In this paper, Hamilton continues his defense of the union provided for by the Constitution by arguing that a single national government will be better able to collect taxes than individual, disunited states. He bases his argument on the assertions that a steady source of revenue is essential to the strength of any nation and that taxes on commerce and consumption are more desirable then direct taxes on individuals based on what they produce. He contends that if America were divided into multiple states or confederacies, it would be very easy for smugglers to bypass the commercial taxes put in place by the various states.

He uses the example of France’s difficulty in patrolling its large land border with neighboring European countries and contends that smugglers could use the many land borders between the states to avoid tax collectors. For example, if New York had higher taxes than New Jersey, an English merchant could bring his goods to a New Jersey port, smuggle them across the border to New York and thus avoid the higher New York taxes. If, however, America were united as a single country, it would only need to patrol its Atlantic sea border and would thus be able to better secure taxes from foreign trade. Hamilton warns that if America is disunited then commercial taxes will soon prove insufficient, forcing the states to levy oppressive taxes on land owners.