Since the beginning of our history, Americans have had a complicated relationship with the Tax Man. “Taxation without representation” was one of the main grievances of the Sons of Liberty, but the Revolution hardly settled the issue. Whiskey tax resistors waged an armed rebellion just a few years later, and ever since, Americans have been arguing about what constitutes “fair” taxation.
On this episode, the History Guys look at the long and turbulent history of taxation in America. How have we decided what to tax? From the Stamp Act of 1765 to the current-day Tea Party Movement, how have our attitudes about taxation changed? Do we think differently about taxes in times of war and national crisis? What was the tariff, anyway, and why did it matter?
Ed Ayers talks with Rebecca Edwards, Professor of History at Vassar College, about how gender politics played into the nineteenth century tariff debate.
Peter Onuf: This is “BackStory,” with us, the American History Guys. I’m Peter Onuf, the 18thcentury guy.
Ed Ayers: I’m Ed Ayers, 19th century guy.
Brian Balogh: And I’m Brian Balogh, 20th century history guy.
Brian: “Give me liberty or give me death.”One of the most famous catch phrases from American history, uttered on the eve of the Revolutionary War by radical patriot Patrick Henry. It’s the closing line of a speech that helped convince his fellow Virginians to take up arms against King George.
Peter: Less well known is a speech Henry gave ten years earlier. But that speech may have been the real opening volley of the Revolution. “Tarquin and Caesar had each his Brutus,” Henry declared at its conclusion, “Charles I, his Cromwell, and George III may profit by their example.” What drove Patrick Henry to taunt his king with threats of assassination? Why—a new tax, the Stamp Tax, levied by Parliament on the colonists in America.
Ed: More than 250 years later, it seems that Patrick Henry’s spirit is alive and well in America. Lawmakers impose new taxes at their own peril, and even though we’re now governed byelected officials, protesters still accuse our leaders of “taxation without representation.” People pause and they said, well, look, our income tax burden is lower than it’s been in three decades. And other people point out that taxpayers in almost every other industrialized nation fork over far more of their incomes to the government than we do, but still, taxation feels like a real problem in this country.
Brian: On today’s show, we’re going to take a closer look at the history of American attitudes about taxes. Is our distaste for them an inheritance from the colonial era? Or can we point toother events since then that have fed our suspicion of the taxman? Are there times when Americans are willing to embrace high levels of taxation?
Peter: We’re going to begin by returning to Patrick Henry. Literally. Considering what a prominent role he plays in the history—and mythology—of American taxation, we thought it might be interesting to hear straight from the horse’s mouth. So I headed down to Colonial Williamsburg, here in Virginia, where Patrick Henry, and his contemporaries, live on. Well, sort of.
Tape: Why, this is Patrick Henry?
Tape: Good morrow, sir. Indeed.
Tape: Peter Onuf, from Charlottesville.
Tape: Well, Charlottesville, sir. One of my very worthy friends and long-time associates is of that place.
Tape: Well, you know, we’ve spoken and—
Peter: After a little small talk about our mutual friend Thomas Jefferson, Henry and I strolled over to Williamsburg’s capital building. Now, if you’ve ever been to Colonial Williamsburg, you know that the 18th century never ended there. So imagine, if you will, that the year is 1765. Mr. Henry is a 29-year-old lawyer, just elected to the House of Burgesses. On his ninth day in town, he goes to the House floor to denounce Parliament’s recent Stamp Act, an act which imposes a tax on colonists who are using official documents. Colonists like newspapermen. And lawyers.
Tape: Resolved, therefore, that the General Assembly of this Colony have the only and sole exclusive Right and Power to lay Taxes and Impositions upon the inhabitants of this Colony and that every Attempt to vest such Power in any person or persons whatsoever other than the General Assembly aforesaid has a manifest Tendency to destroy British as well as American Freedom.
Peter: Not all of Henry’s fellow Virginians agree with him. Many point out that the Stamp Act was an attempt by Britain to recoup its costs from the Seven Years War, a war that kept the French out of the Virginia back country. But to Patrick Henry, that was beside the point. Thepoint was that as British subjects, the colonists had the right to be taxed only with their consent. So he waited until most of his fellow legislators had left Williamsburg and then took to the floor to make the case to those remaining that they reject the new tax. And they did, by a margin of one vote. This was the speech where Patrick Henry made that assassination remark we mentioned earlier, a remark that supposedly elicited accusations of “treason.” But when I sat down with Mr. Henry—in that very same Capital building where this went down—he insisted he was speaking as a loyal British subject.
Patrick Henry: Yes, sir. The people of Virginia have always been the most faithful and affectionate of subjects to his Majesty the King and we will happily show his Majesty all of our allegiance and our obedience so long as we are enjoying the same full rights, liberties, privileges, franchises and immunities—
Peter: Excuse me, I don’t mean to challenge your statement here and it’s obviously something you believe in deeply, but how heavily taxed are you, in fact, compared to British taxpayers?
Patrick Henry: Well, sir, I will remind you that here in Virginia we are still reeling from the debts incurred by the late war which just concluded two years ago. There’s some 500,000 pounds of paper money which is outstanding, must be redeemed and we are not reeling so heavily admittedly as are our cousins in Great Britain. I’m given to understand that their taxes are some eight times greater than ours.
Peter: Yes, indeed, isn’t there a claim that there should be equal taxation throughout the Empire. Don’t you benefit from the great expense that the British government incurred in the recent War against the French that’s created opportunities for you Virginians that are just outstanding, astonishing?
Patrick Henry: Oh, I warrant you, Sir, there were some numbers of British Redcoats in the late War against the French, but who was it who dropped their arms and ran upon hearing the war hoops of the savages coming from the trees. I submit to you, Sir, that we Virginians fought alongside and even with a greater measure of valiance than did those British Redcoats. We don’t want them here. We don’t need them here. We are quite capable of protecting and defending ourselves.
Peter: Mr. Henry, doesn’t British maritime strength protect you and your crops and your people in the Atlantic world? Could you survive without the great power of the mother country?
Patrick Henry: Oh, our ships laden with tobacco, Sir, and all of these other natural riches of this bountiful country are indeed protected by the British Navy, but to whose benefit? Is it to the benefit of the poor planter here in Virginia? Oh, no, Sir. I submit it is to the benefit of those fat London merchants and those in Bristol who are taking the lion’s share of any profits to be realized as a result of our trade.
Peter: Excuse, Mr. Henry. I’ve been traveling around the Old Dominion and observing the style of life of the planters of Virginia. They seem to live quite well, don’t they?
Patrick Henry: It is true that here in Williamsburg City at least the taverns in the evenings are filled with a great many gentlemen who are frivolously gambling away their moneys. There’re men such a Colonel Byrd, for example, who was only happy when he has a box of dice in his hands. I’m not of that number, however, and furthermore, I should wish to say to you, Sir, that I represent the people of the backcountry. There’re a great many small farmers throughout the whole of this country who are not given to such dissipation and extravagance as are these eastern aristocrats here in the Tidewater.
Peter: The militancy of your position is apparent and clearly, you are speaking to a continental audience and that you are imagining a situation in which Americans collectively could dictate to the British Imperial government what its policy should be. I want to ask you once more, though, do you acknowledge that Americans, American colonists, owe any debt to Britain? Do they have any obligations to the British Imperial state?
Patrick Henry: We have met our obligation in prior years, Sir, by answering royal requisitions. We have understood that as subjects to the Crown, that we must pay some part in the debts incurred for the good of King and Empire and this we did. I remind you, respectfully, Sir, that during the late war with the French, we received an answer to the farthing 14 Royal requisitions. Something has changed, however, in 1763 with the Treaty of Paris. Now instead of requesting monies to be raised from the Burgesses, now they are insisting that they have the right to tax us directly. We cannot allow that precedent to be established for where would it end?
Peter: That’s Patrick Henry, the firebrand legislator—and future governor of Virginia. He spoke to us with the help of his spirit medium, Richard Schumann, a re-enactor at Colonial Williamsburg. You can listen to a longer version of my interview with him at backstoryradio.org. And, if you want to ask Mr. Henry a question, put it in an email and send it to “BackStory” at Virginia.edu. We’ll pass it along to him and post his response on our website.
[music—“Yankee Doodle Dandy”]
Brian: Peter, if I’m not wrong, it sounds like there’s more at stake than just a tax revolt here.
Peter: Oh, I think that’s right, Brian. It is a certainly a tax revolt because taxes are all over the place in the run-up to the Revolution, but a tax revolt that makes taxation legitimate because every tax that you specify as illegitimate for a particular reason—no representation—
Peter: Then you’ve provided the answer of how you can exact legitimate taxes and how you might raise the level of taxation, that is, you don’t do the things that set the people off.
Peter: By, in effect, bringing the government home and by making our governors responsible to us, we govern ourselves. Then we have done the major thing that modern states have to do to make taxation legitimate.
Brian: But, Peter, it seems to me that we a pretty sweet deal as far as taxation, right? All those Indian wars. Didn’t the British pretty much pay for all of that?
Peter: Yeah. I mean, that’s crucial and a lot of historians have argued that the American tax levels went way up because of independence so if Americans really wanted to escape high taxes, they should’ve just rolled over and paid the Stamp Tax. [laughter] You know, there’s a wonderful irony here because with the territorial government system in the first phases of western development, it’s eastern states that are subsidizing these new western settlements. They cost plenty, believe me.
Brian: Those easterners, they’ve basically become the British, right?
Brian: They’re providing services. They are providing subsidized land and the people out there are not paying much taxes.
Peter: But meanwhile, those western economies develop and they achieve independence, that is, statehood, and then suddenly they find out that they have to pay taxes. You know, there are tax resistance movements in the territories against statehood because—
Brian: They don’t have pay to taxes.
Peter: They don’t have to pay taxes!
Brian: Sure, well, they learn the lesson of the British.
Peter: Right. In a way, the question is the visibility and invisibility of taxation and in the crucial early periods of American colonial history and then territorial history, tax levels are not visible, that is, because other people are paying, there’s a transfer of wealth from Britain to the Colonies in order to provide security and expansion and so forth and the beneficiaries are not aware.
Brian: And then from the east to those westerners now. Ed, I want to ask you about another transfer of tax burden, if you will. If I’m not mistaken, slaves were taxed?
Ed: Ahhh, slaves were the foundation of the entire southern economy and if you’re a part of the three-fourths of white southerners who don’t own slaves before the Civil War, you are kind of getting a bargain because the one-fourth of whites southerners who do own human property are paying the great majority of the taxes of the slave South. But as Peter said before, the problem comes when the taxes become visible.
Ed: And when they do become visible, we get a major tax revolt, what became known as the Nullification Crisis.
Brian: In a minute, we’ll hear more from our 19th century guy about that Nullification Crisis. We’ll also go where few radio shows have dared go before. Yes, we are taking on the thrilling topic of the tariff. Yeah, I see you touching that radio dial. Back off, because when we come back, I promise we’re going to make you care about the tariff.
Peter: But first, we’re going to take a short break. Don’t go away. More “BackStory,” coming up in a minute.
Peter: We’re back with “BackStory,” the show that takes a topic from the here and now and explores its historical context. I’m Peter Onuf, historian of the 18th century.
Ed: I’m Ed Ayers, historian of the 19th century.
Brian: And I’m Brian Balogh, historian of the 20th century. It’s tax season in America, and we’re marking the occasion with a look back at attitudes toward taxation over the past three centuries. When we left off, Peter and Ed were talking about the differences between visible taxes andinvisible taxes. And that brings us to a subject that has glazed over many generations’ worth of eyelids—the tariff. Wouldn’t you say, guys, that for a while at least, this was kind of the ultimateinvisible tax, so invisible that maybe you better tell me what the heck it is.
Peter: Well, very simply, Brian, the tariff is duties on imported goods collected at the water’s edge by the Customs House and, in effect, you could say those imported goods are luxuries. We don’t need them, we virtuous Americans, and if we produced for ourselves, we don’t have to buy these European gewgaws and let the rich people pay the duty, so it had the feeling of a progressive tax and it had the feeling of an invisible tax, that is, because it’s folded into the ultimate cost to the consumer. It’s not something they’re aware of paying. It was an indirect tax and it was the mainstay of American government in the early 19th century. It was the chief source of revenue.
Brian: Yeah, but let me guess that some people liked it more than others.
Peter: Well, the great thing about a tariff is it protects some people and it protects manufacturers who then have a wall against the imported goods.
Brian: Okay, the manufacturers. They’re in the North, right?
Peter: Right. But the people who don’t like it are people who rely heavily for their way of life on exports and then on imports in exchange, people like southern cotton producers who are shipping directly to European markets and they want free trade if they can get it. Free trade means that you’re going to get maximum dollar return for your product, but if you have to pay heavy import duties on imported manufacturers, then somebody else is benefiting. You’re paying a tax.
Brian: Okay. Time for a fact check here. Are you talking 19th century?
Peter: Oh, yeah.
Brian: You’re talking South. Let’s go to our man in the 19th century, Edward Ayers
Ed: I’m sitting here doing a slow burn [laughter] and thinking about that.
Brian: Everything’s slow in the South, Ed.
Ed: Yeah, well, not our revolt against the tariff. [laughter] Because there in the late 1820s or early 1830s, we see right through this thing and realize that this is conspiracy.
Peter: It’s an abomination.
Ed: It’s an abominable tariff, and what it’s doing is lining the pockets of rich Yankee industrialists while the good salt of the earth planters in the South are being exploited.
Peter: The good slave-owning salt of the earth planters of the South.
Ed: Yeah, well, that’s right. How else are you going to produce all that cotton? And so we come up with a plan we call Nullification in South Carolina and it says that any state can nullify the effect of a national law within its own borders and so what we’re going to do just not pay attention to those taxes here in our state. We’re going to nullify them. Well, to make a long story short, Andy Jackson, even though he’s a fellow southerner, says, “you will not nullify that law and you will pay that tariff because if I lose the power to tax, I’ve already lost the authority of the federal government and you’re not going to do that, so we lose. Decades go by. The 1830s, the 1840s, the 1850s. This slow burn continues. We continue to be furious at the way that it seems to us that the taxation is just stacked against us.
Brian: And is it fair to say, Ed, that one of the prices the South paid for losing the Civil War was that that tariff stayed?
Peter: Oh, it was jacked up.
Ed: Yes, if you have the bad taste to bring that up. [laughter] Yeah, and really, for the next 50 years after the Civil War, the tariff becomes really synonymous with the Republicans in the North who are kind of like the stereotypical Democrats of today. They’re the big government people. They’re tax and spend or, in this case, tariff and spend and what they’re using it for is to build up the power of the federal government, especially with pensions for Union veterans and so forth, so through the whole 19th century, the tariff is a really volatile issue. [music] There’s a historian at Vassar College named Rebecca Edwards, and she’s written about how genderplayed into debates about the tariff in the second half of the 19th century. I sat down with her recently, and she explained that politicians on both sides framed their positions as being best for the American family.
Edwards: You have a lot of men in the 1880s, for example, claiming that women want lower tariffs or women want higher tariffs. But since women themselves don’t get to go to the polls and make a decision, it’s a little hard to say, but certainly one of the real linchpins of the Republican pro-tariff argument is that it protects the American family and by that, they mean manufacturers can pay a higher wage to workers, to mail workers, and women don’t need to work outside the home for wages and the Republicans spent a lot of time pointing to what they say are the sort of horrors of free trade England where they say, you know, women are working in mines and forges, stripped to the waist and their babies are wandering around on the floor neglected because they’re doing these low wage jobs that are very degrading for women and you see this all over the place in Republican rhetoric. Benjamin Harrison, when he’s running for President in 1888, gives this speech to recent Irish immigrants and he says you came here because you wanted to have your wives and daughters protected by the tariff.
Tape: Contrast the American mother and wife, burdened only with the cares of motherhood and of the household with a condition of a woman in many of the countries of the old world where she is loaded also with the drudgery of toil in the field. I know that none more than Irishmen who are so characterized by their deference to women will value this illustration of the good effects of our American system upon the home life.
Ed: Now, very few Irish people actually went for the Republican arguments, right? So, what was the counterargument to the tariff and what would be the argument against Benjamin Harrison?
Edwards: Well, it’s clearly a big fight over working men’s vote and you see both parties trying to appeal to recent immigrants and to working men and the Democrats are probably more successfully, as you suggest, go after the consumer argument and they say, look, every time your family as you as a working man and a working family, every time you go down to the store and buy something you’re paying more because of the tariff. And they run all these cartoons showing how luxury goods like silk and velvet have a lower tariff rate than basic goods, like tin and cotton cloth and things of that sort, so they say, look, this is doubly bad because the kinds of things that the Vanderbilt family is buying or the Carnegie family, are not taxed as heavily, so it’s incredibly regressive.
Ed: So, you’ve told us in your book that there’s two different ways to think about the American family in this context—the domestic and the patriarchal. Can you elaborate on that a little bit?
Edwards: Sure. I think that the Republicans’ argument about the tariff and its impact on the family is deeply grounded in what historians would call domesticity, this model of a family in which women play a central role and really, this is the model in which women are put on the pedestal, you might say. Their job is to devote themselves to their children, devote themselves to charitable activities and to church. Really, this is a model of the family in which women are seen as better parents, better Christians, more moral, more sexually pure than men, which is really a striking change from the 18th century. If you go back further and look, women were not on the pedestal. It’s in the 19th century that this kind of Victorian ideal emerges and the idea was that women exercised influence. Now, you might ask and, in fact, women started asking—if women are so much better parents and so much more morally pure than men, why aren’t they voting? [laughter]
Ed: Because voting would dirty them. It would sully them. It’s pretty clear.
Edwards: Well, and there were actually a lot of women who articulated that argument. They said, we’re better citizens without the ballot, that we are much better citizens if we are able to be un-self-interested and as soon as we get in and start looking for political jobs and votes and voter interests, but you see women out there before they get the vote arguing for everything from white supremacy to pro-tariff to anti-tariff to a range of different things and while they often claim that they’re un-self-interested because that’s the best way to advance their arguments, women have economic interests just like men do.
Ed: So, if the Republicans tended to be associated with this domestic model of the ideal family, what about the other version, what you called the patriarchal model?
Edwards: The patriarchal model of the family is very much based on the household head being in charge and in party politics, it drives this idea that government is bad because it intrudes on or erodes the privileges of the household head and I think that’s a very powerful theme in anti-tax rhetoric. It’s also a theme in protests against the draft during the Civil War and obviously, it’s a major part of the argument to defend slavery because the government can’t come in and interfere in a branch of domestic law and in a whole other array of things, defining something like marital rape. Then there’s a range of really obvious ways in which the question is how much role should government and law have in coming inside the household and reordering or regulating domestic relationships. Those people who believed in the domestic family said, look, government can help make the family better when a husband or father is abusive or in some way the household isn’t working the way it should, government can help. Those people who were defenders of the patriarchal families said government should just stay out of our business.
Ed:That’s Rebecca Edwards, a professor of history at Vassar College. She’s the author ofAngels in the Machinery: Gender and American Party Politics from the Civil War to the Progressive Era.
Peter: What I find really fascinating about Rebecca’s interview, Ed, is the notion of protection and protection of family. What’s being protected, of course, is manufacturers and we know who benefits from that, but that notion of protection is it can take on many different forms and it really can ultimately protect the home.
Ed: And Peter, you know, to talk about protection is to enumerate threats.
Ed: And one of the big threats that emerges at the end of the 19th century is the large corporation, the large trust, and one of the central arguments offered for the emergence of the trust and its destructive impact on the family is this protective wall of the tariff.
Brian: And at the very same time, progressives are beginning to offer an alternative and that alternative is called the income tax. And in 1913, we get our first national income tax. There’s only one problem which is very few people paid that income tax. It was only paid by the wealthiest of the wealthy.
Peter: Well, Brian, believe it or not, I have word that there is a listener anxious to talk with us about the income tax. Let’s go to the phones.
Peter: Our first caller today is joining us from Cary, North Carolina. And it’s Douglas. Douglas–welcome to “BackStory.”
Caller Douglas: Thank you.
Peter: What’s your question?
Caller Douglas: Well, my question is why did the Founders initially forbid the federal government from collecting taxes directly from the people and why did we change that in 1913? How much power does that give the federal government over us that the Founders didn’t want them to have?
Peter: Oooh, okay. Great question. Why didn’t the Founders give the federal government direct tax power over the people and I’ve got bad news for you, Douglas. They did give that power. It wasn’t in the form of the income tax, of course. That’s a later development but there was a provision for the possibility of direct tax provided it applied equally throughout the states.
Brian: And what this meant was that if X percent of the population lived in Virginia, Virginians could not be taxed for more than X percent.
Peter: Yes, and the deeper question, what people are always concerned about in the antebellum period is the status of slaves and slave property. A tax on slaves by the federal government, of course, would be a wonderful revenue stream. This is most lucrative property in the entire country. Why not tax it? But if you did, all the free states or the states that are becoming free would essentially be free riders, so in a way, this is a constitutional bureaucratic snafu. The federal government has the direct tax power, but it can’t actually use it because it’s so difficult to discover a mode of taxation that’s not going to fall disproportionately.
Caller Douglas: So, why did we need 16th Amendment then in the early 1900s?
Brian: But before we get there, Doug, we got to take a stop in Ed’s century because Ed, if I’m not mistaken, that income tax was first tried out in your century.
Ed: Yes, you’re right, Brian. When the Civil War comes, it is so unimaginably expensive and so many orders of magnitude more expensive than anybody had ever seen before that they really had to imagine new kinds of taxes. They, being the North, and one idea was the idea of taxing people who had the most money proportionally to the amount of money they had and this ended up being the income tax, so it was one of the great acts of innovation during the Civil War, but they got rid of it as fast as they could as soon as the War ended, which I think could fit into what I take to be the spirit of your question which is isn’t this kind of un-American, really? I mean, if they’d really wanted to have done it, they would have done it when it wouldn’t just be triggered by an emergency. Is that what you’re suggesting?
Caller Douglas: I think that’s part of it. I see a lot of the power of taxation, I mean, particularly lately, Congress has used the power of taxation to punish people like the AIG executives when they imposed a 90% tax on those bonuses and a lot of that was grabbed during war power and I felt like the Founders didn’t want the federal government to have that ability to tax people right away and then we could change that.
Brian: Well, I think if we’re going to really get into the substance of the 16th Amendment, getting away from having to have taxes that are proportionate to the distribution of people in the population, then I think we need to talk about the growing role of the national government and the need to fund that role.
Brian: And in the simplest terms, Douglas, I think it has to do with America’s increased continuous engagement with the world in a proactive positive way. Of course, we’re always involved with the world through trade but now we lived in the world of nation states that were competing militarily in increasingly threatening ways. Also, the national government was doing all kinds of things that it hadn’t done in the early 19th century. It was worried about forest fires in the national forests. It was constructing irrigation for those people moving out west who wanted to be good Americans and to be able to farm and so it did require an amendment to allow for the possibility of an ongoing revenue source that would not be simply the matter of exigencies like war.
Ed: So, Douglas, that quite the flotilla of artillery that we’ve unleashed at you there. [laughter] I’m curious why you’re asking this and just exactly how much we’ve persuaded you with all this erudition.
Caller Douglas: Well, the reason I’m asking, I think a lot of it goes into the states’ rights and the 10th Amendment argument that we’re seeing now with the tea party movement.
Peter: You’re exactly right.
Caller Douglas: How much power would the federal government really have if it didn’t have this continuous revenue source and how much would it be if we’d left a lot of like the forest fires and the education and the roads to the states?
Peter: Yeah, but do you know, there’s a slippery slope that way, Douglas, and I think that’s the thing to think about. The slippery slope is this: if the national government is impotent and can’t do anything and I give you the Articles of Confederation, then you have the possibility not only that the states are going to take care of forest fires, education and the police powers generally, but they’re going to be armed and they’re going to be prepared to make war. Guess what? Against each other. You know, suspicion about the abuse of tax powers really is a question about the need for government itself and in some ways, anti-tax people have a sense that we don’t need the state. Southerners, for instance, in the antebellum period, didn’t want to pay those import duties because they were in favor of free trade and they thought the existence of governments was what was causing war. In fact, very you might even say idealistic utopian in their notion of a world without governments. Of course, that was a world that also was a world based on racial slavery, I have to point out.
Ed: The point being is that what you see as the people who are skeptical of government are people who believe that they’ve got it made in the market and white southerners said, look, we don’t need no freaking government, we’re handling this ourselves. We’re providing these enormous exports that are driving the entire developed world’s economy.
Peter: You’re exactly right.
Ed: Let us be free. And so there’s always this dichotomy in American ideology between fairness and freedom and this is just another example of that.
Peter: Right. Thanks for calling, Douglas. Thanks a lot.
Caller Douglas: Thank you.
[music: “The tax man’s taken all my dough and left me in my stately home, lazing on the sunny afternoon . . . ”]
Brian: Well, we really do want to hear from the rest of you out there. You can find us at backstoryradio.org or you can leave us a voicemail. The number is 888-257-8851.
Ed: When we get back, we’ll take more of your calls about the history of taxation in America. More “BackStory” coming up in a minute.
Peter: This is “BackStory,” the show that looks at the present through the lens of the past. I’m Peter Onuf, your guide to the 18th century.
Ed: I’m Ed Ayers, your guide to the 19th century.
Brian: And I’m Brian Balogh, catering to all your 20th century needs. We’re talking today about the thing Americans for many generations have loved to hate and that’s taxation.As we do with each of our episodes, we’ve been inviting your input on today’s topic at backstoryradio.org, and our producers have invited a few of the people who left comments there to join us on the phone.
Peter: Next up, we have Bo, calling in from Los Angeles. Great to have you on the show.
Caller Bo: Thanks so much.
Peter: We’re talking about taxation, a painful subject. Share your pain.
Caller Bo: Thanks. Well, when I think about taxation in early America, there’s the British tax on tea and the in later on America, it’s early tax on whiskey and I know neither of those are very popular at the time. The Whiskey Tax might be seen as quite different since it was not simply a good source of revenue, but a tax on a so-called sinful commodity. And I was thinking about these taxes on vice, that they can be seen with a very different kind of scrutiny that, on one hand, taxing a sin might be seen as recouping a perceived cost to society, either an economic cost or a moral cost.
Peter: Yeah. Well, that’s the way we think about it now, exactly. That’s not necessarily the way they think about it in the 18th century, but go on.
Caller Bo: Well, yeah, but I’m thinking that as opposed to paying back a cost, you could also perceive this as government is telling us what to do and the tax is basically like a fine on bad behavior.
Peter: So, what you’re asking is, has tax policy served larger social purposes from the beginning of American national history and before? Well, I’d just like to make one point about sin taxes and the Whiskey Rebellion and it’s important that Alexander Hamilton, the Secretary of the Treasury, when he conjured up this excise on whiskey was not thinking about the behavior of those westerners. He was thinking about establishing a crucial precedent of direct internal taxation in the case that there was a war and we wouldn’t be able to rely on import taxes, you had to have some other sources and to establish and make normal and acceptable the imposition of excises was for him key to national defense.
Brian: But, you know, Bo, what happens in the 20th century is the government and now this is lots of levels of the government, not only uses taxes to collect revenue. They use taxes to achieve what people start calling policy objectives and there’s much more policy, there’s much more state, so they give people tax breaks in order to get people to build homes and they do begin to use tax policies to stamp out sins, but here’s what’s really interesting. Even though taxes, like taxes on alcohol in the 20th century and taxes on cigarettes, start out as good faith effort to get people to do the right things, guess what happens when governments get used to those revenue sources—
Peter: They start promoting sin.
Brian: [laughs] They become very dependent on this revenue and policymakers get very worried about people drinking less or smoking less or driving less, to talk about the greenhouse effect, because gasoline taxes are going to plummet in the case of driving less, so there’s some really interesting, unexpected, unintended consequences in the 20th/21st century from attempting to influence behavior through tax policy.
Peter: Hey, Bo, we could think about state lotteries as a revenue source, right?
Caller Bo: Yeah.
Peter: It’s not exactly a tax. What do you think about lotteries? I mean, how does it affect your thinking?
Caller Bo: I always thought of— I saw lotteries as basically a tax on ignorance of math.
Brian: Bo, what would you change? What sin would you tax in order to achieve some social…?
Caller Bo: Well, __________.
Brian: Right. So, what would that be?
Caller Bo: I don’t smoke, so you can tax cigarettes all you want, I guess.
Brian: I’m sorry. Someone beat you to that.
Brian: What about something that isn’t taxed now that should be? My personal favorite is people who wear heavy perfume in elevators.
Caller Bo: I don’t want to make too many comments…
Brian: I think we should throw the tax law at them, as far as I’m concerned.
Peter: All right. Thanks for calling, Bo.
Caller Bo: Thank you so very much.
Peter: We’ve got another call. It’s from Brenda out in Des Moines, Iowa. Brenda, welcome to the show.
Caller Brenda: Thank you.
Peter: So, what’s up?
Caller Brenda: Well, I wanted to talk about an idea that I heard the last President Bush give I think on more than one occasion. The notion that the taxpayers’ money is the taxpayers’ which sounds great superficially—
Caller Brenda: And then you end up with nobody wanting to contribute to things like infrastructure. Nobody wants to pay taxes and then all of a sudden, they gripe about the potholes in the streets or to the worst extreme like that bridge that fell down in Minneapolis.
Peter: So, Brenda, what is interesting to you is what we might call a kind of collective false consciousness, if not unconsciousness. Government gives a lot and it can do that because of its tax powers, but we think it’s ours and we want to be able to pass on everything that government does.
Caller Brenda: Yeah, sort of the idea that because it’s there in my lifetime, it’s always been there.
Peter: Yeah, yeah. It’s naturalized, you might say. It’s something we take for granted.
Brian: But, I think that in the 20th century taxes like gasoline taxes have been very successful because people can see what they’re getting and what they’re getting, by the way, are roads and infrastructure, as you talked about.
Peter: But it’s not going to go for trains. [laughter]
Brian: No, and, in fact, it gets in trouble when Congress begins tapping into the highway trust fund and these gasoline taxes…
Brian: …to pay for urban mass transportation, people say, hey, they’re not driving. They’re not using our highways. They’re not paying gas taxes. How come we’re giving money to build subway systems in cities?
Peter: So, in a way, you could say that interest groups or groups that understand themselves to have a common interest then become key players in tax policy.
Brian: And they try to set aside those taxes and, of course, the granddaddy of them all is the Social Security Trust Fund. The notion that we are contributing to our own funds for our personal retirement, that money is set aside and that is the key to why Social Security is such a popular program, the notion that we’re getting back what we put in for us individually, which, of course, totally defeats the general concept of taxation which is that it needs to go for the collective good. I think, you know, people like to know what they’re getting and I’m just making a very simple point that when government does so much, it becomes much harder to know what you’re getting for your taxes.
Caller Brenda: Well, it becomes like G.K. Chesterton’s “Invisible Man” which is actually a who-dunnit about a murder that’s committed and other crimes that are committed and things. There is nobody here. Well, yes, there was because the culprit was a mailman and he just sort of disappeared into the woodwork and it’s like government itself has become like that, you know, we just assume that our food’s going to be safe because it’s been inspected and we don’t think we have to pay for it.
Brian: Yeah, and you’re back to your point about taking it for granted. I understand that but here’s another thing that happened in the 20th century, that’s lots of governments, right? You used to get taxed by your local government. You use to pay property tax. You had a sense of where that went. Now, we have the income tax, we have the federal government taxing you. We have all kind of special taxing districts and I think it becomes very hard for people to know not only what is their tax money going for but to even keep track of all the places that it’s going, so, Ed, tell me that back in the 19th century, it was much simpler and people just loved paying taxes, right?
Ed: In the 19th century, Brian, it was much simpler. [laughter] And people really loved paying taxes. It goes to the point that taxation was much more concrete. It actually makes your point very well. Working on the road was a kind of taxation—
Brian: And you literally worked on the road, right?
Ed: You did, or you paid poor guys to do it and ironically, that’s continued through the Civil War. You could pay people to fight for you, you know, but it’s very concrete. If you think about the example of the taxes that Americans have paid most willingly, even happily, they are for the one thing that the state can do that they could not do otherwise which is wage war and if you think about the sacrifices that Americans have made—
Peter: That’s a great point.
Ed: They tend to be— From rationing stamps and all these different kinds of things, they gladly do it if they say I can see exactly where it’s going, it’s to defend our freedom, but as soon as it gets less concrete than that, then doubts start to arise. Even the road—well, why don’t we just do a toll road—
Ed: Right, and so if it can be privatized, I think because Americans believe that business and profit is a kind of accountability that government does not have. I remember my dad always had a phrase when we were out doing something in the yard or something and after a while, he’d say, “well, that’s good enough for government work,” you know [laugher] and that would be our saying which just suggested, no, there’s no real reason to do it really right. If there’s no real accountability except some general sense of the common good and I think that’s the doubt that people have. No matter what great things our government does, there’s a suspicion that because it’s being done for a generalized good rather than a personal good, it can’t be as good.
Caller Brenda: Do you think this completely undermines taxes to the point where nobody wants to pay them or they don’t want to pay for streets in neighborhoods they never go to or things like that?
Peter: Well, you know, I think Ed really put his finger on it in talking about a national larger purpose that we can all agree on. I think it cuts two ways because what we have done in the modern period is given everybody a stake in society. It’s our government, it’s our country, and the way we think about it in popular terms is it’s my property, therefore, I am a stakeholder in America Incorporated and the government is responsible to me. The upside of that is when the government can make a plausible case to us or any government can that a compelling need exists, we’ll rush to do it and I think that’s the American story, but then there’s this corrosive doubt that maybe our funds are being misused and no matter where you think property comes from in the first place and we could argue about that philosophically, it is a good and powerful question to ask—where is it going, what’s it being used for and that Americans ask this question and it’s not a bad thing but if they ask it obsessively and it becomes the only thing on their minds, of course, it can be really corrosive and subversive.
Caller Brenda: Well, isn’t that sort of related to that, oh, it’s the old Roman saw, who watches the watchers?
Peter: Right. Or who listens to “BackStory.” [laughter]
Ed: So, Brian, we’ve managed to get almost all the way through our show about the history of American taxation without talking much about the most significant increase in taxation in all of our centuries. Isn’t that right?
Brian: Yeah, you’re right again, Ed. I mean, we did talk, in fairness, about the inception of the income tax in 1913, but the fact is, virtually nobody paid that income tax. It was a tax on a sliver of the population, literally millionaires. Most Americans didn’t really start paying a lot of income tax until World War II. And two things happened during World War II: the number of Americans paying income tax went from 4 million to 40 million, in fact, more than 40 million during World War II. But the second thing that happened kind of reminds me of what we were talking about earlier in the show, a certain amount of invisibility was introduced to the income tax because they start taking money right out of people’s paychecks.
Peter: Right, withholding.
Brian: To pay the taxes, so you don’t notice it as much but people don’t mind because people can see where their money is going. They feel they’re getting their money’s worth for those taxes, so there’s really no blowback from this. There’s no push back.
Ed: But, surely, that didn’t continue after World War II ended, Brian? I mean, what happened when the Nazis and the Japanese no longer needed to be fought?
Brian: Ed, this proves why you’re such a brilliant 19th century historian.
Brian: In fact, it did continue because we had another war that was a different kind of war, as you well know.
Ed: Almost like a trick question.
Brian: Exactly. No, no, that we had the Cold War and Americans were happy to keep paying taxes because it was literally their federal government that provided the military that built more atomic bombs and then more hydrogen bombs. They really had a sense of what their money was going for and the economy was growing because more people were moving into the middle class, so it really underscores that the economic conditions are really crucial to understanding when Americans will willingly pay taxes, actually kind of forget about them and when we have these flare-ups of tax revolts, so in my period, I think of Proposition 13, the California Referendum that slashed property taxes in the late 1970s. I think of the Reagan revolution which slashed marginal tax rates and the income tax. These were very tough economic times for the United States and what that meant for taxes was people became very conscious, very aware of how much they were paying in taxes at the very time that the government didn’t seem to be doing its job as we understood it in the 20th century which was job no. 1 is to maintain a healthy economy.
Peter: Yeah. Well, Brian, could you say in a way that anti-tax people beginning in the ’70s, Proposition 13 and so forth, began to make the argument that the federal government, particularly was making war against the American people and that same notion of war.
Brian: Yeah. But the new enemy is the government which brings us back to where we started. It brings us back to those southerners who were saying the government is extracting—
Peter: Brian, Brian—
Brian: In an unfair way—
Peter: It takes us back to the American Revolution itself because that’s the first great revolt against a distant, unresponsive government.
Brian: Terrific point, so if you were to start an anti-tax party today, you might want to name it the Tea Party.
Peter: You might indeed.
Brian: So this conversation is never going to end and yet we feel that we discover it over and over again, that we’re really the first generation to resist this idea of the rapidly growing federal government, things are out of control, but in many ways, this is the American conversation from the time that the nation was founded to today—what is the proper limits and bounds of the government and its involvement in our lives. What do we owe each other through the medium of the government and I don’t know if other countries have a more peaceful history of all this, but certainly it is a bright red thread running throughout American history from the very beginning to today.
[music—“Keep on smiling, pay your taxes, do it now today. Then be thankful you are living in the USA. Bless this country [with her justice] and her liberties. Keep on smiling, pay your taxes, help to keep us free.”]
Brian: Sadly, that’s all the time we have for today’s show. But as always, we’ll be waiting for you online to continue the conversation. Drop by and pay us a visit at Backstoryradio.org.
Ed: And while you’re there, sign up for our Podcast. In the next few weeks, we’ll be posting a special Podcast-only edition of “BackStory” that focuses in on the Tea Party Movement, and asks what history can tell us about that movement’s prospects for the future.
Peter: Again, we’re at BackStoryradio.org. Don’t be a stranger.
Brian: “BackStory” is produced by Tony Field, with assistance from Catherine Moore, Eric Verkerke, and Lydia Wilson. Jamal Millner mastered the show. Gaby Alter wrote our theme. BackStory’s executive producer is Andrew Wyndham.
[music—“Keep on smiling, pay your taxes, for democracy.”]
Peter: Major support for “BackStory” comes from University of Richmond, offering a combination of the liberal arts with law, business, leadership studies, and continuing education. More information is available at Richmond.edu.
Ed: Support also comes from the David A. Harrison Fund for the President’s Initiatives at the University of Virginia, UVA’s Miller Center of Public Affairs, The National Endowment for Humanities, Cary Brown-Epstein and the W. L. Lyons Brown, Jr. Charitable Foundation, James Madison’s Montpelier, Marcus and Carole Weinstein, Trish and David Crowe, Jay M. Weinberg and an anonymous donor.
Voice: Peter Onuf is the Thomas Jefferson Memorial Foundation Professor of History at the University of Virginia. Brian Balogh is a Professor of History at the University of Virginia and UVA’s Miller Center of Public Affairs. Ed Ayers is President and Professor of History at the University of Richmond. “BackStory” was created by Andrew Wyndham for VFH Radio at the Virginia Foundation for the Humanities.
Performed by Joe Bedrosian, 4/24/39 Cowell Collection, American Folklife Center, Library of Congress