Chapter 5: Taxation
5.2 Taxation: How freedom was lost
There is that old and reliable indicator of when a politician is lying: his mouth is open. There is, however, an exception to this rule: when he’s talking about raising taxes. Then you can trust his announcements.
For this reason, it is no surprise that the word “tariff” derives from an old Arabic root meaning “announcement.” It was assumed that any government “announcement” was going to cost you something. Eventually, the word referred to officially-published lists of customs duties throughout the shipping world. A tariff traditionally, then, is a tax on imports or exports. In the U.S., tariffs can only be levied constitutionally on imports.
Tax” is more general. It comes from the Latin word taxare which means “to handle,” in the sense of “examine personally for the purpose of assessment”—a euphemism for “invade one’s privacy.” Taxare is likely a form of the Latin tangere which means “to touch,” as in “touch what ain’t yours.” Thus, the taxman first invades one’s privacy, then takes their property. The taxman’s “touch” should be considered equivalent to a TSA “enhanced patdown.” The latter has his hand squarely in your crotch, the other in your pocket. One takes your dignity, the other your substance. It’s government as usual.
The “hand in your pocket” image should be the official logo of the IRS and the SSA, although, granted, the eagle they both use now is even better: the eagle first spies its prey, then grasps it, then flies off with it, and then consumes it.
As I said in the last installment, taxation in this land used to be extremely low—low by standards of the time, microscopic compared to today. Yet, while taxes were very minimal, there never was a time when we actually were “free” in regard to taxation. So, this section is not quite exactly “How freedom was lost.” Nevertheless, it is close enough—as they say—for government work (what’s good for the goose . . .).
Before we begin in earnest, let me say that the history of taxation in this country (in virtually any country) is almost inseparable from that country’s history of war. The taxes and tariffs that helped spark the American Revolution, for example, were George III’s attempt to pay off his war debts from the prior debacle of the French and Indian War. And since we’re talking about sovereign debt, the story is also inseparable from central banking. We will have separate topics for both finance and war later in this project. For now, know that the whole picture of taxation—though gruesome in itself—is without context unless we factor in both wars and central banking.
It is obviously no revelation that our historically-low levels of taxation—“not quite freedom”—were lost, but it will surprise many readers just how quickly and systematically they were lost. For example, as I said before, the revolutionary sentiments were raised in response to the Townshend Acts of 1767. These were a second attempt, after the failed Stamp Act, to raise revenues in the American colonies. The duties imposed were resisted and ultimately repealed on everything except tea, leading to the Tea Act of 1773 and then the Boston Tea Party. So, for the principle of self-government, no doubt, but for the specific case of an 8.33% import tax on tea, American colonists were willing to fight and die if necessary. The irony here is that the Tea Act lifted Tariffs paid by the British East India Company. These were far higher than what the colonists paid, and thus the Tea Act actually dropped the price of tea significantly for the colonies overall. But they still hated the tax. “No taxation without representation!” “Liberty or death!”
So how was this level of freedom lost?
Taxation and the Constitution
The Continental Congress struggled trying to get the States to raise revenues to pay off the debts of their War for Independence—again, war debts. After several failed attempts, the delegates were convened in Philadelphia, and the deed we have referred to so much already was done—the Constitution was written. I have already discussed under Localism how the opponents of that move created a public outcry over the centralization of powers—and one of the most crucial of those decried powers was taxation. Recalling those previously rehearsed comments and warnings, my short answer to the question of how freedom in taxation was lost is simple: the Constitution.
Let’s just do a quick comparison. Americans, I have just said, were willing to shed their blood to fight off Britain over a very moderate tax on one item. Even the Townshend Acts had only placed duties on imported paper, paint, lead, glass—just a few items. In other words, George III tried to impose very limited taxes to pay off war debts—and Americans revolted.
After the Constitution, however, Congress (led by Hamilton’s designs) immediately raised tariffs on their countrymen—again in order to pay off war debts—but this would be beyond anything the people could have imagined under Britain. Here’s the list of items taxed from five to ten percent (more in some cases) under the first Hamilton Tariff of 1789 (Hint: you don’t really need to read the whole list; just scroll down, skim it, and keep reading the meat of this article). There were duties:
- On all distilled spirits of Jamaica proof, imported from any kingdom or country whatsoever, per gallon, ten cents.
- On all other distilled spirits, per gallon, eight cents.
- On molasses, per gallon, two and a half cents.
- On Madeira wine, per gallon, eighteen cents.
- On all other wines, per gallon, ten cents.
- On every gallon of beer, ale or porter in casks, five cents.
- On all cider, beer, ale or porter in bottles, per dozen, twenty cents.
- On malt, per bushel, ten cents.
- On brown sugars, per pound, one cent.
- On loaf sugars, per pound, three cents.
- On all other sugars, per pound, one and a half cents.
- On coffee, per pound, two and a half cents.
- On cocoa, per pound, one cent.
- On all candles of tallow, per pound, two cents.
- On all candles of wax or spermaceti, per pound, six cents.
- On cheese, per pound, four cents.
- On soap, per pound, two cents.
- On boots, per pair, fifty cents.
- On all shoes, slippers or goloshoes made of leather, per pair, seven cents.
- On all shoes or slippers made of silk or stuff; per pair, ten cents.
- On cables, for every one hundred and twelve pounds, seventy-five cents.
- On tarred cordage, for every one hundred and twelve pounds, seventy-five cents.
- On untarred ditto, and yarn, for every one hundred and twelve pounds, ninety cents.
- On twine or packthread, for every one hundred and twelve pounds, two hundred cents.
- On all steel unwrought, for every one hundred and twelve pounds, fifty-six cents.
- On all nails and spikes, per pound, one cent.
- On salt, per bushel, six cents.
- On manufactured tobacco, per pound, six cents.
- On snuff, per pound, ten cents.
- On indigo, per pound, sixteen cents.
- On wool and cotton cards, per dozen, fifty cents.
- On coal, per bushel, two cents.
- On pickled fish, per barrel, seventy-five cents.
- On dried fish, per quintal, fifty cents.
- On teas imported from India or China. On all teas imported from China or India, in ships built in the United States, and belonging to a citizen or citizens thereof, or in ships or vessels built in foreign countries, and on the sixteenth day of May last wholly the property of a citizen or citizens of the United States, and so continuing until the time of importation, as follows:
- On bohea tea, per pound, six cents.
- On all souchong, or other black teas, per pound, ten cents.
- On all hyson teas, per pound, twenty cents.
- On all other green teas, per pound, twelve cents.
- On teas imported from Europe. On all teas imported from Europe in ships or vessels built in the United States, and belonging wholly to a citizen or citizens thereof, or in ships or vessels built in foreign countries, and on the sixteenth day of May last wholly the property of a citizen or citizens of the United States, and so continuing until the time of importation, as follows:
- On bohea tea, per pound, eight cents.
- On all souchong, and other black teas, per pound, thirteen cents.
- On all hyson teas, per pound, twenty-six cents.
- On all other green teas, per pound, sixteen cents.
- On all teas imported, in any other manner than as above mentioned, as follows:—
- On bohea tea, per pound, fifteen cents.
- On all souchong, or other black teas, per pound, twenty-two cents.
- On all hyson teas, per pound, forty-five cents.
- On all other green teas, per pound, twenty-seven cents.
- On all other goods imported from India or China, 12 1/2 per centum ad valorem. On all goods, wares and merchandises, other than teas, imported from China or India, in ships not built in the United States, and not wholly the property of a citizen or citizens thereof, nor in vessels built in foreign countries, and on the sixteenth day of May last wholly the property of a citizen or citizens of the United States, and so continuing until the time of importation, twelve and a half per centum ad valorem.
- On other enumerated articles, 10 per centum ad valorem.
- On all looking-glasses, window and other glass (except black quart bottles),
- On all China, stone and earthen ware,
- On gunpowder,
- On all paints ground in oil,
- On shoe and knee buckles,
- On gold and silver lace, and
- On gold and silver leaf,
- On other enumerated articles, 7 1/2 per ct. ad valorem.
- On all blank books,
- On all writing, printing or wrapping paper, paper-hangings and pasteboard,
- On all cabinet wares,
- On all buttons,
- On all saddles,
- On all gloves of leather,
- On all hats of beaver, fur, wool, or mixture of either,
- On all millinery ready made,
- On all castings of iron, and upon slit and rolled iron,
- On all leather tanned or tawed, and all manufacture of leather, except such as shall be otherwise rated,
- On canes, walking sticks and whips,
- On clothing ready made,
- On all brushes,
- On gold, silver, and plated ware, and on jewelry and paste work,
- On anchors, and on all wrought, tin, and pewter ware,
- On playing cards, per pack, ten cents.
- On every coach, chariot or other four wheel carriage, and on every chaise, solo, or other two wheel carriage, or parts thereof
- On all other goods, except certain articles, 5 per cent. on the value at the time and place of importation.
- On all other goods, wares and merchandise, five per centum on the value thereof at the time and place of importation. . . . [there is more!]
Now that’s quite an oppressive list. George III’s tyranny was mild in comparison to Congress’ and Hamilton’s. But this was just a beginning. Within a year, they increased the rates in some cases by a factor of two or even three. Then they did it again in 1792.
Tariffs ultimately became a sectional war between northern manufacturing and southern agriculture—and the political battle led to the Civil War.
At the same time they began levying excise taxes—taxes on specific domestic items. The first of these came with the “Whisky Act” of 1791—a tax on all domestically distilled spirits. This led to rural producers revolting in the so-called Whisky Rebellion—a tax revolt not much different than the Tea Party and other tax revolts against Britain before the revolution. But this time, instead of having their Continental government behind them, and the option of calling militias from other States to choose whether or not to fight and on what side, the rebels watched their government conscript an army of 13,000 men to be used against them. Washington and Hamilton—reliving old glory-days on the battle field—personally led the charge on horseback.
So the American government almost immediately became a tyranny measurably many times worse than Britain herself would have ever considered. Taxation with representation did not look as great up close as it had at a distance.
Then, things got really bad. How was the freedom lost, you ask?
It was lost with those Hamilton Tariffs of 1789, 1790, and 1792.
It was lost with the Whisky Tax of 1791.
It was lost with the excise taxes raised to offset the loss in tariff revenue during the War of 1812.
It was lost with the Tariffs of 1816 (raised to pay off the debts of the War of 1812).
It was lost with the protectionist Tariff of 1824, and its sister Act—the “Abomination”—in 1828 which raised the rates.
It was lost with the Morrill Tariff in 1861. This established the highest rates in U.S. history, and set a precedent that reigned until Woodrow Wilson.
It was lost with the first income tax in 1861, and again in 1862. The Confederacy did the same thing in 1863. Income tax was a bipartisan (North and South) abuse. This lasted for ten years. After a landmark Supreme Court case in 1895, blanket income taxes were considered unconstitutional. Congress sulked. Wait! No problem! Just pass an Amendment to the Constitution!
It was lost then again in 1913 with the Sixteenth amendment and the Revenue Act of 1913. This measure was championed by progressives of both the Democrat and Republican stripe. Since that time, the income tax brackets have been monkeyed with a few dozen times: the lowest tax bracket has not dipped below 10% since 1933. The highest has reached as high as 92%, though is currently at 35% due to the “Bush tax cuts.”
It was lost during and immediately after the Civil War in a series of excise taxes on, again, liquor. This led to the whole legacy of ridge-runners, moonshiners, and their enemies, the revenuers. This led also to the creation of two agencies involved, respectively, with alcohol and the taxation of it—the ATF and the IRS.
It was lost as federal excise taxes today persist on alcohol, tobacco, firearms, tanning, fuel sources, gas mileage, coal, phone line usage, trucking, vaccines, water transportation, fishing gear, harbor maintenance, airline tickets, jet fuel, and tires.
It was lost when FDR invented “Social Security.”
It was lost as Social Security taxes have been raised 20 times since 1933 to keep propping up the failed socialistic system (beginning at 1%, and reaching to 6.2% today—for both employer and employee).
It was lost when LBJ piggy-backed Medicare onto Social Security, in 1965. The result meant another payroll tax on top of Social Security.
It was lost as Medicare taxes have been raised eight times since 1965—beginning at the promised 0.35%, and ending at 1.45% today (for both employer and employee), an increase of 414%.
And this is considering only federal taxes. Local and especially State governments impose their own versions of these same taxes on top of the Feds. I have seen “total tax burden” per nation considered as a “percentage of GDP”; the U.S. comes in high among western nations with just under a 30% total tax burden. But this is misleading in only regarding income taxes. This does not consider Social Security and Medicare, as well as State, Federal, and Local taxes of every stripe. Including these would send the American percentage much, much higher (to say nothing of the total in other countries).
How was the freedom lost? It was lost for many reasons throughout many phases. We trusted the Federal government. We trust all levels of government to treat us well. They have instead financially raped us. From 1789 until today, we have watched as Washington has gradually taken our money and spent it on frivolities and money pits. Meanwhile, great ideas have come and gone, garnering barely an acknowledgement from the masters above.
Need we say more? We had something close to freedom in taxation. It was lost. And, it was lost decisively in the areas of income, and public choice in schooling, hospitals, etc. There is no doubt taxes are not only too high, but out of control.
We have seen how freedom in regard to taxation was lost. The question is, of course, how to get it back. We will talk about that in the next discussion.
Next section: How to slash taxes by biblical proportions