In Search of the Tax Historian

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A couple of
years ago at Amsterdam University in the Netherlands, there was
a formal cap and gown ceremony in which Dr. Ferdinand Grapperhaus
accepted an endowed chair for the History of Taxation. It was an
impressive ceremony and his acceptance address to the audience and
the academic community, was published in a fine quality booklet
form in both English and Dutch. What should make this of interest
to American academia, is that what happened at Amsterdam University,
could not happen here because we don't even have any classes on
the history of taxation, let alone endowed chairs for leading scholars
and professors. Our departments of history or economics would be
lost to find scholars, or even text books on the subject. Professor
Grapperhaus is especially well qualified having served in the finance
ministry of the Dutch government and written a number or books on
tax history, some of which have been translated into English like,
Tax Tales, and Taxation, Liberty and Property. His
Alva en de Tiende Penning, (Alva and the Tenth Penny) would
make a wonderful book for Americans. Every Dutch schoolchild learns
about the tenth penny, an excise tax of 10% instituted by the Spanish
government on the Dutch people by the cruel Duke of Alba. Like our
Boston Tea Party, this unpopular tax set off the Dutch rebellion
against the Spanish in the 16th century. After an 80-year struggle,
the Dutch expelled their Spanish rulers, and gave birth to the United
Provinces of the Netherlands, from which we adapted our name and
much of our economic, political and fiscal culture. But, unfortunately,
most American history scholars and students know relatively little
about this most important historical event which inspired our own
history and secession from the British Empire. We are ignorant because
our educators, even our great universities have never focused on
tax history. We don't even appreciate our own tax history, which
is really an amazing and fascinating story. Our Founders and our
ancestors in the 19th century were endowed with an anti-tax character
rivaling the most fanatical tax rebels throughout history. If there
was one thing the Americans in the first century of the Republic
hated, it was taxes – with or without representation.

Tax history
in America is an orphan. It has no family of scholars to care for
it. The study embodies a full range of human experience. There is
the lighter side of tax history, the fascinating stories, what I
like to call the "fun-stuff." My favorite story has been
called the "ice-cube and Frederick The Great." He called
in his chief tax minister and wanted to know why the people were
paying so much tax, and his treasury was bare. The minister called
for a cube of ice and gave it to the member of the king's council,
farthest from the king, with instructions to pass the ice on up
to the king. About all Frederick got was a wet hand. At the other
extreme, on the tragic side, we could look at the French Revolution.
No tar and feathering of his majesty's tax men, as in America, the
French, revolutionaries used the guillotine. The most tragic for
civilization was the beheading of Antoine Lavoisier, one of the
great scientists of that era, who discovered the roll of oxygen
in combustion. He pleaded with the Revolutionary Tribunal to spare
his life for as a scientist he had much to offer France. The Tribunal
replied, "The Republic has no need for geniuses." Lavoisier's
crime was having been a part-time tax farmer, and all tax farmers
who could be found, ended up in the guillotine.

While tax history
is filled with innumerable interesting stories, some with humor
and other's deadly, yet those stories are only the seasoning for
the main study and make fascinating reading. Our Founders lived
in an academic world where taxes were all important, and not just
fun-stuff. Baron de Montesquieu, whose The Spirit of Laws so
inspired our Founders, was the book most widely read and studied
by them above all others. Montesquieu focused on taxes throughout
his book as he developed his theses and interpretations of history
and political events. He condemned direct taxation, and you can
see that in our Constitution, which required the 16th Amendment
to permit income taxes. But Montesquieu wasn't the only scholar
to focus on taxes, in what would appear to us to be studies where
taxation had no place. William Paley's popular book in 1788, The
Principles of Moral and Political Philosophy
, is filled
with tax commentaries and analysis. So also, Henry Home Kames, a
1779 book, Sketches
on the History of Man
. This world history treatise is filled
with lengthy discussions on taxes. These scholars of over 200 years
ago saw taxes as crucial whether in the study of history or philosophy,
which means that the Founders and men of letters of that period
were well educated tax historians. It would not be inaccurate to
say that the mark of an educated man at that time, required an extensive
knowledge about taxes, tax history, and tax ideas. Strangely enough,
today's intellectual historians have not picked up on that. To show
how far we have retreated from their interest in taxes, a recent
award winning book on the history of liberty in America never even
mentions taxes! Inconceivable, yet true. Of course, Adam Smith's
economic text was filled with tax matters, but that was to be expected.
The big surprise comes from subjects, which by our way of thinking,
should have nothing to do with taxes, and yet, to the 18th century
thinker, taxes are an important subject, not be ignored. Obviously,
from reading these treatises, to them, taxes were what made civilization
possible — the fuel that made civilization run. A view that seems
hard to dispute despite our apparent disinterest in the subject.

Justice Oliver
Wendell Holmes remarked a century ago, that he "liked to pay
taxes because with them he bought civilization." His words
on the virtue of taxation are chiseled in stone over the entrance
to the Internal Revenue building in Washington D.C., "Taxes
are what we pay for a civilized society." Holmes's liking of
taxes, is not in accord with Americans of the 19th century, and,
considering the anti-tax thinking of that century, it is no wonder
our tax people have chiseled it in stone to preach the virtues of
taxation to an anti-tax people, who had over 150 years hated taxes
with a passion. Yet, in all fairness to our anti-tax ancestors,
the rates Justice Holmes "liked" to pay at that time were
a pittance compared to what he would have paid today. Today's tax
advocates would certainly not want to quote the Founders, like Patrick
Henry or Thomas Paine to name the most forceful anti-tax patriots,
or a century later, the last of the great leaders of the Adams family
in Massachusetts. Brooks Adams wrote in the Atlantic Monthly
in 1878:

All taxation
is an evil, but heavy taxes, indiscriminately levied on everything…
are one of the greatest curses that can afflict a people.

Could you imagine
our tax gatherers chiseling that in stone over the IRS building?

A few years
earlier in the first year of The Nation magazine (that is
still with us) the editors focused on the evils of the income tax,
which it was believed at that time, could only be justified as a
war tax. The objection was in the administration, which like all
bad taxes, said The Nation, put people at the mercy of the
"tax gatherers, who in all ages have been regarded as the most
odious of mankind." This view, unfortunately, comes to the
surface all to frequently with income tax systems in the modern
world. You might ask, what happened to the anti-tax aspect of the
American character? Why have we been willing to tolerate "the
most odious of mankind." in our lives. Our current editors
of The Nation would certainly wince at the words of their
editors in 1865, and so would the editors of The Atlantic
Magazine with Brook Adams's condemnation of "all taxes."
Mainstream magazines just don't do that anymore. Even CBS's Mike
Wallace on "60 Minutes" no longer undertakes to publicize
the misdeeds of the IRS, long one of his favorite targets. And every
March and April the mainstream media publicizes harsh punishments
meted out to tax resisters and evaders who have come under the boot
of the tax man — as a public service to the tax gatherers, to encourage
full compliance with the income tax law. Not a word about our rebellious
ancestors and Founders. John Hancock, famous for his bold signature
on the Declaration of Independence, was a notorious tax evader.
He was wanted for evading millions in British taxes.

In trying to
find answers to why we have lost our anti-tax character I discovered
that in the 19th century our education system enlightened students
on their anti-tax past. It was common practice in schools to have
students memorize the words of Edmund Burke, trying to promote reconciliation
with the Colonies. His speech in the Commons in 1775, is a great
example of the world's best oratory in an age that excelled with
great orators. Said Burke:

The fierce
spirit of Liberty is stronger in the English Colonies probably
than in any other people on Earth…. They are therefore not only
devoted to Liberty, but to liberty according to English ideas….
It happened, you know Sir, that the contests for freedom in this
country were from the earliest times chiefly upon the question
of Taxing….

The Colonies
draw from you, as with their life-blood, these ideas and principles.
Their love of liberty, as with you, fixed and attached on this
specific point of taxing. Liberty might be safe, or might be endangered,
in twenty other particulars, without there being much pleased
or alarmed. Here they felt the pulse, and as they found the beat,
they thought themselves sick or sound.

With America's
school children memorizing these words, it is no wonder that taxes
in the 19th century were looked upon with contempt and
even hatred as the one great danger to the liberty of the American
people. A British periodical,The Quarterly Review, during
our Civil War, lamented the tragedy of the war, for here was the
greatest democracy of all time, "a great experiment… designed
to teach nations wisdom, and to confute the prejudices of old times."
And now, tragically, tearing itself asunder, engaged in uncivilized
warfare, almost unparalleled in history for its slaughter and destruction
of civilized life. Yet, America did produce two important things,
said the editors — a government that was cheap, and taxes that were
low. For that, it will be remembered. Today, of course that is gone,
and the tax historian, as well as intellectual historian, needs
to probe and find out why and how this attitude changed so dramatically.
It changed the course not only of American history, but of world
history as well. Such is the importance of the study of taxes. So,
why is it not worthy of serious attention as a major study, with
endowed chairs as at Amsterdam University? We have created all kinds
of new studies for Native Americans, homosexuals, African Americans,
and for woman, like the prestigious Institute for Women and Gender
Studies at Stanford University. But where do we study taxes and
their influence on the course of history? Taxes could be much more
important than we ever realized. Freud taught that sex was the key
to understanding human personality, it just may be that taxes are
the key to understanding civilized society. If you want to get a
birds-eye view of any nation, find out who is taxed, what is taxed,
and how taxes are collected and spent, and that will probably tell
you more about that nation than any other factor.

The ancient
Greeks focused on this truth when they came to the conclusion that
civilization and freedom were incompatible. The reason? All civilizations
up to that time (Egypt, Babylon, Assyria, Persia, the Greek city-states
ruled by "tyrants") had been sustained by heavy taxes
which had a powerful enslaving factor. The Egyptian civilizations
did not even have a word for liberty. The Greeks concluded that
their civilization was compatible with freedom because they limited
their taxes to commerce (indirect taxation) where the tax was assessed
on a sale, import, or other commercial activity. A direct tax on
the person or on wealth was anathema to liberty, or so the Greeks
taught. Of course the Greeks didn't hesitate to levy a direct tax
on aliens, slavery in all its aspects, and during war-time, taxes
on wealth were assessed. But, they had an alternative during peacetime,
what they called the liturgy, an alternative to progressive
taxation. When a city needed a new building, a bridge, a play, even
rowers for the navy, it was the rich who came forward to provided
the funds and management of the enterprise. The rich often competed
for the privilege of providing for the needs of the city, and they
were honored for doing so. Xenophon, a Greek student of Socrates,
records a dialogue between Socrates and a rich Athenian in which
Socrates reminds his wealthy friend:

I notice
that the city is already laying heavy expenses on you, for keeping
horses, financing plays, gymnasiums and important functions, and
should war break out, I know they will impose on you the costs
of naval vessels, soldier's pay and contributions so great you
will not find it easy to bear.

The rational
for the liturgy was that persons of wealth should voluntarily shoulder
most of the expenses of their city. Public generosity was their
just duty for the unequal share of the riches of the community that
they enjoyed. By and large the rich did not give begrudgingly. Many
of the great buildings in Greece were built by rich benefactors
competing for the honor. Xenophon reports Socrates words, reminding
his rich friend of his obligations to Athens for revenue sharing:
"If ever you are thought to have fallen short in the performance
of these duties, I know the Athenians will punish you just as much
as if they had caught you stealing their own property."

The above glimpse
into ancient Greek tax history is filled with wisdom and lessons
our own tax makers could benefit from learning. High tax Western
nations try and solve the problem of progressive taxation with tax
confiscations, with rates that at times have left very little wealth
or income for the owners and earners, with rates for income above
90% and death taxes not much lower. With such rates, we wonder why
so much great wealth seems to disappear, as if by magic.

We provide
no honor for the rich for tolerating the confiscation of their wealth
for the national treasury and governments to spend. Nor do we take
cognizance of the loss of liberty we have suffered by a tax system
that was once an honor system 50 years ago, and which is now a spy
system. Our nation is covered with a perfect system of espionage
against all citizens and residents by the tax gatherers. The Greek
observation that civilization is prone to destroy liberty seems
all to true for the tax system we have been developing. Perhaps
if we as a nation had the knowledge and awareness of the Greek viewpoint,
we may be debating how to eliminate a tax system bordering on tax
slavery, rather than how to deal with tax surpluses and expenditures.
The tragedy with our tax tyranny (to use a word our Founding Fathers
loved to use), is that no one cares, probably because no one knows
any better. If history makes men wise, as Sir Francis Bacon said
three centuries ago, the antonym for taxation, could be that the
lack of a knowledge of tax history makes for tax follies and an
unwise (stupid?) tax system, dangerous to liberty and bringing much
misery to taxpayers. Or, as the ancient Greek historian Polybius
put it around 125 B.C. — "The best preparation for politics
was the study of history in order to avoid the disasters of others."
Isn't it a disaster for a nation that prides itself on liberty,
to have a tax system that has all the indicia of totalitarianism?
A few years ago, Representative George Hansen of Idaho, went to
the powerful tax-making committee of the Congress, the Ways and
Means Committee, and complained about IRS abuses and misdeeds. He
urged the Committee to investigate. His request fell on deaf ears,
with the response that they (the Committee members) were "scared
to death of what the IRS might do to them." Yet this phenomenon
has been the way of most income tax enforcement throughout its brief
history.

The income
tax was invented by the British and has been called, "The tax
that beat Napoleon." But even the British inventors, scrapped
the tax when the war ended, and then destroyed all the records so
it could not be reinstated. There is little doubt that our government
has created an income tax monster over the past 50 years and the
makers are as much afraid as the taxpayers. Isn't that the problem
Dr. Frankenstein faced with his monster? With any knowledge of tax
history, could this not have been averted?

Montesquieu,
to cite just one important example of good tax history in his marvelous
book, pointed out how serfdom came to Russia — not during the medieval
period, as in the West, but starting in Moscow, in the 16th century.
Taxpayers were free men but abused by the Tsar's tax men. Their
only escape from outrageous tax administration, was to surrender
themselves to powerful nobles, and thus get off the tax rolls. This
wholesale escape brought freedom from the tax man, enslaved the
workers and peasants to a powerful aristocrat, and so serfdom was
born in Russia and lasted until the l860s when the Tsar, Alexander
II, freed the serfs at the same time we freed our slaves. This flight
of taxpayers to serfdom to avoid abusive taxes happened over a thousand
years earlier, in Rome, when Roman taxpayers found the same avenue
of escape and thus brought an end to the ancient world and gave
birth to the Middle Ages — a society of serfdom to one's Lord from
top to bottom. Today, and even throughout the early modern period,
we saw the flight of taxpayers once again, this time to the New
World — overtaxed Spaniards, Dutch, French, Irish, Scots, English,
the list goes on and on. More people immigrating to the New World
to avoid Europe's hated taxes than any other reason — until the
20th century. The tax historian will show us that angry and over-taxed
Europeans came to America for tax freedom. An Irishman wrote back
to his former home in Ulster in 1720:

Tell all
the poor folk of ye place that God has opened a door for their
deliverance… all that a man works for is his own, and there
are no revenue hounds to take it from us here; there is no one
to take away yer Corn, yer Potatoes.

We
all know, to a limited extent, that taxes had a role in our own
Revolution, the French Revolution, the British Civil War, Magna
Carta, Dutch independence, as well the fall of the Spanish Empire.
But the role of taxes doesn't end there, in ancient times, over
taxation has long been considered the reason Rome collapsed. And
in the Old Testament, the 1500 years of Hebrew history is composed
of one tax struggle after another, causing the Lost Tribes of Israel,
the Babylonian Captivity, and Jewish struggles in both the Hellenistic
and Roman periods. What other factor has had such an impact on the
course of civilization, comparable to taxation? Yet we banish it
from academia — making it a relatively unimportant subjects, not
worthy of special emphasis or focus. There are no prestigious institutes
for the study of taxes as a force or catalyst of history — no endowed
chairs and no institutes, even courses. We have developed many special
studies for a host of new disciplines for minority groups, but what
have those new special studies had to do with the great dramas civilization
has been involved in? None that come to mind. Homosexuality was
pervasive in Roman society, even with the emperors, but did it have
anything to do with Rome's greatness? Rome's demise? Elizabeth I
was perhaps the greatest monarch Europe ever had, and her tax and
fiscal policies put England on the road to greatness, above all
other European states. But does the fact that she was a woman have
anything to do with her remarkable achievements? With her genius?

What
I have tried to do here is to point out some of the fascinating
aspects of tax history — not a study in tax rates and systems, but
in how taxes have made history, and directed the course of civilization.
It would be wonderful to see our teachers and schools pickup on
the tax events of the world — to bring taxes into proper focus,
and to hope the wisdom of history may rub off on our tax makers
and rid us of a tax system bordering on insanity, or as Jimmy Carter
said about our tax code, "A disgrace to the human race."


January
2, 2007

Attorney
Charles Adams (send him mail)
is
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,
For
Good and Evil: The Impact of Taxes on the Course of Civilization
.

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