By Thomas Savidge
While many Americans are feeling the sting of Tax Day, April 15, that same day another holiday passed with little notice outside of Massachusetts and Maine. Patriots’ Day commemorates the Battle of Lexington and Concord and the start of the American Revolution happened to fall on the same day as the deadline to file income taxes. The “shot heard ‘round the world” is worth remembering because the ideas those men fought for are worth defending today.
The Significance of the Battle of Lexington and Concord
Much ink has been spilled about the driving forces of the American Revolution, but many scholars argue that taxation played a role in pushing the colonists to declare independence. In the lead-up to Lexington and Concord, Great Britain enacted punitive taxes in order to raise revenue from the 13 colonies. This drew the ire of the colonists, especially in Massachusetts. After the Boston Tea Party in 1773, Britain increased its military presence in Massachusetts and shut down Boston Harbor until colonists had paid for the tea dumped in the harbor during the Tea Party. After removing Royal Governor Thomas Gage, Parliament declared that Massachusetts was in a state of open rebellion.
When British troops attempted to seize weapons in Concord, Massachusetts, they were met by colonial minutemen in Lexington, Massachusetts. The British Empire had taxed these men to ruins and then blocked their ability to freely trade with the rest of the world. Rather than accept submission, these men chose to fight back. The minutemen were initially pushed back to Concord, but, when additional colonial support arrived, they successfully pushed the redcoats back to Boston. The act of defiance became the catalyst for American independence and the rest is history.
With the freedoms won in the revolution the American people became free to build their own lives as they saw fit. Through market exchanges, they could do so peacefully through voluntary and mutually beneficial exchanges. The American system allows for a great deal of innovation and economic growth. As economist Samuel Gregg notes,
Perhaps the most important effect [of America winning independence] was the establishment within the United States of a common market. This facilitated a greater division of labor and specialization throughout America. Indeed, a spirit of entrepreneurship swept the country after the Constitution’s ratification, dwarfing that which existed in colonial America.
This great division of labor and entrepreneurial spirit persists in the United States today, raising the standard of living for generations of Americans.
Leviathan Comes Home
Nearly 248 years after the signing of the Declaration of Independence, a brief overview of the Federal Register shows that U.S. federal agencies cover almost every aspect of life.
Of course, the growth of government did not happen overnight. Over the course of 248 years, much of it during the twentieth century, government used crises to grow and increase its scope of authority. This is known as “the ratchet effect,” where government spending spikes immediately after a crisis, then lowers when the crisis subsides; but never down to pre-crisis levels.
Intrusive government comes at a cost to all Americans. Research shows that federal regulatory growth alone drives up operating costs per unit of output by 3.3 percentage points per year and these costs compound over time. Sluggish business growth means less innovation and less prosperity for all Americans.
Americans also face massive tax burdens. Between federal, state, and local income taxes, American families and businesses pay thousands of dollars to the government every year. In New York City, a location with some of the highest tax burdens, the top marginal personal income tax rate exceeds 50% when accounting for federal, state, and city income taxes. Even in states without an income tax, taxpayers face income tax levies from the federal and local governments, sales taxes, business income taxes, and property taxes.
To make matters worse, massive government debt will shackle future generations with taxes. At the federal level, nearly $34.6 trillion in debt (about 102,000 for every American) plus additional trillions to cover the unfunded obligations for Social Security ($65.9 trillion) and Medicare ($12.5 trillion). State and Local governments owe another $4 trillion in debt. These entities also owe between $2 trillion and $7.96 trillion in unfunded liabilities for public employee pensions and retiree benefits.
Americans Push Back Against Government, but Face an Up-Hill Battle
As government grew, though, there have been Americans willing to pushback. Most recently, the Taxed Enough Already (TEA) Party movement was inspired by those fighting taxation during the revolution, calling for massive reductions in government taxes, spending, and regulations. This movement lost momentum due to pressure from the Internal Revenue Service. From 2010-2012, the IRS denied tax-exempt status to most applicants while subjecting all applicants to “highly intrusive, intimidating requests for information regarding their activities, membership, contacts, Facebook posts, and private thoughts.”
In the wake of 2020, a nationwide State Flat Tax Revolution is underway, 12 states have a flat income tax, one state (Iowa) is in the process of changing from a progressive income tax structure to a flat income tax, and nine states do not levy a personal income tax on wage or salary income at all. Even California taxpayers are finally starting to pushback with as the Taxpayer Protection and Government Accountability Act, according to The Wall Street Journal “would define all levies, charges, and fees as taxes and require a two-thirds public vote to raise local taxes. It would also nullify some post-2022 tax increases that didn’t meet the new two-thirds threshold.”
Even without an adversarial IRS, Americans pushing back against the federal government will still face major challenges. The majority of federal spending is on entitlements, transfer payments from the government to citizens that fall below a certain income threshold. In addition, the federal government has transferred trillions of dollars to state and local governments in the past twenty years alone. Many private citizens and organizations as well as state and local governments would willingly push back against a new tax revolt to ensure they keep receiving government transfers.
These transfer payments are what Columbia Law Professor Philip Hamburger calls a “transactional mode of control.” To receive funds or permissions from the federal government, the recipient must agree to the terms and conditions of receiving the money, often willingly giving up constitutional freedoms. Americans pushing back against the government will have to demonstrate how freedom is a better choice than dependency on the federal government.
How to “Secure the Blessings of Liberty to Ourselves and Our Posterity”
A constitutional amendment limiting spending growth will create fiscal discipline even when members of Congress don’t care about fiscal responsibility. This can be achieved through a tax and expenditure limit like the Colorado Taxpayers’ Bill of Rights Amendment, which limits spending to population growth plus inflation or the Swiss Debt Brake, which limits spending growth to the average revenue increase over a multiyear period with tax rates set by the Swiss Constitution.
A fiscal commission is another viable solution. Research shows that a fiscal commission modeled after BRAC could help reduce government spending. This would include staffing the commission with independent experts, allowing all government spending to be subject to cuts, having results certified by the CBO or GAO, and fast-track approval by the President. In order to stop the cuts from taking effect, both houses of Congress would need to pass a joint resolution rejecting the spending reforms.
These reforms could also apply to state and local governments, but additional steps need to be taken to prevent workarounds to tax and spending limitations. For example, these spending limits must apply to all spending and prevent states and localities from giving funds to “off-budget enterprises” (OBEs) such as mass-transit authorities or transportation entities that otherwise claim to be “self-funding.”
In addition, states would also need to reduce dependence on federal funds. One way to tackle this problem is to follow Utah’s example of Financial Ready Utah. Enacted in the wake of the Great Recession, this package of bills requires state agencies to have emergency plans in place for anywhere between a 5-percent to 25-percent reduction in funding and requires state agencies to seek legislative approval before applying for federal funds.
Conclusion
Whether in 1775 or today, Americans are facing down an oppressive government hoping to expand its control over every aspect of life. We can learn from the spirit of resistance that embodied the minutemen on that cool April morning in Lexington. That spirit of resistance is what drove America to be a place of freedom, entrepreneurship, and innovation. That same spirit can drive Americans to push back against the home-grown tyrannical government. Days like Tax Day and Patriots’ Day can help remind us of how the spirit of resistance can help us.
Thomas Savidge is a Research Fellow at the American Institute for Economic Research. Follow him on X.com at @thomas_savidge.