I did not celebrate
the Fourth of July today.
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). A review published in the Business History Review 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 transatlantic tax burdens may
be a bit of moving target. At one point, he concludes that in the period from
1764–1775 “the nearly 2 million white Colonists in America paid on the order of
about 1% of the annual taxes levied on the roughly 8.5 million residents of
Britain, or 1/25th 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 10 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 inter-Colonial and transatlantic
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.
Was
the Declaration of Independence Built Upon a Lie?
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
obvious 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 his book, Rabushka gets to the point:
Historians have written that taxes in
the new American nation rose and remained considerably higher, perhaps three
times as much, 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 Austrian economist 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 cents to 8 cents a pound. Beef soared from about 4 cents 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.
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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
Dec. 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 Dec. 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 2,898 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.”
“There Was No British Tyranny, and
Surely Not in North America”
Only after the price
control laws were 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. But there was no British tyranny 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 British Loyalists fled to Canada and other places controlled by the
crown. 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. The
victors write the history books.
The
Boston Tea Party: A Protest Against Lower Tea Prices
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 Co., 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’m not
celebrating the Fourth of July today.
