Mises Daily

Home | Mises Library | The Dark Side of the Tax State

The Dark Side of the Tax State

January 25, 2000

There are innumerable articles being published about the end of the 20th century, with an
uplifting theme about the
Greatest Century That Ever Was, or a similar title. Each article lists the miraculous achievements
of the past 100

The lists are impressive: Our greatly extended life spans; our freedom from so many
diseases and early deaths of
children and mothers. Added to that are the marvels of our factories and farms, electrification,
communication, travel,
literacy, our standards of living, etc. The marvels are everywhere. Indeed, the "millennium"
written about by the
ancients seems to be upon us, or so it seems.

The millennium in the Bible was a thousand years of peace--a period of great
happiness for the human race.
Yet the last century has seen more killings of human beings by human governments than in the
past millennium,
estimated at 150 million, if not more by some studies. Passing on to our children in the next
century our talent and
propensity to kill our fellow man, dampens the marvels of an otherwise amazing age of progress.
Of course, there is the
remote possibility our children may reject war and human slaughter and civil destruction as a
way of dealing with
disputes. If so, what else is on the darker side?

One article extolling the great achievements of our age by the Cato Institute, in a one liner,
acknowledged that there
were some "trends" that were bothersome: "Taxes are higher and government is a lot bigger and
more intrusive than
100 years ago." Those negatives are far beyond the "trend" stage, and unless reversed, have
disaster written all over
them, and no one seems aware of what has been happening. So taxes are higher, but we get more
from government.
And as for being "intrusive," that can't be avoided. So, what's the problem?

The problem is with
history. All indications
are that we are repeating a process that costed the Romans their most prized possession of all,
which was not their empire,
but their freedom and liberty. Our statue of liberty, while ostensibly a gift from the French, was
really a gift from the
Romans. The Goddess of Liberty, which she represents, was lost, not by the barbarian hordes, but
by the Roman
government. Rome had great traditions of liberty. In the Justinian Digests we read,
"Liberty is a possession
on which no valuation can be placed." And again, "Freedom is beloved above all things." And
the Goddess adorned
Roman coins and her statues were in temples throughout the empire.

Yet in the 4th century A.D., liberty and freedom for the Roman people was taken away by the
Emperor Diocletian
in order to protect the emperor's revenue. In one fell swoop, Diocletian ordered all Romans to
remain on their jobs, to
not change their places of abode. That way, no one could escape from the tax rolls. Prior to his
decree, Roman taxation
was founded upon a census taken every five years, but overly taxed citizens -- after taxes had
been doubled and then
doubled again -- would quickly move away to a new tax district where they weren't on the rolls,
and until the next
census they were outside the tax system. There was a saying at that time, that "a man was free
if his name was not on the tax rolls." So like all governments before and since, they took the
necessary steps, even if it
meant taking away the freedom of the people, to ensure full compliance with the tax law. There
is evidence to support
and justify what Diocletian did to prevent the empire from collapse. But the great Roman
historian, M. Rostovtzeff, saw
this as no justification for the evil that was done:

The emperors of the fourth century, and above all Diocletian...took their duties
seriously, and they
were animated by the sincerest love of their country. Their aim was to save the Roman Empire,
and they
achieved it.... They never asked whether it was worth while to save the Roman Empire in order to
make a
vast prison for scores of
millions of men.

In the last three decades since 1970, we have done essentially what Diocletian did overnight.
We had constitutional
guards to prevent that from happening, so it happened bit by bit, Congress by Congress, until
today, aided by our
modern technology we have a Diocletianized tax world. Our process for achieving this end was
vividly expressed by
Lord Erskine in 1792 defending Thomas Paine in London:

Let us consider, my lords, that arbitrary power has seldom or never been
introduced into a country at once. It must be introduced by slow degrees, and, as it were, step by step, lest the people should see it
approach. The barriers and fences of the people's liberty must be plucked up one by one, and some plausible pretense must be found
for removing or hoodwinking, one after another, those sentries who are posted by the constitution
of a free country,
for warning the people of their danger. When these - preparatory steps are once made, the people may then, indeed, with regret, see slavery and arbitrary power making long strides over their land; but it will be too late to think of
preventing or avoiding the impending ruin.

Has not this happened in the past three decades? By slow degrees, "step by step" the tax man
in America has gained
total control over everyone's economic life. In short, an almost perfect system of espionage over
every facet of the fiscal
system has slowly evolved until there is absolutely nothing about your economic affairs the
government doesn't have
under powers of surveillance. Here is the scenario of how our liberties have been taken away and
been destroyed, as
Congress, with the blessing of a majority of the Supreme Court justices, pluck out the sentries
posted to protect the
peoples liberties and transform a tax system into a spy system, turning the people into tax
slaves, neo-Diocletian
style. Each fact listed below is pervasive in today's economic life but were non-existent in

  1. All banking records photographed for Big Brother to see at will.
  2. All stock and securities transactions reported to the tax man.
  3. All real estate transactions reported to the tax man.
  4. All interest, dividends, etc. reported to the tax man.
  5. All part time work, even babysitters and teenage garden helpers reported to the tax
  6. All barter transactions reported to the tax man. Like neighborly affairs: "I'll help you with
    your rec room; you
    help me put in a new lawn." Big deal!
  7. All gambling winnings of significance reported to the IRS: casinos, race track, lotteries,
  8. All foreign accounts, holdings, trusts, reported to the tax man.
  9. U.S. citizens living abroad, reported to the IRS by the U.S. Customs, on returning
  10. Passport applicants abroad must report to the IRS.
  11. Travelers checks and cash over $10,000 reported on leaving or entering the U.S.
  12. Any moderately large cash deposits or withdrawals from your bank account reported to the
  13. Heavy fines on banks for not reporting the above.
  14. A multitude of fiscal penalties for failing to comply with a myriad of petty tax rules,
    however innocent or
  15. Surveillance and penalties on tax preparers when preparing an inaccurate return.
  16. Tax shelters must be reported (whatever that means).
  17. Harsh and long prison terms for tax offenders far in excess of what violent criminals

The above list of enslaving intrusions and punishments is by no means exhaustive. There are
a myriad of other
spying devises and punitive measures for tax enforcement. Special units prey on lawyers to keep
them off-balance. A
small town lawyer in California was sent to jail when he sent in a proper tax return without a
check. Rather than send
the matter to the powerful collection division, the IRS simply threw him in jail under a rare,
almost unknown
provision of the tax code. He complained, "I'm a nobody." Wrong! He was a lawyer and other
lawyers will get the
message. There are special training sessions to teach agents how to entice people to report on
their family and friends,
exactly as Stalin's NKVD did in the 1930s.

The 17 points referred to above did not happen at once; it took Congress three decades to tear
down the fences and
dupe the sentries that stood guard over our fiscal liberties. What do we need? A leader to tell
Congress to "Tear Down
this Tax Code," as Reagan told Gorbachev to "Tear Down this Wall."

Unlike other civilized nations that fine tax offenders as the primary punishment, our
government takes delight in
Roman style cruelty. Compare the 30 year prison sentence handed down by a Kansas City federal
judge, Dean Whipple,
against a woman, no less, named Trula Walker -- with a 30 day house confinement given to
Sophia Laren by an Italian
judge for a similar size tax offense. Sentences of 25 years are not uncommon as an Oregon high
school coach was to
learn. Compare also our psychopathic punishments with those routinely given to violent
criminals like Mike Tyson's
rape of a young beauty contestant. It is obviously more important to our government to enforce
tax slavery with an iron
fist, than to protect citizens from violence. The prison term numbers do not lie.

Tax Slavery By The Numbers

Besides the espionage against taxpayers and the savage punishments -- the core of all tax
slavery -- there is the
matter of being part free and part slave. Leo Tolstoy, the great Russian writer and humanitarian
of the 19th century,
gave us a modern definition of slavery in 1891:

The essence of all slavery consists in taking the produce of another's labor by
force. It is
immaterial whether this
force be founded on ownership of the slave or ownership of the money that he must get to live

Thus the question is, how much of your money is owned by the tax man? To what extent are
you a tax slave by the
numbers? Tax slavery has been growing in each decade throughout this century, meaning tax
freedom day has been
slipping away:

Tax Freedom Day:
In 1902 was January 31
In 1922 was February 17
In 1948 was March 28
In 1958 was April 10
In 1968 was April 24
In 1978 was April 30
In 1988 was May 2
In 1998 was May 10

All indication are, over the long term, that tax freedom day will continually be delayed until
we become half-slave
and half-free tax wise. In 1858, Abraham Lincoln, referring to chattel slavery said, "I believe this
government cannot
endure permanently half slave and half free." As the new millennium begins, we should ask
ourselves the same question
with regards to tax slavery, by the numbers.

In the ancient world, chattel slavery was tolerated with little complaint. It wasn't too bad, so
it seemed if we look
at the philosophers and leaders of that time. That seems to be our current attitude with regard to
our tax slavery. It is not
too bad, and as much as we hate to admit it, our Founders were a bunch of rabble-rousers when it
came to taxation. We
tolerate what they would have given their lives to prevent. They read Montesquieu and believe
him more than any other
writer, and in his great work, The Spirit of Laws, he wrote about tax slavery, and they
wanted none of it and
British taxes qualified, as a "badge of slavery." In protest against British stamp taxes, they
formed an underground
organization called "The Sons of Liberty," to resist British taxes. They paraded through the
streets of New York,
Boston, and Philadelphia, singing an anti-tax ballad, with the following chorus:

Parliament's voice has condemned us by law to be slaves, Brave Boys!
Has condemned us by law to be SLAVES.

The historical records of these ballads have the world "SLAVES" capitalized.

The British repealed the stamp tax act and the Bostonians erected a monument to
commemorate the repeal. Patrick
Henry recorded the monument in his writings, on which there was the Goddess of Liberty, with
the wings of an angel.
On the monument were the words -- it was better to die than be a SLAVE.

Nine years later Patrick Henry picked up the same theme in his famous speech in the Virginia
convention in 1775, a
speech every school child knows the words, "Give me liberty or give me death!" Our
schoolchildren should also learn
the rest of the speech:

There is no retreat, but in submission and slavery. Our chains are forged. Their
clanking may be heard
on the Plains of Boston! The war is inevitable -- and let it come!! I repeat sir, let it come!...Is life
so dear or peace so sweet, as to
be purchased at the price of chains and slavery?

The imagery is powerful. Slaves were manacled with chains forged by blacksmiths; as the
slave moved about, the
"clanking" of the chains could be heard. Tax slavery could not have been depicted by the
Founders in more powerful

Fear of tax slavery did not die with the Revolution, but lived on among our progenitors for
well over a century,
until the 20th century. Within 20 years after the Revolution, there were three significant tax
revolts even with
representation, in which a lot of people died fighting domestic taxes they didn't like. The
Jeffersonian revolution in
1800 was against Federalist taxes, which were repealed and did not return until the Civil War era.
Southerners raised
the tax slave issue in their acts of secession in 1861. After the Civil War fear of tax slavery
emerged again when there
was a movement to introduce an income tax in peacetime. An income tax was a war measure, so
it was believed, and
had no place in a free society during peacetime.

The Atlantic magazine also attacked tax slavery, and with this and other major
periodicals attacking income
taxation as a slave tax, it is no wonder the movement died. And when the income tax finally was
enacted in a Populist
era (1894), it was thrown out by the Supreme Court as unconstitutional.

Our Tax "No Free Zone"

When the 20th century began, fear of tax slavery all but disappeared, and we haven't heard
hardly a word on the
subject. Big government and big wars demand big taxes. Big taxes will inevitably lead to tax
slavery as we buck an iron
law of history that when taxes are excessive people will rebel in one form or another, a theme
emphasized by
Montesquieu and so vividly demonstrated by our Founders. Often, throughout history when
governments crack-down
on angry taxpayers it has been more like putting gasoline on a smoldering fire, and has often
burned down the very free
society it was supposed to protect.

Diocletian saved the Roman Empire by tax enslavement, and isn't our Congress in the same
pickle? In both
societies there developed a strong inclination to evade and avoid taxation, and tax slavery
apparently was the only
option for the government, a kind of tax martial law against an unruly society.

Our supposedly freedom loving leaders don't think of freedom the way our Founders did.
Freedom today has
nothing to do with taxes -- that's a "no free zone," like the "no fly zone" over Iraq. If taxpayers
won't comply then their
freedoms will have to go. Thus there is no remorse by Congress in transforming our tax system
from an honor system to
a tax spy system and slave system, Diocletian style.

Going back to the pre-1970 days, what would happen if your bank account wasn't
photographed? If income from
banks, stocks, and bonds was not reported? If part-time income wasn't reported? If real estate wasn't
reported? If cash
wasn't reported? If Americans living overseas weren't hounded by the IRS? If babysitter income
wasn't reported?
Housekeepers? Gambling? If fines were used instead of psychopathic punishments? Would the system work
as it did for the first 50 years? Apparently not, so our Congress and Treasury seem to think. Thus
we have two options:
First, maintain the income tax slave system, adding additional muscle from time to time as
needed; or, tear down the
income tax system and start over with a tax system the people will respect. For the present, we
pass on to our children
in the 21st century the first option.


Charles Adams is the author of
For Good and Evil: The Impact of Taxes on the Course of
Second Edition (1999), from which this essay was adapted.

Follow Mises Institute