In doing so, their grain became taxable distilled spirits under the 1791 excise law, and western farmers opposed what was, in effect, a tax on their main crop. Given this difficulty, many frontier farmers distilled their surplus grain into more easily transportable whiskey. While eastern farmers could readily transport their grain to market, westerners faced the hard task of moving their crops great distances to the east over the mountains along poor dirt roads. However, most smaller producers west of the Appalachian and Allegheny Mountains, then the Nation's frontier, opposed the "whiskey tax."
Large, commercial distillers in the eastern United States generally accepted the new excise tax since they could pass its cost onto their cash-paying customers. All payments had to be made in cash to the Federal revenue officer appointed for the distiller's county. The 1791 excise law set a varying six to 18-cent per gallon tax rate, with smaller distillers often paying more than twice per gallon what larger producers paid. Unlike tariffs paid on goods imported into the United States, the excise tax on distilled spirits was a direct tax on Americans who produced whiskey and other alcohol spirits. Congress took this action at the urging of the first Secretary of the Treasury, Alexander Hamilton.Īlexander Hamilton, first Secretary of the Treasury (1789-1795).
In early 1791, to help pay off the resulting national debt, Congress used its new constitutional authority to "lay and collect Taxes, Duties, Imposts and Excises" and passed the first nationwide internal revenue tax-an excise tax on distilled spirits. By Michael Hoover, Regulations & Rulings DivisionĪs part of the compromises that led to the adoption of the United States Constitution in 1789, the new Federal government agreed to assume the Revolutionary War debts of the 13 States.
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