Video Transcript: Taxes and History | Daniel J. Sanchez

I'm going to talk about taxes and history. Also, sort of the prehistory of taxes.  How, what is the likely way that taxes came about? There's a philosopher and  writer named Franz Oppenheimer, who distinguished between the economic  and the political means of gaining wealth. There's the economic means, which  involves production. You can you know farm and produce your own crops and  and produce wealth that way, or it can mean trade. And then there's the political  means, where you just kind of take what you want. Now, obviously, taxation  would fall under the political means, and taxation and the political means are  very old. In fact, they might be considered older than mankind itself, you might  consider the animal kingdom as operating according to the political means, sort  of taxing each other all the time. You might consider a lion who takes down a  zebra that he's taking what he needs, what he wants from the zebra, and the  zebra is not giving it in return for anything else. It's just it's just the law of the  jungle. Or afterwords, when the lion's eating the zebra and a jackal comes over  and snatches some of the food away from the lion, that's not economic means.  That's that's sort of political means too. That's sort of taxing the lion in a way.  You're just taking what you need, what you want from the lion. Now, that sort of  law of the jungle is also what Montaigne, a French philosopher, he he had what  Rothbard Murray Rothbard called the Montaigne fallacy, which which is that no  man gains except what another man loses, and and that's sort of the way it is in  in wildlife. That no you know the lion doesn't gain unless the zebra loses. The  jackal doesn't gain unless the lion loses. Another philosopher named Thomas  Hobbes he he characterized the state of nature as a a war of all against all, and  that also describes the political means. And so, but taxes usually aren't thought  of in in that nature red in tooth and claw kind of way. It's it's considered more  gentlemanly, and so it's it'd be interesting to trace how you can go from messy  violence like that to gentlemanly violence, like the the nice little process that we  have when we fill out our tax returns and we mail our check to the government,  and it all seems very genteel and civilized. Another way of looking at the law of  the jungle is to what Mises called biological competition. Now humans also  engage in biological competition, sometimes in ways that are very little different  from the animal ways. For example, cannibals. When when cannibals go to war  with each other and one side wins, they just eat the other side, just like the lion  and the zebra. But then there's also biological competition with non-cannibals  too, because if some barbarians sack a city and they take no prisoners and they just kill everybody and just take all the food and eat all the food, that's pure  biological competition. There's no society there at all, but where the inkling  kernel of some sort of social thinking can start, society is whenever someone  takes someone else's purposes in mind with regard to their purposes. So, with  an animal, with a barbarian who just sacks a city? They they don't care about  the other person's purposes at all. But then maybe a barbarian might realize,  wait a minute. If we just kill everybody in the city, and then if we come back next 

year, there won't be any food grown because everyone was dead. So maybe it  would make sense if we left people alive so that they could just take their food,  leave them alive, and then they can grow their crops for a year, and then we'll  

come back and just take the crops again. And so then, at least you're starting to it's not even really society, but it's sort of the the inkling of a society because  you're at least taking other people's actions into consideration a little bit. And  then another step might be that the the barbarians come, and the the people in  the city say, "Look, you know, if you invade us, we're going to fight back and  we're going to kill some of you, and it's going to be really hard. And eventually,  you'll probably win and you'll take our food. But if you don't invade us, we'll just  give you this this much of our food outright, and in exchange for you just leaving  us alone. And so the barbarians might take them up on that offer. They might  say, "Okay, it it's it's easier this way. And so that is how booty, you know, booty is like when pirates just you know take what they want. How booty becomes  tribute, and the tribute is a kind of a tax. You could consider the booty as a sort  of a tax, but it's sort of a short-sighted tax. It's like a one-time short-sighted tax  where you don't realize that oh if I just take all the booty I want then they won't  be able to produce much anymore and then you know I won't be able to to get  very much booty in in the long run, whereas with a tribute, you know it it already  seems a little bit more civilized and and it already it seems more like what we  would normally think of as a tax and. sometimes the barbarian invaders, instead  of sometimes they'll take the tribute and then they'll they'll just leave, sort of like  the the golden horde, these Mongols who would just sweep into Russia once in  a while and they just take everything and they they just leave, or sometimes  they would come in and they would settle in among their victims and take their  tribute throughout the course of the year as they lived there. One group that did  that are were the Spartans. So the Spartans were these Greeks who came  down from the north, and they invaded these people, and the the native people  became what were called helots, and they lived separately and they did all the  work, and the Spartans became sort of a nobility, a noble class that they didn't  they didn't do the work they just fed as parasites off of the helots, and so that's  that's another step where booty can become tribute, and tribute can become a  sort of a tax. Another way of thinking about tax is as a ransom. What's a  ransom? Who can tell me what a ransom is? Anyone? Well, we have ransom  even even nowadays. Like, for example, if if someone kidnaps someone, and  and they would demand a ransom, that the only way they'll let them live and let  them free is if they if they get some money for it. So it's like money for your  freedom, and you might think of tribute as money for your freedom, or taxation  as money for your freedom. And when you think about it, if if you don't pay your  taxes, like today is April 15, if you don't pay your taxes, and if you keep not  paying your taxes after today, what'll eventually happen to you? Right,  essentially enslaved. Exactly because you put in you're put into jail, which is 

where you're a slave anyway. So it's money that you pay for for your your liberty. Like Lou Rockwell's article that's up on the Misesork site today. It's your money  or your life, or you could say your money or your liberty. So in in a way, a tax is  

also a ransom. There's an economist who made a distinction between stationary bandits and roving bandits. So roving bandits would be just like the pirates and  the brigands and the barbarians who just sweep in and then sweep out, and the  stationary bandits are just bandits who just settle in with you, and and and  eventually you get get to be familiar with them, and they don't you forget that  they were bandits in the first place. Another thing, so this is what's called the the  conquest theory Of the state, it was a theory that, among other people, Thomas  Paine believed in this theory that that's how the state governments start out, and that's how taxation starts out. Of course, what will happen when the bandits are  stationary? They're living among you, is that they want you to forget as quickly  as possible that you're a bandit, and so they will especially they'll have  intellectuals who sort of create what are what's called apologia, so sort of  intellectual defenses of the the bandits, and one one apologia that they might  say is that they might say, "Oh, well, you know, the gods will favor us if we are  obedient to to these rulers. Another thing that that can happen that helps this  apologia is the the bandits will give a little bit of what they took back as a  service, and people will start, especially if they're if this view is supported by the  intellectuals. People will start thinking, "Wow, you know that's so generous of  them. That's so nice of them that they're giving me some stuff. It's giving me  some food, and they're they're taking care of me, forgetting where they got that  stuff in the first place. It's sort of like there's this comic where, where there's like  the state, and he's got his hand in your back pocket, and he's giving you money  with in in front of you, and it's like that's how it works, and and so so that helps  to legitimize the state, the bandits. Another thing that happens is the state will  institute democracy, and what what can happen with with democracy is that one  set of people can use the state to mug another set of people, and so the state  kind of kind of serves as like a mugging medium, like a a middleman for  mugging. Where whereas because if one group directly mugged the other  group, you know, it would seem uncivilized, ungentlemanly. But if they do it  through the process of of elections and voting for people who will take from  other people and give to to them, and and then they do it back, then then it all  seems very then. then you get the myth that, like Obama recently said, the  government is us. So you can't really worry about what we do because we're a  democracy. The government is us, and that kind of legitimation really goes a  long way in empowering the state to basically do whatever it wants. Now  another way of looking at at the state is thinking about the difference between  hunting and gathering and farming. So you could think of as the the roving  barbarians and pirates and brigands. By the way, Murray Rothbard said that the  state is a band of brigands writ large. You can think of them as hunters, whereas

you can think of the the stationary bandit who settles in. You could think of them  as farmers. That that they don't, you know, just outright kill the the people and  and just take things once. They they live with the the the beasts of like just like a farmer lives with his pigs and chickens and and takes the substance from them  as as they go along, and so when you look at a political map of the Earth,  instead of just seeing countries, you could kind of see a bunch of farms, and  then that kind of puts wars in a different perspective. That wars can be  considered as one farm invading another farm. Sometimes in order to directly  tax the people. Sometimes it's about farming farmers because instead of directly taxing, taking over, and directly taxing the people, you tax the taxers. So, for  example, in in England, when the the Danes would come in, and then the the  the English kings would have to pay would have to get gather what's called the  Donigeld, which was the money to pay as the tribute for to the Danes, to the  Vikings, and so that's sort of like farming farmers, that the farmers take from the  people and then they give to people who in turn farm them. Now, states often  have a motivation to limit taxation. It doesn't make sense to tax completely. You  don't want to kill the golden goose, the the goose that lays the golden egg,  because then there won't be any more eggs, and then you get you start to  getting back to where you were before, where you're just where it's just pure  biological competition, and you're just destroying them, and it's just like a one time a one-time tax, and then over the long term, you don't have as much.  Another way of thinking about this is that free-range farming is often, if you're  gentler with the chickens and the and the pigs, that they'll be more productive,  and so if you if you let them trade with each other and and feel free, then then  they'll be more productive, and then you can tax more from them in the long run. So this gives us some perspective on on the history of taxation. Once we  understand sort of the nature of taxation, one fallacy that people like to put forth  is they like to say, well, you know what? Before we had the state, before we had  the taxation, you know, we had all these tribes that were just killing each other  all the time. That was more like the war of all against all, and and now that we  have the state, you know, everything's we're all richer. We're all more civilized  and more productive, and that that gets things backwards. That that puts the  cart before the horse. What what happened is that property and the division of  labor came first. People on on the earth didn't always have private property and  trading and the division of labor in primitive societies. There was a lot of it was  just very communal. Even though there wasn't a state, there also wasn't very  much in terms of private property. Everything was just communal. And then what happened is that when private property, but in that in that time, there's nothing to tax, you know. If if everything's primitive and there's no private property, there's  no division of labor, and there's no wealth being built up, there's nothing to tax.  The parasite has to have a host to to survive. So the parasite couldn't have  come into the scene until the host got got big enough, and so civilization 

developed first, and then the state came, and that produces the myth that the  state caused civilization. So all the the early civilizations that that we see. So the first civilization was in what is now Iraq. It was called Sumer, and and they they  had private property first before they had had a state. There's there's a book  called Ancient Iraq by George Rue where he demonstrates this, and it became a flourishing civilization in spite of the parasitic state that that was on top of it. And  then and then you had the civilization in in Egypt. But back then, taxes it was  pretty clear what they were. It it wasn't as genteel as it is now. There's a scribe,  an ancient Egyptian scribe, wrote this about a tax collection. He said, "Dost thou not recall the picture of the farmer when the 10th of his grain is levied? 10th is  where the word tithe comes from. Is where that that was kind of the classic rate  of taxation in the ancient world was the 10th. Worms have destroyed half the  wheat, and the hippopotami have eaten the rest. There are swarms of rats in the fields. The grasshoppers alight there. The cattle devour. The little birds pilfer,  and if the farmer loses sight for an instant of what remains on the ground, it is  carried off by robbers. Moreover, the the thongs which bind the iron and the hoe  are worn out, and the team has died at the plow. It is then that the scribe steps  out of the boat at the landing place to levy the tithe. So a scribe is someone who who writes. And so back in ancient Egypt, not very many people knew how to  read and write. And so it was and it was usually the people who read and write.  Those were the administrators who who served the pharaoh and. Who staffed  the state, and they were the ones who were able to keep tax records, and so so  they were generally the bureaucrats. And so education was, at the time, was  often about becoming a scribe, becoming in order to become a bureaucrat, and  often to become a tax collector, to levy the tithe. So levy means to to to raise to  to pull out. And there come the keepers of the doors of the king's granary. So at  the time they collected taxes in kind. So it wasn't so much of a of a money  economy, so they would collect the grain. That the grain was the tax, and so it  would be a certain percentage of of your grain. And they're crying out, "Come  now, come! There is none. There's no grain. And they throw the cultivator full  length upon the ground, bind him, drag him to the canal, and fling him in  headfirst. His wife is bound with him. His children are put into chains. The  neighbors, in the meantime, leave him and fly to save the grain. So, IRS audits  are one thing, but that was when taxation was really recognized for for what it  was. So, what what can happen is that, like I said before, states have an interest in limiting the taxation. Now, if you don't limit the taxation, then you're going to  be pretty poor, and if you do limit the taxation, you as a state are going to be  richer. Now, a richer state is going to be able to conquer a poorer state a lot  more easily, so that produces what's called the paradox of imperialism. Now,  imperialism means an empire. Now, normally we think of you know freedom in  the domestic area going along with freedom in terms of foreign policy. That if  you're liberal in one area, you're going to be liberal in the other area. But 

actually, that happened. That is often not the case, because it's the the states  that are liberal in the domestic area that don't tax their people as much. They  end up having more resources, and so they're able to conquer the other states.  And so you have, like for example, the Athenians were pretty free. The Greeks  called Athenians, and and so they were able to create their own empire. But it  was a pretty vicious empire. They they had what was called the the Delian  League, and league kind of seems to mean like a voluntary association, like the  Justice League, and but it wasn't voluntary, and they they realized that there  was a famous speech by the leader of the Athenian democracy named Pericles,  and he he told the people he's like we have an empire, let's let's just admit it we  have an empire and we've got to be we we've got to act like an imperial nation  we have to be cruel in order to maintain our empire and so there, there were a  lot of city-states in Greece that were wanted to get out of the Delian League.  They wanted to get out from under the thumb thumb of Athens, and one of them  was called Milos, and they didn't want to pay tribute to Athens anymore, and so  they were completely depopulated. Every male-I mean, we think of Athens as  like you know this wonderfully civilized place, and you know we think of  Socrates and Plato and all this stuff. They they executed every single adult male in Milos for for the temerity of not wanting to pay tribute to be part of the league,  and so eventually, then the next big empire that came along was the  Macedonian Empire, launched by Alexander the Great, and the Macedonians  were their their base were the Greek city states, and so again they were able to  use the the civilization of the Greek city states as a as a base to fund their  empire. The Roman Empire was similar, but the Roman Empire was also brutal  in terms of how much. It exacted as tribute from the people. There's a great  quote from the historian Tacitus, who recalls a speech by a Scottish leader  called Calgacus, and the Scots were being invaded by by the Romans. And  Calgacus said of the Romans that they are the robbers of the world, having by  their universal plunder exhausted the land. They rifle the deep. If the enemy be  rich, they are rapacious. If he be poor, they lust for dominion. Neither the east  nor the west has been able to satisfy them alone among men. They covet with  equal eagerness poverty and riches. So you can kind of think of the American  Empire in that way too. That not only you know have we tried to, especially in  the past, take take over rich areas like we we had imperial designs on China for  a long time, but you know we're we're out there, you know, bombing caves in in  the middle of nowhere to you know take over these these poor people too. So  rich or poor doesn't matter. The empire just spreads to robbery, slaughter,  plunder. They give the lying name of empire. They make a wasteland and call it  peace. Tacitus talked about another leader in Britain named Boudica, a female,  and she she said this in one of her speeches. She said, "How much better it  would have been to have been sold to masters once and for all, than possessing empty titles of freedom, to have to ransom ourselves every year. So again, 

there's that notion of the ransom as a tax, and and just like with us, it's like an  annual ransom, an annual money payment for your freedom, so that was the  Roman Empire. The Roman Empire fell largely because of taxes. Eventually, it it got bad at you know limiting its taxation so it could continue to feed on on the  population, Mises talks about how first the the Romans they they debase the  currency, which itself is is a tax because when you create money out of  nowhere, that's what's called an inflation tax, and instead of collecting taxes in  the debased currency, they started to requisition just goods and services from  from the people in order to support the army. And then Diocletian, this Roman  emperor, he turned that requisition into a huge tax. Eventually, people started  getting poorer and poorer, and some people wanted to move into the  countryside. Some people wanted to escape to go be with the barbarians. They  thought, "Oh, if I I got to escape this Roman Empire, I got to go be with the  barbarians where I can be free. And and so Diocletian tried to freeze everything. He put he put a price ceiling on everything, and he tried to pass a law where  every every person had to stay at the job that they were in, and that their their  children had to stay at the job that their parents were in. And Mises talks about  the upshot of all this. He said to avoid starving, people deserted the cities,  settled on the countryside, and tried to grow grain, oil, wine, and other  necessities for themselves. On the other hand, the owners of the big estates  restricted their excess production of cereals and began to produce in their  farmhouses the products of handicraft, which they needed for their big-scale  farming, which was already seriously jeopardized because of the inefficiency of  slave labor, lost its rationality completely when the opportunity to sell at  remunerative prices disappeared. As the owner of the estate could no longer sell in the cities. He could no longer patronize the urban artisans either. He was  forced to look for a substitute to meet his needs by employing handicraftsmen  on his own account in his own villa. He discontinued big-scale farming and  became a landlord, receiving rents from tenants or sharecroppers, and so that is basically how the the medieval economy started was was from the was from this process that Mises talks about, which came about because of the excess  taxation. However. The Middle Ages weren't so bad. The Middle Ages, after the  after the initial Dark Ages that happened because of this Roman folly, the the  Middle Ages had actually very limited taxation. Rothbard talks about that there  were no regular tax taxes in the medieval era. While the king was supposed to  be all powerful in his own sphere, that sphere was restricted by the sanctity of  private property. So the king had to often come hat in hand to ask for taxes, and  that was the origin of of the Parliament and the Estates General in France. That  that they were holding the purse strings. They were they were having to decide  whether to let the king have those taxes or not. And so the Middle Ages were  actually a time of of great economic prosperity. People think of like the Roman  era as great, and that the middle Middle Ages were poor, but it was in the Middle

Ages where where iron was first used on a widespread basis. It was when they  they had windmills and water mills that could produce things that that used  energy in a continuous manner, and and so cities were springing up all over  medieval Europe in these in these places in north northern Europe where the  Romans didn't even really cultivate like it was just wasteland during the Roman  era. Basically, the Romans were was just a parasite city living off of the East. It  was still the East Egypt and Greece and Asia Minor, where all the wealth was  that mercantile civilization, and Rome was just living off of that as a parasite.  People living in Italy were exempt from taxation. More than that, they they  started getting bread dole. People were were coming in into Rome just to  basically live off of welfare, and so it was really a parasite civilization. And it was  in the medieval era when there were literal, there were limited, more limited  taxes. That's when economic growth start started really getting underway.  Rothbard talks about the 14th century depression, and that's when kings started  to become powerful again, and some of the prosperity that had built up through  the Middle Ages was destroyed, especially Philip the Fair was not fair to to the  people. The fair meant handsome; that he was kind of he was kind of  handsome. Rothbard says that in the early 14th century, Philip the Fourth, the  Fair, King of France, moved to tax, plunder, and effectively destroy the vitally  important fairs of Champagne to finance his perpetual dynastic war. Philip levied a stiff sales tax on the tax on the Champagne fares. He also destroyed domestic capital and finance by repeatedly by repeated confiscatory levies on groups and  organizations with money, including the Jews, who he just just completely  confiscated their wealth and kicked them out. The Lombard bankers, the  Italians, did the same thing to them. The Knights Templar, who were  international bankers, he killed them and and took all their money, and so it was  it was with kings like Philip the Fair. Later on, strong kings like like Henry the  Eighth and Louis the 14th. They became really strong, and they they started  taxing people a lot more, and that ultimately ended up with the revolutions that  that happened in starting in 1688 and then through this 18th century. What what  happened with the kings would would want to go on all these wars. They they'd  have all these dynastic wars and they'd have to tax the people, and so  especially the dynastic wars of Louis the 14th and and 15th, that it was because  of the taxes to support those wars that people were so upset, and and ultimately the French Revolution came out of that, and the American Revolution. I mean,  it's very politically incorrect, but the American Revolution was a tax revolt, and it  was a war of secession. Two two things that that people don't don't really like in  certain circles these days. But that's exactly what they were, and it largely came  out because of the Seven Years' War of of the British that they that it was really  expensive war, and then the result. That's how the British Empire started. Really, was the was the result of the Seven Years' War, and they needed to fund the  war and to fund the empire too. And so, whereas before with the colonies, they 

had what's called benign neglect, where they pretty much left the colonies alone. The only kind of taxes weren't for revenue; they were. For regulating trade, and  they're mostly tariffs, not internal taxes. But they they wanted to start to tax the  colonies, and and so they started with the Sugar Act, and the colonies said,  "Wait a minute, there's you know with the 1688 Bill of Rights, we should have  taxation only with representation. We're not represented in in Parliament, and  then and then the Stamp Act came about, and that that's the dumbest thing to  do is you don't want to you don't want to tax people who publish newspapers  because they'll rabble rabble routs and and and so so the Stamp Act was hugely unpopular, and Benjamin Franklin went over and said, like, you know, we don't  want internal taxes, and so the British said, okay, fine, we'll do external taxes.  We'll do the Townsend Acts, which were a bunch of tariffs, and and so the the  American calls is, wait a minute, no, we don't want any taxes actually unless we  are are represented, and and so they they did boycotts, tax tax revolt in terms of boycotts, and and so most of the towns and acts were removed except for the  Tea Act because they wanted to keep just one little tax, even if it was  inconsequential in terms of revenue. It was the principle that mattered. the  governor the the people in the government they wanted to keep the principle  because they wanted to be able to expand on that principle later they wanted to  be able to get serious revenue later so they wanted that symbolic last thread of  taxation and then of course that last the Tea Act resulted in the in the Boston Tea Party which precipitated the American Revolution, and and there you have it.