On March 3, 1791, the first Congress of the United States imposed the nation’s first internal tax, an excise on distilled spirits. From this rather modest fiscal innovation sprang the famous Whiskey Rebellion, a touchstone in the mythology of American tax resistance.
The tax protest that swept the western counties of Pennsylvania between 1791 and 1794 has long figured prominently in presentist arguments that seek to characterize the United States as a nation of freedom-loving tax resisters. “At least until 1913, America was brimming with tax rebels,” wrote Charles Adams, the leading tribune of this antitax historical narrative, in Those Dirty Rotten Taxes: The Tax Revolts That Built America. “From the time when the British tried to tax us in 1764, to the adoption of the income tax amendment in 1913, our combative anti-tax character led from one rebellion to another.” (Prior coverage: Tax Notes, Apr. 13, 1998, p. 259.)
This is a good and useful story, if you have a point to make about contemporary tax policy. It’s a much less good and useful story if you want to understand the actual history of America’s state and society.
Perhaps the most serious problem with the antitax myth is the implicit claim that it somehow makes Americans unusual or distinctive. But people everywhere and always seem to dislike taxes — not unreasonable, given that the coerced extraction of money by an entity with a monopoly on legitimized force is unlikely to be a pleasant experience. And tax revolts can be found all around the globe in every age of civilization.
Still, the myth of the antitax American is worth taking seriously, if only because it remains a powerful force in American politics. Part of its strength derives from the obvious fact that Americans have been moved to resist taxes from time to time; the nation’s history is peppered with tax revolts, ranging from the famous Boston Tea Party of 1773 to the somewhat less famous CNBC Tea Party of 2009.
But these tax revolts are best treated individually, rather than as multiple instances of a single phenomenon. Each arose from specific circumstances and unfolded in a specific way. More important, at least for anyone seeking to uncover a “usable past,” they don’t all point in the same direction when it comes to modern tax debates: Not every historical tax revolt can be accurately repackaged as an allegory for modern-day tax reduction.
Case in point: the Boston Tea Party. That prototypical American tax revolt wasn’t a protest against high taxes. It was instead a protest aimed at two other things: (1) British infringement on the colonial governments’ power to levy their own taxes, and (2) a corporate bailout in the form of a special tax exemption for the East India Company. (Prior analysis: Tax Notes, Apr. 12, 2010, p. 141.)
If the Boston Tea Party wasn’t about oppressively high taxes, however, it was still about tax oppression. Colonists wanted direct control over the taxes they were required to pay, and while colonial governments were hardly exemplars of democratic governance (and differed from one another on that measure, with northern colonies generally better than southern ones, as the historian Robin L. Einhorn has explained), they were still better approximations than the British Parliament. (Prior analysis: Tax Notes, June 12, 2006, p. 1277.) Similarly, a protest against tax favoritism is also a protest against oppressive taxation.
Citizens in Revolt
Let me suggest a new way to think about tax revolts. Rather than assume, as most people do, that revolts are focused on the level of taxation, we should consider the taxing relationship more broadly. We should view tax revolts through the lens of fiscal citizenship: the web of reciprocal rights and responsibilities that binds the individual to the state — and the state to the individual.
Tax revolts tend to arise when governments transgress fiscal rights or fail to meet fiscal responsibilities. Sometimes that can mean levying taxes that are too high, in which case we have tax revolts of the Adams variety, consistent with calls for tax reduction. But other times, governments can prompt tax revolts by levying taxes that are unequal, making some pay while giving others a pass. Or governments might transgress by levying taxes that require burdensome or intrusive collection techniques, in which case it isn’t the economic burden of a tax that sparks revolt as much as its cost in terms of freedom, liberty, or privacy.
My shorthand for thinking about taxes in this way is a phrase: “other people’s taxes.” When Americans think about taxes, they often think less about themselves in isolation and more about themselves in relation to others — as fiscal citizens, in other words.
When fiscal citizens talk about taxes, they spend a reasonable amount of time talking about the taxes they are required to pay. But they spend at least as much time talking about the taxes that richer people, poorer people, and people of roughly equivalent wealth or income must pay. The comparisons are key because they seem to undergird notions of fairness and equity.
That keen sensitivity to other people’s tax burdens is evident in the recurring popularity of arguments about tax avoidance. Politicians learned a long time ago that you could score points by complaining about people who aren’t paying their fair share — regardless of whether that avoidance was the result of deliberate policy choices by lawmakers or crafty planning by taxpayers and their advisers.
Outright tax evasion, of course, has always been an easy target for law-and-order types, but tax avoiders have been an even more rewarding scapegoat for politicians who like to traffic in outrage. (Which, to be fair, is almost all of them: They differ only in the targets of their outrage. If a politician leans left, she complains about tax-avoiding hedge fund managers. If a politician leans right, he complains about earned income tax credit fraud.)
But “other people’s taxes” isn’t just about the taxes our fellow citizens pay; the phrase also captures something about the levies our politicians impose. Are the taxes we pay truly “our” taxes, to which we have somehow granted our consent, either directly or indirectly? Or are they someone else’s taxes, imposed on us, perhaps for purposes we don’t support? Are the revenues from these taxes being used to support the common good of the citizenry? Or will they be channeled to support the needs of a lucky, privileged few?
Consent and Revolt
Many of America’s most iconic tax revolts can be explained using this rubric of other people’s taxes. For instance, as noted above, the British effort to impose a low-rate tax on tea sparked a revolt in Boston Harbor not because the tax was too heavy, but because colonists resented the imposition of any tax by a legislative body that granted them no direct representation: The tax was not their tax — it was Parliament’s tax.
Further, the colonists didn’t believe the tax they were paying was being used to serve their needs. Although the British insisted, not unreasonably, that Parliament’s taxes were intended to defray the substantial cost of defending the colonies, the Americans were unconvinced. And by exempting the East India Company from the tea tax, Parliament was clearly using the levy to advance the commercial interests of a favored business entity; it was crony capitalism in 18th-century form. That horizontal inequity, which outraged colonial competitors of the East India Company, was the sort of favoritism that tends to trigger tax resistance.
The Whiskey Rebellion is another useful study in the power of other people’s taxes as an explanatory device. The tax was imposed by Congress, so in some sense, the farmers and distillers of western Pennsylvania were duly represented in the process of its enactment. But those farmers deeply resented several aspects of the levy: (1) its design burdened small rural distillers while largely sparing bigger, urban ones; (2) it required an intrusive enforcement mechanism; and (3) its proceeds were dedicated to the support of a small financial elite, not the people who actually paid the tax.
The whiskey tax of 1791 ranged from 9 cents to 25 cents per gallon, depending on alcohol content — not a trivial amount, totaling as much as a full day’s wages per gallon, according to Cynthia L. Krom and Stephanie Krom, writing in The Accounting Historians Journal. The real burden of the tax, however, derived from the realities of the western frontier. Transportation difficulties made it impractical for frontier farmers to move their crops to market without first converting them to liquid form. “The substantial reduction in volume resulting from the distillation of grain into whiskey greatly reduced the cost to transport their crops to the populous east coast — the only place where there were markets for their crops,” the Kroms wrote.
Moreover, given a lack of cash on the frontier, whiskey had become a de facto currency for many farmers; laborers accepted whiskey in return for field work and landlords accepted it as payment for rent. But whiskey couldn’t be used to pay the whiskey tax, which had to be rendered in cash. The Kroms suggest that the whiskey tax, by taxing a de facto currency, functioned as an income tax, at least on the western frontier.
The whiskey tax also required onerous recordkeeping by distillers — and imposed draconian penalties for those who failed to keep those records or (worse) failed to pay any taxes due on their distilled products. Violators could lose not simply their distilling equipment, but other possessions, too. The legislation provided for various extremely heavy fines, while also granting federal revenue officers broad authority to enter and inspect distilleries at their own discretion.
Unsurprisingly, the whiskey tax struck small distillers on the western frontier as deeply burdensome and uniquely unfair. The tax seemed to target them with almost surgical precision; larger, urban competitors didn’t face the same scarcity of cash or the same transportation challenges. Indeed, the large distillers were generally able to pay the tax with relative ease, allowing them a huge competitive advantage over their rural competitors. The tax served as an instrument of commercial consolidation in the distilling trade, driving smaller producers from the market.
Perhaps most galling for the small farmers being crushed by the tax, the proceeds of the new levy had been earmarked for a specific purpose: to redeem devalued federal bonds at par value. This redemption is rightly viewed as one of Alexander Hamilton’s greatest accomplishments as Treasury secretary, but it wasn’t without its inequities. It showered benefits on wealthy, well-connected speculators, who had scooped up bonds at huge discounts, and made good on those debts by taxing poor farmers on the frontier (as well as anyone buying imported goods, because tariffs were raising most federal revenue). Farmers resented the transfer of wealth from poor to rich that the whiskey tax was making possible. That it was being done through such an intrusive and inequitable tax, replete with horizontal inequities, only made it worse. (Prior analysis: Tax Notes, Mar. 20, 2017, p. 1460.)
From the farmers’ perspective, the whiskey tax was truly someone else’s tax, although they were certainly the ones being forced to pay it. Imposed by lawmakers beholden to the monied class, it had been drafted to serve the needs of that small elite, not the nation as a whole, let alone the frontier farmers. Moreover, it transgressed the privacy rights and liberties of the taxpayers who were actually forced to pay the levy. Federal officials marched an army of federal tax officers into the mountains to collect those duties, only to later dispatch an army of actual soldiers once the tax rebellion took a violent turn.
The Whiskey Rebellion, of course, was definitely about high taxes: The farmers of western Pennsylvania resented paying the tax because it was burdensome, perhaps even catastrophic. Had the tax been trivial, there might well have been no rebellion. So Adams, who lionized the whiskey rebels, had good reason to make them heroes in his story.
But to reduce the Whiskey Rebellion to a complaint about high taxes is to miss the point. The crisis arose not simply from the level of taxation, but from the method and purpose of that taxation. The whiskey rebels resented the imposition of a tax that so clearly burdened them particularly, while sparing others in similar lines of work, like their more urban distilling competitors. They also resented the use of this tax to enrich an already monied class, which seemed to them a betrayal of the American Revolution’s egalitarian ideals: The country hadn’t fought for independence from royal tyranny only to be subjugated to the new tyranny of a commercial class.
If we hope to understand the complex relationship of Americans to their tax system — a relationship that has evolved over time, punctuated by inflection points and crises — then we need to move beyond easy generalities about whether we are a nation of tax resisters. Or tax lovers, or tax tolerators, or anything else. We are all those things, at different times and places.
What we really are, always, is a nation of fiscal citizens, negotiating our relationship with the state and our fellow citizens. And we conduct that negotiation around the subject of not just our own taxes, but other people’s taxes, too.