Post- Colonial Taxation 1789 to 1895

Post- Colonial Taxation 1789 to 1895
William G Burmer

Taxation being at the very heart of our Declaration of Independence from Great Britain, gave leaders in our emerging government pause; for they were keenly aware of the damage they could do to their re-election plans by foolhardy taxation.

We The People should not hesitate to remind our elected servants from time to time that the government is not a producer of income or of wealth, but is the beneficiary of the labor of the people. Hence the people necessarily must control the Legislatures taxing policies in a Republic.

It only follows that the legislature should be limited in its power to tax or have any control over property, including the individual lives and liberty of our society. Article I sec 8 of the Constitution provides that “The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises, . . . To borrow Money on the Credit of the United Sates; . . . To Coin Money, Regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures; . . . To provide for the Punishment of counterfeiting the Securities and current Coin of the United States; . . .” Take special note that our currency was by design; tangible-- precious metals, Gold and Silver. Gold, for instance, is the most stable investment one can make. Its value has never changed.

As the colonies struggled under the Articles of Confederation to provide revenues for the revolution the sums of taxes were not enough. After the revolution, and under the new Constitution, individual States provided to the Federal Government funds by taxing property, excises, and tariffs. The burden became too much for some states to bear. The states thus burdened with taxing the Citizen inevitably ran the risk that its Citizens may rebel; and rebel they did.

Farmers were the chief instigators of rebellion; which would appear logical since they owned most of the property, which was taxed. Again, as when the colonies began to organize, Committees of correspondence began to appear among the several states and rebellion over taxes ensued. Beginning in Massachusetts, Courthouses were occupied by insurgents demanding redress of grievances, questioning the taxing authority of the Constitutional Government.

Between August of 1786 and February of 1787 Daniel Shays led a group of approximately 3,000 farmers and forcibly closed the courts of five counties in Massachusetts. Many farmers were losing their land over high taxes and foreclosures brought on by declining farm prices. The federal legislature had previously repealed the legal-tender status of paper money. Banks were requiring the farmers to pay their debt with hard to obtain specie (Gold and Silver). Some farmers were put in to debtors prison because of none payment.

A superior force of federal soldiers defeated Daniel Shay’s men when they tried to seize an arsenal in Springfield in January of 1787. They were again defeated at Petersham in February of the same year. The federal legislature met in Philadelphia later that month (February) and reduced court costs, paid interest on securities from excesses, and reaffirmed their commitment to the use of Gold and Silver coin as legal tender. In the spring John Hancock was elected Governor of Massachusetts.

With the help of the state legislature the governor reduced the poll and estate taxes, and ended jailing of debtors. The new Governor ultimately pardoned Daniel Shays and other leaders of the rebellion. Their cause had stirred up unrest in neighboring states creating a demand for a stronger national government. In the end, the American farmer insisted that taxes should be low. 1

During the Civil War, President Lincoln, in an effort to raise funds, enacted what was to be known as the Civil War Income Tax Law. The “Bureau of Internal Revenue” was born as a collector of the taxes. The Court ruled it Constitutional saying that “Direct Taxes as expressed in the Constitution, are only Capitation Taxes that taxes on real estate are excise or duty.” 2.

In 1863 Lincoln created the National Bank Act, which gave the country our first National Currency called “Green Backs”. There followed a long train of excise taxes on liquor and tobacco, manufacturer’s, professional men (doctors, lawyers, insurance companies) railroads and banks. Congress also enacted and income tax on inheritances. They relied on tariff duties and excise taxes for most of their revenue. This tax remained in effect until 1872 when the statutes regarding the war taxes were revised.

New sources of taxes were becoming available because of the rapid industrialization of our nation. Friction between the rich planters of the South and the rich industrialists of the North highlighted the struggles within the new nation for seventy-five years. Finally, in 1861, after Lincoln’s election, the southerners walked out of Congress and formed the Confederate States of America with a new constitution to check the power of their new government to tax.

Secession by the South was a reaction against Lincoln’s high-tax policy. In 1861 slavery was (at least in the administrations mind) not a critical issue. Lincoln and the Congress gave unequivocal assurance that slavery in the South would be respected; yet the South would not budge from its secessionist plans.

The Leaders of the South believed secession would attract world trade to Charleston, Savannah, and New Orleans, replacing Boston, New York, and Philadelphia as the chief trading ports of America, primarily because of low taxes. This was the pot of gold behind secessionist dreams. In addition the south stressed the importance of States Rights by opposing emancipation of slaves.

Economics in the south was dependent upon slavery; many in the south were not going to take any chances with this commodity. Slavery was a matter of ownership; slaves were property, and a way of preserving their economy and way of life.

1 The American Heritage Encyclopedia of American History, Ed. By John M. Faragher, Henry Holt and Co. Inc. pp. 45-46.

2. See Unbridled Power inside the Secret culture of the IRS. By, Shelley L. Davis c1998. Harper Collins Publishers, Inc. New York, NY


“WE THE PEOPLE” and the American Constitution

By: William Grant Burmer ISBN 978-1-4363-2186-0

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