Financial History Issue 122 (Summer 2017) | Page 17

Taxing to Build a Commonwealth Public Finance in America, 1607–1861 Part printed tax circular ordering the collection of taxes by the Sheriff of Fairfield County, Connecticut, dated April 12, 1787 and signed by John Lawrence. By W. Elliot Brownlee Histories of taxation in early America often give center stage to the era of the American Revolution. The usual story is one of social crisis and resolution: oppres- sive British taxes, fierce American resis- tance to taxation, a revolution that con- tained powerful tax revolt (“Tea Party”) elements, the writing of a Constitution that limited taxation and the formation of an early republic of modest government and low taxes. There is something to recommend this approach, but beneath the drama was a more profound social trend, or a long swing, as I call it. The swing encompassed far more history than the American Revolution, involved more elements of public finance than just taxation and produced higher rather than lower taxes. The long swing of taxation and public finance in general was toward creating and sustaining an American “commonwealth,” to use a term employed by historians Oscar and Mary Handlin. By this, they meant a society that was republi- can, capitalist and expansionist. The swing began very early during the colonial period, continued for more than a century and accelerated during the formation of the new republic and the building of a powerful nation by the time of the Civil War. The “commonwealth” swing originated in the process of transplanting and adapt- ing the fiscal system of England (and Britain) to America and adapting it to American conditions. The fiscal system had emerged following the crisis of the En glish Civil Wars in 1642 and constituted the world’s first modern fiscal state. In this new fiscal state, the crown and Parliament relied on taxing domestic consumption and international trade, collected taxes indirectly (through third parties) and lev- eraged their new tax revenues in under- taking long-term lending. The taxes on colonial trade raised rev- enue that funded most of the routine costs of governmental administration in the American colonies and helped finance the loans that the British floated to fight its colonial wars. The taxes also served as a means for regulating economic activity according to mercantilist principles. The current consensus of historians is that this regulatory taxation proved only moder- ately burdensome to the colonial economy. Moreover, powerful commercial and agri- cultural elites in the colonies understood that the benefits of membership in the www.MoAF.org  |  Summer 2017  |  FINANCIAL HISTORY  15