Wednesday, August 3, 2011

Tea Party and Tea Tax

The Tea Party makes liberal reference to the "founding fathers" as the bedrock, the principals upon which their principles rest. So what of taxes on tea?
For the answer I checked that old stalwart, Davis Dewey, Financial History of the United States, New York: Longmans, Green, 1902. 1791-1901, which apparently was "the" text for public finance in the early part of the last century, as there was a new edition every few years through at least 1920. See pp. 80-82 for details.
Given the exigencies of the time, a tax bill was submitted to Congress even before George Washington was inaugurated; the bill passed on July 4, 1789. So what did they tax? -- tea! And not modestly, but at a rate of 6¢ to 20¢ per pound. Furthermore, if the tea was carried on a foreign vessel, then that rate was doubled. By the 1870s -- that particular tariff was abolished in 1872 -- it was raising roughly $10 million per year, a tidy sum for that day and age.
For the Founding Fathers, tea was an important symbol (and practical target) for the need for revenue to support the functions of government that underlay the shift from the Articles of Confederation to our current constitution. The fight hadn't been against taxes, the challenge wasn't limiting government, it was finding sources of revenue to support the expansion of government to provide the services that the British would not. Patriots gave their lives for a government that would serve the people, for the right to levy taxes, if need be (and the need was there) for higher taxes.
Mike Smitka, August 3, 2011

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