Resistance to Taxes: Then and Now

0:00And it all began in January of 1765 when King George III gave his opening speech to Parliament. And he said that he wanted to tax the American colonies at all hazards and put the weight of the British crown behind the collection of taxes. And that, of course, set the stage for the American Revolution. And that was a very revolutionary idea because the British had toyed with the idea of taxing to the American for many decades, and Sir Robert Walpole, who was prime minister, in fact, he was the first British prime minister, and in 1740, he had some trouble with taxes and revenue, as these governments always do, and one of his ministers said, well, let's tax the Americans, and Walpole, in his wisdom, said, I have old England against me now, do you think I want new England against me as well? And then he said, I'll to someone with more courage than I have. So Walpole was a pretty wise guy. He was one where the Americans weren't going to buy it.

1:05But anyway, going back to George III, so he gives his speech to Parliament, and of course they immediately draft the Stamp Act. And the word leaks out, of course, that the British government is going to tax the colonies at all hazards and with the full weight of the crown. Well, there was immediately revolts throughout all of the colonies. There arose a guerrilla organization called the Sons of Liberty, They started, not only did they tar and feather tax men, anybody that was going to become a tax man was strapped with his life. And old Benjamin Franklin plays a most interesting role in American history in this time. Benjamin Franklin applied for the job of being a stamp tax collector. Of course, when he realized that you might end up getting tar and feather, he decided he'd try to do some else. So the colonists got together in New York in 1765 in what was called the Stamp Act Congress and the idea was to protest against the British taxes.

1:59But you might think of the Stamp Act Congress as the birthplace of the United States. Here was the Congress that brought together the qualifying colonies and they organized themselves to protest over the tax. Now they sent old Benjamin Franklin off to London to talk to the British government and and talk to the House of Commons. And the idea was to try and persuade the British to not carry forward with this text on stamps. Now stamp taxes is taxed on legal documents, newspapers, commercial paper, things like that. So old Benjamin Franklin, he goes off to London and they stick him in the House of Commons and he's very respected. So they have a question period. And he goes into the House of Commons and the British ask him, he says, well, what is the temper of the Americans toward the British government.

2:48And Franklin says, oh, the best in the world, we love you, we obey all the laws of parliament, we are just the greatest subject you've ever had, except for internal taxes. Now, you can't tax us internally. You know, a stamp tax is an internal tax. And, but then he says, but it would be okay if you taxed us externally, and that an external tax is an import duty. So he leaves, and of course, there's quite a bit of protest and problems, and the governors are riding home to London and saying, you can't enforce this thing, so the British House of Commons repeals the stamp act. And then they turn around and introduce taxes on commodities being imported into the dollars, and one, of course, of the commodities was tea.

3:34The problem with Benjamin Franklin is he opened the door for the American Revolution by saying it's okay to tax us on import. Benjamin Franklin was out of touch with the American people. The American people weren't about to tolerate a tax on anything from the British government, and as a result of that, of course, we know the story of the Boston Tea Party and the American Revolution. It's interesting that if Benjamin Franklin didn't handle it right, we know we may never have a revolution. But by telling the British that they can go ahead and tax tea and things like that, and the British government said when they adopted the various taxes on the import, Well, isn't this what Dr. Franklin said was okay? And so the American representative there said it's okay to tax us on tea and do things like that.

4:20But he was totally out of touch with the American people. Well, we have a revolution and, of course, then we have a new government. And the new government are the Autos of Confederation and under the Constitution. One thing they don't teach you in history is that these two structures of government were very anti-tax structures. They really tried to restrict and control and limit the power of the Congress of the United States to tax. And when you read the Constitution, you may wonder, well, this can't be our government, because the restrictions are still there, most of them. The first restriction that they had under the article was that no tax law could be passed unless it was approved by three-fourths of the states. There were 13 of them, and nine states had to approve it before it was taxed.

5:08Now that's called a supermajority, and now we're beginning to see it in the states. But that was the original intention to control taxing. Then when they decided to draft the constitution and amend the articles, again they were trying very strongly to control and limit the power of the government, the tax, but this time they would go for a majority, didn't have to have a supermajority, but of course revenue bills had to arise in the House of Representatives, they had to be approved by the Senate, they They had to be approved by the President, so that in itself made it very difficult. But then the real control which they thought of, and they thought this would really be the way to control taxes, was that taxes had to be uniform throughout the United States. Now in their debates they said, taxes should be common to all, taxes should be uniform and equal, whatever one man is taxed, the other man should be taxed the same way, and

6:03And they really meant that, and you know that restriction in the constitution has never been effectively enforced. Today you can tax at your pleasure, you can tax one man at one rate, you can tax another man at another rate, there's no limit to your right to discriminate in taxation, yet if you read the constitution and you read the debates, that is the one thing they were trying to avoid. And why? Because the worst tax system in the world at that time was in France, and in the French tax system there was all kinds of discriminations. There were certain wealthy classes that didn't pay any tax. There were the aristocrats that didn't pay any tax. There was the wealthy clergy that didn't pay any tax. There were the lawyers. The lawyers got a lower rate.

6:50That's interesting. The lawyers had a lower rate of tax, and so you had all these variations Now the Americans didn't want that. They wanted this to be taxed through a common to all and uniform and equal and they put it in the Constitution and it has never been worth a damn because our Congress has discriminated and the courts have said it's okay. And as one legal scholar had said, the uniformity command of the Constitution is a dead letter, it's an empty shell. And in the famous income tax case, there was one concurring opinion written by Justice Field. And Field thought that the income tax was unconstitutional because it violated the Uniformity Command of the Constitution.

7:38And he said, and this is very prophetic, he says, when the day comes that this court sanctions the discrimination in taxation and repudiates the Uniformity Command of the Constitution, Constitution. On that day, the very decadence of our government will have begun. And the question is, was he right? And I'll leave that to you. Well, no sooner had the Constitution been in effect than there were two major tax revolts. The first revolt took place in the western part of Pennsylvania called the Whiskey Rebellion. And it was, they revolted over that very principle because they didn't have much money out in western Pennsylvania and And they used whiskey for money, whereas in the rest of the colony, not now the states, there was money.

8:26So they used whiskey as money. So this whiskey tax was an outrageous burden on them. So they rose up in revolt, they talked about seceding from the Union, they not only tarred and feathered, actually a lot of people got killed. And then someone suggested that maybe this is treason, and so they broke it up and decided to forget it. Well, Alexander Hamilton, this was his little baby, so he wanted to put down a revolt, although was already put down, so he organized and promoted an army led by Washington that went into western Pennsylvania and they arrested some of the rebels, tried them for treason, convicted them to be hanged, and George Washington pardoned them all. And that made Hamilton furious. Well then the thing that happened is after George Washington left, then there was a president with the Adams name, John Adams, and so John Adams with the Hamiltonians in his cabinet, Hamilton, I was now thinking he was a general, but anyway, he's people in the cabinet.

9:21They introduced the first direct tax. It was on property and homes and houses and slaves. And so in Eastern Pennsylvania, the assessors came in and were measuring up the houses and of course the people were furious, you know, at the idea that the government would intrude like this, the federal government would tax them. So they rounded up all the assessors and they ran them out of the county. You know, see, we're about to say anti-tax rebels, you know, in our history. And, well, anyway, they arrested some of those who did it, and they locked them up in a jail. And an old auctioneer named John Fries, he organized a mob, and they went down, and they intimidated the jailer, and he let them go. Well, you know, Hamiltonians were furious at this, so they arrested poor old John Fries. They tried him for treason.

10:06He had the best lawyers in the country at the time, but the judge was so determined to hang old Fries that they walked down the court and said forget it. He was just harassing the attorney. So poor old John Fries had to defend himself and he was convicted and he was tried and he was sent to be hanged. Well, I went up to the cabinet for a possible pardon and John Adams said, well wasn't this just a riot? You know, how can a riot be treason? The whole cabinet, including Hamilton, wanted to hang John Fries, but President John Adams pardoned him. Well, Hamilton wrote an open letter to the American people saying, looky, George Washington foolishly pardoned the people in the Whiskey Rebellion, and John Adams pardoned the people in this latest rebellion, the Fries Rebellion, and that just means you're going to have another rebellion. And of course, they did have another rebellion. But it was a rebellion against Hamilton. They had an election the next year, and not only was all of his people throwing

11:03was thrown out of office and the Federalist Party was thrown out of office and the Federalist Party disappeared from history and Jefferson came and he repealed all the taxes. So those are the first early rebellions. The next and perhaps most significant rebellion is the War of the Terrace. This happened because the northern industries wanted a high protected pair to keep British and European goods off of northern markets and southern markets and then it would force for the Southern people to buy Northern goods and they couldn't buy goods coming from Europe. Now this was terribly difficult for the Southern economy and I'll explain why. The South was the great exporting section of the nation and they exported cotton, cotton was king, all the British mills and so forth and industries and clothing were depending on Southern cotton.

11:52They exported tobacco, they exported sugar and the ships would then return from Europe loaded up with manufactured goods from Britain, but with the high tariff the Southerners could no longer receive British goods because the tariff would make them, you know, price them out of the market and then it would force the southern people to buy northern goods. Well this was outrageous to the south because they would get less money for their cotton and their tobacco and on top of that they would be forced to buy northern goods at inflated prices. So they called this a terrible tribute, they hated it, they called it the tariff of abomination, We almost had a civil war over it in 1832, but that was kind of settled by compromise. But the issue continued to burn up until 1860. And in 1860, when Lincoln was nominated for the Republican party to be the presidential candidate, they had political platforms in those days, just like we do today.

12:46And when the question of a high tariff came up before the Republican convention in 1860, According to the newspapers, there was so much yelling and whooping and hollering and cats and canes thrown in the air. It was as if a herd of buffalo had stampeded through the convention hall. So that set the stage and that stampede of a buffalo, that noise was heard all the way down to the south and that sparked the major move of the southern secession movement. And as a result of that, the south started its secession from the union and it was really a critically a terrible issue. When Lincoln came to office, he was faced with a problem, what do you do with my men in Montgomery? He was asked that question, he posed that question, and they said, well just wait a while and pretty soon the South will come back.

13:36And Lincoln said, but what about my revenue, what about my tariff? And that was the critical issue, it was why he proceeded to reinforce Fort Sumter, and of course as soon as the war started within less than a week, he had set up blockades on Southern Ports. The real start of the Civil War was a tariff war, and actually looking at it from Lincoln's point of view, it wasn't such a dumb idea. The fear was that with a low tariff in the South and with a high tariff in the North, the commerce of the world would no longer go to Boston, Philadelphia, New York. It would now go to Charleston and Savannah in New Orleans and it really would have. And so he was, they had horrible projections of the disaster that the low tariff in the south would bring on the northern economy and I think they were dead right.

14:29I think that the south would have really strangled the north with a low tariff and so Lincoln for economic reasons and only economic reasons could, you could justify his assault of the south to to prevent them from setting up a free trade zone. Well, then there's another little tax story that I love, which isn't in my other books, it's in my new book. You remember the old ballad, the Hatfields and McCoys were feudant mountain boys? How did they get to be feudant? Well, the way they got to be feudant was one of the Hatfields, I think it was called Devil Ansel Hatfield, he was turned in by the McCoys for making a little corn liquor. And he got 10 bucks for turning in your friends in those days for making corn liquor.

15:17And that started a feud. But during this period of time, there was a tremendous tax to go going on throughout all of Appalachia over the tax on whiskey. And so we have the revenuers going through the mountains and through the farms and through the area trying to hunt down people making corn liquor. And there was quite a war going on there. And this, I think, is more significant I think that this rebellion set the stage for the behavior of the federal bureaucracy into the lives of the people. There was the first intrusion of the federal government into the everyday lives of the people. And in that particular intrusion, they used weapons and they murdered and they killed and they shot up the moonshineers.

16:03And it was a full-scale war. And so the idea that if you offend the federal regulation, such as make a corn liquor, and you're going to be shot for it, seems to have set the stage for the federal behavior today. And so maybe Ruby Ridge and maybe Waco really go back to that pattern of being able to kill people who offend federal regulation. Well, the moonshine rebellion is still on. And those of you that like George Jones, he has a little ballad on white lightning. Do you remember how the chorus goes? It says that G men, T men, revenue was two, looking for the place where my pappy made his brew. And of course, and then one of the other Western singers is about, we wave old glory down at the White House and down at the courthouse and the white lightning is the best, you know, the best game in town.

16:56So in one sense, I guess, our moonshiners have won the war, and what happened, of course, is the income tax came along, and the U.S. tax industry, which in those days was called the Internal Revenue Bureau, they had bigger fish to fry. And of course, the fry today is the income tax, and this would be, I hope, the fifth major American tax revolt. The American people are really fed up with the income tax. And I think the poll shows that about 78% of the Americans want to get rid of the Internal Revenue Code and they want something new. And the other 25% don't pay any taxes anyway, so it's almost unanimous that the people want to get rid of the income tax. Well, you would think in a democratic society where the will of the people is supposed to rule government, and when the will is so strong and so unanimous and so powerful that Congress would listen.

17:47Listen. And a lot of people ask me, do I think that they will do anything? And my answer is no. And this is a failure of democracy. This is a real failure of democracy that we can't get a dramatic change in our tax system because the Congress and the Republicans and the Democrats, except for a few, and the President and the Treasury won't do a damn thing about it. They like the income tax just the way it is. And I'm quoting Samuelson of the Treasury Department and his testimony before the Congress. And I think this is one of the great tragic things. Americans really want it, really, really want tax reform. They really want some other than what they got. Well, what kind of a tax system, how would you label our taxes? I remember listening to, I put this in my book, I wonder if I'm going to get a call from the Treasury Department. Robert Rubin, our Secretary of the Treasury, he was interviewed in Jim Lehrer News Hour a

18:42a few months ago and he was asked about me state tax and wasn't it unfair and Rubin said well you know we in so many words you say well we'll let you keep a lot of your money and I listened to that and I said well isn't that interesting the last time I heard that was by Louis XIV in the beginning of the 18th century when people came in and complained about the taxes you know they're too high you It's just the same complaint that was given to Secretary Rubin. And this is the most powerful king of France ever had it. He said, well, he said, everything that the citizens have is mine. And I've only taken what is mine anyway. Now isn't that what Rubin is saying?

19:28He says, everything you have belongs to the government. They're letting you keep some of it. So whose money is your money? And I think that's dead wrong. But see, if you had uniformity and taxation, you wouldn't have that problem Because a system would control itself, you can't discriminate against people who are rich in dollars and poor in votes. And I think that's one of the tragedies of our system. So we have today some tax revolts. Now, the first revolt that happened under the income tax was the revolt of the rich. Now, why did we get an income tax amendment? You know, if the founding fathers thought it was a dumb idea and they put prohibitions against it, Why did our ancestors around 1911, 12, 13 introduce this kind of a terrible tax that the founding fathers were against?

20:14Well, there's a Russian proverb, and my wife's a Russian, and she digs out this little book of proverbs, and it says, do not dig a hole for someone else to fall in, lest you fall in yourself. Now, that's a little proverb for Russian school kids, and she says, well, isn't that what's happened here? And I said, yeah, you're right. See, the first income tax was a tax on the rich. Only the top 2% of the Americans were going to pay the tax. Well, hell, everybody thought that was a great idea. Man, so that constitutional memo unit went through like, what did Patton say about the German lines? You remember that? Like shit through a goose? Yeah. Anyway, the income tax went to the legislature that way, and of course everybody thought it was great to let the rig pick up the whole tab.

21:00Well, the rich rebelled against the tax. One of the ways they rebelled was they just rebelled with their shoes. They left the country. Or, if they didn't leave the country, their wealth left the country. Or, if their wealth didn't leave their country, they hired these tax lawyers, what I call Yankee ingenuity. The next rebellion came from the middle class in what you call the underground economy, which is growing by leaps and bounds and hotel numbers, people working in the The next rebellion came from the middle class in what you call the underground economy, which is growing by leaps and bounds and wholesale numbers.

21:47People were no longer willing to support a tax that they thought was too complex, they thought was too unfair, and that their money was being spent for things that they disapproved of. And this became the moral justification for the underground economy. A lot of bad justification is certainly in terms of America's rebellious tradition over bad taxes. Well, I guess we're going to get to the end of it. I'll end with Charles Dickens. It's somewhat related to the stuff we heard today, but I thought about it as I heard these various talks. Charles Dickens, in 1862, wrote an article about the American government. in the United States and by this time he was the greatest man of letters of the 19th century and maybe even of our century.

22:35There probably never will be another Dickens when an author calls him the last great man. But he wrote about the American government and he said the presidency is a flawed concept. It's flawed because in order for the government to work, the president must be an extraordinarily Great Men, and America has not had any great men in the presidency since the founders died. And he said, and what happens is you're stuck for four years with these guys and they bring in all their cronies, he didn't use that word, but they do, and they rape the public treasury and they mismanage the government and you're stuck with it for four years. Whereas under the British system, if you get that kind of a prime minister, you can boot And somebody asked me the other day when I quoted that, they said, well, who was the last great president, Mr. Adams? And I'd say, well, probably James Monroe. You should have heard the people laugh. James Monroe was president in 1820, but if you go back through the list of the presidents, really, we really do get mediocre people in the presidency. And it is one of the great failures of America.

23:52and I think that maybe if we can get some extraordinary great men, as Charles Dickens said, we'd be on the road to major tax reform. Anyway, thank you very much.