Grenville faces the problem of not only paying for these troops but servicing the national debt.

The debt had grown from £75,000,000 before the Seven Years' War to £122,600,000 in January 1763, and almost £130,000,000 by the beginning of 1764.

George Grenville does not expect the colonies to contribute to the interest or the retirement of the debt, but he does expect the Americans to pay a portion of the expenses for colonial defense.

Estimating the expenses of maintaining an army in the Continental colonies and the West Indies to be approximately £200,000 annually, Grenville has devised a revenue-raising program that will raise an estimated £79,000 per year.

The first tax in his program to raise a revenue in America, a modification of the Molasses Act of 1733, is the Sugar Act, also known as the American Revenue Act or the American Duties Act, passed by the Parliament of Great Britain on April 5, 1764.

The preamble to the act states: "it is expedient that new provisions and regulations should be established for improving the revenue of this Kingdom ... and ... it is just and necessary that a revenue should be raised ... for defraying the expenses of defending, protecting, and securing the same."

The earlier Molasses Act of 1733, which had imposed a tax of six pence per gallon (equal to £3.74 today) of molasses, had never been effectively collected due to colonial evasion.

The Molasses Act of 1733 had been passed by Parliament largely at the insistence of large plantation owners in the British West Indies.

Molasses from French, Dutch, and Spanish West Indian possessions is inexpensive.

Sugar (from the British West Indies) is priced much higher than its competitors and they also have no need for the large quantities of lumber, fish, and other items offered by the colonies in exchange.

In the first part of the eighteenth Century, the British West Indies had been Great Britain's most important trading partner, so Parliament was attentive to their requests.

However, rather than acceding to the demands to prohibit the colonies from trading with the non-British islands, Parliament had passed the prohibitively high tax on the colonies on molasses imported from those islands.

If actually collected, the tax would have effectively closed that source to New England and destroyed much of the rum industry.

The purpose of the Molasses Act was not actually to raise revenue, but instead to make foreign molasses so expensive that it effectively gave a monopoly to molasses imported from the British West Indies.

It did not work; colonial merchants avoided the tax by smuggling or, more often, bribing customs officials.

The Sugar Act reduces the tax to 3 pence per gallon (equal to £1.60 today) in the hope that the lower rate will increase compliance and thus increase the amount of tax collected

The Act also taxes additional imports and includes measures to make the customs service more effective.

These incidents increase the colonists' concerns about the intent of the British Parliament and help the growing movement that will become the American Revolution.