It's Tax Time Again: Should You Feel You're Overtaxed?

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Robin L. Einhorn is the author of American Taxation, American Slavery (University of Chicago Press).

The evidence is clear, and especially around April 15. Americans hate everything about taxation—with a passion. We sometimes tell pollsters we are willing to pay higher taxes to get better public services from our governments (schools, roads, and so on), but, in a "read my lips" political culture, no campaign promise works better than the promise to cut taxes. The hatred at issue has little to do with the actual cost of the taxes. We are willing to pay hefty premiums to private HMOs, but not the taxes to finance a national healthcare system. Intermittent rounds of hoopla aside, it has very little to do with the behavior of the Internal Revenue Service either. We tolerate the hardball nastiness of the private collection agency but work ourselves into a rage at the very idea that the IRS will get serious about tax evasion. Most strangely, American antitax attitudes seem unrelated to the distribution of tax burdens. Middle-income people who pay big chunks of their earnings in payroll and sales taxes will support tax cuts for millionaires (estate tax abolition, low capital gains rates), which not only threaten the funding for the services on which they depend—but may even increase their taxes!




Americans are easily persuaded of our desperate need for "tax relief," but the fact is that our taxes are low. According to the Organization for Economic Co-operation and Development (OECD), American governments (federal, state, local) take less of our incomes in taxes than the governments of other countries with comparable economies. In 2002, American taxes amounted to 26 percent of GDP. This was only half the burden in the true high-tax countries, Sweden (50 percent) and Denmark (49 percent), and well below the average for the thirty member countries of the OECD (36 percent). In fact, taxes were lower in the United States than in all except three OECD countries (Japan, Korea, and Mexico)—which means that taxes were higher in countries ranging from Canada, Britain, and Germany to Poland, Turkey, and Greece.

Most Americans would probably agree that our hatred for taxes has something to do with a more profound aversion to government in general—an aversion with deep roots in our history. A nation founded in a tax revolt, we are told, is true to itself only when it is "starving the beast." Yet the original revolutionary objection was never to taxes in general, much less to government in general. It was to taxation without representation and government by a faraway empire. The Boston patriots who threw the tea chests into the harbor were not calling for cheaper tea. They were demanding the right to decide for themselves, in their own colonial assembly, how to tax their own tea—and refusing to let somebody else's parliament decide for them. They would have been stunned to see their protests interpreted two centuries later as attacks on taxation in general. They had no interest in renouncing their own power to tax themselves.

Nevertheless, Americans are right to think that our antitax and antigovernment attitudes have deep historical roots. Our mistake is to dig for them in Boston. We should be digging in Virginia and South Carolina rather than in Massachusetts or Pennsylvania, because the origins of these attitudes have more to do with the history of American slavery than the history of American freedom. They have more to do with protections for entrenched wealth than with promises of opportunity, and more to do with the demands of privileged elites than with the strivings of the common man. Instead of reflecting a heritage that valued liberty over all other concerns, they are part of the poisonous legacy we have inherited from the slaveholders who forged much of our political tradition.

This surprising conclusion is one of the major findings of my new history of taxation in the early United States. American Taxation, American Slavery is the first modern study of the tax policies and debates of early American history. Taking its story from the original founding of the colonies through the Revolutionary War, early republic, and antebellum period, this book exposes the powerful impact of slavery on the structure of American government and rhetoric of American politics. Despite a burst of recent studies exploring the ways our founding fathers thought about slavery, political historians still often treat the persistence of slavery as a kind of exception in stories about the growth of liberty and democracy in the United States. This is a serious mistake. Slavery was a major institution in the American economy, slaveholders were major players in American politics, and major political decisions, such as tax decisions, always had to take these facts into account. To tell a story about early American political history that ignores slavery is to miss what often was the very heart of that story.

It might seem strange to trace our antitax and antigovernment ideas to slavery instead of to liberty and democracy. Isn't it obvious that a democratic society where "the people" make the basic political decisions will choose lower taxes and smaller governments? The short answer is no. In this democratic society, the people might decide to pool their resources to buy good roads, excellent schools, convenient courthouses, and an effective military establishment. But slaveholders had different priorities than other people—and special reasons to be afraid of taxes. Slaveholders had little need for transportation improvements (since their land was often already on good transportation links such as rivers) and hardly any interest in an educated workforce (it was illegal to teach slaves to read and write because slaveholders thought education would help African Americans seize their freedom). Slaveholders wanted the military, not least to promote the westward expansion of slavery, and they also wanted local police forces ("slave patrols") to protect them against rebellious slaves. They wanted all manner of government action to protect slavery, while they tended to dismiss everything else as wasteful government spending.

But the crucial thing was the fear. Slaveholders could not allow majorities to decide how to tax them, even when the majorities consisted solely of white men. Slaveholders occasionally supported lavish government spending, but they would never yield the decision-making power to nonslaveholding majorities. Recognizing that the power to tax was "the power to destroy," they could not risk the possibility that nonslaveholding majorities would try to destroy slavery—even when the nonslaveholders insisted on their loyalty to the "peculiar institution." This was a totally different problem from whether to allow the British Parliament to tax American tea. Far from a democratic demand for local political autonomy, it was an antidemocratic rejection of all public power and public decision making. As a Virginia planter phrased it in 1829, opposing a reform that would have granted a nonslaveholding majority its fair share of seats in the state legislature, this was a flat-out rejection of anything that "put the power of controlling the wealth of the State, into hands different from those which hold the wealth." It was a flat-out rejection of democracy.

In the long period of American history before the Civil War, the demands of slaveholding "masters" often dominated the political terrain. This was true even when the masters themselves believed "that all men are created equal" and endowed with "unalienable" rights to "life, liberty, and the pursuit of happiness." It was no accident that the first southern representative to threaten that his state would secede from the Union was a signer of the Declaration of Independence. On July 30, 1776—less than a month after the adoption of the declaration—Thomas Lynch of South Carolina issued an ultimatum on behalf of his constituents. "If it is debated, whether their Slaves are their Property," Lynch warned, "there is an End of the Confederation." Unless the rest of the members of Congress agreed to stop talking about slavery, Lynch was saying, the United States would survive for a total of only three weeks!

Congress was not talking about slavery in 1776 because its members were abolitionists who wanted to act on the promise of the declaration. That was not the problem at all. Congress was talking about slavery because its members were framing a national government for the new nation—what would become the Articles of Confederation. Trying to figure out how to count the population to distribute tax burdens to the various states, the members inevitably faced the problem of whether to count the population of enslaved African Americans. Since slaves were 4 percent of the population in the North (New Hampshire to Pennsylvania) and 37 percent of the population in the South (Delaware to Georgia), this decision would have a huge impact on the tax burdens of the white taxpayers of the northern and southern states. Predictably, northerners wanted to count the total population (including slaves) while southerners wanted to count only the white population. As the members jostled with each other over this basic conflict of interest, they began to justify their positions by making claims about whether slavery was profitable and therefore made a state able to pay higher taxes (northerners said yes, southerners said no). The important point, however, is that once this issue had been opened it was impossible to prevent discussions of the injustice of slavery itself—in a Congress that had just declared that "all men are created equal."

Variations on this problem would recur over and over again. Every time northerners and southerners had to make a national decision together, they found themselves forced to talk about the practical implications of a sectionalized institution of slavery. There was no common ground here in either the profound racism of most northerners or the moral qualms of some southerners. These were debates about the implications of slavery for whites rather than about the liberation of African Americans. The problem was institutional rather than ideological—built into the very structure of the nation itself because the United States was half slave and half free. Every time a discussion of this kind began, slaveholders worried that nonslaveholders would try to abolish the institution of slavery by imposing prohibitive taxes on slaves. Thus, at the Virginia convention that debated the ratification of the U.S. Constitution in 1788, Patrick Henry worried about a federal slave tax hefty enough to "compel the Southern States to liberate their negroes." Ten years later, another Virginian (John Taylor of Caroline) expressed the same fear: that Congress could "effect a general emancipation, by imposing upon the property thus intended to be secured [the slaves intended to be freed], an excise or duty so exorbitant as to deprive it of its value."

Whether they were worrying about the federal government or about the governments of their own states, slaveholders developed three solutions to this general problem. First, they tried to guarantee that they dominated the legislative process by manipulating the representation rules. Second, they demanded weak governments that would make few of the decisions that provoked discussions of slavery. Third, they insisted on constraining the tax power through constitutional limitations on its use. Regardless of which of these strategies they were pursuing at a particular moment, slaveholders were always trying to prevent nonslaveholding whites from talking about how the institution of slavery harmed them. The goal was always to prevent situations in which the nonslaveholders would think about taxing the institution of slavery out of existence.

Yet the real slaveholder victory lay in a fourth strategy—persuading the nonslaveholding majorities that the weak government and constitutionally restrained tax power actually were in the interests of the nonslaveholders themselves. Proslavery representation rules—the infamous three-fifths clause of the U.S. Constitution and similar devices within southern states—became necessary compromises with slavery, but the other two solutions to the slaveholders' political problem became protections for the "common man." Majorities voluntarily renounced the right to regulate their society by majority rule. Giving up the essence of democratic self-government, they celebrated the outcome as democracy. The consequences would outlive the slaveholders who played such a large role in establishing this attitude toward government and taxation. Long after slavery was gone, a regime forged around preferential treatment for the slaveholding elite came to favor very different elites—commercial and industrial elites who shared little with their slaveholding predecessors except a demand that majorities renounce their right to govern what ostensibly was a democratic society.

The irony is that the slaveholding elites of early American history have come down to us as the champions of liberty and democracy. In a political campaign whose audacity we can only admire, charismatic slaveholders persuaded many of their contemporaries—and then generations of historians looking back—that the elites who threatened American liberty in their era were the nonslaveholders! Today, this brand of politics looks eerily familiar. We have experience with political parties that attack "elites" in order to rally voters behind policies that benefit elites. This is what the slaveholders did in early American history, and they did it very well. Expansions of slavery became expansions of "liberty," constitutional limitations on democratic self-government became defenses of "equal rights," and the power of slaveholding elites became the power of the "common man." In the topsy-turvy political world we have inherited from the age of slavery, the power of the majority to decide how to tax became the power of an alien "government" to oppress "the people."

Why do Americans hate taxes? Because we are truer to our political traditions than we would want to admit if we agreed to identify those traditions correctly.


Copyright notice: ©2006 by Robin L. Einhorn. All rights reserved. This text may be used and shared in accordance with the fair-use provisions of U.S. copyright law, and it may be archived and redistributed in electronic form, provided that this entire notice, including copyright information, is carried and provided that the University of Chicago Press is notified and no fee is charged for access. Archiving, redistribution, or republication of this text on other terms, in any medium, requires the consent of the author and the University of Chicago Press.


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Brian Martin - 4/16/2007

How do you reconcile the Whiskey Rebellion with your theory of slavery as the origin of American anti-tax beliefs?

William J. Stepp - 4/16/2007

Exactly. A libertarian historian who read Einhorn's book mentioned that it is two books in one. One is a leftwing pro-taxation political rant; he states the other is a good history of taxation in colonial America.
Einhorn seems blithely unaware of the fact that that there are two types of slavery: chattel slavery and taxation.
Both are forms of involuntary servitude.

Her claim that the roots of the anti-taxation movement are in the "libertarian sensitivities" of southern slaveholders is preposterous.
Libertarians are nothing if not opponents of both slavery and taxation. The antitax movement included the folksinger Joan Baez, at least for a season, and that noted slavery advocate and small business owner Vivian Kellems, who challenged the government's authority to make her withhold taxes from her employees' paychecks.
I'm interested in reading Einhorn's book. I wonder if there's a whiff of Bellisiles here.

David Pinholster - 4/15/2007

The reason that one doesn't compare taxes before the twentieth century and after is because before they were all tariffs and excise taxes, not income.
Once the government began to tax the people's labor, the people become slaves of the government.
As a student of economics, I suspect your book is yet another tired polemic against our "evil founding fathers" with a socialist's lack of understanding of economics.

Robin Einhorn - 4/14/2007

I agree completely with your general point that something having been done in the past does not necessarily make it a good idea today, much less more "American." Slavery, for example, might fit in this category.

I also agree that high taxes can pay for very undesirable things, of which wars have, historically, tended to be the most prominent and expensive.

My piece is not an argument in favor of socialism, as you suggest. Rather, it is an argument against false uses of history that stem from the fact that we have known so very little about U.S. taxes before the 20th century.

And thanks for your interest in this important topic.

Jason Blake Keuter - 4/12/2007

Something about this piece makes me think the author is simply using history to argue in favor of a present situation without really looking at the merits of the present situation. Having uncovered a secret history of greater taxation, the author seems to be weighing in that higher taxes would be consistent with our actual traditions. The implication is that historical precedence somehow justifies present policy. Those that feel we are taxed too much are thus fooling themselves and others that their anti-tax position is consistent with American traditions. The unstated point of contention seems to be: what is more American? High or low taxes.
The unstated assumption underlying the question is that we can determine what is most American by looking at what was most prevalent in our history.

Now, conceding for the moment that America's tax burden is "low", let us ask the more imporant question : what is tax money spent on and does government really need to be doing the job it uses that money for? Invariably, someone mentions infrastructure, or some other ballyhooed "public good" and argues that only government can perform such functions. In some cases, that may be true, but that argument doesn't mean that's what government is spending the bulk of taxpayers money on!

In a round about way, those who argue that our tax burden is low are really arguing for a government managed economy. Hence their fixation on taxes instead of spending, most of which is wasteful thievery.