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The Birth and Death of Taxes: A Hypothesis

Published online by Cambridge University Press:  11 May 2010

Edward Ames  and
Richard T. Rapp
Edward Ames
Affiliation:
State University of New York, Stony Brook
Richard T. Rapp
Affiliation:
State University of New York, Stony Brook
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Abstract

Tax systems in England, France, Spain, and Venice are regarded as providing payments from subjects to governments for protection against foreign and domestic threats. In each developing state, the supply and demand for protection at the time of the tax system's origin determined the long-term character of taxation. Only where taxes arose in an environment of exceptionally long wars did subjects forfeit their right to control levies. Groups having close substitutes available for central government paid non-extortionate taxes. Collusion in the supply of protection led to noble tax privileges. Once created, taxes survived as long as the government itself.

Type
Papers Presented at the Thirty-Sixth Annual Meeting of the Economic History Association
Information
The Journal of Economic History , Volume 37 , Issue 1 , March 1977 , pp. 161 - 178
Copyright
Copyright © The Economic History Association 1977

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References

1 We define a “new tax” as a change in the objects taxed or a change in the mode of collection. In the early modern period governments created countless taxes with new names but almost all of these were based on the precedents of the late middle ages. An important exception (and a good example of a new tax) is the impost on income from public office such as the paulette (France, 1604)Google Scholar, the Decima degli offici (Venice, 1574), or the media anata (Spain, 1631)Google Scholar. These arose because a new form of property (the office) had recendy been created. From the taxpayers' standpoint, the rate, yield, and frequency of tax collections may be as significant as the overall character of the tax system, but our present concern with institutional development leads us to neglect these matters here.

2 Stephenson, Carl, “The Origin and Nature of the ‘Taille’,” Revue beige de philologie et d'histoire, 5 (1926), 801–70CrossRefGoogle Scholar, especially pp. 802–03, 859–63. The taille remained fora time a local, servile tax levied by feudal lords on noneombatant subjects in time of war.

3 Strayer, Joseph, “Consent to Taxation under Philip the Fair,” in Joseph Strayer and Charles H. Taylor, Studies in Early French Taxation (Cambridge, Mass., 1939), pp. 3–105.Google Scholar

4 We are not alone in our impression of the static nature of tax systems. For the case of France, see Wolfe, Martin, The Fiscal System of Renaissance France (New Haven and London, 1972), pp. 52–56, 77–78Google Scholar; and Dent, John, Crisis in Finance: Crown, Financiers, and Society in Seventeenth-Century France (New York, 1973), p. 20.Google Scholar

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6 The tax on movable property gave the king something useful, mainly food for his army and wool (foreign exchange). It came too close to purveyance (the requisitioning, with compensation, for the needs of the royal household and army). In 1334, therefore, this tax became a lump-sum levy on local authorities, who made assessments and collections. After a disastrous attempt at an income tax in 1378 (the Peasants' Revolt followed), a land tax supplemented it. This pair of taxes, called subsidy in Tudor times, monthly assessment in the Commonwealth, and the Land Tax of 1692, survived the Napoleonic Wars until the late nineteenth century; Dowell, Stephen, A History of Taxation (2nd ed.; London, 1888)Google Scholar, Book II, ch. 1. “And when, after the Revolution, another attempt was made to introduce and establish the principle of rating in taxation, the property tax of William III … grew gradually to resemble the assessments, the subsidies and the fifteenths and tenths in the form it attained of the fixed land tax of the eighteenth century. To the present day, at the distance of five centuries and a half, the consequences of the arrangement made in 1334 for the local assessment and collection of the fifteenth and tenth are clearly visible in England” (ibid., vol. 1, p. 88).

7 Miller, Edward, “War Taxation and the English Economy in the Late Thirteenth and Early Fourteenth Centuries,” in Winter, J. M., ed., War and Economic Development: Essays in Memory of David Joslin (Cambridge, 1975), pp. 11, 20.Google Scholar

8 Harriss, G. L., King, Parliament, and Public Finance in Medieval England to 1369 (Oxford, 1975)Google Scholar contains a detailed analysis of the relations between king and Parliament.

9 Dowell, History of Taxation, vol. 2, pass.

10 Quesada, Miguel Angel Ladero, La Hacienda Real de Castillo, en el sigh XV (Seville, 1973), p. 63Google Scholar and throughout, for other less important taxes. On the date of the alcabala, Vives, Jaime Vicens (with Jorge Nadal Oller), An Economic History of Spain, trans. Lopez-Morillas, F. M. (Princeton, 1969), p. 285CrossRefGoogle Scholar. Ladero Quesada says that the alcabala assumed its characteristic form only in 1342 when it was reimposed during the seige of Algeciras.

11 A warning against assuming that indirect taxes were more regressive than direct taxes is issued by Schumpeter, Joseph, History of Economic Analysis (New York, 1954), p. 201Google Scholar. By the end of the reign of Philip II there were indications that the economy of Castile was cracking under the strain of the imperial adventures of the Spanish crown, increasingly financed by Castilian taxes in the wake of the declining importation of American silver. A new levy, the servicio de milliones, was imposed on the towns. In fact, it was not so much a new tax as a reorganization of the mode of collection of older taxes. The millones was paid with funds compiled from the old consumption taxes and, as the name suggests, it came to bulk large in the state budget. See Vicens Vives, An Economic History of Spain, p. 441; Elliott, J. H., Imperial Spain, 1469–1716 (New York, 1963),. pp. 279–80.Google Scholar

12 Broussolle, Jean, “Les impositions municipales de Barcelone de 1328 à 1462,” Estudios de historia moderna, 5 (1955), 3–164Google Scholar; Vicens Vives, Economic History of Spain, pp. 236–38.

13 Lane, Frederic C., Venice, A Maritime Republic (Baltimore, 1973), p. 150Google Scholar. Lane remarks that the rich did very well under a system where consumption taxes paid for ordinary government expenses, including interest on the public debt. This is so, but it should not be inferred that the arrangement was harshly regressive. Gino Luzzatto's opinion is that the burden of indirect taxes was not excessively heavy: Storia economica di Venezia dall'XI al XVI secolo (Venice, 1961), p. 115Google Scholar. The diet of the very poor, at least, based on bread or polenta, cannot have been greatly affected by the major consumption taxes on meat, wine, oil, and salt. The cost to taxpayers of day-to-day administration was minimized by relying on fees and fines to pay much of the ordinary expenses of government. Officials' salaries were kept low and were supplemented by the profits of office.

14 On Venetian taxation: Bilanci generali della Repubblica di Venezia, vol. 1, part 1 of Documenti finanziari della Repubblica di Venezia, ser. 2 (Venice, 1912); and Luzzatto, Storia, pp. 32–34, 108–15. On forced loans and the public debt, see Lane, Frederic C., “The Funded Debt of the Venetian Republic, 1262–1482,” in Venice and History: The Collected Papers of Frederic C. Lane (Baltimore, 1966), pp. 187–98Google Scholar; and the volume to which this essay was originally appended, Luzzatto, Gino, Il debito pubblico della Repubblica di Venezia (Milan, 1963).Google Scholar

15 See the four articles reprinted in part 3 of Lane, Venice and History, pp. 373–428; North, Douglass C. and Thomas, Robert Paul, The Rise of the Western World: A New Economic History (Cambridge, 1973), pp. 6–7CrossRefGoogle Scholar; and Lane, , “The Role of Government in Economic Growth in Early Modern Times,” this Journal, 35 (March 1975), 8–17Google Scholar, with discussion by North and Thomas, pp. 18–19.

16 Lane considers possible subdivisions of protection in “The Economic Consequences of Organized Violence,” Venice and History, p. 414, n. 2. In his “National Wealth and Protection Costs,” ibid., pp. 373–82, Lane has applied the term protection to the use of force by a nation to drive up the cost of commerce for competing nations, thereby creating “protection rents” for its own merchants. In such cases the government in effect becomes a partner in a business venture with its merchant class.

17 In the monopoly of usual economic theory, private goods are involved. Nobody may be compelled to buy from the monopolist. The public goods supplied by government, however, are not to be refused, except by rebellion or emigration, and “organized violence” guarantees that they will be paid for. Thus the term “extortion” seems to make an appropriate distinction between the monopoly profit we discuss and the usual monopoly profit. The extortion payment corresponds closely to Lane's “tribute” (“Economic Consequences,” p. 418; “Role of Governments,” p. 12). Speaking of taxes (or a part of tax payments) as tribute or extortion-money is historically quite acceptable an abstraction. Taxation of property or person originated in the West as an exaction on conquered enemies, and for many centuries such taxes were borne as a badge of disgrace. Seligman, Edwin R. A., Essays in Taxation (3rd ed.; New York, 1900), p. 4Google Scholar; Ardant, Gabriel, Théorie sociologique de l'impôt, 2 vols. (Paris, 1965), p. 33 ffGoogle Scholar. The blurry line between customs-duty collection and highway robbery is admirably discussed in Steensgaard, Niels, The Asian Trade Revolution of the Seventeenth Century (Chicago, 1974), pp. 60–67.Google Scholar

18 In 1315 the French king took charge of the wholesale distribution of salt because there was then a severe shortage. In 1343, the king decided (as a wartime measure) to retain the profits of the salt trade, and in 1346 made this a permanent source of revenue. Thereafter a variety of tax rates for salt are reported at various dates. Beginning in 1517, a fixed sum was assigned to each parish, representing the tax on an amount of salt the parish was supposed to consume. In effect, the parishes were to pay for salt whether or not it was actually sold by the royal monopoly. Note that salt is not a public good, but extortion is. The salt monopoly could not have sold at the prices it charged without police assistance (Dupont-Ferrier, Etudes sur les institutions, vol. 2, chap. 5).

19 This account is suggested by Soulié, D., Théorie des marchés contrariés: antagonismes, négotiations et menaces entre un monopole et un oligbpole. Unpub. diss., University of Paris IX-Dauphine, 1975Google Scholar, chap. 3. Our calculations are based on diagrams, pp. 627–28.

20 Tinbergen, J., Development Planning (New York, 1967), p. 105.Google Scholar

21 Royal assets included land and treasure. Kings could also purvey “rights.” The French crown sold titles of nobility, public offices, and exemptions from military service. The Tudors and Stuarts sold monopoly rights (charters and letters patent). Many European cities bought charters that conferred tax exemption.

22 Wolfe, The Fiscal System, p. 50.

23 Ardant, Théorie sociologique, p. 47.

24 See Kern, Fritz, Kingship and Law in the Middle Ages, trans, by Chrimes, S. B. (New York, 1970 rpt), pp. 186, 194.Google Scholar

25 Fowler, Kenneth, ed., The Hundred Years War (London, 1971), p. 1.Google Scholar

26 Barnie, John, War in Medieval English Society: Social Values in the Hundred Years' War, 1337–1399 (Ithaca, 1974), p. 10Google Scholar; C. T. Allmand, “The War and the Noncombatant,” in Fowler, The Hundred Years' War, pp. 163–83, esp. p. 167.

27 Kenneth Fowler, “Truces,” ibid., pp. 204–09.

28 During the truce of Tours (1444) the French and English crowns prohibited the exaction of protection money and replaced the practice with a direct tax, the taille (ibid., p. 207).

29 Barnie, War in Medieval English Society, p. 41. McFarlane, K. B., “War, the Economy and Social Change: England and the Hundred Years' War,” Past and Present, 22 (1969), 3–13CrossRefGoogle Scholar, argues that for England the war was not very costly or disruptive of economic life.

30 Elliott, J. H., The Revolt of the Catalans: A Study in the Decline of Spain (1588–1640) (Cambridge, 1963), pp. 2–3, 6Google Scholar. The crusading aspect of the reconquista is manifest in the Castilian tax system by the way in which the Church, in effect, collaborated with the Crown in the collection of taxes by contributing a proportion of ecclesiastical revenues to the cause. This tradition continued after the reconquest in the tercias reales (one third of tithes), subsidio, excusado, and cruzada, which were all clerical taxes paid to the crown in the time of Charles V (Elliott, Imperial Spain, pp. 192–93). The conquest of Granada, the last Moorish kingdom, was financed mostly by such ecclesiastical taxes (Quesada, Miguel Angel Ladero, Castillo y la conquista del Reino de Granada [Valladolid, 1967], p. 212).Google Scholar

31 “During the reign of Alfonso XI (14th century) the Cortes obtained from the king the promise that he would not assess any tax or levy without its authorization. This law appeared in all the fundamental codes of Castile, but in spite of it the monarchy never paid much attention to a concession which had been extracted from it at a tight moment. On the other hand, when the Cortes did vote a tax it was the royal officials who collected it, thus giving an opportunity for the indefinite perpetuation of a tax granted for a special and transitory purpose” (Vicens Vives, An Economic History of Spain, p. 287).

32 Ibid., p. 232.

33 Kern, Kingship and Law, p. 87.

34 Willard, J. F. (Parliamentary Taxes on Personal Property, 1290 to 1334 [Cambridge, Mass., 1934], p. 162)Google Scholar points out that in England only the immediate royal family and the poor were exempt in principle from the tax on moveables; the exemptions he lists (chaps. 5 and 6) fit into no neat social pattern. In Venice direct taxation was aimed especially at the well-to-do, nobility included. And in the Kingdom of Aragon early on, even the king and royal family were not exempt from the municipal taxes of Barcelona (Broussolle, “Les impositions,” p. 131).

35 “Mountain freedom” is Braudel's useful phrase describing regions whose physical geography impedes the penetration of mainstream civilization. Mountain freedom thus involves elastic demand for protection and no economies of scale. As Braudel points out, it also means paying no taxes (The Mediterranean and the Mediterranean World in the Age of Philip II, trans, by Reynolds, Siân [New York, 1975], vol. 1, p. 41).Google Scholar

36 Schumpeter, (“The Crisis of the Tax State,” International Economic Papers, 4 [1954 (orig. 1918)], 13)Google Scholar speaks of the maintenance of an expensive court as a necessary royal expenditure. We would qualify this assertion by associating the need for a court (a) with the degree of collusion between king and nobility, and therefore (b) with inelastic demand for protection, and (c) an extortionate tax system.

37 Henneman (Royal Taxation in Fourteenth Century France, pp. 308–20) argues that in the mid-fourteenth century the French nobility was not entirely tax-exempt. Their feudal claim to military exemption was weakened by the need for standing armies, and by defeats such as Crécy. The higher nobility, however, had strong enough territorial position to negotiate directly with the Crown concerning taxes. Along with the privilege of not paying taxes, Spain's nobility won the right to collect royal taxes, a fact that suggests their tax exemption was more than a chivalric perquisite.

38 J. H. Elliott's The Revolt of the Catalans is the essential source for the full history of this event. In his epilogue Elliott points out that Portugal, in 1640 part of Spain, regained its independence permanently in that year. The Portuguese had been treated very much like the Catalans during their brief membership in the Spanish kingdom. Unlike Catalonia, however, Portugal underwent no internal revolt. Thus the Portuguese commercial and landed nobility lacked the internal threat to their position which their Catalonian counterparts faced, and were less ambivalent toward the prospect of national independence.

39 Lefebvre, Georges, The Coming of the French Revolution, trans, by Palmer, R. R. (Princeton, 1947), p. 16Google Scholar. Also see Goubert, L'Ancien Régime, vol. 2, p. 70.

40 Revolts by the petit peuple directed violence against royal officers and royal taxation, but not against the king's person or right to rule (ibid., p. 82). Often, however, the desperation of country folk in the face of royal exactions drove them to seek protection from the local seigneur. In this capacity aristocrats frequently led “popular” uprisings. See Rothkrug, Lionel, Opposition to Louis XIV: The Political and Social Origins of the French Enlightenment (Princeton, 1965), p. 134.Google Scholar

41 As Rothkrug has shown, the aristocracy at this time was willing to forfeit its tax exemption in exchange for an increased share of governing power and in fact proposed the most efficient legislation in this regard (ibid., pp. 132–44). The crown resisted and the bargain was never struck.

42 A narrower statement of this same view is R. R. Palmer's remark that “The inflexibility of the taxation system in old regime Europe] was due mainly to institutions associated with aristocracy” (The Age of the Democratic Revolution [Princeton, 1959], vol. 1, p. 78Google Scholar). In matters of taxation the aristocracy was the most militantly conservative group, not because they alone had privileges, but rather because their privileges were more under attack than those of any other group. See Behrens, “Nobles, Privileges and Taxes,” pp. 452, 464–66.