While this topic is vast and we cannot do it full justice, we have to understand something of the history of taxation to help us understand the nature of taxes and the state.
In short, and necessarily oversimplified, taxation often originated in systems of war, conquest, and tribute, and over time became institutionalized within states that claimed a monopoly on force, evolving into more complex systems that combine coercion with varying degrees of legal legitimacy and public provision.
Conquest and Tribute
The extraction of resources from domestic populations has always been the crucial and central function of every state throughout history, in fact, it is from this process that states emerge. Initially, this extraction took the form of direct conquest—warriors and rulers would simply seize what they wanted through force. This evolved into systems of tribute, where conquered peoples paid regular amounts to their conquerors to avoid further violence.
The transition from conquest to tribute represented the first step toward regularization. Rather than repeatedly raiding and pillaging, conquerors found it more efficient to leave productive populations in place and extract regular payments from them. This allowed the conquered peoples to continue producing wealth that could then be systematically extracted.
Frank Chodorov, in “Taxation Is Robbery,” states,
By way of preface, we might look to the origin of taxation, on the theory that beginnings shape ends, and there we find a mess of iniquity. A historical study of taxation leads inevitably to loot, tribute, ransom—the economic purposes of conquest.
While it might seem like this is simply overstating the case or exaggeration, it is true that modern taxation can be traced backward to raiding, conquest, and tribute. Franz Oppenheimer—author of The State: Its History and Development Viewed Sociologically—identified six stages in the creation of states:
- Plunder/raiding—Nomadic or warlike groups raided settled agricultural communities for food and goods; occasional predation; violence is intermittent, not institutionalized (not a state)
- Regularized Raiding/Truce—Raids become more predictable and systematic; aggressors realize repeated extraction is more profitable than destruction; victim stops resisting and accepts extractions; early movement toward economic exploitation instead of annihilation
- Tribute Extraction—Instead of killing or dispersing the population, conquerors demand regular tribute; key transition from chaos to structured domination
- Permanent Domination—The conquering group settles among or above the conquered population; a ruling class emerges; society becomes politically stratified by castes: rulers vs. producers; real birth of the state structure
- Administrative Organization—The ruling class develops systems to manage and stabilize extraction; tax systems replace ad hoc tribute
- Territorial State (Mature/Modern State)—The system becomes a stable political entity with defined territory; monopoly on force is consolidated; taxation is normalized and justified (law, religion, ideology); the state presents itself as protector and provider (often in social contract with citizens), not merely extractor
Key to his analysis, Oppenheimer quotes Friedrich Ratzel (1844–1904)—a German geographer and ethnographer who wrote on political geography and attempted to explain the state as an organism. Oppenheimer quotes Ratzel on the origination of states,
It must be remembered that nomads do not always destroy the opposing civilization of the settled folk. This applies not only to tribes, but also to states, even to those of some might. The war-like character of the nomads is a great factor in the creation of states. . . .
This takes place pursuant to a law. . .whereby advantageous state formations arise in rich peasant lands adjoining a wide prairie; where a high material culture of sedentary peoples is violently subjugated to the service of prairie dwellers having energy, war-like capacity, and desire to rule.
It is important to note that states and what we know as taxes gradually emerged through war, conquest, plunder, and tribute. While the organization has changed and become formalized over time, states and taxes have not lost their coercive character.
Oppenheimer summarized the beginnings of states and taxation in the following way, “The peasant is attached to his ground, and has been used to regular work. He remains, yields to subjection, and pays tribute to his conqueror; that is the genesis of the land states in the old world.”
The Formalization into Modern Taxation
What we recognize as modern taxation emerged as states sought to legitimize and systematize these extractive relationships. Just as with conquest and tribute, the fundamental nature remains coercive.
The modern tax state—particularly as it developed in recent centuries—represents a sophisticated evolution of these ancient practices. Rather than naked force, states now employ complex legal frameworks, bureaucracies, and ideological justifications to accomplish what was once done through simple conquest. The rapid rise of taxation in recent centuries has enabled the construction of the modern administrative state, but the underlying dynamic remains unchanged: resources are extracted from productive individuals through the threat of force.
Ryan McMaken—working from off Schumpeter’s “The Crisis of the Tax State” (1918)—describes the characteristics of modern tax states:
- Centralization: taxes are directly imposed by the central government. The central government does not rely on regional or local governments to collect taxes or enforce tax laws. (This does not preclude regional or local governments from imposing their own taxes.)
- Unilateral power: The central government can raise taxes unilaterally. The central government’s legislature or executive has the prerogative to raise taxes on its own authority without the permission of any other sovereign within the state’s territory. Put another way, no regional or local government has the ability to veto a tax increase or legally prevent its implementation.
- The central government freely decides how revenues are spent. Once tax revenues are collected, the central government spends the revenues in whatever manner is preferred by the central state’s legislative power.
- Taxes are not fees or a payment for a service. Strictly speaking, a fee is a payment that is designed to fund a specific service, and only those who “benefit” from the service pay the fee. Tax “benefits,” on the other hand, are not tied to any particular service. Tax states are not legally held to any sort of reciprocal duty to spend tax revenues in a manner that benefits those who pay the tax. (emphasis in original)
Ryan McMaken comments further, “In the West, tax states are relatively modern institutions, and they developed from earlier non-state civil governments that were not primarily funded by taxes.” This distinguishes between civil government institutions and modern nation-states. Taxes, as we know them today, are products of the state and originated through war, plunder, conquest, and tribute.
Due to the modern mythologies surrounding modern nation-states (e.g., social contract theories, public goods theory, etc.), especially in the West, the organization and orderliness of modern taxation, and the status quo bias of most who live and have always lived in the context of a modern nation-state, many overlook the the coercive nature of taxation, the nature of the state, and taxation’s dark history.
The Great Delusion of the Day
Frederic Bastiat described what he saw as the great delusion of the day: “to enrich all classes at the expense of each other; . . .to generalize plunder under pretense of organizing it.” Bastiat also called the state “the great fictitious entity” by which everyone tries to use plunder to live at the expense of everyone else.
Lysander Spooner—abolitionist, lawyer, and radical libertarian legal theorist—contrasts the state and the highwayman (robber) and argues that the robber is actually more of a gentleman because he eventually leaves you alone and doesn’t pretend his actions are providing a service or for your own good. To quote him,
The fact is that the government, like a highwayman, says to a man: Your money, or your life. And many, if not most, taxes are paid under the compulsion of that threat.
The government does not, indeed, waylay a man in a lonely place, spring upon him from the road side, and, holding a pistol to his head, proceed to rifle his pockets. But the robbery is none the less a robbery on that account; and it is far more dastardly and shameful.
The highwayman takes solely upon himself the responsibility, danger, and crime of his own act. He does not pretend that he has any rightful claim to your money, or that he intends to use it for your own benefit. He does not pretend to be anything but a robber. He has not acquired impudence enough to profess to be merely a “protector,” and that he takes men’s money against their will, merely to enable him to “protect” those infatuated travellers, who feel perfectly able to protect themselves, or do not appreciate his peculiar system of protection. He is too sensible a man to make such professions as these. Furthermore, having taken your money, he leaves you, as you wish him to do. He does not persist in following you on the road, against your will; assuming to be your rightful “sovereign,” on account of the “protection” he affords you. He does not keep “protecting” you, by commanding you to bow down and serve him; by requiring you to do this, and forbidding you to do that; by robbing you of more money as often as he finds it for his interest or pleasure to do so; and by branding you as a rebel, a traitor, and an enemy to your country, and shooting you down without mercy, if you dispute his authority, or resist his demands. He is too much of a gentleman to be guilty of such impostures, and insults, and villanies as these. In short, he does not, in addition to robbing you, attempt to make you either his dupe or his slave.
