Allan Rolnick, CPA
On July 4, 1776, a determined group of colonists clinging to the shore of a harsh new world declared independence from the political bonds connecting them to the British Crown. The colonists cited all sorts of injuries and usurpations to justify their revolutionary decision: the King had plundered their seas, ravaged their coasts, burned their towns, and destroyed their lives, blah, blah, blah. But the real non-negotiable that we remember today is that the King had imposed taxes on the colonies without their consent. Every school kid can tell you what happened at the Boston Tea Party. History nerds can go on to tell you about the Stamp Act. (Those are the kids who go on to write the future laws in Washington.) But just how bad were those British taxes that pushed us out of Britain’s arms? It turns out that if the Founding Fathers could see what the government they launched 246 years ago is charging for citizenship today, they would revolt all over again. Colonial levies included property taxes, poll taxes on men over 18, excise taxes, and occasional forced labor for projects like roadbuilding. (You thought “Infrastructure Week” was something new?)
As war drew near in 1775, those taxes were skimming off just 1-2% of the colonies’ economy. But taxes were devouring 20% of the economy back home, and the Kingdom was steadily ramping up pressure on us to cover what they couldn’t afford themselves. The Sugar Act of 1764 was designed specifically to extract revenue, not just encourage trade. And the Stamp Act of 1765 was the first direct tax on the colonies, as opposed to the usual tax on imports or exports. Colonial leaders were fine with paying tariffs but drew the line at direct taxation without representation. Parliament got the hint – they repealed the Stamp Act in 1767 and nixed a slew of import duties in 1770. But they kept the tax on tea to make the point that they were still in charge. Unfortunately, by that point, the colonies had had their fill of second-class citizenship and were ready for a taste of independence.
Today our federal, state, and local governments have imposed a jury-rigged superstructure of taxes on income, sales, payrolls, and inheritances that gobbles roughly 25.5% of our economy. Just imagine how Benjamin Franklin – in many ways, the Elon Musk of his day – would react to today’s taxes on his electricity, his newspapers, and his real estate fortune. How much happier do you think he would be with the knowledge that at least we voted ourselves into this mess? One thing still hasn’t changed since the shot heard ‘round the world that launched the battles of Lexington and Concord. We still chafe at that whole “without representation” thing. In 2009, Congressional Democrats, acting without a single Republican vote, passed the Affordable Care Act and hacked off half the country who thought they should have a say in remaking 17% of our GNP. Eight years later, it was the Republicans’ turn, acting without a single Democratic vote to pass the Tax Cuts and Jobs Act of 2017 and hacking off the other half who thought they should have a say in how we pay our bills. July 4th is traditionally our day for celebrating our evolving, imperfect American democracy. April 15th is the day we pay for it. But both of those are stand-ins for year-round responsibilities. This summer, keep in mind that the real lesson of independence was demanding a say in how much we pay. And, as always, you don’t have to start a revolution to pay less. Just call us!
Allan J Rolnick is a CPA who has been in practice for over 30 years in Queens, NY. He welcomes your comments and can be reached at 718-896-8715 or at email@example.com.