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Constitutions, Corporations, and Corruption: American States and Constitutional Change, 1842 to 1852

Published online by Cambridge University Press:  15 March 2005

John Joseph Wallis
Affiliation:
Department of Economics, University of Maryland, College Park, MD 20742, and Research Associate, National Bureau of Economic Research, E-mail: wallis@econ.umd.edu.

Abstract

Between 1842 and 1852, eleven states adopted new constitutions, simultaneously creating procedures for issuing government debt and for chartering corporations through general incorporation acts. Why simultaneously? Voters wanted geographically specific infrastructure investments but opposed geographically widespread taxation. States resolved the dilemma by developing several innovative public finance schemes. One, “taxless finance,” used borrowed funds and special corporate privileges without raising current taxes. Another scheme, “benefit taxation,” coordinated the incidence of taxes with the geographic benefits of investments through the property tax. After the fiscal crisis of the early 1840s, states changed their constitutions to eliminate taxless finance in the future.

Type
ARTICLES
Copyright
© 2005 The Economic History Association

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