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Charles Townshend, known as "Champagne Charlie" to his friends, was the chancellor of the exchequer in the period following the repeal of the Stamp Act. Hoping to enhance his political career, he tackled the pressing problem of imperial finance. Riots in England convinced him that tax relief was needed at home, but he hoped to reduce the national debt by imposing taxes in the colonies. This made sense to Townshend and others because the recent French and Indian War had been fought on behalf of the colonies and had contributed mightily to the indebtedness.

Townshend was perceptive enough to realize that during the Stamp Act crisis, the Americans had objected to what they had described as internal taxation. That distinction puzzled the chancellor, but nonetheless he set about creating a clearly external tax, reasoning that the colonists could not possibly object.

The intent was to raise revenue for the payment of the salaries of royal officials in the colonies, thus bypassing a role traditionally played by assembles.

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