Debt, Taxes and Consequences

It is appropriate to discuss taxes this week inasmuch as all qualifying Americans will be completing their tax filings and about 50% of filers will be making their final payments tomorrow. Taxes change history. They have had significant consequence for our independence; our revolution and our democracy. Let’s look at a brief 15 year history of American Revolution events and dates:

• 1773 Boston Tea Party

• 1774 First Continental Congress

• 1775 Shot heard round the world

• 1776 Declaration of Independence

• 1777 Articles of Confederation

• 1783 British surrender

• 1786 Shays rebellion

• 1788 USConstitution adopted

Every smart fifth grader knows these events, we hope. But, do you know what preceded this sequence of events?

• 1756-1763 Seven Years War

• 1764-1767 Sugar Act, Stamp Act and Townshend Acts

• 1770 Boston Massacre

• 1773 Boston Tea Party

In 1756, the debt of Great Britain was about £75 Million, not an inconsequential amount in purchasing power for the time. Britain then engaged in a lengthy war with France and other European powers with significant battles in North America where the war was known as the French and Indian War. The war actually started here. When peace was established, Britain’s debt had risen to £800 Million. Now we’re talking real money. King George III and the British parliament levied taxes on the unrepresented North American colonies to service and pay down the debt. These taxes were ill received in America and resulted in significant opposition and nonpayment and, ultimately, the imposition of an expanded British military presence in the colonies and Boston proper. The troops fired on a Boston gathering in 1770, killing 5 and injuring 11. The revolutionary war was beginning. Debt and taxes have direct consequence. Here is a quote from one of America’s founding fathers that is every bit as pertinent today as then:

"It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-half the wars of the world." Thomas Jefferson, 1820.

When Jefferson spoke these words, such niceties as political correctness, special interest controlled politicians and entitlement receiving voters were not fully entrenched. But the truth of the words is still pertinent and few, if any, politicians and kings grasp their meaning. So, TheFundamentals would modify Jefferson’s last sentence to read as follows: “A principle, if acted upon, would save one-half the wars of the world and substantially reduce other government spending, both of which create massive debt which then require the need to levy taxes to pay off the debt, which, ultimately increases the frequency of taxpaying citizen revolts and other forms of uprising which are not healthy for the well being of politicians, bureaucrats and kings.” This lesson has not been learned. Neither the party in power (PIP) nor the party out of power (POOP) has embraced it. Neither PIP nor POOP can be looking forward to November 2010. The current talk about new forms of taxation and the lack of any real, implemented spending reductions should lead to a sea change at that time. But only if taxpaying citizens work hard to force change. Remember these powerful words --  “It is incumbent on every generation to pay its own debts as it goes!”