'Down, Down to Hell! and Say I Sent Thee!!'

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on Replacing the Income Tax Before the Committee on Ways and Means,
U.S. House of Representatives, Washington D.C., June 6, 1995.

Chairman, my name is Charles Adams, author of a 20-year study, entitled,
Good and Evil: The Impact of Taxes on the Course of Civilization
History reveals that most great empires taxed themselves to death,
while others became great because of the right kind of taxes — taxes
that stimulated growth, peace and commerce. If the Congress decides
it is time to replace the income tax, then history provides some
wonderful guides on how to do so. Let me begin with the unusual
repeal of the first modern income tax, almost two centuries ago.

European cartoonists
in the 18th and 19th centuries loved to depict taxes the people
hated as a many-headed monster, and the first modern income tax
was no exception. Britain's most renowned cartoonists, Cruikshank,
marked the repeal of the income tax in 1816 with the following cartoon.
A battered Britannia on the ground is told, "Rise Britannia!
The Monster that so long oppressed and trampled on you is at last
Subdued. Members of Parliament wielding their clubs on the monster,
shout: "Down, Down to hell! & say I sent thee!!"

No doubt a
great percentage of American taxpayers would like to send their
Internal Revenue Code, "Down to Hell, and say I sent thee!"

This British
income tax with its many schedules and concept of income was the
forerunner of modern income taxation today. It was the tax that
beat Napoleon. But when the Corsican general was finally put away
and the political issues settled at the Congress of Vienna, The
British people let their government know they despised the tax,
but accepted it for 18 years as a wartime measure only. In the debates
over retaining the tax, the leader of the opposition to the tax
received a rousing ovation when he proclaimed:

hoped that the country would rise up as one man against it…
This extension of bureaucratic power into everyday life might
be the herald of an all-embracing tyranny."

The Crown followed
with a motion to retain the income tax. When the Speaker announced
the defeat of the motion, there was "the loudest exultation
ever witnessed" within the halls of Parliament. A motion then
followed to have all the records of the tax destroyed. It was carried
— burned tax records, like dead men, tell no tales. The Crown was
a bad loser. The Chancellor of the Exchequer is said to have stoked
the fires as the records were being burned, while secretly retaining
a duplicate copy of the records hidden away in the basement of the
Exchequer Court.

Seventeen years
later the famous Reform Parliament (which abolished slavery), considered
instituting an income tax. Even the Chancellor opposed the idea
with these words:

inquisitorial powers are spoken of, where will you find inquisitorial
powers greater than those which were then [ Napoleonic times]
exercised. The tax was — detested by the whole country."

The entire
generation of Britons who lived under that first income tax had
to pass away before the Crown could pass another income tax law.
In 1842, to put the government's finances in shape, Sir Robert Peel
pushed through Parliament a simple, 3% flat tax, with stoppage at
the source. To allay any fears this tax might become permanent,
Peel promised its repeal in a few years once the government's finances
were in balance. Of course, that never happened. The tax has continued
to this day. But the low rate, flat tax, lasted for almost 70 years,
and became a shining example for proponents of income taxation everywhere,
and played no small role in the adopted of income taxes in the U.S.

In 1911, Professor
Edwin Seligman came forth with a book, The
Income Tax
, which extolled the virtues of income taxation.
He dismissed the experiences under the Napoleonic tax, "Early
complaints against the inquisitorial character of the tax have long
since well-nigh completely disappeared." That observation looks
ludicrous today, but in 1911, with 70 years of tolerable experience
under Britain's modest flat tax, how could anyone have predicted

But all was
not entirely rosy. Germany had instituted an income tax in the late
19th Century which involved extensive audits (like today), which
prompted one German legislator to acknowledge, "The country
is covered with a perfect system of espionage." But German
tax oppression would not happen in America, said Professor Seligman,
"Nowhere else are people so meek
in the face of officialdom. In no other country in the world would
it be possible to enforce so inquisitorial a procedure as we have
learned to be customary in Prussia." And what was the procedure?
The audit. The inquisitorial procedure the proponents for the 16th
Amendment said would not happen here has become a way of life for
all America, and today, most American taxpayers want out, like the
British did in 1816.

disgrace to the human race"

Our income
tax code has been in disrepute for decades. In President Carter's
acceptance speech at the Democratic Convention in 1976, he called
for major tax reform, labelling the Internal Revenue Code "A
disgrace to the human race." No one objected on the Republican
side, yet no significant tax reform came about. The whole issue
seemed to degenerate into a national debate in our major periodicals
over the deductibility of the three-martini lunch. Carter's condemnation
of the tax code was almost 20 years ago. The Internal Revenue Code
and Regulations today are almost twice as thick and certainly twice
as complicated and down right unintelligible. One of our most respected
income tax scholars, Professor James Eustice, of NYU, when asked
about certain new provisions of the tax code, said, "About
all I can do is laugh."

Polybius, the
great Greek historian of the second century B.C., said that the
best preparation for politics was the study of history — in order
to avoid the disasters of others. And one of our most revered thinkers
in the 20th Century, Oliver Wendall Holmes, echoed the same idea
in a 1922 case, "A page of history is worth a volume of logic."
However, history gives us a mixed voice when it comes to income
taxes. The early British income tax, the German income tax, and
our own income tax monster all attest to the dangers inherent in
income taxation. On the other hand, the simple flat British tax
in the latter half of the 19th Century suggests that, with the utmost
care, an income tax can be administered consistent with the spirit
of a free nation. But if not controlled, the tax, like fire, can
burn down the very civilization we seek to perpetuate. Our income
tax is a monster because of our zeal for revenue; we ignored the
lessons of history — what Polybius called, "The disasters of

Getting rid
of our current income tax may seem like an impossibility, considering
the huge national debt and deficits, but the seemingly impossible
may turn into reality if the American taxpayer, like our cousins
in Britain in 1816, has a say. Actually, the Congress and the Treasury
have been, unwittingly, digging a grave for the income tax code
for over 30 years. President Ulysses S. Grant, said that the best
way to get rid of a bad law, is to strictly enforce it, and that
has been happening to the income tax law for the past three decades.
For the first 50 years, the income tax in America was an honor system.
In my first tax audit as a professional, some 30+ years ago, a veteran
IRS agent on the eve of retirement, said to me, "You know,
our income tax system is an honor system, which is the only way
it will work in a free society." Today, the honor part is gone.
Does that mean the free society is gone as well? In a sense, yes
— although no one wants to accept that painful judgment.

Thirty years
ago the ubiquitous information return was almost unknown, and that
is why it was an honor system. Today, besides mandatory reporting
on just about every aspect of one's financial life, everything going
through one's bank account is photographed and held in storage for
the tax man to see. Our tax administration is now a spy system,
not an honor system. Does that mean there has been a tragic decline
in the honor and integrity of our citizens? Or, is there another

Almost 50 years
ago, Supreme Court Justice Jackson, who was formerly chief counsel
for the Internal Revenue Bureau, wrote, praising the tax integrity
of the American taxpayer:

The United
States has a system of taxation by confession. That a people so
numerous, scattered and individualistic annually assess itself
with a tax liability often in highly burdensome amounts, is a
reassuring sign of the stability and vitality of our system of

This praise
was repeated by many others at that time. But in 1983, Richard Neely,
Chief Justice of the West Virginia Supreme Court, made this disturbing

on federal and state income tax is all-pervasive in all classes
of society; except among the compulsively honest, cheating usually
occurs in direct proportion to Opportunity.

Justice Jackson
spoke of the rare instances of self-serving mistakes and outright
evasion — and that was when the income tax was indeed an honor system.
Justice Neely, writing almost 40 years later, saw such misdeeds
as the norm if people have the opportunity. The government has two
choices: cover the nation with even more espionage against taxpayers
as the Germans did, or get rid of the monster.

What has
gone wrong?

Rather than
attack the integrity of the people, what we are experiencing is
a broad, non-violent revolt against the tax system. Wealthy citizens
are revolting with their shoes — they take flight to more gentler
tax climes; others, not so fortunate, resort to just about anything
that works: legal, and not-so-legal. To add even more extensive
surveillance, more and more penalties, and even worse, more savage
punishments, is like adding gasoline to a smoldering fire. The better
solution is to bring in a wrecking crew and tear down the whole
disreputable edifice. The American people have had a belly-full
of a bad tax law; they are fed-up with it and with the many phoney
attempts at tax reform. They want out, and their defiance and rebelliousness
is a warning to tax policy makers. In fact, politicians who fail
to see this sign-of-the-times, had better prepare for a short-lived
political career, as George Bush learned. We saw that happen last
November. Fortunately, it was a lynching by votes. In other times
past, when taxpayer representatives approved taxes the people didn't
want, they were lynched by ropes or the headsman.

History has
not been kind to governments that taxed too much, or in ways the
people disliked. The American Revolution is a reminder we can hardly
ignore. In the French Revolution angry, over-taxed Frenchmen hauled
every tax man they could find down to the guillotine and cut their
heads off. No tears were shed when their heads flopped into the
basket. Thomas Jefferson wrote that a government needs a rebellion
every 20 years or so, and that the governors should not punish the
rebels severely, for the rebels are pointing out sicknesses to which
the government needs to give attention. Looking at Jefferson's historical
frame of reference, we discover something other writers who quote
Jefferson have ignored. There were about a dozen revolts in Europe
and America when he lived — and all of them were over taxes. His
was an era of violent tax revolts. Ours is an age of tax revolts
by everything but violence. But the revolt is real, and the message
the same.

These hearings
on replacing the Federal Income tax should be the most important
fiscal inquiries since the debates in the nation at the turn of
this century over the income tax Amendment. The outcome will determine
what kind of civil liberties we will pass on to our children in
the next century: i.e., whether or not we pass to them a tax system
that is unintelligible, corrupt, and tyrannical; or a system in
which all citizens will know that the Costs of running the government
are apportioned among the people by a standard of fairness they
can understand and see. Today, they can neither understand it, nor
see it. "Duty, honor and country" have been replaced with
beating Uncle Sam out of every penny you can, and this, to a large
extent because the tax law is, as President Carter charged, "A
disgrace to the human race." How can you expect rational Citizens
to support a law with such a condemnation?

What should
be done?

Nero in one
of his fits of madness, said that he wanted to abolish all taxes
and make a beautiful gift to the human race." Not a bad idea,
unless you want civilized life. For taxes are the fuel that makes
civilization run. But if you have bad fuel with impediments, or
not properly designed for the engine, then civilization will run
badly, and that has happened too many times in history to need explaining

Our income
tax can be likened to a dirty industrial smelter that pollutes the
air, poisons the streams, and kills the forests. It will be tolerated
so long as nothing else has been invented, and the smelter is essential
for society. Like a dirty smelter we pollute the social order with
our income tax system. We seek a society in which equality, integrity,
and liberty abound, but our current tax system pulls us in the opposite
direction. Instead of equality, we have inequality, intentionally
and deliberately fostered upon us. Instead of integrity, we have
fraud. Instead of liberty we have totalitarian surveillance and
inquisitions. In short, our income tax is a dirty tax and the more
we demand of it the dirtier it becomes. We are stuck with it because
we haven't taken the time to develop something better. Now is the
time. We need heroic leadership in matters of taxation and expenditure.
Hopefully, that leadership will begin with this Committee.

What guidance
can the past give us?

There are both
positive and negative lessons. Taxes that wrecked empires, tell
us a great deal about human nature, and about taxes that produced
the "disasters" Polybius warned us about. And then there
were taxes that were compatible with liberty, democracy and repeated
private property. We need to focus on those taxes as well. Besides
these historical examples we have the marvelous wisdom of the great
minds of the past; of men who pondered the wreckage bad taxation
had wrought, and sought out answers for the best way to tax and
spend. We need to look to these great sages of the past, and fortunately,
so many of them were prominent in the formation of the United States
200 years ago. They spoke our language. We don't need a translation.
All we need to do is listen.

1. Any permanent
forms of taxation should be as indirect as possible.

The condemnation
of direct forms of taxation as the archenemy of liberty, is a truism
over 2500 years old. It came from the Greeks and Romans who taught
that direct taxation produced tyranny. They came to that conclusion
from history — from examining the tax systems of the great empires
of their day and their past — Assyria, Babylon, Persia, and Egypt.
These were Civilizations that were devoid of liberty and respect
for private property. The Greeks concluded from history that tyranny
was the consequence of the wrong kind of taxes, and liberty came
from the right kind of taxes, like sales, imports, or taxes on Commerce.

Cicero, the
great Roman lawyer, wrote that direct taxes should be instituted
only if there was no alternative other than complete national collapse.

When Rome declined
and fell in A.D. 476, direct taxes had been in operation for over
175 years, and, at the same time, all forms of liberty had been
taken away, starting with the Emperor Diocletian, who enslaved the
Roman world to make the tax system work.

The Founders
were schooled in classical history, and their greatest sage was
from Europe, Baron du Montesquieu. His The Spirit of Laws
was quoted more than any other writer by the Founders. He picked
up the Greek and Roman theme and said that direct taxation was natural
to slavery, but indirect taxes, like those on merchandise, were
more compatible to liberty, "because it has not so direct a
relation to the person."

I have searched
through the debates at the Constitutional Convention and the debates
in the state legislatures, and there is not one word of support
for direct taxation. Madison and Hamilton wanted the power of direct
taxation in the Constitution but only for "extraordinary emergencies."
James Wilson, from New York, whom some believe was the primary architect
of the Constitution stated that direct taxes were for "all
cases of emergency." Luther Martin, a delegate from Maryland,
said direct taxes "should not be used but in cases of absolute
necessity." In the state debates, a representative, Alexander
Hanson, reasoned that direct taxes were to be held in reserve, "nothing
but some unforeseen disaster will ever drive them [the federal government)
to such ineligible expedients."

It is clear
from the writings and thinking of the Founders and of the ancient
Greeks and Romans, that a nation bent on preserving liberty should
avoid direct taxation and rely on indirect taxes, like sales and
import duties, taxes on commerce, not the individual. Add to that
historical wisdom the experience of the British under the Napoleonic
income tax. They tried to pass on to later generations that the
income tax they had experienced over 18 years was a tyranny of the
worst kind, and by destroying all the records of this hated tax,
they left a message for future generations to come. A message, we
might add that never got through to our tax makers a hundred years
ago. In this century, we have confirmed, the hard way, that the
British in 1816 were right.

2. Taxes,
whatever the format, must not be excessive.

The Founders
and the men of the Enlightenment, condemned taxes that were "excessive."
Unfortunately, they did not define the term, but they did explain
the consequences. Montesquieu, who relied on history for his judgments,
said excessive taxation resulted in "extraordinary means of
oppression." Now, that's worth thinking about. What he seems
to be telling us, is that human nature rebels against excessive
taxation. It may be a violent revolt; it may be emigration to avoid
tax; it may be evasion or fraud of some sort — but it is an iron
law of history you cannot legislate against human nature. When a
government does, in the tax field, it has to resort to "extraordinary
means of oppression." But Montesquieu does not end there; for
the inevitable consequence was, "the country is ruined."

The best definition
of excessive comes from a leader of the British House of Commons
at mid-18th Century, following the excise tax revolts against Sir
Robert Walpole. The government had to do a lot of thinking about
what had happened, and Henry Fox summed up the wisdom learned with
this observation:

All governments
must have a regard not only for what the people are able
to pay, but what they are willing to pay, and the manner
in which they are willing to pay, without being provoked to a

3. Most
important, the tax system as a whole, must be moderate.

There is an
ancient Asian proverb, "It is not the heavy taxed realm that
executes great deeds, but the moderately taxed one." This is
consistent with the Greek doctrine of the "golden mean,"
propounded by Aristotle. Virtue is the middle ground between extremes.
Tax policy should follow a moderate course in all respects: tax
rates, surveillance, privacy, punishments, even equality. It is,
in my opinion, no virtue to exempt any citizen from some tax. In
the New Testament, even the Widow paid her mite. In the Roman Republic,
the taxes of widows and orphans, however small, were set aside for
the cavalry. Taxes were paid with pride, and love of one's Country.

Tax rates should
pass the smell test, and not reek of plunder against any minority
class of citizens, like our estate taxes which today confiscate
over half the accumulated (and taxed) wealth of the rich. No wonder
they take flight and leave, for patriotism, like it or not, is soluble
in taxes. Not even a half-starved crow will sit around to be shot

should show some respect for privacy and due process. Photographing
everything in every bank account is looked upon by other Western
societies with horror, like something out of Orwell’s 1984.

Our savage
punishment of tax sinners is not only out of step with Western Civilization,
it was condemned by the great writers of the Enlightenment. Not
only Montesquieu, but William Blackstone in his Commentaries,
and Adam Smith in The Wealth of Nations. They all condemned
making tax evasion a felony. The tax evader, said Adam Smith, was:

every respect, an excellent citizen, had not the laws of his country
made a crime which Nature never meant to be so. In those corrupt
governments where there is at least a general suspicion of much
unnecessary expense, and great misapplication of the public revenue,
the laws which guard it are little respected."

and Blackstone in one voice, both said, you must not treat tax offenders
as villains.

4. There
is no single form of tax Nirvana.

Around 1750,
the famous British Poet, Alexander Pope, gave us this wise couplet:

hopes a faultless tax to see,
what ne'er was, is not, and ne'er will be.

Reliance upon
any single form of taxation has not worked well in history. Alexander
Hamilton saw this and he pushed hard at the Convention to give Congress
broad authority to tax in any number of ways. He argued this point
in The Federalist to overcome the popular view that the federal
government should only be able to tax imports. His argument was
sound. He said that if great revenues are needed, as they will be
at certain times of emergency, then a single tax will become excessive
and this will injure commerce and foster evasion with the high tax
rates that will be necessary. Better to have the power to tax all
kinds of sources, not just one source, so the rates can be moderate.

examples are easy to find. The Spanish Empire and later the super-Dutch
empire both went into decline because of heavy excise taxes that
crippled trade. The Netherlands, the superpower of the 17th Century,
was unable to compete with lower-priced, and lower taxed British
goods. An English diplomat in Holland wrote home: "When in
a tavern, a certain dish of fish is eaten with the usual sauce,
about 30 several excises are paid." Said another English writer,
"Should we in England be obliged to pay the taxes that are
here imposed, there would be rebellion upon rebellion." As
British merchants underpriced Dutch goods, Leiden was a desolate
town, its once flourishing cloth industry in a depression. The linen
industry of Haarlem had similarly shrunk. As a modern Dutch historian
has observed about the decline of the super-Dutch, "Taxation
meant the strangling of trade."

The British
eclipsed both the Spanish and the Netherlands in world markets,
supporting the government with a broad range of taxes on all aspects
of commerce and wealth. The tax philosophy of Britain's rise to
superpower status was to avoid a single primary tax, which, in the
words of one British tax writer 200 years ago, "ought to be
most sedulously avoided."

The wisdom
of Hamilton has been proven by our reliance on a single, primary
tax to carry most of the country's revenue needs: it has fostered
evasion and hurt commerce just as he predicted. There is no single
tax Nirvana, if history is to be a guide. Such schemes have had
disastrous results in the past.



the Rosetta Stone to the US Code: The History of Taxation

CD with ten MP3 files
Author: Adams, Charles
Your Price: $35.00


What should
be done? Should the present income tax be abolished? Yes — definitely
so. It has been misused; the American taxpayers have been abused;
they are fed up with it and want a real change. A flat income tax
has merit as long as it is moderate, as indirect as possible, and
as long as the Orwellian powers of the tax man are rooted out. We
may not be able to "Subdue" the tax monster as the British
did in 1816, but we must tame the beast before the faith
of the people in federal taxation can be restored.

What about
a national sales tax? A VAT? A GST like Canada, or some other form
of tax on commerce. All these forms of taxation are indirect, and
conform to the best tax wisdom of the past 2500 years. The Greeks,
Romans, the Enlightenment, the Founders, all would favor such taxes.
They have history on their side, as long as they are not too excessive
or extensive as was the excise with Spain and The Netherlands.

else? We need to explore other tax ideas, even novel or ideas that
may appear crackpot. We want a tax that conforms to and does not
buck the Wisdom of the past. This story from Henry Ford's search
for a safer car, may have some merit in our search for better ways
to tax:

Henry Ford
wanted to protect lives and injuries from shattered auto glass.
He asked the world's glass experts to make unbreakable glass for
his new models. The world's glass experts said it couldn't be done.
They knew too many reasons why it couldn't be done. Henry Ford said
to his aides, "Bring me eager your fellows who do not know
the reasons why unbreakable glass cannot be made. Give the problem
to ambitious young fellows who think nothing is impossible."
He got the unbreakable glass.

America needs
a new tax invention, something that might be possible with our modern
technology and be compatible with the temper of a free people. In
our Search for a new tax system every idea and plan to replace the
income tax, must be measured and tested against these four criteria
of a bad tax system, given to us by Adam Smith in The
Wealth of Nations

  1. The tax
    must not foster a large bureaucracy.
  2. The tax
    must not discourage enterprise, and thus deprive jobs from the
  3. The tax
    must not encourage evasion — legal or illegal.
  4. The tax
    must not put taxpayers through odious and vexation examinations
    by the tax gatherer.

to Adam Smiths four signs of a bad tax system, the four positive
factors set forth in this treatise:

  1. A permanent
    tax system should be as indirect as possible.
  2. The tax
    must not be excessive; i.e., not only what the people are able
    to pay, but What they are willing to pay.
  3. The system
    as a whole must be moderate: no savage punishments; no totalitarian
    intrusions and surveillance; uniform and equal rates.
  4. No reliance
    on a single form of tax — taxes should cover a broad range of
    the national wealth and commerce.

If we measure
our current tax system by the above eight principles, it fails miserably.
It might be necessary, if we are to have a good tax system, to give
the problem to ambitious young fellows (and gals) who think nothing
is impossible.

21, 2006

Charles Adams (send him mail)
the author of When
in the Course of Human Events: Arguing the Case for Southern Secession
and Those
Dirty Rotten Taxes: The Tax Revolts That Built America
. Much
of this material and more on this subject can be found in his book,
Good and Evil: The Impact of Taxes on the Course of Civilization

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