HAPPY BELATED BIRTHDAY, AMERICA!
Photo: CBS News Philadelphia
So, now our country is two and a half centuries old. It has actually been that old for four days, even though we celebrated two days ago on the fourth. The vote for independence in the Second Continental Congress was taken on July 2, 1776, with twelve states approving the Lee Resolution, and New York abstaining. A single “nay” vote would have defeated the measure. Two days later, the Declaration's text was unanimously adopted.
Since we FAIRtax supporters are about eliminating income taxes, we must remind ourselves that taxes played a significant role in the decision to separate from Great Britain. Britain needed money to pay for the French and Indian War in 1763, which we fought as an adjunct to the Seven Years’ War in Europe. The result was the Stamp Act of 1765, requiring colonists to pay a tax on all paper documents and printed materials. The colonists saw this tax as taxation without representation.
What would have happened if the colonists had had representation? If the 2.5 million colonists had been represented in Parliament, they would have been outvoted by the estimated 8 million people who lived in Great Britain. The colonists may, however, have legitimately complained that the Stamp Act did not apply to British subjects in Britain – just to the colonists.
The Stamp Tax was soon repealed, but a series of measures under the heading of the Townshend Acts replaced it. Their purpose, among others, was to establish the precedent that Parliament had the right to tax the colonies. The Townshend Acts imposed a tax on glass, lead, paints, paper, and tea.
These taxes highlighted another reason the colonists rebelled: a doctrine called mercantilism. Mercantilism, as applied to the colonies, dictated that all raw materials be sold to the mother country, Britain, and the colonies had to buy their finished goods exclusively from the mother country.
Notably absent from the Townshend taxes was an income tax. Britain would not adopt an income tax until 1842 under Prime Minister Robert Peel of about 2.9% on incomes above £150 (equivalent to £14,678.18 today, or US$19,859.58). The tax was meant to be temporary, but we know what happens once a new tax burrows its way into the system. The Brits were way ahead of us on an income tax, but only after our country was founded.
Most of the Townshend taxes were repealed, except the tax on tea. We know what happened next at Boston Harbor in 1773.
The clashes at Lexington and Concord two years later, in 1775, highlighted the persistence of dissatisfaction with the crown, but the formal decision to separate did not occur for another year.
Eleven years following the day we commemorate today, the Founding Fathers understood the need to give more power to the central government, even though they had just rebelled from one. But they intentionally made taxing income under the Constitution difficult. Direct taxes such as the income tax had to be apportioned among the several states according to their respective numbers by adding to the whole number of free persons.
To illustrate, imagine the waiter at a restaurant bringing the check to your group, and the group leader says, “Bob, you had the scrambled eggs, so you owe this, and Joe, you had the sausage, so you owe that.” Substitute, “New York, you have x number of free persons, so you owe a, and South Carolina, you have y number of free persons, so you owe b.” Presumably, each person in New York and South Carolina would pay the same dollar amount in federal income taxes directly to the federal government, regardless of income.
So, the original Constitution did not expressly prohibit income taxes, but it effectively made the income tax flat, regressive, and cumbersome.
If our founding fathers rebelled against consumption taxes, how do you think they would respond to today’s income tax? Would they not prefer the FAIRtax as the lesser evil? Since all persons today are free (except those serving time in prison), would the Founding Fathers not embrace the FAIRtax today as taxation with representation? I would love to know what you think.
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