Paying Your Fair Share

"Historically, the definition of a free person is a person who owns his own labor."  – Paul Craig Roberts

[A slave is] "someone who is deprived by force of the fruits of his labor." – Doug Casey

Politicians the world over are forever seeking justification to raise taxes. They offer myriad excuses for why such taxes are justified, and the sands of who is being taxed and why are forever shifting. One clever approach to justifying a tax increase is the modern claim by politicians that one group or another must pay its "fair share." The magic of this term lies in the implication that, somehow, until now, the group in question has not been paying its fair share – an implication that serves to inspire other groups to want to see the group in question punished through a tax increase. This places the group in question in the minority and helps make them conciliatory for their "crime."

But no matter how much we pay in tax, we are reminded from time to time that we should be grateful. After all, we live in a "free" society in which we are not oppressed by greedy kings.

So, let's take a look at a couple of obvious examples of this – first in the UK, then in the US.

British Taxation History

As a schoolboy, I was taught that, in Britain in the Middle Ages, the king would impoverish his serfs through heavy taxation. I clearly remember the BBC television series showing Robin Hood defending the serfs against the tax collector – the Sheriff of Nottingham. However, at that age, I never thought to ask just what the going tax rate actually had been in the Middle Ages.

Much later in life, I learned that the tax rates in medieval England varied, depending on the king and events at any given time. Still, taxes rarely rose above 15%. In fact, 10% was the norm. Taxes were generally paid on land ownership, so those taxed were barons and lords. Serfs were exempt. What the serfs did pay, however, were tithes. The Saladin Tithe was created in 1188 by Henry II, requiring farmers to pay 10% of their labor (usually paid in wheat) and requiring tradesmen to pay 10% in goods and services. The standard benchmark was described as "One day's labor in ten." Such payment might be made directly to the king, or it might be made to a liege lord, a trade guild, or even a town.

Of course, like today, the king might attempt a further tax. In 1377, a flat tax was attempted, which was replaced in 1379 with a graduated tax. The increasing taxes led to the Peasants' Revolt in 1381. Generally speaking, when the tax level began to approach 30%, it was treated as intolerable.

Just as well, then, that modern Brits are not overly educated in the actual tax levels of the Middle Ages, or the illusion of being  a "free person" might be quite diminished.

US Taxation History

A similar misconception exists across the pond in the US, where schoolchildren are taught that the colonists rebelled against repressive taxation under King George III in 1776.

Until 1765, the American colonies paid no direct tax to Britain, and the level of government spending was as low as 3% of GDP. Not surprising, therefore, that the colonists bristled at the imposition of the Stamp Act of 1765. Although this only required a small tax on printed documents, books, newspapers, etc., it was the first occurrence of direct taxation. It was repealed the following year as a result of protests, but the British government retained its view that it had a unilateral right to determine taxes – a position that led to the American Revolution.

So, if those were the bad old days from which the UK and US have escaped, we should all be grateful. Unless of course, we compare these levels of tax to those of the present day. In the US, for example, the total direct federal, state, and local taxes are quite a bit higher today than in 1776. In addition there are a host of other taxes – corporate tax, inheritance tax, capital gains tax, sales tax – too many to list here. And the total percentage as related to income is impossible to compute. What is certain, however, is that Americans are taxed far beyond what they were when they declared their independence in 1776.

However, those of us who are British should not be tempted to smugly take the position, "We told you so – you should have stuck with us." Taxation in Britain today is also beyond the pale, although, in 2013, the top income tax rate is to be reduced to 45%.

(Hardly worth going to work in the morning.) Still, there are those countries out there that actually avoid direct taxation (the Bahamas, the Cayman Islands, the UAE, etc.). Hard to imagine?

There are other examples; however, the countries above were chosen because they aren't exactly the Black Hole of Calcutta. They are very prosperous jurisdictions that are very livable.

This tells us that, in some respects at least, the grass really is greener in the other fellow's yard. It may also suggest to us that we may wish to re-think our view on the definition of slavery – how we might once have applied it to the serfs of old and whether that would, depending upon where we live, define us as the serfs of today.

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