Michael Keen - Rebellion, Rascals, and Revenue: Tax Follies and Wisdom through the Ages

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Taxation is eternally lively; it concerns nine-tenths of us more directly than either smallpox or golf, and has just as much drama in it; moreover, it has been mellowed and made gay by as many gaudy, preposterous theories.

H. L. MENCKEN

At best the subject of antiquated taxes and fiscal mechanisms is crabbed and unlovely.

GEORGE TENNYSON MATTHEWS

ON THIS, we side with Mr. Menckenand our aim in this book is to persuade you to agree. Even Professor Matthews seems to have been unpersuaded by his own rhetoric, as he proceeded to write 292 pages about arcane tax arrangements in ancien rgime France.

Tax stories from the past, we hope to show, can be entertainingsometimes in a weird way, sometimes in a gruesome one, and sometimes simply because they are fascinating in themselves. They are also helpful in thinking about the tax issues that run through todays headlines and politics. The stories we tell in this book span several millennia, from Sumerian clay tablets, Herodotus, and the unusual tax ideas of the Emperor Caligula through to the slippery practices revealed by the Panama Papers, the tax possibilities unleashed by blockchain, and the outlook for taxation in a world transformed by the COVID-19 pandemic. But this book is not a history of taxation. Nor is it a primer on tax principles. It is a bit of both.

The principles help frame the history, in understanding, for example, how rulers of the past, lacking anything like an income tax, invented other ways of tilting the tax burden away from the poorest (if only to ensure their own survival). Sometimes, too, the popular understanding of the few episodes in tax history that are widely known (which, it is true, are not many) turns out to be plain wrong, but in intriguing and significant ways. The tax that provoked the Peasants Rebellion of 1381, for instance, was not really a poll tax; and it was a tax cut, not an increase, that provoked the Boston Tea Party.

The history also helps clarify the principles of taxation. Sometimes these are harder to see at work in taxes that are familiar to us than they are to see in the oddities and even the physical relics of the past. It is easy to be distracted by the frothy political rhetoric that often accompanies the tax debates of our times. Shorn of polemic, past tax episodes can shed a clear light on these underlying principles. The intellectual case for using carbon taxes to save the planet from climate risk, for example, is much the same as that for the tax on beards introduced in Russia by Peter the Great in order to save Russia from the boyars.

Many of the tax episodes we look at may at first seem far-fetched or ridiculous. Some are stories of disastrous missteps and cruelty. Some, we admit, teach no useful lesson that we can discern, but are just pleasingly gaudy and preposterous. But along with the follies there are also episodes of remarkable wisdom. For it is a theme of the book that, when it comes to designing and implementing taxes, our ancestors were addressing fundamentally the same problems that we struggle with today. And they were no less ingeniousnot just in creating taxes, but also in avoiding and evading themthan we are. We should not feel too superior to our forebears, given the taxes we have nowadays. The idea of taxing chimneys may seem quaint to us. But we suspect our descendants will find some of the things that we do today more than a little peculiar, such as taxing multinationals by trying to figure out what some entirely different and hypothetical set of companies would have done in the unlikely (possibly inconceivable) event that they found themselves in the same circumstances. And they would be right.

The purpose of this book is not to convince you that taxation explains everythingthough we do suspect it helps explain more than is often recognized. It is more fun to hear of Henry VIIIs lust for Anne Boleyn than of how he could ease his fiscal problems by breaking with Rome and taking for himself the taxes being paid to the Pope. Nor does the book promote any pet tax system of our own, though we do not hesitate to draw implications from the tax episodes that we discuss for todays tax controversies. That, after all, is the point. Todays tax landscape is quite different from those of classical Greece, colonial Sierra Leone, Tokugawa Japan, or the Depression-era United States. But it continues to be shaped by decisions made long in the past. One legacy of the debates over slavery and taxation in the new-born United States, for instance, is now a real obstacle to the introduction there of a wealth tax. The most fundamental point, however, at the heart of this book, is that many of the principles of good and bad taxation run through history. They can help us understand our past and choose wisely for a future that is being transformed by technological change, and seeing them at work in history provides a pleasing dose of gaudiness.

To bring out the themes running through the story of taxation, the book is organized not by timelines but by issues, and so jumps around across the centuries and over the continents. It is in five parts. The first sets the scene by taking in the big picture: It opens with some episodes in tax historyfrom the lurid to the quaintthat encapsulate some of the unchanging tax truths with which the book deals and then takes a broad look at how, over the ages, governments have set about trying to make the likes of us all pay for whatever it is they wanted to do. The second part, on winners and losers, is about fairness in taxation. This is something even wicked rulers have to care about if they want to survive, and we look at the many mistakes and occasional brilliance that they have shown in trying to cope. Figuring out exactly who the winners and losers from taxation are, however, turns out to be far from easy. We will see that the question of who exactly bears the real burden of taxation has vexed policy makers since at least medieval England and has even helped shape our political institutions. The third part of the book showcases the extraordinary power of human ingenuityfrom Pharaonic Egypt to todays multinationalsin finding ways to avoid paying taxes. It also considers how governments have, have not, and ought to take account of such rascality. The fourth part turns to the painful (sometimes fatal) art of tax collection, which brings out both the best and the worst of human nature, and to the ways that governments have foundfrom gorgeous bronze devices in ancient China to drones over Buenos Airesto threaten, cajole, and sweet-talk us into paying whatever their rules say we ought to. The final part looks at the messy realities of making tax policy, describes spectacular successes and failures, and distills a few lessons to help cope with a future in which taxation, we can be pretty sure, is not going away but may well start to take quite different forms from those we are accustomed to. The book ends by speculating about what tax follies future generations will find to chuckle over when they see how we do things today.