With the adoption of the Constitution, the federal government assumed the Revolutionary War debts of the original 13 colonies. A problem arose as to how to pay off these debts, and Treasury Secretary Alexander Hamilton proposed a solution: an excise tax on whiskey produced in the United States. Congress passed the tax law in 1791. The tax angered western farmers who saw it as an abuse of federal authority.
For large-scale commercial distilleries on the east coast, the tax on distilled spirits wasn't too big of a deal. They had the ability to pass on the extra production cost to consumers, and the variable tax rate meant high-volume producers paid less tax per gallon than the smaller home distillers on the frontier. Farmers west of the Appalachian and Allegheny Mountains couldn't easily transport excess grain to market, so they used it to make whiskey instead. In the cash-strapped west, they also used whiskey to barter for goods and services. The tax, which could be as much as 9 cents a gallon and had to be paid in cash up front, was a hardship for these western farmers. Many simply refused to pay, but others eventually took a more violent stand against what they viewed as an imposition by eastern elites.
Violence in Pennsylvania
Anti-tax violence erupted along the western frontier of every state south of New York, but the worst of it happened in four counties in southwestern Pennsylvania. Tax collectors had been tortured and beaten by rebels, but shots were fired in July of 1794 when a U.S. Marshal came to serve a writ for failure to pay on William Miller. No one was injured in that initial altercation, but the next day the rebels went to the tax collector's house looking for the Marshal. A shoot-out began in which John Neville, the tax collector, shot and killed one of the rebels. The angry rebels fled to regroup. When they returned to find Neville wasn't at home, they torched his house and burned it to the ground. The initial group of rebels, along with 500 militia men, went off in search of the federal agents.
A Test of Federal Power
For President George Washington, the situation had gone far enough. He had to suppress this rebellion to confirm federal supremacy over the states. This was the first test of the Constitution and the power it granted to the federal government. Washington first attempted to negotiate, sending representatives to negotiate with the rebel leaders. When negotiations failed and the rebels still refused to pay the tax, Washington federalized 13,000 militia troops and they marched on the Pennsylvania rebellion. This army, larger than any that fought in one place during the entire Revolutionary War, was intended to intimidate the rebels into submission. However, by the time the troops arrived the rebellion had already collapsed. The federalized militia was sent in search of the men who had been involved. By October of 1794, more than 100 had been arrested. Two men were convicted of treason, but President Washington later pardoned them.
The Birth of the Two-Party System
Washington had proven the federal government could control citizen uprisings and maintain order in the fledgling nation, but it came at a cost. Thomas Jefferson believed using federal military force against the country's own citizens set a dangerous precedent. For Jefferson, sending in troops was an abuse of power and a threat to republican ideals. A line had been drawn. Federalists, such as Alexander Hamilton, favored urban, industrial interests and increased federal authority. Anti-federalists, including Jefferson and James Madison, championed rural, agricultural interests and a less powerful federal government. When Jefferson became president he appointed Albert Gallatin, one of the more moderate anti-tax rebels, as his treasury secretary. In 1802, Jefferson repealed the excise tax on whiskey.