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The Tax Romana is long gone. The Tax Americana is well underway. Who will be the barbarians we greet as liberators?

The Tax Romana



A harrowing tale it is. The destruction of a great state -- the first European Union -- not by plague or barbarians or Christianity, but by the state itself. The economic tyranny imposed by the rulers of the later Roman Empire shattered the wealth and the will of their citizens.
The earlier reigns from Augustus to Marcus Aurelius (31 BC to 180 AD) favored low taxation, free trade, and stable currency. During these two centuries the middle classes grew and prospered. The state contributed to this growth by improving infrastructure and wiping out pirates and brigands. The state also reduced its size, mainly by mustering out 30 legions. These two centuries, the Pax Romana, have been called the happiest time in human history. After the death of Marcus Aurelius things went south fast. His spendthrift playboy son started the slide, and the Empire hit the wall during the middle years of the Third Century. A combination of runaway inflation (1000% in a two decade stretch), crushing taxation and confiscation, barbarian incursions, and political instability (emperors were regularly murdered) nearly toppled the Empire. Later in the century warrior emperors defeated the barbarians and restored internal order. The Roman economy however lay in shambles. Commerce had slackened to a trickle, large areas of farmland lay abandoned, and what wealth existed was hidden from the insatiable maw of the state. Inflation continued unabated -- fueled by mints that struck up to one million debased coins per day.

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Enter the emperors Diocletian and Constantine and their attempted reforms. To better run the provinces Diocletian doubled the number of civil servants. To better defend the Empire he increased the army to over half a million men. To end inflation he issued sound coins of gold, silver and bronze. To systematize revenue he ended arbitrary tax farming and seizure of goods, replacing them with a flat head tax and a progressive property tax. Both taxes were heavy. To his chagrin the high taxes did not yield enough revenue. The taxes led to massive evasion by small farmers and urban merchants. Many farmers sold themselves to large landholders; merchants fled towns and cities. In response, Diocletian outlawed deserting one’s occupational post. But even with his efficient bureaucracy squeezing remaining taxpayers hard, revenue fell far short of need. To close the revenue gap the state could not resist mass production of bronze coins. Inflation returned and worsened. The soldiers -- the one class the emperor could not alienate -- saw their wages able to buy ever less. This set the stage for the Edict on Maximum Prices in 301 AD. Diocletian did not blame inflation on big government or debased money, but on “persons of unlimited and frenzied avarice”, i.e. greedy merchants. The Edict regulated prices on over a thousand items. The penalty for evasion could be banishment or death. (The Edict also set a maximum on wages.) Though the state exacted the death penalty, evasion was the response of the day. Black markets flourished and inflation continued. The Edict was such a spectacular failure that after only several years it was not enforced. The next decade Constantine tried his hand at turning things around. He ordered the bureaucracy to assess in detail the holdings of every citizen. The intrusion of the state knew no bounds as every clod on a farm and every good in a warehouse was cataloged. Taxes were levied accordingly. No one escaped. Not even Senators, formerly tax-exempt. (It was to senatorial estates that farmers had previously escaped.) Not merchants, now taxed on capital as well as income. Not municipal governments, whose gold reserves were confiscated. (Bankrupt cities resorted to issuing their own debased coins to meet expenses. The state never stopped.) Inflation soared. From 301 to 337 (when Constantine died) prices doubled ten times for goods bought with bronze or brass coins. But we moderns can take comfort on the fate of gold. During two centuries of sustained inflation, the purchasing power of gold bullion remained constant. On top of all this, Constantine decreed occupations hereditary. Even the sons of soldiers had to become soldiers. The state controlled life from top to bottom. Among the demoralized populace the last sparks of individual initiative died. The next century the Western Empire fell. Few regretted its passing as the barbarians flooded over the imperial borders. Indeed, many citizens greeted the invaders as liberators. The populace rejoiced as the bonds of the avaricious and oppressive state were at last severed. In our time and place, is it déjà vu all over again? Federal expenditure, bureaucracy, and regulation relentlessly grow. The tax burden also increases, but revenue still cannot match expense. To close the gap -- the abyss -- the state prints reams of paper money. And prices climb. When prices surge from their current trot to a gallop, the electorate will scream bloody murder. Will the state respond by reducing taxes, regulation and funny money? No, it will blame the greedy merchants. And tax them more. And impose price and wage controls (but surely death for evasion will be off the table). Once again taxation and regulation will fail to yield adequate revenue. Well, what about confiscation? Retirement accounts to start, then furs and jewelry, then perhaps the kitchen sink. And if that doesn’t bring in enough, what about using eminent domain to seize nonessential real property, such as vacation homes? You say that can’t happen here. But the insatiable maw of the state will be fed. What about binding people to their vocations? Impossible, you say, though the coming shortage of doctors may compel such legislation. Yet permanent high unemployment can effectively thwart career changing. Men and women will cling fearfully to their underpaid, overtaxed and hyper regulated jobs. We will all end as serfs of the state. The Tax Romana is long gone. The Tax Americana is well underway. Who will be the barbarians we greet as liberators?


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Guest Column Clayton Spann -- Bio and Archives

Items of notes and interest from the web.


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