The challenge of raising revenue from the colonies fell first to George Grenville. Widely regarded as “one of the ablest men in Great Britain,” Grenville understood the need for far-reaching imperial reform. He first passed the Currency Act of 1764, which banned the American colonies from using paper money as legal tender. Colonial shopkeepers, planters, and farmers had used local currency, which was worth less than British pounds sterling, to pay their debts to British merchants. The Currency Act ensured that merchants would no longer be paid in money printed in the colonies, boosting their profits and British wealth.

The Sugar Act Grenville also won parliamentary approval of the Sugar Act of 1764 to replace the widely ignored Molasses Act of 1733 (see Chapter 3). The earlier act had set a tax rate of 6 pence per gallon on French molasses — a rate so high that it made the trade unprofitable. Rather than pay it, colonial merchants bribed customs officials at the going rate of 1.5 pence per gallon. Grenville settled on a duty of 3 pence per gallon, which merchants could pay and still turn a profit, and then tightened customs enforcement so that it could actually be collected.

This carefully crafted policy garnered little support in America. New England merchants, among them John Hancock of Boston, had made their fortunes smuggling French molasses. In 1754, Boston merchants paid customs duties on a mere 400 hogsheads of molasses, yet they imported 40,000 hogsheads for use by 63 Massachusetts rum distilleries. Publicly, the merchants claimed that the Sugar Act would ruin the distilling industry; privately, they vowed to evade the duty by smuggling or by bribing officials.

The End of Salutary Neglect More important, colonists raised constitutional objections to the Sugar Act. In Massachusetts, the leader of the assembly argued that the new legislation was “contrary to a fundamental Principall of our Constitution: That all Taxes ought to originate with the people.” In Rhode Island, Governor Stephen Hopkins warned: “They who are taxed at pleasure by others cannot possibly have any property, and they who have no property, can have no freedom.” The Sugar Act raised other constitutional issues as well. Merchants prosecuted under the act would be tried in vice-admiralty courts, tribunals governing the high seas and run by British-appointed judges. Previously, merchants accused of Navigation Acts violations were tried by local common-law courts, where friendly juries often acquitted them. The Sugar Act closed this legal loophole by extending the jurisdiction of the vice-admiralty courts to all customs offenses.

The Sugar Act revived old American fears. The influential Virginia planter Richard Bland emphasized that the American colonists “were not sent out to be the Slaves but to be the Equals of those that remained behind.” John Adams, the young Massachusetts lawyer defending John Hancock on a charge of smuggling, argued that the vice-admiralty courts diminished this equality by “degrad[ing] every American … below the rank of an Englishman.”

In fact, accused smugglers in Britain were also tried in vice-admiralty courts, so there was no discrimination against Americans. The real issue was the growing power of the British state. Americans had lived for decades under an administrative policy of salutary neglect. Now they saw that the new imperial regime would deprive them “of some of their most essential Rights as British subjects,” as a committee of the Massachusetts assembly put it. In response, Royal Governor Francis Bernard replied: “The rule that a British subject shall not be bound by laws or liable to taxes, but what he has consented to by his representatives must be confined to the inhabitants of Great Britain only.” To Bernard, Grenville, and other imperial reformers, Americans were second-class subjects of the king, with rights limited by the Navigation Acts, parliamentary laws, and British interests.