Saturday, November 20, 2010

A no-tax society

The phrase sounds absurd. We have become accustomed to being taxed at almost every level of government: federal, most states, and some cities. Add property taxes, school taxes, sales taxes, gasoline taxes, and various stealth taxes in the form of fines.

We can hardly imagine otherwise anymore. We've agreed with Benjamin Franklin's witticism that nothing is certain except death and taxes. (But the great man was mistaken: death is an illusion.)

Yet only a century ago, Americans paid no income tax. But hold on. That was just before we got the Federal Reserve, Woodrow Wilson's progressive vapors, and an income tax.

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Back in our colonial days, taxlessness was almost normal. In his A History of the American People, Paul Johnson says that America was "the closest the world has ever come to a no-tax society."
... the American mainland colonies were the least taxed territories on earth. Indeed, it is probably true to say that colonial America was the least taxed country in recorded history. Government was extremely small, limited in its powers, and cheap. Often it could be paid for by court fines, revenue from loan offices, or sale of lands.
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New Jersey and Pennsylvania governments collected no statutory taxes at all for several decades. One reason why American living standards were so high was that people could dispose of virtually all their income. Money was raised by fees, in some cases by primitive forms of poll-tax, by export duties, paid by merchants, or import duties, reflected in the comparatively high price of some imported goods. But these were fleabites.
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Even so, there was resentment. The men of the frontier claimed that they should pay no tax at all, since they bore the burden of defense on behalf of everyone. But this argument was a self-righteous justification of the fact that it was hard if not impossible to get them to pay any tax at all. Until the 1760s at any rate, most mainland colonists were rarely, if ever, conscious of a tax-burden. It is the closest the world has ever come to a no-tax society.
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This was a tremendous benefit which America carried with it into Independence and helps to explain why the United States remained a low-tax society until the second half of the twentieth century.
The taxes the British government eventually did try to impose -- the Stamp Tax, the Tea Tax, &c. -- strike us today as minuscule; it's hard to understand why they were anything to get fussed about. Revisionist historians like to claim that the colonists' claimed resistance to "taxation without representation" was no more than rhetoric and that they just didn't like paying taxes, full stop.

There is probably some truth to that, but it doesn't necessarily mean that 18th century Americans were only greedy. They or their ancestors had emigrated from Europe where taxation often was a form of tyranny and control. They understood from experience Chief Justice John Marshall's famous later dictum, "The power to tax is the power to destroy."

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In the past century, the relation between the central government of the United States and its people has changed drastically. The Constitution had as one central idea that the federal government was only responsible for things that individuals or smaller government units couldn't effectively do, such as waging war or "to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States ... ." The 10th amendment, passed as part of the Bill of Rights shortly after the adoption of the original Constitution, explicitly states: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

If the first citizens of the United States could see how the 10th amendment has been virtually obliterated in practice, they would be astounded and very likely appalled. We've gone from a federal government that provides for "the common defence," &c. to one that hectors you about how much salt is in your diet.

The inspiring anti-slavery slogan, "Am I not a man and a brother?" has been turned upside down: "Are you not my keeper?"

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To keep 300 million Americans requires a hell of a lot of tax revenue. And as we are constantly told, it still isn't enough to keep us out of debt, $13 trillion and counting, or untold trillions more if you include all the entitlements our vote-buying politicos have lavished on us.

Some taxes are a necessary evil. But we can appreciate why early Americans had such a deep distrust, verging on loathing, of them. Despite the past century, that distrust hasn't been bred out of us yet. We have been anesthetized to taxation through artificial prosperity and socialist propaganda, but the anesthetic is wearing off and no more is left. Only the pain, and another chance perhaps to stop the cause of it.

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5 comments:

Anonymous said...

Mr. Darby,

As a long time practicing CPA that is an expert in taxation, you have no idea how pervasive taxation is. Now that the cities, states, counties, local districts have gotten in on the act they assess all kinds of "fees", "licenses" on the back of businesses who have no choice but to pass those costs along. And this says nothing at all about all of the various regulations placed on business all in the name of "protecting" _________ (fill in the blank). Also, you should see all of the regulations placed on businesses just to hire someone to do an hourly job. No wonder all of the jobs are being outsourced. Then you have the AA nazis to deal with once you get to be any size at all. To wrap it all up we have this ridiculous "health" care law to pay for.

Free men can not afford to have women vote or support more than a very small number of third worlders (aka NAMs, in the HBD vernacular) for more than a century before it all crashes down, which is what we are in the midst of right now.

MDR

Rick Darby said...

MDR,

I believe you that the full extent of taxation is hidden and disguised from most of us.

What are you implying by, "Free men can not afford to have women vote"? That female emancipation is responsible for our predicament? I've read the argument that women tend to vote more from emotion than men, and are responsible for our web of government overreach in the guise of compassion.

Maybe, but men who intellectualize fantasies of a Utopian society have done at least as much damage. There weren't a lot of female Bolsheviks.

Anonymous said...

Mr. Darby,

I should have been more clear that the Founders had it correct when they limited the franchise like they did. There is no "one" thing that has caused our predicament but incremental steps along the way that have moved us away from the Founders and but one of those was expanding the franchise to include women. Which clearly, at least to me, has led to the government replacing fathers and men in women's life which leads to more taxes needed to fund transfer payments. I was really using the female vote and the expansion of non-Western European people as two examples, not entire causes of our incredible expansion of taxes and regulation. Of course, most of the crooks on Wall Street, again look at Denninger's rants, are White Men, to include those of Jewish background as well as Gentile and high IQ Asians.

I apologize for not being more clear and/or sounding like Whiskey.

God Bless,

MDR

Rick Darby said...

The Founders had the good sense to strike a balance between a democracy and a republic. They established a lower house, the House of Representatives, which would be elected by direct popular vote; and an upper house, the Senate, to be chosen by state legislators, who at the time were mostly from the ranks of property owners and the well-to-do.

It may not have been an ideal solution -- there is no guarantee that property owners will be wise or public-spirited -- but in politics there are no ideal solutions. All in all, it was probably better to have at least one house insulated from the need for jiving and pandering to win wide public favor. Of course, we abandoned that system a long time ago in favor of direct election of senators as well as representatives.

On another note, while it is normally my policy not to edit posts after they have been commented on (except for correcting typos and such), I have fixed an outright error: I originally wrote "billions" when it should have been "trillions."

Maria said...

We could use a lot fewer idealistic college students who want other people to pay for the fervency of their ideals.

If we are going to limit the franchise, the first exclusion should be age-based: not until you are 22, for either gender. Exceptions are active military personnel.