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  • Print publication year: 2016
  • Online publication date: July 2016

1 - Anglo-American Regimes


When the thirteen states that had won independence from Great Britain adopted the Constitution of the United States in 1788, they created a federation and a federal government with the power to tax its citizens. A federation and federal taxation were new to America. However, beginning in the early seventeenth century, the thirteen colonies had already experienced taxation by a higher level government – the large and sometimes seemingly remote imperial government of England and Britain (after England's union with Scotland in 1707).

The tax regimes that developed in British North America before the American Revolution were integral components of the world's first modern fiscal state, one that had emerged following the crisis of the English Civil Wars in 1642. In both metropolitan England and the colonies, the Crown and Parliament had expanded taxation on domestic consumption and international trade, collected the taxes indirectly (meaning through third parties), established those taxes as the primary source of revenue, and leveraged their new tax revenues to expand long-term borrowing. From the revenue raised from external taxation of its colonies, England funded most of the routine costs of administering colonial governments. However, these revenues were inadequate to support British military forces in North American during wartime, so the British government often taxed and borrowed within the British Isles for that purpose.

Until 1763, British taxation of the colonies was largely external, applied to trade between the colonies and the rest of the world and trade among the colonies themselves. As such, this tax system served both as a source of revenue for Britain and a component of a complex system of British trade regulation – the system that came to be known as mercantilism. On the whole, before 1763 this external taxation was relatively light in its extent and effects and well tolerated by the colonists. Meanwhile, the British government left its American colonies relatively free to develop systems of both domestic self-governance and autonomy in funding a variety of public services. In 1763, however, to pay for the costs of fighting a major war and administering an expanded North American empire, Britain ramped up its tax effort in the colonies. In effect, it created a new tax regime for the colonies – one that was more ambitious, internal, and centralized.