By Gautham Rao, Department of History, New Jersey Institute of Technology
In 1798 President John Adams signed into law legislation that taxed merchant mariners’ wages at the rate of $0.20 per month used the subsequent revenue to construct a national medical network for the use of “sick and disabled” merchant mariners. The Marine Hospital Act of 1798 was the federal government’s first foray into public medicine.
Congress enacted this legislation to stabilize a labor force that was crucial to national economic development. In this era before the advent of railroads, water-borne transportation was the only way to move commodities over long distances. During debate about the Marine Hospital Act in Congress, opponents claimed that the law would decimate the United States maritime labor force in two ways. First, some argued that sailors would seek out alternate labor markets to avoid paying the tax. Second, others worried that the tax would damage the American shipping industry. Specifically, representatives from states with notable shipping interests argued that in order to pay the tax, mariners would pass on to their employers the cost of the hospital tax by demanding higher wages, and undermining mercantile profits. The critics were incorrect on both counts. The American merchant marine grew rapidly throughout the nineteenth-century, anchoring the expansion of national commerce. Moreover, economic historians argue that this era of national commercial expansion served as the catalyst for the transition to capitalism in America.
The significance of this story is twofold. First, the Marine Hospitals serve as a successful historical example of the taxation of wages for the purpose of providing subsidized medical care. This history also provides a crucial reference point in contemporary debates about the role of government in the health insurance marketplace. Contrary to the assertions of many journalists and policy scholars, federal taxes on wages for the specific purpose of providing medical care is neither radical nor unprecedented. Rather, the founding fathers themselves erected such a mechanism to uphold a system of Marine Hospital that remained intact until the early 1980s.
