by Robert Maynard
With Tax Day here now is a good time to reflect on the subject of excessive taxation. The subject is front in center in the budget debate in Washington D.C. as President Obama proposes to raise taxes. The subject is a hot one here in Vermont as the healthcare reform bill being thrust upon us calls for all sorts of new taxes. Those of us who strongly opposed to new taxes are portrayed as greedy. When we point to our founder’s aversion to taxation, we are told that it was only because the taxation was without representation. Now that we have representation, we should not be opposed to excessive taxation.
This response assumes that the only concern our founders had regarding taxation was that it be carried out by the proper “representation.” This was not at all the case. There were several other areas of concern that were of even more importance. Other basic concerns were the overall level of taxation, the use of taxes and how they were obtained. These concerns were summed up in the following quote by Thomas Jefferson:
“...a wise and frugal government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government.”
First of all, he insists that the government be “wise and frugal.” In other words, do not spend the taxpayer’s money wastefully. Of course, the flip side of this concern is that excessive taxation to be avoided. The second concern expressed here was the purpose of government for which taxation is used to support. Taxation was restricted for use as revenue to provide the essential services of government. Those functions were minimally defined so as to keep the overall tax burden light and the people free. Finally, our founders were opposed to direct taxes that “take from the mouth of labor the bread it has earned.” Instead they favored indirect taxes on transactions such as excise taxes and tariffs. User fees were another method of generating the needed revenue to support the limited functions of government. Excessive taxation was considered a thing to be avoided. Besides the level of taxation, the reporting of one’s income to the state was seen as an intrusive assault on our privacy. This attitude toward taxation carried over into the 19th Century.
In a 1976 article for the Freeman entitled “The Power to Tax is the Power to Destroy,” Dr. Clarence Carson quotes from an opinion put forward by Chief Justice John Marshall in the 1819 case McCulloch v. Maryland.
“That the power to tax involves the power to destroy; that the power to destroy may defeat and render useless the power to create ….“
Of course the question in this case was an attempt by the State of Maryland to tax a federal bank. Chief Justice Marshal was applying the stated general principle of taxation to the relationship between political entities. Dr. Carson simply broadened the application to include the relationship between a political entity and private citizens.
This theme is also picked up by Charles Adams, who was a certified specialist in taxation law, in his book “For Good and Evil: The Impact of Taxes on the Course of Civilizations.” The book provides a well-researched conclusion that policies of a light tax burden have long accompanied the rise of civilizations, while excessive tax burdens have been a big factor in the fall of civilizations.
“Arbitrary taxation, in despotisms to supply the wants of the ruler, in aristocracies and in oligarchies to supply the state, is perhaps still more destructive to providence than even war, …“
He concluded that the method used by the Egyptians to enslave the Israelites was excessive taxation. Taxation was seen by the Israelites as a form of tribute that set up a master servant relationship. The use of a tax collector to confiscate this tribute by force was particularly objectionable. The Israelites set up a “tithe” system when they entered the promise land in which they gave out of their own conscience to support the work of God.
Direct taxation and confiscation was an anathema to the ancient Greeks as well. Herodotus, the father of history, saw the defining relationship between the east and the west as one of freedom vs. tyranny. The central factor in this division was the method and level of taxation. Like the Egyptians, the Persian Empire was extracting tribute from the people who submitted to them. The Greeks refused to pay tribute to them and this refusal sparked the Persian War that the movie 300 made famous.
The Greeks considered a direct tax on the wealth one had accumulated to be a tool of tyranny. They only considered indirect taxes on financial transactions to be a legitimate way of raising revenue from a free people. This was an idea that out founders picked up. The bulk of the revue collected by the City States in ancient Greece did not even come from taxes, direct or indirect. The Greeks had devised a system known as the Liturgy to fund public projects. The term loosely translates as “public service” and was later adopted by the Catholic and Orthodox Churches for their worship services. It consisted of a voluntary contribution to the public good on behalf of prominent citizens. It was considered an honor and a civic duty. The name of the donor was displayed in recognition of his contribution. No tax collectors were needed as this was given voluntarily out of civic patriotism. Voluntary giving out of a sense of civic patriotism, rather than forced confiscation of wealth, was considered a more appropriate way of generating revenue from free citizens.
Today it is clear that we have strayed far from a non-intrusive revenue generation system designed to fund only the essential functions of government. Our founders would be horrified with our current tax system and would have considered it a tool of tyranny, as would the ancient Israelites and Greeks.