A review of For Good and Evil: The Impact of Taxes on the Course of Civilization by Charles Adams (Madison Books, 2001).
Why can’t American Presidents learn that if you raise taxes on the American people they will vote you out? George Bush crashed because he raised taxes, and Bill Clinton will go down as soon as the people get a shot at him. Maybe the people are awful to react to taxes in such a negative way, but the fact remains that the political consequences of raising taxes today is death.
It was not always like this. Americans pay their taxes when they support the government’s policies. They did in World War II. Irving Berlin wrote, “You see those bombers in the sky / Rockefeller helped to build them / so did I.” If, however, the government, like George III, is pursuing programs the people don’t believe in, taxation may lead to a revolution.
The problem today is that the democratic bond between the people and their elected representatives has snapped. If that proposition seems a little extreme to you, try to remember the last time Congress passed a law that you liked. You have to go back a long way. The people, by tax resistance, are saying: if you won’t listen to us on the things that are important to us, the things that determine what kind of society we live in, e.g. affirmative action, criminal justice, pornography and schools, we will do what we can to cut your money
off. Even a failed government can probably float along if it asks little or nothing from the people. Maybe a 4.3 cents a gallon gas tax is o.k., but maybe 10 cents a gallon is not. At some point, though, a little wind is going to turn the boat over.
Bill Clinton, in his August 3, 1993 oval office address said we had to “assume responsibility for ourselves, our communities and our country. No more something for nothing. We’re all in this together.” We are, he said, “on the eve of historic action.” The President, who during the campaign had promised a middle class tax cut, went to great pains to say he was not asking for sacrifices from the middle class: “80 percent of the new tax burden fall on those making more than $200,000 a year.” The plan, he explained, was fair it asked the “average working family to pay no more than $3 a month in new taxes, less than a dime a day.” The President said over and over that he was just raising income taxes on the top 1.2 percent of families.
The middle class, however, didn’t believe it. Polling taken after the talk asked: “Who will pay the most under the President’s plan?” Only 22% thought the “wealthy” would pay the most while 68% thought the “middle class” would. Forty-four percent of the people said the President’s plan asked for “too much sacrifice.” Forty-four percent of Americans, therefore, take the position that “less than a dime a day” is too much sacrifice to accomplish what the President called “historic action.” What, exactly, is going on? The White House believes, because of Republican disinformation, the public does not understand the plan. They would like it if they understood it. But the middle class understands it well enough; it just doesn’t believe the promises that the new taxes will fall somewhere else. They have been deceived and fooled so many times. Any tax bill, they believe, is going to soak the middle class because that’s where the money is. Only 33% of the people supported the President’s plan. Congress, undismayed, passed the new taxes.
The middle class suspicion that some hidden provision will get them is based on long experience. This time, the administration, in a bold move, has called the hidden middle class tax hike a “cut.” The proposed $56 billion in Medicare “cuts” are in fact, disguised tax raises. The trick is that the Budget Bill reduces reimbursement for doctors and hospitals who then make up the loss by raising fees on non-Medicare, mostly middle class patients.
The government, even before the new taxes, is asking for a great deal of sacrifice. Americans currently pay $4,660 per head in Federal tax. Not surprisingly, the polling reports that Americans believe they are heavily over-taxed. How, in a democracy, can we be taxed more heavily than we want to be? That seems like a reasonable question, particularly in view of the following chart:
Does history help explain how a democracy can be more heavily taxed than it wants to be? Charles Adams’ new book, For Good and Evil-The Impact of Taxes Upon the Course of Civilization, examines the role of taxation in history. Mr. Adams is a practicing tax lawyer and brings a practical view to his fascinating study of taxes. As he notes, behind every political event, if you dig deep enough, there is a financial or tax explanation. He believes: “Taxes are the fuel that makes civilization run, but how we tax and spend determines to a large extent whether we are prosperous or poor, free or enslaved, and most importantly, good or evil.” Taxes, in short, are the heart of the relationship between the people and government. His central thesis is that declined cultures have had bad tax systems. Rome, for example, rose to greatness under a liberal tax regime but declined under high oppressive taxes. A government or empire can’t tax too heavily and survive. People getting mad about taxes is a major force for shaping history.
Some of Adams’ story is familiar (English Constitutional History) and some controversial (American Civil War). King John was chronically short of money. The customary feudal taxes did not bring in enough money for the King, so he designed some creative new taxes to meet his needs. The barons refused to pay and met him on the plains at Runnymede in 1215 and made him promise to stop. The key provision of the Magna Carta was: “No scutage or aid, save the customary feudal ones, shall be levied except by the common consent of the realm.” The consent of the governed, in this case, meant the consent of the barons, but a great idea was born that would end up as the premise of Jefferson’s Declaration of Independence. Adams makes the interesting point that the courts construed the language “common consent” to mean that no baron was bound unless he, individually, consented. Let Congress try that one.
In the seventeenth century, following the English Civil War and the beheading of Charles I, the Parliament definitively took over the power to tax and spend. The Bill of Rights of 1689 established that there would be no taxation except by act of Parliament. For Englishmen, as Adams points out, the issue of taxation and consent was finally settled after a 500 year struggle. John Locke, in 1690, wrote:
Thirdly, the supreme power cannot take from any man any part of his property: without his own consent. For the preservation of property being the end of government, and that for which men enter into society…. It is true governments cannot be supported without great charge, and it is fit everyone who enjoys his share of the protection should pay out of his estate his proportion for the maintenance of it. But still it must be with his own consent. . . For what property have I in that which another may by right take when he pleases himself?
The American colonies, however, were not represented in Parliament and were consequently taxed without representation. Adams points out that the taxes the Crown imposed on the colonies were not oppressively large. The British taxes were modest, and the money was to be spent in the colonies for their benefit and protection. The 1764 Sugar Act was the Crown’s first and only successful tax in the colonies. The Stamp Act and Town-shend duties produced little revenue for the Crown, yet were bitterly opposed. The Crown, like Bill Clinton, thought its taxes were fair, the equivalent of “less than a dime a day,” and could not understand why the Americans were so unreasonable. Adams notes: “If revolution is the consequence of oppression, then the American Revolution should never have occurred.” Adams believes the Revolution was based on our objection to the lack of consent.