Chapter 5: Taxation
5.1 Taxation in a Free America
We have now laid out the fundamental shape of decentralized government as it ought to be. The county should be fundamental, and people should have to deal with no government official other that their county officials, with perhaps limited exceptions for State elections, etc. This is nowhere more true than with that most hated of all ancient evils—taxation.
What we have been trying to demonstrate—based on biblical and historically Christian ideas, as well as their implementation in much of western history—is the power that true federalism has for restoring and protecting freedom. In theory, in a truly federal system, the National government should only govern States, State governments should only govern counties, and county governments only should govern the people (and where there are smaller units below counties, such as townships, towns, cities, etc., then the principle of federalism should extend that much further).
In regard to taxation, true federalism means the National government should have no power to tax individuals. The only agency—if any—that should have any authority to tax individuals is the smallest, most local, nearest jurisdiction to that individual. No jurisdiction above that should be able to touch the individual directly unless through that individual’s consent. Instead, if higher governments desired to raise revenue through taxation, they should be forced to deal only with the next level of government below them. In other words, the Feds could only tax States, States could only tax counties, and counties only could tax citizen (or municipalities where applicable).
None of this, however, is to justify taxation in general. Ideally, there would be none, and public services would be much more like private services, if not in fact private services. Police and fire services are essentially insurance services for the protection of property, and could be paid for in a very similar way, privately. Public water and sewer services are often already paid in this way, so are some ambulance and EMT services (at least in part); there is no reason police and fire could not be as well. Even the court system could be improved through greater proliferation and even dominance of private courts. There is very little reason that most currently public services should require taxation in order to exist and function effectively.1 We can discuss this in more detail later.
But if taxes must exist, they should be as decentralized as possible. Only the most local municipality should have power to tax the individual. Counties must do the duty of protecting their people from the reach of State taxes. They should act in concert, represented at the State level as counties, to create a government and tax barrier between individuals and the State. Then, if the State absolutely needs revenue, it must work with the counties in concert in order to arrive at an acceptable level. Thus, county representative will be negotiating how much of their budgets they shall agree to provide to the State for its services. To the degree that local citizens have control in their counties and are adequately represented in the State assembly, you can be sure that they will not want much of their county’s budget at all to be handed over to the State—nothing beyond necessity. This will mean a strictly limited State power.
The same delicate negotiating balance should also occur between the National government and the States represented in concert (this is one reason the 17th Amendment should be repealed, as I discussed recently). States, being squeezed by the local interests and bargaining power of their counties, will naturally (and rightly) wish to guard their scarce revenue for themselves. This will create strong pressure against the taxing desires of the National government, and will thus keep its powers limited to that degree—preferably funding only the bare necessities of government, whatever those should be.
Constitutionally speaking—and I will discuss in the next installment why the Constitution is way more tyrannical on taxation than we should want—the States have an added bargaining chip. The Feds are allowed—and the States forbidden—to collect duties on exports and imports. Thus the National government already has a unique and exclusive source of revenue, and should not need much if any taxation upon member States. States can point to this as one more reason to deny further taxation upon them by the Feds.
Taxation in the Bible
What type of tax is best? There is no biblical law regarding any taxation for civil government. This leads me to believe there should be none. Nevertheless, we are given the ecclesiastical precedents of the tithes as a model for which type of taxation is best in the event that a sinful society demands one. There were only two types specified by law: a tithe on increase of produce, and a small flat head tax. The particular flat tax, however, specified in Exodus 30:11–16, was explicitly priestly in nature, and was only paid by males over 20 years old who were numbered in the army. It was specifically called “ransom money” to protect the lives of God’s holy soldiers. It was specifically for atonement. It was only collected when a army was raised for a battle. It was thus not meant to be pattern for a general stream of revenue. It should thus not be looked to as a good measure for civil revenue either.2
The other type seems more suited for the purpose of general revenue: this was the general tithe on increase of produce. The tithe was ten percent and was payable after harvest at a central location during the appropriate semi-annual festival. It could be paid in produce itself or in monetary form, depending on the taxpayer’s convenience (Lev. 27:30–33; Deut. 14:22–29). In a modern monetary economy, we would simply call this an income tax. In Deuteronomy, the ten percent was God’s requirement for the ecclesiastical institution—not the civil State. The funds were to be used for feasting and making merry, as well as taking care of the widows and fatherless, and the priests and Levites. (Thus, welfare was an ecclesiastical function as well).
The Bible gives no such ten-percent requirement for the civil government. It in fact gives no percentage at all for civil government. Yet when Samuel warns the Israelites against the adoption of a king “like other nations” (1 Sam. 8), he spells out the tyranny that would follow. Among the list of confiscations and enslavements to come, Samuel warns that such a king will “take the tenth of your grain and of your vineyards . . . the tenth of your flocks, and you shall be his slaves” (1 Sam. 8:15–17). In other words, when the civil government assumed the right to a ten percent income tax, it was absolute, unimaginable tyranny equivalent to outright slavery. For when the civil ruler assumes the right to extract as much as God Himself demands, then the civil government is exalting itself above God. The civil ruler is then essentially saying that his work is more important than the work of God Himself. Thus, while there is no explicit number in Scripture for civil taxes, Samuel certainly indicates that 10% has far exceeded the maximum for a free society. At this point, don’t call it taxation, call it slavery to the State.
Hardly any western nation on earth today has a total tax burden below 30% (a couple are slightly below, several are over 40%).3 This means that nearly every western nation today needs to slash its tax burden by at least 66% in order to return to Samuel’s standard of tyrannical slavery.
One problem with allowing an income tax, however, is the need for accurately reporting income. This is not an issue with the ecclesiastical tithe, for God allowed no legal enforcement of the tithe. Thus the Church must depend on the free giving and honesty of her members.4 The State, however, will use legal coercion to extract its duties. Thus, if taxation is based on a percentage of income, it will require reporting of income to make sure it’s getting its demanded percentage accurately. To eliminate this requirement, several measures could be taken—all of them undesirable to someone. First, the State could rely on honesty and non-reporting like the Church does. In this case, revenues would certainly plummet, just as the Church sees nowhere near the ten percent it is due today. Voluntary reporting or only payer-reporting would have similar results. Fraud would be rampant. The civil government could require an accurate income statement as qualification to vote. This would disenfranchise many people, especially those who are generally honest and upstanding, but place a high value on person privacy. (It’s also unconstitutional at this point.) There seems to be no good way around this problem, if an income tax is desired.
A property tax is not only problematic, but is not permitted in Scripture, and should in fact be considered unbiblical. Only God has absolute ownership of property; He delegated this to individuals, and gave us a commandment against property theft in all forms (Ex. 20:15; Lev. 19:11, 13; Deut. 19:14; 27:17; Prov. 22:28; 23:10). God did not give the civil State any claim of ownership in individuals’ land. It has none, and for it to claim such a right is to defy God. And what is a property tax except a claim of partial ownership in the land? It is a system of feudal tenure in which the State claims a percentage of the value of your property, yearly, for the sole privilege of living on land under the particular jurisdiction. While this type of tax has deep historical roots, it is also deeply unbiblical. And though this tax has historically been collected and spent at the county level—thus demonstrating how the County historically was the fundamental unit of governmental authority in this country—it is nevertheless an unbiblical form of taxation and should be replaced with a better form in every place in which it is practiced.
A sales tax seems to be the least intrusive on the surface of it. It is enacted not on ownership or income, but only on exchange. Thus it is extracted piecemeal. This means there is never a large tax surprise at the end of the year. As a tax only on voluntary purchases, it gives people an incentive to save as much of their money as possible if they wish to avoid taxation. One problem, however, is that to the extent we have to buy a certain amount of basic necessities, a sales tax places a greater necessary burden on lower classes than upper. Of course, it is assumes that wealthier people will indeed spend more and thus pay more in sales tax; but they are not required to do so by the basic needs of life. If it is a valid consideration that there is a basic set of human needs most people must purchase of necessity, then a sales tax does indeed hit the poor harder. For this reason, many States and municipalities do not assess sales tax on basic food stuffs and certain other groceries. Secondly, while it seems fairly unobtrusive from the shopper’s perspective, the sales tax requires the business to keep records of all sales and submit accurate reports along with the collective sales tax payment. This additional bookkeeping and reporting creates the same problems for businesses that an income tax creates for individuals. It is also additional and unnecessary expense added to the cost of doing business.
There seems to be no good form of taxation compatible with preserving the privacy of person, income, or property. Taxation seems to be an inherent compromise of life, liberty, property, and the pursuit of happiness. This is why, I believe, the Bible prescribed no method for civil taxation: because taxation for support of civil government is inherently at odds with the type of freedom God desires us to attain. The very idea of empowering the coercive arm of society to fund itself by means of its own coercive arm seems at best a recipe for corruption, if not enslavement. If it is fundamental folly to put the power of the purse and the power of the sword in the same hands, then our means of funding the administration of justice in society needs to be radically rethought.
Taxation will always require some degree of servitude. To the extent that it does—and it will vary from time to time, place to place—it means we are not free people, not a free society. To the extent that we must tolerate taxation as Christians—as our inspired writers have told us to (Rom. 13:7; 1 Pet. 2:13–17)—it is an admission that sin has a grip on society, both among the people and the officials. We must strive to reach a society in which the protections of person and property and ensured through voluntary means. I believe the silence of the Bible on the method and form of civil taxation was deliberate because no method could be prescribed in accordance with God’s design for society—even in a sinful world—which would not itself involve some amount of sin.
What principles, then, can we glean from Scripture in order best to rein-in taxation? First, it should be based on a fixed percentage. The tithe was ten percent for everyone. A graduated percentage is unbiblical and thus unjust—the rich should not pay a greater percentage than the poor as they are forced to do now. Second, the fixed percentage should be nowhere near as much as ten percent total. Ten percent should be an indicator to us all that we are squarely in the midst of tyranny. Social repentance and a return to individual responsibility are in order. Third, the only biblical model for a method of taxation is on income. Other forms of taxation either have no biblical precedent at all, or run against biblical principles of property.
The Right Form of Taxation
Based on these criteria and what else we have said above: if we are to suffer the evil of taxation for civil government, it should take only the following form: 1) local governments and local governments only should tax individuals, 2) only on net income, and 3) well under a total of ten percent, and 4) only for bare necessities of the administration of justice. The same principles should apply at each level in the federal system: the taxes collected by counties should be viewed as income, and taxed well under ten percent by States. The fullness of revenue collected this way from all counties by the State should be considered the State’s income. The Federal government should tax the income of the States for its services, but only well under ten percent.
This system would mean: 1) no individual would ever suffer greater taxation than what occurred at their local county level, and 2) at least ninety percent of your tax dollars would stay in your local community (only a maximum of nine percent would stay at the State level, and one percent to the National level).
For example, average household income in the U.S. is about $45,000 annually. In today’s mad system of taxation, a couple filing jointly will pay roughly 13% in federal income tax (25% if not married), and (in my state of Georgia) 6% in state income tax. They will also pay their half of Social Security and Medicare (the employer pays the other half), 6.2% for social security and 1.45% for Medicare. (If the earner is self-employed, he or she is liable to both halves, and thus 12.4% and 2.9% respectively.) When the order of taxes and all the brackets are considered, the total tax burden here is 22.13%.
This does not include the sales taxes we pay, taxes on imported items, increased prices due to government regulations, the hidden tax of inflation, so-called “sin taxes” on tobacco and alcohol, and possible luxury taxes. Plus, an average American pays roughly 1% to 2% of assessed property value in property taxes. With average home prices around $175,000 in the U.S., just a low 1% property tax rate would mean an additional bill of $1,750. That an additional 3.88% of yearly income. Including this conservative property tax number raises our former total to 26.01%—a loss of $11,700 in income annually to the average couple.
Consider, in contrast, my proposed “biblical” federal model. Let’s assume an almost worse-case of 9%—almost to the 10% tyranny threshold— at each level of government. In such a case, the same household would surrender 9% of its earnings to the local government—that’s $4,050. He would pay nothing else in taxes. The State would then extract 9% from the county level—$364.50 from this case. The Feds, extracting 9% of State revenue, would get only $32.81 of this one person’s contribution.
In the current scenario, people are taxed directly by every level of government, and the money is often spent in ways they disagree with, for purposes that conflict with their values, and in ways in which they are not truly represented. In a free society, people are accountable to only one agency, only at the local level where they can be most accurately represented (or can move), and their money is spent mostly in that particular public square. And even in the worst-case scenario, it costs them way less than half of what the current scheme does.
Taxes in Colonial America
Decentralization and low taxes are not only good theory, they’re more originally American, too. It’s closer to the way America used to be. In colonial days, before the Constitution, there was no taxation from a central National government. When the central government (Britain) attempted to impose centralized taxation, it set in motion a series of tax revolts that culminated in the Declaration of Independence—a document which condemned King George III and Parliament among many other grievances “For imposing Taxes on us without our Consent.”
This is a very general truth, however. This is not to say that the colonies were a tax haven, although taxes were generally lower than anywhere else throughout the British Empire at the time. Nevertheless, there were very many taxes of various types, and they were implemented variously in every colony throughout the period from colonization to the Declaration. There were poll taxes, land taxes, “collective mass of property” taxes, all-livestock taxes, specific taxes on horses and cattle, taxes on stocks, taxes on cash investments, house taxes, slave taxes, and carriage taxes.5 Only one colony, North Carolina, implemented as few as three of these ten types during this time; most used between four and six. So the colonies were not shy about implementing taxes.
Taxes, though various in type, were generally very low. For example, Virginia instituted a poll tax as early as 1619. The tax was one pound of tobacco per male person over sixteen years old. This was about one day’s wages for a common laborer.6 (Compare this to the full 26% described above for today, which means the government gets over three months worth of the average family’s wages.) In the midst of a financial strain, Virginia took on debt. In a few years, the tax was 10 pounds of tobacco. By 1644, it was as high as 18 pounds per male head.7 Even at this extreme point the 18-pound tax represented less that 7% of yearly income for a common laborer—the lower classes. It would thus have been much less for a professional of any sort. For a schoolmaster in 1651 making £30 per year, 18 pounds of tobacco would have equaled only 4.5% tax on his income.8
Again, this is only one of various taxes to which different people at different times were liable. But these rarely overlapped, and when they did, they still did not amount to a great collective burden. Overall, the burden to which any person and any given time was subject was very low, especially by today’s standards. It was also low in comparison to the tax burdens of the rest of the British Empire at the time. This is why George III chose the American colonies as the place to raise taxes to begin with.
And again, when Britain tried to impose a tax from the central government in addition to these colonial (State) governments, the colonists resisted and ultimately revolted. The Boston Tea Party was thrown as a result of Britain’s “Townshend Acts” of 1767 and Tea Act of 1773 which had levied a tax on several imports, including tea, and created a government-enforced monopoly on tea. The tax on tea was uncomfortable but not exorbitant by today’s standards—at 8.33% (3 pence per pound when tea was selling at 3 shillings (36 pence) per pound). Consider that this was only on a tax on single product which was used mostly by the upper and upper-middle classes, and not a universal sales or import tax. Today, several States allow sales taxes on most goods at rates higher than the 8.33% on only tea for which our ancestors rebelled and shed their blood. Meanwhile, the total per capita tax burden in the colonies was significantly less—only two to four percent—of what was being levied in Britain.9 And the colonists said, “We would rather die.”
Of course, consider the wisdom the British bureaucrats—imposing taxes on the most outspoken and able of people in the colonies. The Stamp Act of 1765 levied taxes on all printed materials, thereby enraging every minister, lawyer, publisher, and politician in the hemisphere. Then the Townshend Acts hit their tea—a commodity indulged in mostly by the wives of the aforesaid classes. Now you’ve got disgruntled lawyers with the added aggravation of their wives nagging them! Then, to add insult of intelligence to the original insult, the British imposed a monopoly on the tea with the Tea Act. So the British succeeded in enraging the classes of people most self-interested and most able to rouse the masses against the British: the preachers, the lawyers, and their wives. That would be about as smart as, today, levying a tax on lobbyists, liquor, and prostitution in Washington, D.C. You would see an immediate tax revolt from the vast majority before you could say “Washington Monument”!
Well, enough has been said so far to demonstrate the point: a biblical view of taxation is greatly decentralized, based on only a fixed percentage, and only assessed on an increase in income. Even this is not fully biblical in the sense of God’s ideal of only voluntary services, and taxation can only be described as a very questionable, necessary evil. And taxation to pay for civil government should always be well less than ten percent of net income annually. And it should only go to local government. Higher levels must wrangle and negotiate with the more fundamental, local units for their services. Beyond this is to prescribe tyranny, which is to say we live in a tyranny now.
I say, it’s time for another tea party. Throw off the taxes. Assert fundamental rights and local sovereignty. In the next section, I’ll show you how it got so bad.
Next section: Taxation: how freedom was lost
- See Gary DeMar, “Financing the Responsibilities of the State,” Chapter 16 of God and Government: A Biblical, Historical, and Constitutional Perspective (Powder Springs, GA: American Vision, Inc., 2011), 307–329. [↩]
- Gary North, Tools of Dominion: The Case Laws of Exodus (Tyler, TX: Institute for Christian Economics, 1997), 903–912. [↩]
- Also, this is generalized as revenues as a percentage of GPD. Results for individuals can range from around ten percent total to well over 50 in the U.S. [↩]
- Proof of paying tithes ought to be considered, however, as a qualification to vote in church elections, especially for financial decisions. [↩]
- Robert M. Kozub, “Antecedents to the Income Tax in Colonial America,” The Accounting Historians Journal 10/2 (Fall 1983): 101. [↩]
- Based on stats collected by William B. Weeden, Economic and Social History of New England, 1620–1789, 2 vol. (New York: Hillary House Publishers, 1963), 880. [↩]
- Kozub, 103. [↩]
- Weeden, 881. [↩]
- Ben Baack, “The Economics of the American Revolutionary War,” February 5, 2010, EH.net (accessed Sept. 22, 2011). [↩]