The ancient Greeks equated taxes with Tyranny. And they were probably not the first people to apprehend that taxes crush personal liberty and reduce the wealth of nations not only by transferring private property and hard-earned income to the public sector, distorting market price signals, and fueling the expansionist proclivities of the state, but by spawning abusive bureaucracies to collect them. Among the many tales Charles Adams tells in his wide-ranging history of taxation, For Good and Evil: The Impact of Texas on the Course of Civilization, the officials sent by Rome to collect taxes in Asia Minor during the first century B.C. had the authority to scourge and to behead tax dodgers. Confronted by tax collectors imbued with the arrogance of bureaucrats and the power of military executioners, taxpayer compliance attained levels to be envied by modern-day revenue agents. In his book, Those Dirty Rotten Taxes; The Tax Revolts that Built America, Adams focuses on Americans proud heritage of resisting unfair oppressive taxes. From the Boston Tea Party to todays efforts to abolish the IRS, tax protestors have exerted an enormous impact on American Politics explains.
The American colonists were driven to the point of rebellion by the heavy hand of royal excise taxes, which were imposed in England on a variety of basic items, including liquor, tea, coffee, soap, and salt, and which many had fled to America to escape. Hoping to free themselves from the tyranny of the state (Bernard Bailyn, The Ideological Origins of the American Revolution), and inspired by the writings of John Locke (Two Treatises on Government) and Thomas Paine (Common Sense, The Right of Man and Other Writings), the Boston Tea Party was one of the most conspicuous of the colonists tax protests, but the Stamp Tax was perhaps more pervasively galling. It became a source of outrage, not because tax rates were particularly high (though some were), but because it was so intrusive, touching myriad aspects of daily life. No contract could be negotiated, no business could be opened, no property could be transferred, no marriage could be solemnized, and no newspaper, pamphlet, or other printed material could be sold without the proper documentary stamp.
Ironically, soon after the colonists shattered the yoke of British rule, the hated excise tax once again become an important tool of American public finance. The external taxes (import tariffs) which were the new federal governments chief source of revenue proved inadequate for paying off its Revolutionary War debts and financing its routine. Prodded by secretary of the treasury Alexander Hamilton to excise its constitutional authority To lay and collect Taxes, Duties, Imports and excises, Congress enacted selective excise tax on whiskey, of seven cents per gallon in 1792.
Perhaps momentarily forgetting one of the sharp lessons, just taught to ancient regime France by Doctor Guillotine, Congress delegated the enforcement of the whisky tax to private tax collectors under a tax-farming system. The tax collectors, who had broad authority to search for and to seize bootleg whiskey, received four percent of their tax take. (Another one percent went to the directors of the 14 administrative districts.) Given the incentives for vigorous law enforcement created by the tax-farming system, it is not surprising that the whiskey tax collectors were hated nor that their zeal was often rewarded with tarring and feathering.
Grievances against the tax were particularly strong in western Pennsylvania, where cost-conscious farmer converted their rye into whisky before shipping it to market in Philadelphia. Believing that the tax discriminated against them, the farmers rebelled. Described in fascinating detail by Thomas P. Slaughter in The Whiskey Rebellion: Frontier Epilogue to the American Revolution, a military confrontation between the farmers and the 2,500 militiamen led into the field by President Washington personally was narrowly averted. The rebellion collapsed in the face of such overwhelming force; in return for promised pardons, the rebels signed a solemn promise to submit to the whiskey tax and any future federal edicts as well.
Alexander Hamilton had proved his point. The new federal government was a force to be reckoned with. Carriages, snuff, sugar and salt were soon added to the list of taxable items. Though most of these Internal taxes were later repealed by Thomas Jefferson (the salt tax continued in force), Hamiltons successful use of moral suasion to secure enactment of a tax on some-thing people ought not to consume in the first place (for their own good, of course) began an American tradition of sin taxation that has long since expanded beyond the conventional evils of smoking, drinking, and gambling, to encompass all sorts of politically incorrect behavior, such as driving luxury cars, burning fossil fuels, depleting the ozone layer, eating unhealth snacks, hunting, fishing, and working too hard.
The evolution of selective excise taxes as weapons in moral crusades past and present to control consumption choices and (not incidentally) to help feed Leviathans insatiable revenue appetite is traced in the Independent Institute volume, Taxing Choice: The Predatory Politics of Fiscal Discrimination. As this book amply demonstrates, cloaked in the guise of social costs and user fees, public health scares and environmental alarums have been elevated to crisis proportions, displacing war ad depression as the accepted pretexts for pushing back the limits of taxpayer resistance to the growth of government. Robert Higgs emphasizes this point in Crisis and Leviathan: Critical Episodes in the Growth of American Government, a modern classic thankfully available again.
Taxing Choice also shows how selective excise taxes have historically served as stalking horses for probation, and that the gangsterism and widespread disobedience of the law that predictably follow criminalizing trade produce substantial benefits for local and federal law enforcement agencies, expanding their bureaucratic domains, increasing their budgets, and with the advent of civil-forfeiture statues, allowing them to share in the plunder from selling assets seized while making arrests. The Bureau of Alcohol, Tobacco and Firearms is, at bottom, chiefly a tax collection agency.
And then there is the IRS. Recent congressional hearings have documented what every income tax-payer knew, namely that tax collectors have for many years been running a quasi-legal shakedown operation. The abuses of taxpayers rights are legendary. Many of the horror stories are recounted in chilling detail by George Hansen (To Harass Our People: The IRS and Government Abuse of Power), David Burnham (A Law Unto Itself: Power Politics and the IRS), and the first and last official IRS historian Shelley L. Davis (Unbridled Power: Inside the Secret Culture of the IRS). Whilst Congress has been forced to curb some of the agencys worst offenses, the confrontational relationship between taxpayers and tax collectors remains.
What is to be done? Making fun of government (P.J. ORoukes Parliament of Whores: A Lone Humorist Attempts to Explain the Entire U.S. Government, John Kohuts Stupid Government Tricks: Outrageous (But True!) Stories of Bureaucratic Bungling and Washington Waste, and anything by H.L. Mencken are among the best introductions to Washingtons comic villainy; unfortunately, though, the jokes are on us and continuing to document its systematic tramplings of personal freedoms (see James Bovards Lost Rights: The Destruction of American Liberty) are good places to start.
A more concrete reform proposal can be found in Alvin Rabushkas and Robert E. Halls The Flat Tax, which lays out the intellectual case for the tax simplification plan supported by Steve Forbes and Dick Armey. Replacing income taxation altogether with a broad-based consumption (national sales) tax is another measure now being reconsidered. No matter how well-intentioned its supporters may be, one drawback to any proposal to revise the tax code is that special interest groups have stakes in shaping the proposals legislative specifieswhat the precise tax rate will be, what items will or will not be included in the tax base, and so on. When the distribution of tax shares is put up for grabs, special pleaders are galvanized to push their groups points of view and politicians are afforded the opportunity to extract roots from them in return for promises to act favorable (or forbear from acting unfavorably) Wined and dined by the denizens of Gucci Gulch, the tax writers prosper at taxpayers expense. All is not necessarily lost (see Milton and Rose Friedmans Tyranny of the Status Quo), but the Iron Triangle will not yield without a fight.
A return to first principles is called for. The lessons taught by Frederic Bastiat (The Law: The Classic Blueprint for a Free Society) and Albert Jay Nock (Our Enemy, the State) must be relearned. The scope of government must be scaled back to the narrow limit defined by its core functions of safeguarding life, liberty and property. Its myriad programs and agencies that serve as instruments of legalized theft through taxation, regulation, and income redistribution must be dismantled. This is a job not for starry-eyed reformers but for realists who constantly bear in mind James Madisons reflections on human nature in Federalist Paper No. 51 (The Federalist Papers). Men are neither angels nor are they governed by them. Better government can only be molded by placing binding constraints on whoever hold those offices.
In the meantime, personal achievement and happiness are still possible for most Americans provided we escape or avoid the self-imposed traps that keep us from enjoying fully what liberty we still have, as Harry Browne reminds us in his classic, How I Found Freedom in an Unfree World: A Handbook for Personal Liberty.
A bedrock assumption of public choice, a school of thought, founded by James M. Buchanan and Gordon Tullock (The Calculus of Consent: Logical Foundations of Constitutional Democracy) and cogently summarized in Beyond Politics: The Roots of Government Failure by Randy Simmons, is that all humans action, whether of the governed or their governors is animated by self-interest. Perverse public policies which produce outcomes at odds with their stated purposes, such as the sorry record of government interventions into labor markets documented by Richard K. Vedder and Lowell E. Gallaway in their bestselling Out of Work: Unemployment and Government in Twentieth-Century, are not usually the result of error or of ignoranceafter all, mistakes can be corrected and ignorance can be dispelledbut of the purposeful pursuit of personal gain self-styled policy wonks who think they know better than mere mortals how to allocate the economys scarce resources (what Friedrich Hayek calls The Fatal Conceit: The Errors of Socialism), operating under a set of institutional incentives that supply them with larger payoffs for responding to the demands of special interest than for tending to the more general interests of the taxpaying public.
The constitutional fetters must be reattached so that the fetters binding markets can be released. Read Hayek, read Friedman, and read Rothbard (For a New Liberty: The Libertarian Manifesto). Then fight back.