The philosophy of taxation

Originally published on Argus Leader Media’s Political Smokeout blog on Feb. 5, 2013. Modified and reposted with permission here.

Dating back to ancient times, to be taxed was viewed as being to some degree unfree. More precisely: to be directly taxed was viewed as being unfree.

To the ancient Greeks, direct taxes “were an offense to the dignity of the citizen. State revenues from publicly owned property were acceptable, as were taxes on foreigners and limited indirect taxes. But the citizen would not have his money taken from him at the behest of some leviathan” (James Macdonald, “A Free Nation Deep In Debt: The Financial Roots of Democracy.” pp. 32-33).

To raise money for vast undertakings (read: wars) without taxes, free societies instead resort to expediencies such as forced, repayable gifts. Citizens would be obligated (by social pressure if not by law) to give freely of their fortunes to the state, which would then repay this donation out of the spoils of the presumably victorious war.

Direct taxes were only levied by despots, tyrants and emperors.

Later on, as various Germanic tribes set up successor states around the remnants of the Roman Empire, they shared beliefs about freedom. As conquerors, “the Goths and the Franks were not subject to tax any more than other successful tribal conquerors in past times” (Ibid., p. 61).

Indeed, the word “Frank,” the name of a tribe, increasingly began to acquire another connotation — “‘free’ — and especially ‘free from tax’” (Ibid., p. 61). (The word “franchise,” in terms of “having the franchise” or having the right to vote, is another descendent of this meaning of “Frank.”) The nobility of France would maintain their exemption from direct taxation until the verge of the Revolution. The social inferiors of the nobility, descendants of the conquered, not conquerors, had no such exemption and so bore most of the tax burden.

The medieval Italian republics shared this same aversion to taxation: “Like the Athenians of ancient Greece, the merchants of Venice disliked taxing themselves. Indirect taxes were easier to collect and fell on every resident and visitor…” (Ibid., p. 72). As the costs of the incessant wars of the Middle Ages mounted, Venice and other republics relied on loans from their citizenry — increasingly compulsory loans.

These repayable levies were a medieval response to the perennial question of how to tax free citizens. They neatly expressed the duality of the position of citizenship in a small state: the obligation to undertake extra burdens and responsibilities to ensure the survival and prosperity of their state; and the exemption from the insult of direct taxes. (Ibid., pp. 73-74)

Eventually, this ancient aversion to direct taxation would lessen — but never entirely. A key aspect was that such taxes be voluntary, voted on citizens by citizens themselves. (The citizens had long voted taxes on non-citizens, who it’s important to remember at this time comprised a large, sometimes even overwhelming, percentage of a republic’s population. But under the logic of the time, the non-citizens didn’t enjoy any freedom from direct taxation.)

The Dutch, who had protested so vigorously about their very low tax payments to the Habsburgs, ended up paying unimaginably greater sums to their new autonomous government… In 1595, an English observer commented on the political paradox: “The Tributes, Taxes and Customes, of all kinds imposed by mutuall consent — so great is the love of liberty or freedome — are very burthensome, and they willingly beare them, though for much less exactions imposed by the King of Spaine…” (Ibid. p. 155; [sic])

In the American Revolution, recall, the grievance of the colonists was not that Parliament was taxing them, but that they were being taxed without representation.

Today, we live in a republic with universal suffrage — and direct taxation. Part of the rhetoric used to back taxation is the idea that it’s the civic duty of a citizen to pay their taxes — a possible evolution of the earlier attitudes about the obligation of citizens to give to the state.

But notice that direct taxation — the income tax, the estate tax, the capital gains tax — provokes far more indignation and opposition than indirect taxes like those on sales. In some sectors, the rhetoric used to describe the income tax is that of government “confiscation” of private wealth — perhaps a necessary evil, but an evil nonetheless, and one to be kept to an absolute minimum.  As one can see from history, this indignation is of ancient provenance.

Moreover, when tax-averse leaders support a new tax (such as a South Dakota tourism surtax that originally spurred this reflection) don’t overlook the key factor: that the people who pay such a tax requested it themselves. In the committee hearings on the tourism tax, tourism promoters and business owners alike emphasized how they saw the benefits of the tax outweighing the positives; conservative Republican lawmakers in turn highlighted the willingness on the part of the tourism business owners to tax themselves.

Very few Americans have anything one could even charitably call a classical education (and I am including myself in this benighted horde), so this would seem to not be a case of explicit imitation of ancient values. But perhaps indirectly modern Americans are tapping into some more profound intellectual well.

A few disclaimers: In sketching out this theory I’m not presenting any sort of normative argument, either that taxes are bad because the ancients opposed them, or that the ancients were silly for opposing direct taxes. I’m simply attempting to describe. Modern American democracy has many intellectual parents, not simply classical republicanism; to privilege it is anyone’s right, but there’s no necessary reason why one MUST rank it above all others. Finally, the ancient republics were of course not saintly — while citizens of these republics enjoyed far more freedom and power, and checked their rulers more strictly, than non-republican states, their citizenry comprised a relatively small subset of the population, with disenfranchised non-citizens and often large populations of slaves living in the polis but not voting, and often subjugated foreign cities paying tribute and having no citizenship rights at all. (This is true even if you set aside the half of the population who could not vote because they were female.) In many ancient republics, the dominant conflict was between the aristocratic republican elite on one hand, and despots promoting the rights of the common man on the other. Freedom and equality were in constant tension. Whether you cheer for a Caesar or a Cato, both have their flaws.

Original publication note: Earlier this year, a discussion of taxes on a South Dakota political blog spurred me to write a short essay about the subject. It was primarily sourced from one of my favorite nonfiction books (and this is a somewhat telling statement about my character), “A Free Nation Deep In Debt: The Financial Roots of Democracy.” That book’s author, James Macdonald, is a former investment banker, but before he starts getting into analyses of bonds and interest rates and defaults, he delves into political philosophy.