------------ EH.NET BOOK REVIEW --------------
Published by EH.NET (August 2008)

Alvin Rabushka, _Taxation in Colonial America_.  Princeton, NJ: 
Princeton University Press, 2008.  xx + 946 pp. $60 (hardcover), ISBN: 
978-0-691-13345-4.

Reviewed for EH.NET by Roger Hewett, Department of Economics, Drake 
University.


After years of relative neglect, early American public finance is 
attracting increased attention in the new millennium -- from the 
reappraisal of Alexander Hamilton?s dominating influence on late 
eighteenth century American taxation [1] to renewed interest in the 
Beard Hypothesis [2] and a revisionist account of slavery?s impact on 
American taxation [3]. Alvin Rabushka?s volume on colonial taxation 
marks a significant addition to an already expanding literature on the 
history of American public economics. Running to nearly a thousand 
pages, this massive compendium of colonial American tax data draws 
together disparate primary and secondary sources in an impressive feat 
of scholarship. It provides an encyclopedic account of taxation in all 
thirteen colonies from the onset of European colonization to the 
American Revolution.

The book?s organization is considerate to the majority of readers who 
will probably use the volume for reference rather than reading it cover 
to cover. It is divided chronologically into six parts, each beginning 
with an overview of British and colonial constitutional circumstances. 
The tax chapters are separated into regional sections: the New England 
colonies of Massachusetts, Connecticut, Rhode Island and New Hampshire; 
the ?middle? colonies of New York, Pennsylvania, New Jersey and Delaware 
and the ?plantation? colonies of Virginia, Maryland, the Carolinas and 
Georgia. The tax chapters feature a section on monetary matters before 
proceeding to a detailed accounting of the full array of taxes, rates 
and revenues. Though repetitious and often tedious in its cataloguing of 
taxes with minimal, compartmentalized commentary, this approach is 
understandable in an encyclopedic reference work.

Tax history may seem a topic with limited appeal beyond specialist 
researchers. However, as Joseph Schumpeter recognized nearly a century 
ago: ?The spirit of a people, its cultural level, its social structure, 
the deeds its policy may prepare -- all this and more is written in its 
fiscal history. ... The public finances are one of the best starting 
points for an investigation of society? [4]. For Rabuska, colonial tax 
history provides the occasion for understanding colonial constitutions, 
British and American politics and the history of money.  Digressions are 
also offered on land tenure, weights and measures, even the transition 
from the Julian to the Gregorian calendar. Notably, although taxation is 
also a good starting point for investigating expenditures, colonial 
spending is not dealt with in detail.

Even without detailing the expenditures it is clear that war and taxes 
were closely related in colonial America. Tax burdens rose and the 
nature of taxation changed during times of war. Where excises and other 
indirect taxes often met the expenses of civil administration in 
peacetime, direct taxation of income and property became more prevalent 
in wartime. The greater the conflict the greater the impact: taxes 
increased during the conflicts around the turn of the eighteenth century 
but later rose even higher as a result of the French and Indian War 
(1754-1763), sowing the seeds of the American Revolution.

The colonies varied widely in their methods of taxation. New England 
developed the most sophisticated colonial tax system, relying upon a 
combination of poll, property and faculty (income) taxes. New York 
depended upon several indirect taxes while tobacco taxation funded the 
plantation economies of Virginia and Maryland.  British subsidies 
limited the need for taxation in Georgia, the charity colony for debtors.

Regardless of variations in tax methods and wartime tax levels, colonial 
tax burdens were typically a very small fraction of what English 
taxpayers endured. The early tax incentives given to bolster colonial 
growth conditioned Americans to expect low levels of taxation. The 
burden of empire rested lightly on Americans. Parliament?s efforts to 
increase colonial contributions were fiercely resisted. Though taxes 
were raised during the French and Indian War, British grants buffered 
Americans from the costly war to ensure colonial support.

When not pressed by Britain, as in the peaceful period of ?salutary 
neglect? from 1714 to 1739, Americans managed to drive tax burdens to 
negligible levels by issuing paper money to meet their needs. Government 
loan offices proliferated during the era, granting mortgages to 
landowners. Interest on the loans became a major source of colonial 
revenue while the loans became bills of credit which circulated as 
money. The colonies also issued other bills backed by pledges of future 
taxation. The quantity of bills in circulation, denominated in the 
currency of each colony, affected the values of colonial currencies both 
relative to one another and relative to British sterling. The 
monetization of a wide range of commodities, most significantly tobacco 
in Maryland and Virginia, provided another layer of accounting complexity.

With the Currency Act of 1751, Parliament asserted its authority over 
colonial monetary power. Focused on New England, the greatest source of 
monetary instability, the Act reined in the emission of bills, restoring 
the value of colonial currencies relative to sterling. The tax increases 
required to redeem outstanding bills were diminished by Parliament?s war 
reimbursement grants later in the decade.

By this time the constitutional balance of power between the Crown and 
Parliament had shifted decisively in favor of Parliament. Over the 
course of the colonial period a declining medieval monarchy ceded its 
authority to the Parliament of a modern state. In the wake of the 
expensive Seven Years? War (a global conflict, of which the French and 
Indian War was only a part), Parliament turned to the feudal legacy 
underpinning colonial contributions to the British state. The 
institution of voluntary requisitions, the historical basis for colonial 
support of the Seven Years? War, was regarded as unsatisfactory. The 
Sugar Act of 1764, the Sugar Act of 1765, the Townshend Acts of 1767 and 
the Tea Act of 1773 reflected Parliament?s confidence in its supreme 
constitutional power.  That the prosperous American colonies should be 
able to avoid their share of the empire?s costs undermined the supremacy 
of Parliament over colonial legislatures. Parliament?s supremacy would 
be eliminated by the Revolution, but the constitutional conflict 
continued after the war.  United States Congressional supremacy would be 
established by the Constitution in 1788.

America?s antipathy toward taxation is never convincingly explained in 
Rabushka?s tax history. That Americans were conditioned by low taxes 
during early settlement years to expect low taxes indefinitely is not 
persuasive.  Perhaps the explanation lies in a more complete fiscal 
history, specifying in greater detail the correspondence between 
expenditures and the taxes supporting them. Also, Rabushka establishes a 
boundary between taxation and other fees levied by governments and 
churches. Taxes are involuntary payments for public goods and services. 
The other charges are either voluntary or fees for private goods. 
Establishing this boundary implies an understanding of public 
expenditures as well as an interpretation of ?involuntary? in tax 
systems where noncompliance was widespread. Wherever the boundary lay it 
was probably also in flux over the course of the colonial era as feudal 
obligations, such as quitrents, gave way to state taxation. While this 
study provides a heroic compilation of colonial taxes, it only begins to 
investigate the nature of colonial public economics.

Notes:

1. In 2004, the New York Historical Society featured an exhibition on 
?Alexander Hamilton: The Man Who Made Modern America.? The same year a 
lengthy new biography by popular author Ron Chernow, _Alexander 
Hamilton_ (New York: Penguin) was also published.

2. Robert McGuire, _To Form a More Perfect Union: A New Economic 
Interpretation of the United States Constitution_, Oxford: Oxford 
University Press, 2003.

3. Robin Einhorn, _American Taxation, American Slavery_, Chicago: 
University of Chicago Press, 2006.

4. Joseph Schumpeter, ?The Crisis of the Tax State? (1918), in Joseph 
Schumpeter, _The Economics and Sociology of Capitalism_ (edited and 
introduction by R. Swedberg),  Princeton: Princeton University Press, 
1991, p. 101.


Roger Hewett teaches at Drake University. He has authored articles on 
public economics, economic history, the history of economics and 
economic education. [log in to unmask]

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