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Tax Protest Time

Bob Hoye

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April 14, 2009

Initially, recent tax protest started with some small replications of the “Boston Tea Party” of 1773, which symbolized the start of the American Revolution. Under relentless assault by serial taxers and regulators this is becoming a political phenomenon. It is uncertain how far it may go, but the onslaught of Democrat corporatism is alien to the fundamental nature and constitution of America and Washington’s mania needs to be censored and curbed.

Over the past few years we have briefly discussed the “Second American Civil War”. The first one, of course, was prosecuted to bring freedom to all citizens. This one has been prosecuted under the banner of political correctness to constrain the freedom of all citizens. Last year’s Democratic electoral success has turned loose a remarkably energized movement to intrude upon every aspect of life.

The classic condition for successful political reform has occurred when tax demands are still soaring as most levels of government are in an aggressively expansionist mode–as the private sector suffers a severe post-bubble contraction. In March, Secretary of State Clinton advised “never waste a good crisis”. That was by way of an pitch about taxes and regulations needed to cure the earth’s “health”. Government can find incredible reasons to spend, and the following essay reviews some classic chicanery.

One would have hoped that financial rip-offs committed by medieval princes would have been permanently shelved when liberal enlightenment ended the divine right of kings.

Recent imperious announcements by Chairman Bernanke to use the “printing press” to inflate anything they can should be considered startling only in the resort to honesty. Euphemisms for currency depreciations started with the original promoters of the Fed and the tout was that a “flexible” currency would prevent serious financial contractions.

Although policymakers have been convinced that currency depreciation would keep every “recovery” going, the 95 percent depreciation of the dollar’s purchasing power has exaggerated the booms and busts.

This is particularly ironical as government intervention did not prevent massive contractions such as with the commodities collapse of 1921 and with the collapse of virtually everything after 1929. Moreover, the timing and percent declines on this fall’s crash replicated those of 1929 with remarkable fidelity. The crisis has been used as an excuse to increase taxation and regulation. The ambition is reaching Medieval proportions.

Nineteenth Century liberals, so rational and principled in their views, could not have imagined the greedy craft developed by many modern governments in confiscating private wealth earned by productively working citizens. Are we seeing medieval financial tyranny replicated by today’s proponents of the divine right of bureaucrats? A look at history provides perspective.

Although outrageous when imposed, the passage of time makes early examples of princely finance somewhat amusing: the colourful Richard I (1189-1199) sold property to finance his joining the crusade of Peter the Hermit. Upon returning, he took it back on the pretense that originally he had no right to sell it.

The infamous King John (prompted the Magna Carta in 1215) introduced the clever plan of imprisoning and ransoming the mistresses of priests, confident that the funds he could not obtain from their greed he would from their lust.

Edward I (1272-1307) confiscated money and silver or gold plate from monasteries and churches, faked a voyage to the Holy Land and, in keeping the money, refused to go.

Edward IV (1461-1483) was described as the handsomest tax-gatherer in the country; and when he kissed a widow because she gave him more than he expected, it is said she doubled the amount in hopes of another kiss.

The fiscally sound Henry VII (1485-1509) approached wealthy families with two arguments. If the household was not extravagant in expenditure, then he attacked what they had saved by thrift; while if they lived extravagantly they were considered opulent and could afford any exaction. Named after his minister of finance, the ploy was called “Morton’s Fork”.

A broader form of wealth confiscation capable of tapping even the poor was accomplished by currency debasement and extreme examples in ripping off everyone provoked severe social disorder. No matter what method employed, financial outrage prompted the evolution of parliament as a necessary means of constraining fiscal ambitions of the governing classes.

The struggle between individual freedom and authoritarian state proceeded until the late 1600s when growing commercial wealth and political power in London began to become influential with its financial common sense. The specific event that formalized the victory over the ancient status quo was the “Glorious Revolution” of 1688, which maneuvered the pro-business and Protestant William of Orange into the British Crown and displaced James II as the last absolutist king. How refreshing this was is indicated by the oppressive politics of his and his predecessor, Charles II. Starting with the restoration of the monarchy with Charles in 1660, both kings were bribed by France to change the culture of England - consistently in an authoritarian direction. Scornful remarks by miffed establishment were similar to those directed to the pro-business “religious right” today.

No matter how imaginative or despotic princely financing was, it can’t compare with the long- running compulsion to spend other people’s money by today’s bureaucrats and politicians, virtually unrestrained by the checks and balances of constitution or mainstream media.

But before expanding this point, consideration should be given to the other event that formally ended the old world, which was the beginning of modern finance with the incorporation of the Bank of England in 1694. As history shows, central banking is fine when disciplined by a convertible currency and, when not, it becomes a tool of state ambition to confiscate wealth though currency depreciation. That the dollar has lost 90% of its value in only 50 years exceeds most princely devaluations and, like those, has been no accident.

Indeed, recent Fed announcements to “print money” could be an attempt to go for the final 10%. While many outside central banking would consider this as infinite folly, it is uncertain as to how long this endeavour will maintain credulity in even academic circles. Regrettably, modern financial agencies such as the Treasury or Federal Reserve System have become as corruptible as their medieval counterparts.

Fortunately, history provides some antidotes to governmental abuse of the productive sector. Short of rebellion, the most effective of course has been government and its financial agencies being forced to be accountable to the taxpayer. As for those who have wrecked the currency (also a government responsibility), Dante, in his Inferno, reserves a special place in hell for “false moneyers”.

The Anglo-Saxon Chronicles record something equivalent, albeit more temporal:

“1125 A.D. In this year before Christmas King Henry sent from Normandy to England and gave instructions that all moneyers … be deprived of their members … Bishop Roger of Salisbury commanded them all to assemble at Winchester by Christmas. When they came hither they were then taken one by one, and each deprived of the right hand and the testicles below. All this was done in twelve days between Christmas and Epiphany, and was entirely justified because they had ruined the whole country by the magnitude of their fraud which they paid for in full.” - The Laud Chronicle (E)

Fortunately, history indicates that the public will eventually figure out that no matter how beguiling the claims about currency management and taxation are, the gambit has been mainly to confiscate private savings. They will then demand the return of sound money and accountable government.

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