A Staff Report from the Straight Dope Science Advisory Board

Percentagewise, were taxes greater in the old days or now?

Dear Straight Dope:

Could you enlighten the tax payers (like myself) as to an average percentage paid in taxes now as opposed to average taxes paid to the King of England that helped cause that war thing a couple of hundred years ago. Surely our forefathers didn't have it as bad as us. Of course I mean tax wise. I wouldn't dream of going up against them on transportation or the indoor plumbing revolution.

Of course. I mean, one man you never wanted to get in a pissing contest with was Ben Franklin. However, what Ben and company were fighting over wasn't the amount of the taxes, which, as we'll see, was actually quite small, but the right of the crown to impose taxes in the colonies at all. "No taxation without representation" was the colonial motto, and the necessity of a government "deriving their just powers from the consent of the governed" was the real sticking point of the whole revolution thing.

Before 1763, Americans were the least taxed citizens in the western world. Colonial subjects were taxed, on average, a total of about one shilling per head per year. (Brief digression here: While these conversions are tenuous, and some might say meaningless, over the span of a couple centuries or so, I spent some time with some conversion, wage, exchange rate, and price index tables from the Census Bureau's Historical Statistics of the US, and came up with a conversion of one pound sterling in 1770 = about $150 in 1998, with a shilling equal to 1/20 of a pound sterling, or twelve pence = $7.50 today; the average wage for an urban laborer was around 5 shillings, equivalent to about $40, per day.) In Britain, the tax amount worked out to about 26 shillings per year (say around 200 bucks). So the American colonists, for all their bitching and moaning, were actually taxed at a much lower rate than their cousins who'd stayed in the old country. Still, as I say, it was the principle of the thing.

The British taxed the colonists to help pay off the sizable war debt accumulated during the Seven Years' War, particularly the part fought in North America, which we call the French and Indian War. The British national debt doubled to £150 million between 1756 to 1763. A great part of that debt arose from the colonies' price gouging of the British Army during the war, charging them nearly twice the market price for lumber, raising the price from 9 pence to 15 (say from $6 to $9) for boards, and lodging, with room rates in rural American towns more expensive than typical rates in downtown London. Not unreasonably, the British figured hey, we saved their butts -- and their territory -- from the French, and we left a big part of our army there in the colonies for continued protection, so just maybe the Americans can help us pay off our debt.

George Grenville, who became Britain's Chief Minister in 1764, was said to believe "a national saving of two inches of candle" was worth more than all the military victories of the Seven Years' War. A national debt of 150 million pounds horrified him, so he pushed through all kinds of measures to eliminate it. The tax measures hit the Americans much more softly than the Britons, who faced not only new stamp duties, excises, and taxes on building materials, but also lived directly under the eye of Grenville and the crown. In America, Grenville decided to ease the citizens into their new revenue-supporting role. The Revenue Act of 1764 (now usually termed the Sugar Act) was on its face simply a renewal of the molasses duty Americans were supposed to be, but weren't, paying all along. In fact, the duty was reduced, from six pence to three (say from $4 to $2) per gallon of molasses (cost in Philadelphia around half a pound sterling, or $75 -- I know that seems high, but molasses was controlled by the rum manufacturers and was expensive to import), or about 3% of cost. The difference was that now the duty would be enforced. Americans opposed the act, ostensibly because the duty was more than the market would bear, but more likely because it was a direct attempt to raise money from the colonies, rather than simply a regulation of trade within the Empire. In any case, attempts to collect the tax were largely a failure, since American officials treated the collectors with hostility, and the smuggling rate for a gallon of molasses was only about a penny and a half (say a dollar) per gallon.

Ordinary Britons having made it clear, through riots and vandalism, that they would accept no more tax increases, Grenville looked for alternative ways of raising cash from America. The Stamp Act of 1765 imposed duties on just about every piece of printed material in the colonies, from licenses to wills to leases to playing cards. The stamps varied in amount, from a halfpenny (say 50 cents) on newspapers, to 2 pounds sterling ($300 today) on diplomas, and more in the cases of some deeds, on which the taxes were to be proportional to the value of the land involved. Grenville expected to raise some £100,000 from the act, a pittance compared to the nearly £1,000,000 the crown spent in America annually, more valuable as lip service to show English citizens that Americans were starting to pull their own weight. The Americans, however, reacted ferociously to the stamps, both through official channels such as the states' legislatures, and through private actions such as hanging Stamp Masters in effigy, and burning and vandalizing the homes of officials involved in taxation.

British officials never collected a penny through the Stamp Act. But they never stopped looking for ways to collect revenue from the increasingly resentful colonists. The Townshend Acts of 1767 were enacted under the notion that hostility to the Stamp Act was directed to its being an "internal" tax, on items sold within the colonies, but that "external" duties on imports into the colonies would still be acceptable. Townshend, Chancellor of the Exchequer, got this idea from Ben Franklin, who, answering prearranged questions before the House of Commons, told them "the sea is yours; you maintain, by your fleets, the safety of navigation in it," and consequently had the right to charge duties to maintain the fleets which maintained that safety. This was an unfortunate misrepresentation of the colonial position, as the colonists had already made it clear that, without representatives in Parliament, they would brook no further taxation. The Townshend acts applied rather small duties to items America had to import from elsewhere in the Empire, particularly glass, silk, lead, tea, paper, and paints. The money was to remain in America, simply to defray the expenses of maintaining the British Army in the colonies, and support the civil government there. Even as designed, it would have minimal impact on those expenses, raising only about £40,000 annually, and the fear in Parliament was that it would hurt British merchants of these goods by encouraging Americans to develop their own manufacturing. The reaction to these acts was much more sedate than it had been to previous taxes, including resolutions from the legislatures of New York and Massachusetts in protest of the tax, and John Dickinson's Letters From a Farmer in Pennsylvania, a protest using legal arguments and precedents to attack the acts. Britain's reply was also moderate, and in 1769 they eliminated all the duties except the one on tea, an item which could not be produced in America.

The duty from tea was three pence (say $2) per pound of tea. Tea prices subsequently dropped sharply because the Tea Act of 1773 enabled the British East India Company to export tea directly to America, avoiding the process of selling to wholesalers in England, who would then export it to the colonies. Win-win for everybody except American merchants, who were taken out of the lucrative tea loop by the establishment of this virtual monopoly, and this all came to a head in Boston in December 1773. Hopefully, you know what happened after that.

All in all, the fuss was really not about the amount of the taxes involved. The Stamp Act was never enforced, but it was remarkably progressive in taxing more for items more likely to be purchased by richer buyers. The Sugar Act was actually a tax cut, and the Tea Act was all that remained after the elimination of a lot of other taxes. Economically, it can be said that what led to the American Revolution was actually an attempt to balance a budget while at the same time cutting taxes. And Newt wonders why he's out of a job.

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