Apart from the Constitutional question, the crux of the issue, so far in my thinking, resides with the market.  Do business-hungry incentives distort the market?  (the market, I reckon, being the set of considerations a business ponders when locating.)

I suppose everything is allowed within the scope of considerations that a participant in a market may encounter.  That may be; so a distortion, in this respect, is one that is overly-prominent such that the market participant is unable to make a reasoned decision.  Beyond the market as existing between the buyer (a business looking to site) and a seller (a state looking to give tax breaks), the effects of such a distortion may play out among the public–indeed, that’s the point, I reckon.  A state’s tax break might get some folks jobs in a region, but might take away other folks’ state funded quality roads, education, or utilities.

Enough of that, though, as I wanted to leave this an open question.

F12 appeared just as the skirmishes of Shays’ Rebellion were ending. Shays led the rebellion against the Massachusetts’s attempt at paying off war debts with a direct tax that most notably hurt subsistence farmers. Lesson learned, Ham notes, “from the experience we have had on the point itself, … it is impracticable to raise any very considerable sums by direct taxation.” And figuring he has the proper alternative, “far the greatest part of the national revenue is derived from taxes of the indirect kind, from imposts, and from excises.”

As Lily pointed out, Ham offers an item on which the government could levy a duty:

The single article of ardent spirits, under federal regulation, might be made to furnish a considerable revenue. Upon a ratio to the importation into this State, the whole quantity imported into the United States may be estimated at four millions of gallons; which, at a shilling per gallon, would produce two hundred thousand pounds. That article would well bear this rate of duty; and if it should tend to diminish the consumption of it, such an effect would be equally favorable to the agriculture, to the economy, to the morals, and to the health of the society. There is, perhaps, nothing so much a subject of national extravagance as these spirits.

A couple years after Publius smiled on the ratified Constitution, Treasure Secretary Hamilton (shed momentarily from Latin pseudonyms) persuaded Congress to take up the war debt. And to help pay it, Congress approved a tax on spirits, as more-or-less suggested in F12. As in the tax that spurred the Shays Rebellion, though, this one hit the small boys; while the big boy producers enjoyed a flat rate, small time producers paid by the gallon, and, frequently using the spirits as a bartering item, had little cash to actually pay anyway. So, eight years after Shays, the Whiskey Rebellion popped up to provide America some notable trivia answers: the first sitting president (an old Washington) leading first American use of military force against its own citizens, and accompanied by Hamilton and Robert E. Lee’s daddy; all of this forcing the Whiskey rebels from western Pennsylvania into Kentucky and Tennessee (outside the scope of the spirits tax) where the easy corn growth spurred corn whiskey, which in turn developed into America’s brown entry into the world of distinctive whiskeys: bourbon.

So, Hamilton must have wondered after the lessons of Shays and Whiskey: what kind of taxes can we slip passed these wee Catos?