What and Who to Tax

Taxes have always been an issue in American politics. If one goes back to the American Revolution, being taxed unfairly was one of the major causes. The Brits wanted to impose or raise taxes on commodities such as tea, paper, glass, and paint. All in the name of having the Thirteen Colonies pay the costs of their government.

So fast forward to, for example, the year 1805. The United States of America had been an independent country for 22 years. In just over two decades, we’d gone from a loose confederation of independent states governed by the Articles of Confederation to creating the U.S. Constitution and making it work.

In 22 years, we’d elected three presidents—Washington, Adams, and Jefferson —fought a war against the French, another against the Barbary Pirates, and managed to stay out of the French Revolutionary and Napoleonic Wars. The country had physically doubled in size with the Louisiana Purchase, and settlers were moving westward. We could do this because our population had increased from 2.5 million in 1775 to 3.93 million in 1790 to 5.3 million in 1800 and growing about 35+% every 10 years.

The Industrial Revolution had begun, and along with those in England, U.S. inventors were leading the way. Immigrants were pouring into the new United States from primarily war-torn Europe. Through legislation, we determined who we should let in, how they should be vetted, and what the path to citizenship was.

To manage all of this, the United States needed an effective central government. 1805 was picked arbitrarily because Jefferson had just been elected for his second term. As a Democratic-Republican, he was philosophically opposed to a strong central government and wanted the United States to stay primarily agrarian. Jefferson didn’t believe in standing armies or navies and didn’t want the country to incur debt.

If this sounds familiar, the question of how U.S. citizens pay for their government has been an issue since the Revolutionary War. After trying to govern under the Articles of Confederation in which the Continental Congress had to beg each of the 13 states for money, our Founding Fathers ensured that the new Constitution gives the Federal government the power to tax its citizens.

Back in 1805, there was no individual or corporate income or sales taxes. The Federal government’s sources of income to pay is obligations rested on three pillars.

Pillar one – excise taxes on items such as rum and whiskey, tobacco and tobacco products, refined sugar and molasses, salt, and carriages. If one sold a slave, the Federal government got a percentage of the sale.

Pillar two – taxes on land sales. If a person bought land through the Land Act of 1804, he/she paid a tax on the acquired land you and from that point on, the owner paid taxes annually on the assessed value of the property.

Pillar three – customs duties and tariffs assessed on manufactured goods being imported and exported.

Although not intended this way by the Founding Fathers when they wrote the Constitution, the president has the power to use tariffs as a foreign policy tool.

1765 cartoon that appeared in British newspapers by unknown artist depicts Lord Pitt driving his government into an abyss by forcing the Stamp Act on its 13 American colonies.