Earlier this week, the United States celebrated the 247th anniversary of its declaration of independence from the United Kingdom of Great Britain,[i] though the latter did not formally recognize the independence of its thirteen former colonies until the Revolutionary War ended, seven years later, with the signing of the Treaty of Paris on September 3, 1783.
Most adult U.S. citizens[ii] are at least passingly familiar with the history of the Revolutionary War.[iii] They recognize, for example, the names of some of the key players, such as Washington, Franklin, Adams, and Jefferson.[iv]
In addition, most are aware that the colonists’ attitude toward taxes[v] played a significant role in galvanizing support for the Revolution.
Indeed, one of the mottos adopted by the colonists was “No taxation without representation,” a concept which found its way into the Declaration:
“That it is inseparably essential to the freedom of a people, . . . that no taxes be imposed on them, but with their own consent, given personally, or by their representatives.”
However, there is one individual – an Englishman turned American, who also professed to be a citizen of the world – whose contribution to the success of the Revolution cannot be overstated, but of whom too many of our citizens know very little: the writer and political philosopher, Thomas Paine.
According to John Adams, “Without the pen of Paine, the sword of Washington would have been wielded in vain.”[vi]
Of course, Adams was referring to Paine’s 47-page pamphlet, “Common Sense” (published in January 1776), in which Paine persuasively advocated that the colonies should be independent from Britain.
When one considers that, by the time of the first anniversary of its publication, an estimated 20 percent of the colonial population owned a copy of “Common Sense,” one can appreciate the effect it must have had on the pro-independence movement in the Colonies.[vii]
Paine On Taxes
Paine’s writings, however, also extended to taxes. In fact, much of his thinking regarding the role of taxation in society, as well as many of his proposals for the types of taxes that should be imposed, remain relevant today.[viii]
To appreciate Paine’s views on taxes, one must first understand his view of government.[ix] For purposes of this post, the following excerpt from Common Sense will suffice:
Some writers have so confounded society with government, as to leave little or no distinction between them; whereas they are not only different, but have different origins. Society is produced by our wants, and government by our wickedness; the former promotes our happiness positively by uniting our affections, the latter negatively by restraining our vices. The one encourages intercourse, the other creates distinctions. The first a patron, the last a punisher.
Society in every state is a blessing, but government even in its best state is but a necessary evil; in its worst state an intolerable one; for when we suffer, or are exposed to the same miseries by a government, which we might expect in a country without government, our calamity is heightened by reflecting that we furnish the means by which we suffer . . . For were the impulses of conscience clear, uniform, and irresistibly obeyed, man would need no other lawgiver; but that not being the case, he finds it necessary to surrender up a part of his property to furnish means for the protection of the rest; and this he is induced to do by the same prudence which in every other case advises him out of two evils to choose the least.[x]
Thus, an individual will “surrender up a part of his property” – i.e., pay taxes – to maintain a government that will protect his private property.[xi]
Unfortunately, according to Paine – as he distinguished theory from reality – those in government often take advantage of their position.[xii]
War and Taxes
Most of Paine’s reflections on taxes are found in his Rights of Man, where he stated that governments “fleece their countries by taxes.”[xiii]
Specifically, he asserted that “[w]ar is the common harvest of all those who participate in the division and expenditure of public money.” Paine asked, what is the best way to increase the pot of public money? By increasing public revenue. Because “revenue cannot be increased without taxes,” he stated, “a pretence must be made for expenditure.” He concluded that “taxes were not raised to carry on wars, but that wars were raised to carry on taxes.”[xiv]
Paine’s mistrust of government and his more colorful assertions aside,[xv] his tax proposals and their underlying theory cannot be easily ignored because they resonate with many politicians and so-called avctivists today.
Let’s start with his basic premise that, as a general matter, “when taxes are once laid on, they are never taken off.” Thus, the act of imposing a tax should not be undertaken lightly.
With that, Paine distinguished between taxes that are imposed on wealth that is inherited, on the one hand, and wealth that is acquired by one’s efforts or “industry,” on the other.
Inherited wealth, Paine tells us, is an “evil” that must be limited.[xvi] As he put it, there is a level of inherited wealth the excess beyond which “may not improperly be called a prohibitable luxury.” In other words, wealth beyond a certain threshold should be prohibited; “an overgrown estate . . . is a luxury at all times, and, as such, is the proper object of taxation,” according to Paine, and “the object is not so much the produce of the tax as the justice of the measure.”
Thus, Paine would use taxes to intentionally eliminate wealth over a certain amount.
Wealth acquired through commerce or labor, however, is to be encouraged. Commerce, Paine asserted, “is a pacific system, operating to cordialise mankind, by rendering nations, as well as individuals, useful to each other. . . The most effectual process is that of improving the condition of man by means of his interest;[xvii] and it is on this ground that I take my stand.”
Moreover, such wealth must be protected from what Paine describes as “the greedy hand of government thrusting itself into every corner and crevice of industry, and grasping the spoil of the multitude. Invention is continually exercised to furnish new pretences for revenue and taxation. It watches prosperity as its prey, and permits none to escape without a tribute.”
Notwithstanding his advocacy on behalf of business, there are limits to Paine’s support for the favored taxation of industry and the accumulation of commercial wealth. Although he stated that it “would be impolitic to set bounds to property acquired by industry, and therefore it is right to place the prohibition beyond the probable acquisition to which industry can extend,” he also stated that “there ought to be a limit to [such] property.”
Thus, Paine believed there was a line beyond which wealth cannot be said to have been generated by one’s efforts or industry and, so, as in the case of generational wealth, was a proper object of what may be described as “confiscatory” taxation.
Query where this line would be drawn.
As the foregoing demonstrates, the debate over the appropriate objects of taxation – property or wealth versus labor – and the degree to which they should be taxed has been troubling Americans since the founding of the republic.
Until fairly recently, Paine’s ideas, as described briefly above, had not taken root with either politicians or the general public.
However, beginning with the 2020 presidential election primaries several Democratic Party candidates seemed to be channeling Paine when they suggested the enactment of a wealth tax, and President Biden is doing the same now when he distinguishes the return on one’s wealth from the amount received for one’s labor.
The 2024 elections are just around the proverbial corner. Stay tuned. rr-m
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The opinions expressed herein are solely those of the author(s) and do not necessarily represent the views of the Firm.
[i] The Declaration of Independence was signed by the 56 members of the Second Continental Congress on July 4, 1776.
[ii] My understanding of what is being taught in schools is mostly anecdotal. Much of what I hear is disturbing.
Unfortunately, as a people, we are woefully ignorant of history in general, and you know what they say about those who are ignorant of history.
Don’t get me started on geography – it brings me to tears to think how inadequate the “national curriculum” is.
[iii] I don’t think I am alone when I refer to it as the first Civil War fought in the Americas primarily between two groups of individuals of Anglo-Celtic descent.
[iv] It would behoove us to learn something about the other signers of the Declaration and to appreciate that the following were not empty words:
“For the support of this declaration, with a firm reliance on the
protection of the Divine Providence, we mutually pledge to each
other, our lives, our fortunes, and our sacred honor.”
I recommend the following site: https://www.nhccs.org/Destiny.html.
[v] Manifested in the Boston Tea Party and in other instances of resistance, including boycotts of other products on which taxes were imposed.
There are some who believe Paine may have had a hand in drafting or organizing the Declaration.
Not surprisingly, Adams (a Federalist) endorsed few of Paine’s ideas, especially with respect to taxes.
Thomas Jefferson wrote the following of Paine in 1821:
“You ask my opinion of . . . Thomas Paine. [He made] bitter enemies of the priests and pharisees of [his] day. [He was an honest man;] [an] advocate for human liberty. Paine wrote for a country which permitted him to push his reasoning to whatever length it would go. . . No writer has exceeded Paine in ease and familiarity of style, in perspicuity of expression, happiness of elucidation, and in simple and unassuming language. In this he may be compared with Dr. Franklin; and indeed his Common Sense was, for awhile.” believed to have been written by Dr. Franklin, and published under the borrowed name of Paine, who had come over with him from England.
[viii] If they haven’t done so already, both sides of today’s incessant tax debates would do well to read Paine’s Rights of Man, Part Second (published 1792).
[ix] It is an oversimplification, but not an entirely unwarranted one, to say that Paine was a product of the Enlightenment and its theories on social contract.
[x] The above continues, “Wherefore, security being the true design and end of government, it unanswerably follows that whatever form thereof appears most likely to ensure it to us, with the least expence and greatest benefit, is preferable to all others.”
[xi] In Common Sense, he described how a society is formed and then a government:
“necessity, like a gravitating power, would soon form our newly arrived emigrants into society, the reciprocal blessings of which, would supersede, and render the obligations of law and government unnecessary while they remained perfectly just to each other; but as nothing but heaven is impregnable to vice, it will unavoidably happen, that in proportion as they surmount the first difficulties of emigration, which bound them together in a common cause, they will begin to relax in their duty and attachment to each other; and this remissness, will point out the necessity, of establishing some form of government to supply the defect of moral virtue.”
[xii] At times, as you’ll see immediately below, a modern reader might be tempted to say that Paine sounds like a conspiracy theorist, whatever that means.
[xiii] The text of his writings may be found here: https://www.gutenberg.org/files/3742/3742-h/3742-h.htm#link2H_4_0011.
[xiv] Paine also stated, “The inhabitants of every country, under the civilisation of laws, easily civilise together, but governments being yet in an uncivilised state, and almost continually at war, they pervert the abundance which civilised life produces to carry on the uncivilised part to a greater extent.”
These are some pretty serious assertions. It should come as no surprise that he alienated many people – the “priests and pharisees” of his day, as Jefferson wrote, above – especially with his views on religion. See his “Age of Reason” Part 1 (1793-1794).
[xv] I am not prepared to dismiss all of them, however.
[xvi] In his time, he was thinking of the landed nobility and its influence in Parliament.
[xvii] Socialism and especially communism fail to appreciate this basic concept, that people – almost all people – are driven by their self-interest.