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Taxation in Colonial America

Taxation in Colonial America

by Alvin Rabushka

ISBN: 9780691133454

Publisher Princeton University Press

Published in Business & Investing/Accounting, Business & Investing/Taxation, Business & Investing/Economics

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Introduction

On may 13, 1607, twenty-seven-year- old Captain John Smith, leading the Susan Constant, the Godspeed, and the Discovery, made landfall in Jamestown, Virginia. The London Company, sponsors of the voyage, had been granted a charter by King James I of England to establish a colony in the part of America called Virginia. To foster its development, James exempted the company from all taxes for seven years on all goods, chattel, armor, munitions, and furniture exported from England to the colony. A second charter of 1609 exempted the company's employees and agents from all customs and taxes in Virginia for twenty-one years.

One hundred sixty-eight years later, the shots heard round the world At Lexington and Concord signaled the start of the American Revolution. The colonists had resisted more than a decade of impositions by Parliament-the Revenue (Sugar) Act of 1764, the Stamp Act of 1765, the Townshend Acts of 1767, and perhaps most famous of all, the Tea Act of 1773, which prompted the Boston Tea Party. From the founding to the Revolution, taxes were uppermost among the concerns of the colonists. Colonial politics were governed more by disputes over taxes and how they would be spent than all other matters, such as freedom of conscience, French threats on the frontier, and security of land titles.

This book is the story of taxation imposed from outside, and levied inside, on colonial Americans. It encompasses the kinds, amounts, and burdens of taxes, and the political fights over the right to levy and control their use. The term "colonial America" signifies the thirteen original colonies that formed the United States of America. Other designations include the American colonies, the English colonies of North America, British North America, the first British Empire, the plantations, and the provinces. Colonial America comprises the Dutch West India Company's settlement of New Netherland (1624-64) and the New Sweden Company's colony of New Sweden (1638-55) until both gave way to English rule. British colonies in Canada, the West Indies, and Florida are not included. Brief mention is made of the several counties in Maine that came under the jurisdiction of Massachusetts in 1652, Plymouth Colony until its absorption into Massachusetts in 1691, and New Haven before its annexation by Connecticut in 1664.

Scholars and historians have chronicled numerous aspects of taxation in colonial America, but none has written a comprehensive account of all thirteen colonies for the entire colonial era. A first wave of studies was written and published as doctoral dissertations between 1892 and 1915 by Columbia University, the Johns Hopkins University, and the American Economic Association. Numerous unpublished theses were completed between 1928 and 1953, drawing upon British and colonial archives housing public documents and private papers. Historians have published a large number of books and articles on specific taxes, such as the Navigation Acts, Negro slave duties, the Stamp Act, and royal quitrents, an older form of property tax, and the impact of wars with Indians and the French on colonial tax burdens. Taxation in colonial America was a relatively popular research topic until about 1980 but has since received only minor attention among historians.

This book covers British taxes imposed on the colonies and the various taxes enacted in the colonies. The list includes British import duties on American products, British taxes on trade between the colonies, royal taxes on colonial land, colonial duties on trade with other colonies, and a wide variety of internal taxes levied by colonial legislatures, vestries, counties, and towns-poll or head taxes, property taxes, "faculty" or income taxes, required labor contribution, license fees, retail excises, import duties, export duties, tonnage fees on shipping, religious taxes, and levies to support community projects and schools. Also mentioned are tax exemptions, for example, those granted the president, faculty, and students of Harvard College, tax preferences for goods imported in locally built ships, and premiums or bounties for the production of iron, hemp, flax, and silk, to name a few products.

The description and analysis of colonial taxation are divided into the three geographical clusters of the New England colonies of Massachusetts, Connecticut, Rhode Island, and New Hampshire, the middle colonies of New York, Delaware, New Jersey, and Pennsylvania, and the southern plantation colonies of Virginia, Maryland, North and South Carolina, and Georgia. These clusters reflect similar patterns of settlement, economic development, political institutions, monetary policies, and systems of taxation.

Taxation in colonial America neatly divides into five periods. The first is 1607 to 1688, from Jamestown to the overthrow of King James II by William and Mary of the Netherlands' House of Orange, known in England As the Glorious Revolution of 1688. These years were a period of rapid growth in the colonies and chronic turmoil in England. The second is 1688 to the end of Queen Anne's reign in 1714, a quarter century of unremitting Europe an warfare with its colonial counterparts in King William's and Queen Anne's wars. The third is 1714 to 1739, a period of general peace, from the accession of George I of the German House of Hanover until the beginning of the War with Spain. During this "era of salutary neglect," the colonies were left to develop largely on their own without much direction or interference from Great Britain. The fourth is a period of chronic warfare that began in a war with Spain in 1740 and ended in 1763 with Britain's defeat of France in the French and Indian War. Britain's victory ended the threat to the colonies from France but left Britain with high taxes and a large public debt. The final period is the twelve years of turmoil and insurrection between 1763 and 1775 brought about by British efforts to tax the colonies that erupted into the American Revolution.

Dating Colonial Events

The task of dating colonial events prior to the uniform use of the modern Gregorian calendar (n.s. for new style) in 1752, which dates the beginning of each year on January 1, is complicated by the use of different calendars in Europe during the period in which the American colonies were founded. Until 1582, all of Europe used the calendar authorized by Roman emperor Julius Caesar in 46 b.c. The Julian calendar (o.s. for old style) started the year with the first day of spring, setting March 25 as its official "new year's day." March was treated as the first month of the year and February the twelfth, although the first twenty-four days of March were counted as part of the preceding year. Leap years added a day in February because it was then regarded as the twelfth month.

European powers shifted to the new Gregorian calendar at different times. The Julian calendar was based on a year of 365.25 days, where as the astronomical calendar is actually 365.242199 days. Thus each year the seasons shifted by eleven minutes and fourteen seconds, or one-and-a-half days every two centuries. By 1545, the vernal equinox, which was used to determine the date of the movable feast of Easter, had shifted by ten days, making it difficult for pious Christians to observe Christmas and Easter within their proper seasons. On February 24, 1582, Pope Gregory XIII corrected this error with a papal bull which decreed that the date following the Feast of Saint Francis of Assisi, celebrated on Thursday, October 4, 1582, would be changed to Friday, October 15, 1582. The ten days of October 5-14 were suppressed. Gregory changed the official start of each year from March 25 to January 1 and declared that leap years would take place only in centennial years exactly divisible by four hundred, thus excluding 1700, 1800, and 1900 as leap years. This provision eliminated the differential of one-and-a-half days every two centuries.

The Protestant Reformation divided Europe's Christians into warring factions. Spain, Italy, France, Holland, and the Catholic provinces of Germany adopted the new calendar in 1582. Switzerland, Scandinavia, and Germany's Protestant districts did not complete the switch until 1701. Great Britain retained the Julian calendar until the mid-eighteenth century, by which time the discrepancy between the two had grown to eleven days. To end Great Britain's long duration as odd man out, Parliament passed the British Calendar Reform Act of March 1751, which declared the day following September 2, 1752, to be September 14 in Great Britain and its colonies, and the new calendar would thereafter begin on January 1.

To illustrate these differences, in the English calendar of the day, March 23, 1643, was March 23, 1644, according to the Swedish calendar and modern usage, and was April 2, 1643, according to Dutch usage. That date was often written in the English colonies as March 23, 1643/44, indicating that it was March 23 in the official English year 1643, but in fact March 23 in the year 1644 beginning January 1. From 1664 onward, distinctions among English, Dutch, and Swedish dating were largely eliminated with the English conquest of New Netherland from the Dutch, who seized New Sweden nine years earlier. Before then, the same event recorded in British, Dutch, or Swedish documents would have different dates. Both the dates and days of the week in England differed from those of continental Europe, which explains how different dates can exist in different historical documents and histories. Cited dates in the text of this book reflect period colonial or British usage apart from those of New Netherland and New Sweden that refer to Dutch and Swedish accounts. Throughout the text I use the modern calendar for dates between January 1 and March 24, and on occasion the colonial style that signifies both usages.

Historians vary in their efforts to compensate for the suppressed days when trying to reconcile different sources. An event that occurred on May 27, 1652, might be cited as having occurred on that Julian date, rather than adjusting for the ten suppressed days and using the Gregorian date of June 7, 1652. A prominent illustration is the Battle of the Boyne. King William and Queen Mary of Orange, the new Protestant rulers of England in 1689, defeated the forces of the ousted Catholic king James II in Ireland in a battle that began on July 1, 1690. The battle is recalled each year in the celebrations of the Orange Order on July 12, with the difference due to the advance of eleven days with the change to the Gregorian calendar in 1752. The date of the battle is still recorded in historical accounts as July 1.

This discussion of calendars and dates draws from Louis Jordan, John Hull, the Mint and the Economics of Massachusetts Coinage (Hanover, NH, and London: University Press of New England for the Colonial Coin Collectors Club, 2002), xvii-xix, and Thomas L. Purvis, ed., Colonial America to 1763, Almanacs of American Life (New York: Facts on File, 1999), 286-87. Table 16.3 in Purvis, "Perpetual Calendars for Historical Dates under the Julian (o.s.) and Gregorian (n.s.) Systems," covers 1580 through 1799 inclusive (287-91).

British politics, in particular the contest between the Crown and Parliament for power, the Navigation Acts and other trade rules that governed Britain's commercial ties with its colonies, and the evolution of constitutional government in the colonies each affected the level and composition of colonial taxes. Each of the five parts of this book reviews these circumstances to set the context in which taxes were imposed or levied.

Terminology

I have tried to preserve the flavor of the colonial era by using the terms that the colonists themselves employed in their discussions of taxation and expenditure, and in their political efforts to take and secure control of the public purse from their imperial overlords. Many of these terms conflict with contemporary usage. A good example is the word "Negro." The colonists wrote and spoke of Negro slaves. Indeed, many of the colonies taxed the importation of Negro slaves, most notably South Carolina. Other colonies levied poll taxes on Negro slaves that were paid by their owners. The term "Negro" has fallen out of use and is regarded as pejorative in contemporary academic circles. It has been replaced by a succession of terms such as "black" or "African American."

To give another example, women did not vote for representatives to, or serve in, colonial assemblies. Nor did many women engage in business to any substantial degree. To use gender-neutral terms distorts the reality of male domination of economics and politics in the colonial era. Where women were important, for example, Queens Mary and Anne of England, the language in the text is gender specific.

Historical terms that have fallen out of usage are defined or explained in the text or in footnotes where their meaning is unknown or unclear. Imposing modern twenty-first-century usage of terms on the colonial era in place of contemporary usage is potentially misleading if modern usage conveys meaning that differs from the historical use of seventeenth- and eighteenth- century language.

Money

The description and analysis of taxation in the colonies cannot proceed without a thorough treatment of the money of the day. Taxes are paid in some form of money, broadly defined. Until 1690, the colonies had little control over their monetary circumstances. The British government regulated the kinds and values of money that were used in the colonies. To give but one example, it banned the right to mint silver and gold coins in the colonies. Later, from 1704, it set maximum limits on the value of the coins of Spain, France, and other European countries that circulated in the colonies.

Nor were there substantial deposits of gold or silver that could be mined in British North America. Between 1652 and 1682 Massachusetts briefly minted coins known as pine tree shillings, and Maryland briefly experimented with minting coins, but neither was an important source of specie in the colonies.

Newly arriving immigrants brought some coins with them, but these quickly drained abroad to pay for imported goods that were not, or could not be, produced in the colonies. An early form of money that was used in trade with Indians was wampum, oblong shells fashioned from the inner whorls of cowries or tiny seashells found on the mud or just below the surface of water along the coast, which were ground and polished, drilled through the center to string them with fibers of hemp or tendons of wild beasts, and woven into belts, aprons, head pieces, and other decorative items. From time to time, colonial legislatures designated commodities as money and set their value for tax purposes and payment to public creditors. These included a wide variety of animal skins, corn, wheat, rye, barley, peas, dried fish, livestock, pork, beef, cheese, sugar, molasses, rum, cotton, wool, tallow, timber, tobacco, rice, indigo, naval stores, and other items. These legally defined commodities were called "current money" or "countrypay," in contrast with specie or cash. The value of commodities was frequently adjusted to reflect market conditions. Premiums were often given for payment of taxes in coins.

The colonies placed different lawful values on foreign coins of Spain minted in Peru and Mexico, the most common circulating coins in the colonies, and those of France, Germany, Sweden, Portugal, and other Europe an countries. A Spanish piece of eight, or dollar, was worth more in some colonies than in others, which often resulted in the flow of specie to the colonies that placed a higher value on the silver content of coins. The export of specie could have a debilitating effect on the colonies that experienced a loss of money with which to conduct trade and pay taxes. To correct this problem, Queen Anne issued a proclamation in 1704 that sought to regulate the value of coins in the colonies. Queen Anne's proclamation set an upper limit of foreign coins at one-third above their official rate in England. Colonial money valued at 33.33 percent above sterling, based on its silver content, was known as Proclamation Money or Lawful Money. The values of most, but not all, foreign coins were based on an assay of their silver and gold content undertaken by Sir Isaac Newton in 1702. The proclamation met with only limited success. To give but one example, New York evaded the proclamation by defining the lawful value of silver in terms of Lyon dollars, a Dutch coin, which was not included in Newton's assay.

(Continues...)

Excerpted from "Taxation in Colonial America" by Alvin Rabushka. Copyright © 0 by Alvin Rabushka. Excerpted by permission. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher. Excerpts are provided solely for the personal use of visitors to this web site.
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