Taxation through the Ages(Reprinted from SOBRANS, December 2003, pages 35)
Ive told this story before, but Ill tell it again.
In the summer of 1965, when Id just finished my freshman year in college, I was reading a little book called The Law a long pamphlet, really by the nineteenth-century French legislator Frédéric Bastiat, when I was riveted by a single sentence: Look at the law, and see if it does for one man at the expense of another what it would be a crime for the one to do to the other himself.
In Bastiats view, government, beyond the strictest limits of justice, became organized plunder, a device by which everyone seeks to enrich himself at the expense of everyone else. In other words, government itself tends to become the very evil it is supposed to prevent: crime. But it confuses people because it enacts criminal acts under the forms of law.
The simple insight rocked me. It upset my faith in my country and its basic justice. If Bastiat was right, the United States was already profoundly corrupt. It took me years to come to terms with this idea. Today it seems to me almost self-evident. I marvel that anyone with common sense thinks otherwise.
This means, for openers, that taxation is a gigantic system of fraud, robbery, and extortion. Most taxpayers receive nothing to justify the amounts they are forced to pay. Yet its the taxpayer, not the ruler, who is treated as a criminal suspect and required to confess his earnings and holdings. The ruler isnt penalized for anything he does to the taxpayer.
This fact makes me wildly indignant, and Im frustrated and baffled that so few Americans share my feelings. We are being robbed and cheated on an astonishing scale.
Once, during a radio interview (Ive been known to repeat this story too), I was asked, Why dont you ever criticize big business the way you always criticize big government? I answered, Im not forced to do business with General Motors. If I do so voluntarily, I get a car for my money. But I am forced to do business with the government. Every year Im forced to pay it roughly the price of a new car. And Ive never seen that car. Someone else gets it.
Bastiat, a devout Catholic, reasoned about the state from a natural law philosophy. He concluded that the state violates the most basic principles of natural justice. Once you start thinking that way, you can hardly avoid thinking of politics as a largely criminal activity.
At some level, most people know this intuitively. I think this accounts for the huge popular appeal of The Godfather. We are all taught that the government is there to protect us from criminals. The Godfather audaciously reverses our civics lessons: it shows us a benign master criminal who will protect us from the corrupt government. This is another sentimental myth, of course unlike real mafiosi, Don Corleone never extorts taxes from shopkeepers in the form of protection money but it has enough truth to seize our imaginations.
But the states myth still prevails, and we submit. Most people see nothing questionable about state taxation, and politicians complacently assume their right to take our wealth.
Some Oklahoma politicians, for example, are currently in a tax-boosting mood. They want to raise taxes of all sorts income taxes, sales taxes, property taxes, excise taxes, you name it.
According to the National Taxpayers Union, the average Oklahoman already pays more in taxes Federal, state, and local than for food, shelter, clothing, and transportation combined. This amounts to 26.5 per cent of per capita income.
How much is enough? What is the limit? At what point, short of taking 100 per cent of our earnings, do our rulers feel they are taking too much from us?
The obvious answer is that they recognize no limit. The subject never comes up. They view the taxpayer as an inexhaustible resource.
And why shouldnt they? The sad fact is that the American taxpayer is a remarkably passive creature. He merely grumbles at conditions far more oppressive than the tyranny that drove his ancestors to rebel against British rule in 1776.
One of the chief complaints of the American colonist was that he was taxed without his consent. Yet by todays standards, his taxes were amazingly low. Precise figures are hard to come by, but in 1764, for example, the average American was taxed by the Crown at the rate of sixpence per year. That is not a misprint. Six pennies per year. One penny every two months. Even adjusting for inflation, that is a pretty light tax burden. Todays children pay more than that in sales taxes.
And the British were cautious about raising taxes. Even a slight tax increase, as on a commodity like tea, could bring the colonies to a boil.
The Americans knew that a principle was at stake. Unlimited taxation could mean slavery. That is why they tried, at every turn, to nip it in the bud.
Under slogans like No taxation without representation, Americans fought for independence and established their own governments. They thought self-government was their bulwark against tyranny and overtaxation.
But the problem turned out to be more complex. Even elected officials found it easy to abuse the taxing power, and self-government could be as predatory as foreign rule. Senator John C. Calhoun remarked that the most surprising thing experience in government had taught him was that it was easier to raise taxes than to cut them.
The Lincoln administration imposed the first Federal income tax to meet the costs of the Civil War. But again, by our standards the rates were amazingly low: the basic rate was 3 per cent, with a top rate of 5 per cent. Even so, after the war the U.S. Supreme Court soon ruled that a Federal levy on incomes was unconstitutional.
In 1913 the Federal Government surmounted this obstacle by winning a constitutional amendment authorizing taxes on incomes. No upper limit was set, but most Americans were unaffected. Incomes were narrowly defined; an unmarried taxpayer had to make about $50,000 (in todays money) to pay the tax at all; and the top rate, a mere 7 per cent, reached only the very rich. It wasnt until after World War II that most Americans paid income taxes, but then the rates rose to their current punishing levels. And in recent decades most states have imposed income taxes too. Other taxes have also increased at dizzying rates.
At nearly every step, the government has had its way. Taxpayers have mounted only sporadic resistance, in what are often called tax revolts. The phrase is significant. If our rulers are really our servants, as self-government implies, why are the wishes of the ruled considered revolts? Can we revolt against our own servants? Or have they really become our masters?
The question answers itself. We might also ask, At what point does taxation become confiscation, theft, and even involuntary servitude? Our rulers we may as well say our masters never address this point. The Ruler of the universe asks only 10 per cent of our wealth. Our earthly rulers wont settle for such a modest share. They consider us greedy for wanting to keep more of our own money; they consider themselves compassionate for wanting to take more of it 20 per cent, 40 per cent, why not 80 per cent?
If the politicians had any respect for our rights, our property, our liberty, even our dignity, they would impose taxes only reluctantly, and they would acknowledge some just limit. They would act as if the money they take and spend is our money, to be used for the common good of all, and not for buying the votes of special interests and government dependents. In short, they would recognize that taxation is a moral issue, not a mere political convenience to be exercised arbitrarily and irresponsibly.
I know of only one history of taxation, Charles Adamss 1993 book For Good and Evil: The Impact of Taxes on the Course of Civilization. Its not a totally satisfactory book; the writing is uneven, some of its judgments are open to question, and the subject is far too vast to cover in 530 pages. But its about the only book dealing with the topic for the general reader, and its full of fascinating information and anecdotes, backed by a basic wisdom.
Adams isnt categorically against taxation. He thinks there are good taxes as well as bad ones, and he argues, for instance, that the Roman Empire fell because it wasnt collecting taxes efficiently. He blames tax evasion for its demise, but blames its policies for fostering evasion.
Nevertheless, his narrative makes it hard to deny that organized plunder has been the very lifeblood of most states throughout history. In most times and places taxation, like slavery, was simply taken for granted as an inescapable fact of life; now and then there have been tax revolts, just as there have been slave revolts; and at times, especially since the Christian era, taxation has been recognized as presenting serious moral problems.
Aside from the Roman Empire, Adams thinks states have usually destroyed themselves through overtaxation. Greed is almost the defining mark, not of the capitalist, but of the state. Ingenious rulers have found a thousand ways, from slavery to debasing money to tariffs to exacting tribute, of appropriating others wealth. At the same time, they fail to foresee how their own oppression will breed tax resistance.
Adams finds abundant records for this. In fact, many important archeological discoveries have been of tax inventories. The fabled Rosetta stone is essentially a tax record. A large percentage of all ancient documents are tax records of one kind or another, he writes. The day may come when historians will recognize that tax records tell the real story behind civilized life.... They are basic clues to the way a society behaves. After reading his swift review of history, you can hardly doubt it.
Taxation has always been big business, the biggest business of government. Hebrew complaints about the oppression of the Egyptian pharaohs seem to have been chiefly about the taxes imposed on them, which often amounted to, and were hard to separate from, slavery. (The Egyptians were cruel taxers, even sending scribes into every home to make sure people werent preparing their food with untaxed cooking oil!) Sometimes we hear of taxation so casually that we hardly notice it, as in the Gospel accounts of Joseph and Mary going to Bethlehem to submit to a great Roman tax census.
As Adams sees it, history is largely the story of mens constant efforts to get the wealth produced by other men, with politics and the state as the main means of acquisition. Its amazing that this ever-present dimension has been so slighted in most history books. Men have fought for power for many reasons, but the strongest has always been their own enrichment. Its hardly too much to say that the story of taxation is the story of mankind.
Adams sees Old Testament history as the constant struggle of the weak Jews against powerful predatory neighbors, Egyptian, Babylonian, Persian, Assyrian, Greek, and Roman. Losing a war, or avoiding one, meant paying tribute. (We tend to read words like tribute without grasping their concrete meaning.)
In the often deadly game of politics, tax exemptions and immunities as well as taxes were key weapons. Exemptions were irresistible privileges and definers of social class; Islam owed much of its original appeal to its offer of tax immunity to converts. This sufficed to lure the great majority of Christians and Jews in the Middle East, still heavily taxed by the dying Roman Empire, to the Muslim faith. But in time, Muslim rulers, having run out of taxable infidels, became eager taxers of their own people, and Islam lost its zeal even in its own domains. Islam ceased to spread when converts were not offered a tax break. Conversion had become a tax loophole that worked only too well.
In the Middle Ages, struggles between Church and state were usually over taxes and the authority to tax. Stern moral limitations inhibited taxation, especially new and unheard of taxes (exactio inaudita). Rulers who raised taxes were widely regarded as wicked tyrants who incurred sin and would be punished by God. But churchmen sometimes had greater taxing powers than secular rulers.
Like Rome, argues Adams, the mighty Spanish Empire finally broke down because it taxed too many too much and was unable to enforce its demands on a resentful population. But one of his most original chapters says that Aztec Mexico fell to the tiny forces of Cortés because of its own short-sighted greed in taxing its provinces.
Adams likewise sees taxation, not chattel slavery, as the issue that precipitated the American War Between the States. His sharp reading of Lincolns first inaugural address confirms this. (He has developed the argument further in another book.)
Only one country, as Adams tells it, has gotten it right: Switzerland. The Swiss have kept their government under control pretty well, in great part because they have had the wisdom to keep the taxing power and the spending power under separate agencies. He says this practice also preserved English liberty for a long time, but the vaunted American constitutional separation of powers overlooked this crucial distinction. The U.S. Congress taxes and spends. So we lack checks and balances where we most need them. Moreover, the Swiss federal government cant raise taxes without a popular majority, which is usually denied. The Swiss taxpayer, unlike the American, has learned to defend himself.
According to Adams, Americas downfall may come gradually through its failure to control and limit the taxing power. A nominally federal system is in vain when the spending and taxing powers are combined and centralized. Its at least a provocative idea; but if his book teaches anything, its that Swiss wisdom isnt contagious.
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