In Search of the Tax Historian


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