Robert M. Kozub
UNIVERSITY OF WISCONSIN-MILWAUKEE

ANTECEDENTS OF THE INCOME TAX IN COLONIAL AMERICA

Abstract: One of the goals of the present federal income tax system is to tax in-dividuals to the extent of their ability to pay. This concept of vertical equity did not originate in the current century. Analysis of the tax laws of the American colonies results in the conclusion that our colonial forefathers attempted to measure the faculty or ability of individuals when enacting tax legislation. This paper analyzes the varied historic forms of the test to measure the capacity to bear the burden of taxation.

Taxation, it is said, is a hateful process in the eyes of mankind.1 However, every government must provide for its general expenses and the cost of other public necessities by means of taxation. Recognition that the organization of society into a state necessitates taxation is found within the words of Sir Edwin Sandys, the moving spirit behind the Virginia Company: “The maintaining of the publick in all estates being of no less importance even for the benefit of the private, than the root and body of a tree are to the particular branches.”

Yet each social class has endeavored, amidst the clashing of greatly divergent interests, to shift the burden of taxation upon other classes. One must analyze the economic development of the American colonies in order to trace the development of taxation and the evolution of the principle of faculty or ability to pay, the principle that individuals should be required to bear the financial burden of the government in proportion to their ability to help themselves. As the economy of the colonies developed, the historic forms of the test of the faculty to bear the public burden also evolved. This paper traces the development of the attempts to measure the presumed capacity of individuals to bear this burden. A survey of the origins and evolution of colonial taxes entails a survey of the man

*ln quoting from early documents, the author has consciously elected not to note spellings which differs from present form. Such notation would have adversely affected the readability of the quotes and the paper in general due to the frequency of these differences.

ner in which the theory of justice in taxation developed as a solution to economic relations.3 As the tax system develops and is modified, it is not only the method of collecting revenue that changes, but also the theory supporting that tax system.

In analyzing the development of theories in taxation, one should not attempt to discover well-developed theories and technical details in a primitive society and its institutions. The act of constructing an exact science where, in fact, none existed, is to pervert the course of history. New theories do not arise to replace old theories unless man has experienced the abuse generated by the application of those theories not compatible with the present social structure. Although the theories of taxation evolved slowly in colonial America, the faculty test was incorporated into the colonial tax system and has been called the ancestor of the modern income tax. Supreme Court Justice Cardozo recognized the colonial contribution to modern tax theory by saying our colonial forefathers “knew more about ways of taxing than some of their descendants seem to be willing to
concede.”

Colonial Revenues

During the colonial period in America, the financial systems of the colonies rested upon a multitude of sources of revenue. At various times these sources included:

1. Quit-rents
2. Poll taxes
3. Property taxes
4. Fees
5. Miscellaneous taxes
6. Lotteries
7. Duties

Exhibit 1 illustrates various taxes levied in the American colonies.

By any technical definition of the term “taxes,” quit-rent would not be considered a tax. The quit-rent system was an inextricable part of the feudal manorial land system transported from England to American soil. All lands discovered by English subjects were considered feudal possessions of the English Crown. The privilege of holding various territories in liege to the Crown was conferred upon a lord as a Royal prerogative. Grants of lands were made by the liege lords to the settlers. In the southern colonies, the quit-rents were designated to cover the expenses of administering each colony.5 Among the thirteen colonies the importance of the quit-

Kozub: Antecedents of the Income Tax in Colonial America

Exhibit 1 Taxes Levied in the Colonies
Tax

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