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December 14, 2005
A Tax Revolt or Revolting Taxes?
Joseph J. Thorndike

Full Text Published by Tax AnalystsTM

Last Friday marked the 232nd anniversary of the Boston Tea Party, a fixture in the folklore of American nationalism. Every schoolchild learns the story of the tea, Boston Harbor, and a band of ersatz Indians. But what did the tea party mean? And more to the point, what is its legacy for contemporary American politics?

For many critics of the modern federal state, the tea party demonstrates the inchoate antitax strand of American political culture. In 2002 Citizens for a Sound Economy, now part of FreedomWorks, introduced www.usteaparty.com, a Web site linking modern tax politics to the famed episode of 1773. "Today, we're having a new tea party against high taxes!" the site declares.

Fair enough. But was the original tea party a protest against high taxes? Not really. In fact, the Boston Tea Party was sparked by a tax cut, not a tax increase. That colonial exercise in civil disobedience was certainly a protest against oppressive taxation, but it was also a revolt against tax preferences. Specifically, the tea party was sparked by an 18th century version of corporate welfare.


The Brewing Revolt

Taxation figures prominently in the narrative of American independence. The French and Indian War (known in Europe as the Seven Years' War) ended in 1763, leaving Great Britain in firm control of most of North America. But victory came at a steep price: Between 1754 and 1763, the British national debt rose from £75 million to £133 million. In London, leaders of the empire looked to the American colonies for help in paying the tab.

A series of revenue measures followed, including the notorious Stamp Act of 1765. Colonial leaders complained that stamp taxes were unconstitutional, insisting that direct levies designed to raise revenue -- rather than regulate trade -- were the preserve of colonial legislatures. To drive the point home, political and commercial leaders organized a series of protests, including a remarkably effective boycott of British goods. Parliament eventually gave in, rescinding the stamp tax in 1766.

But new taxes soon followed. In 1767 a new chancellor of the exchequer, Charles Townshend, convinced Parliament to impose modest import duties on items of broad colonial consumption, including paper, paint, lead, glass, and tea. Colonial leaders responded with another organized protest, mobilizing popular support for nonimportation and nonconsumption agreements. As historian T.H. Breen argued in The Marketplace of Revolution, those boycotts played a vital role in radicalizing the colonial population in the lead-up to war.

Once again, Parliament backed down, repealing all but one of the Townshend duties. The prime minister, Lord North, insisted on retaining the tax on tea, determined to underscore Parliament's right to impose direct levies on the colonies. The tea tax was not lucrative; after the costs of collection, it raised very little revenue. But Lord North considered it a vital symbol of imperial authority.

Some colonial leaders tried to hold the line in the face of North's intransigence, but unity soon crumbled and imports resumed, including shipments of dutied tea. However, at the same time colonial merchants increasingly turned to smuggled tea, much of it coming from Holland and the Dutch colonies. Contraband tea was cheaper than the British imports, and smugglers soon captured roughly 90 percent of the colonial market.

The Tea Act

Had Lord North left well enough alone, things might have remained relatively calm. But in 1773 Parliament passed the Tea Act. Designed to rescue the ailing East India Company, which was struggling against a crushing debt load, that new legislation granted the company a virtual monopoly over colonial tea sales. Drawing on a huge inventory of unsold tea in its London warehouses, the company prepared to ship 600,000 pounds of tea to the colonies. The company would assign that tea to a few chosen consignees, leaving most American merchants -- including those with a thriving trade in smuggled tea -- completely out of the loop.

Tea exported from Great Britain was usually subject to an export tax, but Parliament agreed to exempt the company from that duty. Lord North again refused to repeal the remaining Townshend duty on tea, still devoted to its symbolic value. But even so, the exemption from export duties would allow the East India Company to sell the tea at rock-bottom prices, undercutting smugglers. American consumers would have enjoyed a windfall: a happy influx of cheap, high-quality British tea.

If Lord North and the East India Company expected a warm reception, they were in for a rude awakening. Colonists agreed with Lord North that the tea tax held great symbolic importance, and they reacted violently to the Tea Act. Foes threatened anyone who might be inclined to cooperate. As one rabble-rouser warned in a New York newspaper, "A thousand avenues of death would be perpetually open to receive and swallow you, and ten thousand uplifted shafts, ready to strike the fatal stroke whenever a favourable opportunity offered for the purpose."

Under such pressure, the consignees in several American cities refused to accept the tea shipments once they arrived in the colonies. But in Boston, Massachusetts Governor Thomas Hutchinson refused to back down, insisting that the tea be offloaded into warehouses. In response, a crowd of patriots gathered on the night of December 16. Organized by Sam Adams and his radical cadre, the Sons of Liberty, the protestors boarded the Dartmouth, a cargo ship loaded with 342 chests of tea. They were joined by onlookers who blackened their faces with soot to mimic the Indian disguise of the original protestors. That large but surprisingly disciplined crowd methodically dropped the entire tea shipment into Boston Harbor. Losses totaled almost £10,000 -- a vast sum for the era.

Reaction to the protest varied dramatically. Royal officials were predictably outraged, but even many colonial leaders were aghast at the organized criminality. Benjamin Franklin, among others, insisted that the tea owners should be compensated for their losses. But the British reaction swept aside those concerns. A series of punitive measures, known as the Coercive Acts, swept through Parliament. One act closed the port of Boston to all commercial activity until the tea losses had been repaid. Colonists were outraged by that heavy-handed lawmaking, and soon enough, colonial leaders were organizing a broad-based, powerful response.

Many historians consider the tea party a principal catalyst of the American Revolution. The cross-sectional outrage engendered by the Coercive Acts helped unify the colonies at a critical juncture, and within a few years sustained violence would tear the colonies from the empire.

The Meaning of the Tea Party

What prompted the Boston Tea Party? Was it outrage over the tea tax? Or was it Parliament's ham-handed effort to rescue the East India Company, establishing a pernicious monopoly at the expense of colonial merchants? For many years, historians emphasized the monopoly argument. In 1917 Arthur Schlesinger Sr. insisted that complaints about the tax on tea were "the flowering, not the roots, of the tree that had been carefully planted and nourished by the beneficiaries of the existing business order."

More recent historiography gives greater weight to ideas and ideology, accepting complaints about the tea tax more or less at face value. While not ignoring the role of commercial interests, historians like Benjamin Labaree emphasize the importance of antitax thinking. "Opposition to the East India Company's tea plan was based almost entirely on the issue of the tax," Labaree wrote in his landmark study of the tea party. While smugglers helped organize the antitea campaign, monopoly concerns were too remote to energize most Americans.

The truth, as always, lies somewhere in the middle. Clearly, resentment of the tea duty was central to the tea party. Like Lord North, colonial leaders understood that any move to accept the dutied tea would imply a similar acceptance of the right to impose those duties.

But it's also true that those abstract, ideological concerns had carried little weight between 1770 and 1773 -- years during which Lord North had ostentatiously refused to eliminate the tax on tea. "As American colonists went about their daily affairs in September 1773," Labaree said, "almost all of them ignored the desperate efforts of a few radical patriots to keep alive the spirit of resentment." Only when the Tea Act united antitax feeling with plans for a state-sanctioned monopoly did that resentment again boil over.

"Most politicians sense that Americans hate taxes," according to Julian Zelizer, a prominent political historian with a fondness for tax issues. "We are a nation with a long tradition of tax revolts." Indeed we are. But tax revolts come in a variety of shapes, sizes, and meanings. Sometimes they give voice to a simple antipathy for taxes of any sort. Other times they focus on methods of imposition and assessment -- the famous colonial slogan "no taxation without representation" gave voice to that sort of political and procedural concern.

But some tax protests -- including the Boston Tea Party -- have also been infused with a sense of fair play. Americans resent arbitrary and capricious taxes, especially when revenue tools are compromised by special interests. Loopholes and tax preferences are a powerful source of antitax activism.