W. Marc Gilfillan CPA

There has been no modern revolution that was more solidly based in taxation. Taxation didn’t just cause it, but assisted in providing unity for the disorganized and squabbling colonies. However, probably not precisely the way you might imagine.

First, the British taxes on the colonies were neither not fair nor oppressive. Actually, Americans had it great: we had the help of the British empire, the land was rich, businesses thrived, and jobs were widely available. Europe’s social castes did not enchain us and our sons were not conscripted to battle in wars in far-away places… we had it good. So why? Well, some missteps and misstatements by each side.

“Taxation without representation” was indeed an issue. But nobody quite knew what to do about it (after the American revolution, many colonies such as Canada and Australia were able to find adequately achievable solutions). However, at the point in history there was no agreement by the British parliament or American leaders on what could happen to dissolve “taxation without representation”. Ben Franklin, probably without his own knowledge I presume, made the issue worse. He took a boat over to England as our liaison and said that internal taxes were unacceptable but external taxes were OK.

By internal taxes, Franklin meant the stamp tax and other taxes that were paid on transactions in the actual colonies themselves. External taxes, according to colonists’ definition, were taxes like import taxes that were on transactions that only partially took place within the colonies. The colonists believed import taxes were external to the colonies. Yes, if you are puzzled about this, you should be. It makes almost no sense. Apparently no one understood the connection between import/export taxes and the ultimate prices paid for the goods and services. In other words, import/export taxes affected the “other guy” so they were OK.

OK, said the British parliament. if that’s what you want we will play along and give you whatever it takes to make you happy. So, the British created new tariffs, import and export taxes. Then, Americans decided they made a mistake. They saw the folly of their reasoning… but it was too late and the situation got worse.

Keep an eye out for W. Marc Gilfillan’s next chapter in his History of Taxes series: Taxes and the Boston Tea Party.

http://www.marccpa.com/