by Gary North, Daily Reckoning:

I did not celebrate the Fourth of July today.

This goes back to a term paper I wrote in graduate school. It was on Colonial taxation in the British North American Colonies in 1775. Not counting local taxation, I discovered that the total burden of British imperial taxation was about 1% of national income. It may have been as high as 2.5% in the southern Colonies.

In 2008, Alvin Rabushka’s book of almost 1,000 pages appeared: Taxation in Colonial America (Princeton University Press). A review published in the Business History Review summarizes the book’s findings.

Rabushka’s most original and impressive contribution is his measurement of tax rates and tax burdens. However, his estimate of comparative transatlantic tax burdens may be a bit of moving target. At one point, he concludes that in the period from 1764–1775 “the nearly 2 million white Colonists in America paid on the order of about 1% of the annual taxes levied on the roughly 8.5 million residents of Britain, or 1/25th in per capita terms, not taking into account the higher average income and consumption in the Colonies” (p. 729). Later he writes that on the eve of the Revolution, “British tax burdens were 10 or more times heavier than those in the Colonies” (p. 867). Other scholars may want to refine his estimates, based on other archival sources, different treatment of technical issues such as the adjustment of inter-Colonial and transatlantic comparisons for exchange rates or new estimates of comparative income and wealth. Nonetheless, no one is likely to challenge his most important finding: the huge tax gap between the American periphery and the core of the British Empire.

Was the Declaration of Independence Built Upon a Lie?

The Colonists had a sweet deal in 1775. Great Britain was the second-freest nation on Earth. Switzerland was probably the most free nation, but I would be hard-pressed to identify any other nation in 1775 that was ahead of Great Britain. And in Great Britain’s Empire, the Colonists were by far the freest.

I will say it, loud and clear: The freest society on Earth in 1775 was British North America, with the obvious exception of the slave system. Anyone who was not a slave had incomparable freedom.

Jefferson wrote these words in the Declaration of Independence:

The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States.

I can think of no more misleading political assessment uttered by any leader in the history of the United States. No words having such great impact historically in this nation were less true. No political bogeymen invoked by any political sect as “the liar of the century” ever said anything as verifiably false as these words.

The Continental Congress declared independence on July 2, 1776. Some members signed the Declaration on July 4. The public in general believed the leaders at the Continental Congress. They did not understand what they were about to give up. They could not see what price in blood and treasure and debt they would soon pay. And they did not foresee the tax burden in the new nation after 1783.

In his book, Rabushka gets to the point:

Historians have written that taxes in the new American nation rose and remained considerably higher, perhaps three times as much, than they were under British rule. More money was required for national defense than previously needed to defend the frontier from Indians and the French, and the new nation faced other expenses.

So as a result of the American Revolution, the tax burden tripled.

The debt burden soared as soon as the Revolution began. Monetary inflation wiped out the currency system. Price controls in 1777 produced the debacle of Valley Forge. Percy Greaves, a disciple of Austrian economist Ludwig von Mises and for 17 years an attendee at his seminar, wrote this in 1972:

Our Continental Congress first authorized the printing of Continental notes in 1775. The Congress was warned against printing more and more of them. In a 1776 pamphlet, Pelatiah Webster, America’s first economist, told his fellow men that Continental currency might soon become worthless unless something was done to curb the further printing and issuance of this paper money.

The people and the Congress refused to listen to his wise advice. With more and more paper money in circulation, consumers kept bidding up prices. Pork rose from 4 cents to 8 cents a pound. Beef soared from about 4 cents to 100 a pound. As one historian tells us, “By November 1777, commodity prices were 480% above the prewar average.”

The situation became so bad in Pennsylvania that the people and legislature of this state decided to try “a period of price control, limited to domestic commodities essential for the use of the Army.” It was thought that this would reduce the cost of feeding and supplying our Continental Army. It was expected to reduce the burden of war.

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