled from foreign materials. The tax represented a substantial portion of the selling price, leading to widespread discontent, especially among farmers in the less developed areas, such as Western Pennsylvania.
This discontent culminated in the Whiskey Rebellion, where farmers, feeling the financial burden of the tax, resorted to violent protests, including assaults on tax collectors. The situation escalated to the point where President George Washington dispatched a militia to enforce the tax, ultimately leading to the rebellion's suppression. The tax laid the groundwork for future excise taxes on luxury items, although it faced significant opposition, prompting efforts to repeal internal taxes in the years to follow. This episode reflects the complexities of early American governance and the challenges of balancing fiscal responsibility with public sentiment.
Whiskey tax of 1791
Identification Excise tax assessed on the distilling of whiskey
Date Enacted on March 3, 1791
The whiskey tax was the United States’ first internal federal tax, and it was promoted to Congress as a “sin” tax; it thus served as the precedent for similar taxes in future years.
In the wake of the Revolutionary War, the United States needed to pay its war-related debts. Secretary of the Treasury Alexander Hamilton proposed a tax on distilled spirits as a way simultaneously to raise money to repay debts and to impose moral discipline on the American people. Hamilton thought the consumption of whiskey represented a threat to the country’s virtue. The law levied a tax of 7 cents per gallon on spirits produced in the United States (mostly whiskey) and 10 cents per gallon on products distilled from foreign materials (mostly rum). The tax was 28 percent of the 25-cent selling price for a gallon of whiskey.
Distillers in the Northeast were able to shift the tax burden to consumers, but distillers in the underdeveloped areas had to absorb the burden themselves. As a result, farmers in Washington Country, Pennsylvania, led by a county prosecutor named David Bradford, began assaulting tax collectors. Often, these assaults took the form of “tar and feathering.” That is, tax collectors were coated in hot tar and then had feathers dumped on their bodies.
In 1794, President George Washington called out 12,950 militiamen to enforce the tax. Washington, along with Virginia governor Harry Lee, led the militia into Western Pennsylvania. The rebel farmers quickly surrendered. A treaty of sorts was signed by an antitax committee that agreed to submit to U.S. laws in exchange for a pardon on previous offenses.
The whiskey tax opened the door for additional excise taxes on so-called luxury items. A 1794 law extended the excise tax to carriages, snuff, sugar, and salt. However, Thomas Jefferson promised to abolish internal taxes during his presidential campaign in 1800. By 1802, all but the salt tax had been repealed. Nevertheless, the precedent had been established, and throughout the next two hundred years, Congress periodically introduced other types of luxury or sin taxes.