on the Fourth of July
by Gary North: Never
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.
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.
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.
these words in the Declaration of Independence:
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.
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.
article on taxation in that era, Rabushka gets to the point.
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
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.
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."
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
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.
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."
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."
the price control law was repealed in 1778 could the army buy goods
again. But the hyperinflation of the continentals and state-issued
currencies replaced the pre-Revolution system of silver currency:
Spanish pieces of eight.
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.
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
American loyalists fled to Canada. They were not willing to
swear allegiance to the new colonial governments. The retained their
loyalty to the nation that had delivered to them the greatest liberty
on earth. They had not committed treason.
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."
write the history books.
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?
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.
North [send him mail]
is the author of Mises
on Money. Visit http://www.garynorth.com.
He is also the author of a free 20-volume series, An
Economic Commentary on the Bible.
2011 Gary North
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