I do not celebrate the fourth of July. This goes
back to a term paper I wrote in graduate school. It was on colonial taxation in
the British North American colonies in 1775. Not counting local taxation, I
discovered that the total burden of British imperial taxation was about 1% of
national income. It may have been as high as 2.5% in the southern colonies.
In 2008, Alvin Rabushka's book of almost 1,000 pages
appeared: Taxation in Colonial America (Princeton University
Press). In a review published in the Business History Review, the reviewer
summarizes the book's findings.
Rabushka's most original and
impressive contribution is his measurement of tax rates and tax burdens.
However, his estimate of comparative trans-Atlantic tax burdens may be a bit of
moving target. At one point, he concludes that, in the period from 1764 to
1775, "the nearly two million white colonists in America paid on the order
of about 1 percent of the annual taxes levied on the roughly 8.5 million
residents of Britain, or one twenty-fifth, in per capita terms, not taking into
account the higher average income and consumption in the colonies" (p.
729). Later, he writes that, on the eve of the Revolution, "British tax burdens
were ten or more times heavier than those in the colonies" (p. 867). Other
scholars may want to refine his estimates, based on other archival sources,
different treatment of technical issues such as the adjustment of intercolonial
and trans-Atlantic comparisons for exchange rates, or new estimates of
comparative income and wealth. Nonetheless, no one is likely to challenge his
most important finding: the huge tax gap between the American periphery and the
core of the British Empire.
The colonists had a sweet deal in 1775. Great Britain was the
second freest nation on earth. Switzerland was probably the most free nation,
but I would be hard-pressed to identify any other nation in 1775 that was ahead
of Great Britain. And in Great Britain's Empire, the colonists were by far the
freest.
I will say it, loud and clear: the freest society on earth in 1775
was British North America, with the exception of the slave system. Anyone who
was not a slave had incomparable freedom.
Jefferson wrote these words in the Declaration of Independence:
The history of the present King
of Great Britain is a history of repeated injuries and usurpations, all having
in direct object the establishment of an absolute Tyranny over these States.
I can think of no more misleading political assessment uttered by
any leader in the history of the United States. No words having such great
impact historically in this nation were less true. No political bogeymen
invoked by any political sect as "the liar of the century" ever said anything
as verifiably false as these words.
The Continental Congress declared independence on July 2, 1776.
Some members signed the Declaration on July 4. The public in general believed
the leaders at the Continental Congress. They did not understand what they were
about to give up. They could not see what price in blood and treasure and debt
they would soon pay. And they did not foresee the tax burden in the new nation
after 1783.
In an article on taxation in that era, Rabushka gets
to the point.
Historians have written that
taxes in the new American nation rose and remained considerably higher, perhaps
three times higher, than they were under British rule. More money was required
for national defense than previously needed to defend the frontier from Indians
and the French, and the new nation faced other expenses.
So, as a result of the American Revolution, the tax burden
tripled.
The debt burden soared as soon as the Revolution began. Monetary
inflation wiped out the currency system. Price controls in 1777 produced the
debacle of Valley Forge. Percy Greaves, a disciple of Ludwig von Mises and for
17 years an attendee at his seminar, wrote this in 1972.
Our Continental Congress first
authorized the printing of Continental notes in 1775. The Congress was warned
against printing more and more of them. In a 1776 pamphlet, Pelatiah Webster,
America's first economist, told his fellow men that Continental currency might
soon become worthless unless something was done to curb the further printing
and issuance of this paper money.
The people and the Congress refused to listen to his wise advice.
With more and more paper money in circulation, consumers kept bidding up
prices. Pork rose from 4¢ to 8¢ a pound. Beef soared from about 4¢ to 100 a
pound. As one historian tells us, "By November, 1777, commodity prices
were 480% above the prewar average."
The situation became so bad in Pennsylvania that the people and
legislature of this state decided to try "a period of price control,
limited to domestic commodities essential for the use of the army." It was
thought that this would reduce the cost of feeding and supplying our
Continental Army. It was expected to reduce the burden of war.
The prices of uncontrolled, imported goods then went sky high, and
it was almost impossible to buy any of the domestic commodities needed for the
Army. The controls were quite arbitrary. Many farmers refused to sell their
goods at the prescribed prices. Few would take the paper Continentals. Some,
with large families to feed and clothe, sold their farm products stealthily to
the British in return for gold. For it was only with gold that they could buy
the necessities of life which they could not produce for themselves.
On December 5, 1777, the Army's Quartermaster-General, refusing to
pay more than the government-set prices, issued a statement from his Reading,
Pennsylvania headquarters saying, "If the farmers do not like the prices
allowed them for this produce let them choose men of more learning and
understanding the next election."
This was the winter of Valley Forge, the very nadir of American
history. On December 23, 1777, George Washington wrote to the President of the
Congress, "that, notwithstanding it is a standing order, and often
repeated, that the troops shall always have two days' provisions by them, that
they might be ready at any sudden call; yet an opportunity has scarcely ever
offered, of taking an advantage of the enemy, that has not been either totally
obstructed, or greatly impeded, on this account…. we have no less than two
thousand eight hundred and ninety-eight men now in camp unfit for duty, because
they are barefoot and otherwise naked…. I am now convinced beyond a doubt,
that, unless some great and capital change suddenly takes place, this army must
inevitably be reduced to one or other of these three things: starve, dissolve,
or disperse in order to obtain subsistence in the best manner they can."
Only after the price control law was repealed in 1778 could the
army buy food again. But the hyperinflation of the continentals and state-issued
currencies replaced the pre-Revolution system of silver currency: Spanish
pieces of eight.
The proponents of independence invoked British tyranny in North
America. There was no British tyranny, and surely not in North America.
In 1872, Frederick Engels wrote an article, "On Authority." He criticized anarchists,
whom he called anti-authoritarians. His description of the authoritarian
character of all armed revolutions should remind us of the costs of revolution.
A revolution is certainly the
most authoritarian thing there is; it is the act whereby one part of the
population imposes its will upon the other part by means of rifles, bayonets
and cannon -- authoritarian means, if such there be at all; and if the
victorious party does not want to have fought in vain, it must maintain this
rule by means of the terror which its arms inspire in the reactionists.
After the American Revolution, 46,000 American loyalists fled to Canada. They
were not willing to swear allegiance to the new colonial governments. They
retained their loyalty to the nation that had delivered to them the greatest
liberty on earth. They had not committed treason.
The revolutionaries are not remembered as treasonous. John
Harrington told us why sometime around 1600. "Treason doth never prosper:
what's the reason? Why, if it prosper, none dare call it treason."
The victors write the history books.
What would libertarians -- even conservatives -- give today in
order to return to an era in which the central government extracted 1% of the
nation's wealth? Where there was no income tax?
Would they describe such a society as tyrannical?
That the largest signature on the Declaration of Independence was
signed by the richest smuggler in North America was no coincidence. He was
hopping mad. Parliament in 1773 had cut the tax on tea imported by the British
East India Company, so the cost of British tea went lower than the smugglers' cost
on non-British tea. This had cost Hancock a pretty penny. The Tea
Party had stopped the unloading of the tea by throwing privately owned tea off
a privately owned ship -- a ship in competition with Hancock's ships. The
Boston Tea Party was, in fact, a well-organized protest against lower prices
stemming from lower taxes.
So, once again, I shall not celebrate the fourth of July.
[Posted originally here: https://www.garynorth.com/public/8215.cfm]
