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PA R T 2
Taxation as a stepping stone
to the formation of the United States of America
(1765-1801)
THE THIRTEEN AMERICAN COLONIES ON THE EVE OF THE
REVOLUTION
A
fter earlier failed attempts to settle on the North American
continent, in May 1607 a group of some hundred colonists landed in
Chesapeake Bay. The colonists successfully created a settlement there with
a regular supply of new immigrants from Europe and, in 1620, a definitive
colony was founded by the Pilgrim Fathers. Other groups followed and,
more than a century later, a total of thirteen colonies were in existence.1
These were mainly populated by the children of immigrants not only from
England and Ireland, but also from other European countries. Some
immigrants, like the Puritans and Pilgrim Fathers saw an opportunity to
escape religious persecution in their own countries and, in the New World,
freely practise their religion. Some immigrants were embittered younger
sons looking for adventure and fortune; and some were destitute people
hoping to start a new life as contract labourers, whilst others, sent to the
colonies as prisoners, on gaining their freedom stayed to make a new life.
The initiative for American colonization did not, therefore, stem from the
British government but from the will of private individuals who were
motivated by their own desires. Britain only became involved with the
running of the colonies in order to further her own interests. Initially, Britain
as the ”Mother Country” failed to show any interest in the settlements
overseas. Only when they began to enjoy some success was Britain’s interest
• • • • • • • • • • • • • • • • • • • • • •
1
Virginia, Massachusetts, Rhode Island, Connecticut, New Hampshire, Maryland,
North Carolina, South Carolina, Georgia, New York, New Yersey, Pennsylvania and
Delaware.
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kindled. The British government weighed the colonies down with trade and
navigation regulations which were very much to its own advantage. The
newly founded colonies were granted charters which, whilst providing them
with specific forms of popular representation, allowed the settlers of the
separate states to manage their own affairs, subject to British supervision.
Despite women, Roman Catholics, Jews, non-believers, blacks, Indians,
mulattos and contract labourers not being entitled to vote and, although
property ownership was a requirement for the right to vote and being
elected for office, the representative body in most settlements was still
chosen more democratically than the British House of Commons. There,
whilst an elite minority dictated policy with ordinary people having no say,
in the new colonies of America the freeholders2 did have a voice in political
matters. Meanwhile, as in the Old World, financial wealth still dictated
politics in the New World. Although the degree of tolerance towards
religions other than the majority’s differed from state to state, there was no
religious prosecution anywhere.
In 1763 the total population was about 2 million people of who 15 per cent
were black. In Virginia, the most populous state with half a million, a third
was black and in Carolina even the majority. The southern states were very
rural and cities and towns were few and far between. The aristocratic
plantation owners on the vast plantations were more inclined to adapt to the
British system of standards and values than the people in the northern states,
in particular New England, where the inhabitants were averse to any form
of tyranny. They saw this particularly embodied in France, which still played
an important role on the American continent, of which they hated and feared
the absolute monarchy as well as the Roman Catholic religion. When the
French threat had vanished their puritan resistance against any interference
from outside, which in their eyes easily was tyranny, did not at all disappear.
Whilst little political interest was shown by Britain in the colonies,
economic matters were another story. For transport to and from the colonies
only British ships or ships from the colonies could be used. When a colonial
merchant wanted to ship goods he had to guarantee that the goods were
shipped to England. If he could not offer this guarantee, or did not want to,
• • • • • • • • • • • • • • • • • • • • • •
2
Farmers on owned land.
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the goods were heavily taxed at exportation. In fact England became the sole
entrepôt for colonial wares, such as rice, sugar, tobacco, cotton, wool, indigo,
copper, hemp, tar, pitch, hides, rigging. For the colonies this permanent
market was an advantage, but the low prices were a disadvantage. Another
advantage was the booming shipbuilding industry. One third of the ships
flying the British flag were built on the shipyards in the colonies.
When, as a result of the inflexible Trade Acts, the colonies started
buying fewer British products and manufacturing more of their own,
Britain lost no time in protecting itself against American colonial
competition. In 1699 England forbade the export of yarns and woollen
fabrics from the colonies and, in 1732, the Hatter’s Guild successfully
lobbied to prohibit the American export of hats. Steel manufacture was
limited, sugar refineries were banned and slave labour was forbidden in
factories. This list of enumerated commodities grew steadily in the
eighteenth century, as the colonies became more and more independent.
”Colonialism” was, therefore, a particular form of mercantilism. Whilst
this had been accepted without any comment in the seventeenth century, in
the eighteenth century people started to question this form of economic
exploitation. When Adam Smith in 1776 poured scorn on the colonial
system, he was, however, a few decades late.
One area that escaped British interference was in the trading of slaves.
After the monopoly of the Royal African Company was lifted, both American
and British merchants were allowed to trade in African slaves, provided 10
per cent of the purchase price of this ”imported merchandise” was deposited
with the British Treasury. By the middle of the eighteenth century, as many
as 5000 slaves were shipped annually to the North American continent. So,
from these figures, it is clear that this ”transportation tax” brought the British
Treasury a sizeable income.
THE TAX SYSTEM IN THE COLONIES
B
ecause the Americans did not have to maintain an army to defend
themselves against the French and the Indians, relatively low and simple
taxation measures were quite adequate. Taxation differed from colony to
colony. The states of New England levied direct taxes on movable property
such as cattle and slaves, and on houses and land. This method of taxation
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was especially onerous for farmers, who could not hide their sheds, cattle
and houses from the tax authorities. A capitation tax was also levied which
hit the poor very hard — whilst the Governor, together with teachers,
parsons, handicapped people and students were exempted from this tax.
This form of taxation was, however, later abandoned. People earning more
than a certain amount of money were taxed according to their ability to
pay.
In the southern states, dominated by rich plantation owners, indirect
taxes were preferred to a levy on property and income. Import and export
duties were the main source of taxation whilst a capitation tax was levied
as well. This was often paid in the form of tobacco or another consumable.
In the states of New York and Maryland, a combination of direct and
indirect taxation was applied, with the extra refinement of a tiered
capitation tax sometimes added.
Because of the unceasing efforts of William Pitt, the prime minister,
Britain emerged in 1763 as one of the victors of the Seven Years’ War,
having finally defeated France as a colonial superpower on the American
continent. Although the war had been waged in defence of the thirteen
colonies, the colonies themselves had offered only partial assistance. Some
colonial governments had vigorously supported the British, while others
had behaved as if the war had been conducted on an other planet. Britain
had stood by helplessly whilst the colonies engaged in large-scale trade
with the enemy; in fact the French army was mainly supplied by American
tradesmen. The war had drained Britain’s financial resources. The country
faced sky-high debts, together with an obligation to maintain an army in
the American colonies as well as having to pay the salaries of a sizeable
number of American government officials. Why should not the Americans,
therefore, carry a greater portion of the financial burden?
The first, and quite moderate step in the direction of greater colonial
participation was taken during the Seven Years’ War. To facilitate the
collection of import duties by customs officials Britain issued search
warrants (Writs of Assistance) permitting officials to search private
residences, stores and warehouses on suspicion that they contained
smuggled goods. Legal protests proved worthless since the AttorneyGeneral in London had decreed that the Writs were a legal means to
implement the Navigation Act. Britain paid dearly for these increased
revenues from the import duties and fines because they signalled the
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beginning of an estrangement between the colonies and Britain as the
mother country.
Immediately following the Seven Years’ War, which had greatly
bolstered the colonists’ self-confidence, Britain ordered customs officials to
collect existing taxes strictly according to the letter of the law. The
Americans interpreted this order as a form of taxation to which they had
not granted their consent. Up until that time, import and export duties had
been levied in America but these formed part of the regulation of trade.
Nobody believed that these cases would be taken as an example to justify
the taxation of Americans on behalf of the British Treasury. British
taxation of Americans did not fit the standard constitutional pattern of
colonials governing themselves under British supervision. The average
American considered this action as symptomatic of King George’s
aspirations to absolute power.
During the Seven Years’ War the government in London had already
attempted to curb the contraband operations carried out by the colonists,
by allowing any customs official suspecting smuggling taking place, to
invoke police assistance. Immediately after the war, Parliament passed a
law allowing, even during peace time, British warships to be stationed in
American waters, which enabled the Navy to assist the customs officials.
The same had happened in Great Britain.
Furthermore, customs officials were granted more extensive powers
and special courts were set up to enforce regulations on forbidden imports
more effectively. These steps were primarily intended to increase the
revenue flowing from America into the British Treasury. Added to the list
of enumerated commodities that were not allowed to be exported to
Europe were lumber, iron, potash, hides and pelts.
The Sugar Act (1764), although reducing import tariffs on raw sugar
and molasses, raised tariffs on refined sugar and indigo, coffee, wine and
textiles making them subject to import duties. The Sugar Act set off a chain
of strong protests, together with the publication of pamphlets denouncing
these British measures. Immediately the opinion was heard that taxation
with which the citizens had not consented by means of their representative
bodies, made them lose their freedom and turned citizens into tax slaves.
Despite the far-reaching financial and economic impact of the Sugar Act,
opposition to the Act was limited to written protests.
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