[00:00:00] Intro: Forget the civilized path. It’s time to break the chains of debt and dependency, take control of our financial lives, and live free. This is the Fiscally Savage podcast.

[00:00:15] Dylan Bain: Hello and welcome to Fiscally Savage. I’m your host, Dylan Bain, and today, I want to tell you about a time where I came into my history class when I was in college. And it was US History, so I was there to study the founding of the nation that I was born into. And I’m a history buff, it’s my jam. I love it. And I am so excited to just explore in a more detailed way the origins of the nation that I have been brought up to be so proud of. And the professor walks in and introduces himself to the entire class and he starts off with one question: Why did we rebel against Britain? And I was taken aback. Didn’t we all know why? It was, “No taxation without representation!” That’s what it was.

[00:01:04] Ladies and gentlemen, today on Happy 4th of July, we are going to discuss some of the American Revolution, and we’re going to start talking about taxes. I’m going to be doing in these Tuesday episodes several different iterations on taxes. But I think it’s neat that this episode coming out on the fourth, we get an opportunity to talk about history, and how history is informative of our current state of things. And so we’re going to start going off there.

[00:01:32] Before I get into that, I want to take a quick break on this episode and I want to let you guys know that I am going to be rebranding my financial coaching practice pretty soon, in the near future. FiscallySavage.Com is going to become DylanBain.com, and the podcast name is going to be changing from Fiscally Savage to Intuitive Finance.

[00:01:50] There’s a lot of reasons of doing this rebranding, and it’s not going to happen right away. So if you are subscribed to this podcast, you don’t have to do anything. It will just turn over when I change all of my syndication stuff.

[00:02:00] If you’re not subscribed, go hit that subscribe button, stop the podcast right now. If you’re driving, pull over and subscribe on Spotify, Apple Podcasts, or anywhere you get your podcasts so that you don’t miss an episode that I’ve got coming for you.

[00:02:14] And with this rebranding, we’re going to be rolling out a ton of stuff. I’ve been working on it for a couple of months now. We’re gonna be bringing on some guests on the podcast. So I am super excited for what we have in the pipeline for you. Okay, end of the break. Let’s talk about it.

[00:02:27] The American Revolution. Here on the 4th of July, we celebrate the day in which the American Congress declared their independence from the colonial masters, which at the time was Britain. Now, one of the things that’s interesting is that we always use the phrase, “No taxation without representation,” because it’s a nice propaganda line, like it’s catchy, it’s easy to say, it rolls off the tongue. And taxes, to be clear, are a headline issue in the causes of the American Revolution. You should note that one of the things, if you’ve grown up in the United States that we always talk about, are things like the Stamp Act and the Sugar Act. These were taxes that were levied on these various products.

[00:03:09] But it’s interesting, if you’ve ever gone to read the Declaration of Independence, and you absolutely should. And by the way, there’s an extra bonus episode that’s coming out today where I do just that. I read the Declaration of Independence. As an American citizen, you should have read that document. And it’s very informative, because if you want to know why somebody rebelled, just ask them. You want to know what the Civil War was about in the United States? Go read the articles of secession from say, Alabama, where they start off going, “This is about slavery.” Or Mississippi, where they say, “This is about slavery.”

[00:03:39] And the American Revolution, where they don’t mention taxes and their reasons until Item 16 on their list of grievances. And it’s not to say that taxes weren’t an issue, but it’s only mentioned once in the entire Declaration of Independence. And the key, I think, in the statement, and I’m just going to quote directly from the Declaration of Independence here is, “For imposing taxes on us without our consent.” Sounds a whole lot like no taxation without representation. Clearly a reason that was in there, but there’s a whole bunch of other ones that go with it. Although there were a number of taxes levied mostly for the war debt, it wasn’t the main driving cause. It was the “without consent.” It was the inability to rule themselves and be able to have a say in their fate.

[00:04:27] And it’s worth noting that on July 4th, 1776, the vast majority of what would become Americans viewed themselves as British subjects, not even British citizens. British subjects. And the American Revolution was not without its controversy. It was not like everybody was like, “Yep, this is the best thing to do.” Only about a third of the population was really in on it.

[00:04:48] But what’s interesting to me, and I’ve gone back and I’ve talked a lot about these schools of economics. And specifically, if you go back to me discussing the traditional economics or any of the episodes I’ve done on the Wealth of Nations, which was published in March of 1776, you’ll know that the economic system that’s being used by most of the European powers at the time is something called mercantilism. The idea is you colonize a place and you basically strip mine all the resources out of it. So you’re strip mining out any natural resources. In the case of the American colonies, cotton and tobacco are huge ones. You’re bringing them back to your home country, you’re processing them, and you’re selling them back to your colonies by creating exclusive trade zones.

[00:05:27] And that’s what the Sugar Act and the Stamp Act were, and several of the other things in the Declaration of Independence refer to the closing of Boston Harbor, the exclusions of any other traders other than British traders into American courts, the inability to trade with the French, and the list goes on. Economics were a main reason for and driver of the rebellion, and taxes were a part of that, but it was not the main issue.

[00:05:50] And more importantly, one of the things, take a side note here, is that the British at the time were trying to pay off their war debt from the French and Indian War, which was not a war between the French and Indians. It was a war between the British and the French and their Indian allies. And if you look at a map, you can look at Quebec and where New England is and see where the conflict was, because France was the other major player in this area. The lack of home rule was the biggest reason for the American Revolution. The fact that they didn’t have control, they were given governors who were from Britain, who were not from the American colonies. They would follow dictates from the crown and didn’t really take into consideration how this would affect the average citizenry.

[00:06:27] The other thing that people will say is the issue of what are called dependent judges. Now at least in theory, the judiciary of the United States is what’s called an independent judiciary, which means that they are free to rule without facing retaliation by the powers that be, that is to say that they can rule against the president. They’re not just yes men. But judges at this time, because of the British, they very much were dependent. That is, if they didn’t rule the way the king wanted them to, then they wouldn’t have a job anymore and that was the best case scenario. The other thing that was happening at the time were unfair trials, and judgments and punishments that were meted out that were what we considered to be cruel and unusual.

[00:07:08] Probably the biggest reason that came into the American Revolution were these trade restrictions. But there’s also, when you study history, you always understand and start to be able to realize that there’s a lot of things that build into any of these major events. It’s never any one thing, it’s typically a confluence of things. And I don’t think we can discount the propagation of Enlightenment thinking through things like the printing press at time. The ideas of the individual or what we have come to understand as human rights, life, liberty, pursuit of happiness. The property in a general sense and being able to own property, to be able to own a tree or plot of land, and to own it by in your own right, not on the behalf of a king. Because remember at the time, the king of England owned all the land. And so if you had a plot of land and you had purchased the right to manage that land on behalf of the king, you didn’t own it.

[00:08:00] And so the other thing that I’ve already pointed this out in this episode, but I’ve pointed out a bunch, is that Enlightenment thinking also includes the establishment of classical economics with the publication of Adam Smith’s The Wall of Nations, which happened in March of 1776. It’s unlikely that the Founding Fathers had read that prior to the Declaration of Independence, but I can’t rule it out. But this is the entire idea. The world is changing, the Industrial Revolution is underway, and this is something that’s a byproduct of that, this promulgation of ideas.

[00:08:32] But there’s something else that was promulgated too, and when you go talk to historians about the American Revolution, some will point to the expansion of the British Empire enough to be able to import coffee. And if you know anything about coffee, it has caffeine. And what is caffeine? It’s a stimulant. A blessed, blessed stimulant. But I digress.

[00:08:52] The idea here, though, is that coffee gave people the ability to focus for longer periods of time. It also gave them a place, also known as a coffeehouse, to gather and talk about ideas. This then caused those ideas to mix and diffuse through the entire population, but also made the people who were consuming coffee that was mostly in the Americas at the time, be far more productive. And when you’re far more productive, you tend to be far more interested in what’s going on. And when you’re interested, more interested in what’s going on, you tend to be more obsessed with things like local control. So coffee is probably something that was thrown in this mix as well. Not exactly a finance thing, but I do love my coffee and definitely want to talk about it.

[00:09:31] Okay, so I think it’s fair and safe to say that most of us understand how the American Revolution went. We declared independence, the British of course didn’t like that. This then led to the rebellion, which of course ended in the Battle of Yorktown, which was almost entirely a French victory considering that for every one US soldier, there were three French soldiers, and it was the French Navy that kept the British from being able to reinforce their position. But I digress.

[00:09:59] What were the state of play after the revolution? So much of the constitution, to be clear, there was a period of time where we had the Articles of Confederation, which was a huge failure and I’m not going to cover that, but with the establishment of the US Constitution, the taxation regime that the US government used was mostly through tariffs.

[00:10:18] So remember, one of the biggest things that the Americans really didn’t like was the British restricting the ability to trade. You could only trade with British merchants who had purchased the rights to come into that port. So even if the French were selling it at half the price, they weren’t even allowed in the port. And you can imagine that this created a massive black market. So black markets are probably about as American as apple pie, if we’re going to be entirely honest about this.

[00:10:44] But the American government, as it stood with the constitution, was funding itself through tariffs. And those tariffs required tax collectors, and a lot of the Founding Fathers worked at a customs house. What’s a customs house? Where they collect the tariffs. So they were tax collectors. Almost all of them were. Alexander Hamilton is very notable for this, but you can look at Ben Franklin. He was also a man who worked in the custom house. And most of these men either worked in the custom house or worked with the custom house a lot.

[00:11:13] The only other taxes that were really levied after the revolution were something called an excise tax. And that excise tax is like what you tack on to purchasing things like whiskey. Now I use whiskey very specifically because we just fought an entire revolution about home rule and about people making restrictions and putting onerous burdens on us. And so if the US government came in and said, we’re going to tax whiskey on the frontier because all you people who crossed the Appalachian mountains, and we told you not to, are now costing us a lot of money for your need for military support because we’re fighting wars on your behalf. Oh, hey, this sounds a lot like what the British were doing.

[00:11:47] And that’s right, ladies and gentlemen, the United States government was levying an excise tax on whiskey because of their need to support colonists who had crossed the Appalachian mountains when they weren’t supposed to. And so in 1791, we had the Whiskey Rebellion, which was then put down by then President George Washington. This also marks the last time that the president personally led troops into battle. That’s right ladies and gentlemen, the first President of the United States, as one of his last acts as Commander in Chief, was to raise an army and to put down a rebellion sparked by taxation. History is fascinating. You can’t write fiction this good.

[00:12:26] Now let’s go forward to today. And like I said, I’m going to be putting together a series on taxes to talk about it because it’s a topic that a lot of people will email me about and ask. So let’s talk about taxes today. Obviously there’s a lot of ground to cover from the Whiskey Rebellion in 1791 to the present day here in 2023, but we’re just, for the sake of time, we’re just going to gloss over that.

[00:12:50] So today in the United States, the average citizen pays a handful of taxes to a variety of different entities. There is, of course, the notorious federal and state income taxes, unless you happen to live in a state like Texas where there is no income tax, and they’re funded in part by oil revenues. Oklahoma, I think, falls into this bracket, and it’s a pretty popular movement. More to come on that here in a second.

[00:13:12] There’s also local taxes. For example, I have an office down in downtown Denver that I go to, and if I spend enough days there, I have to pay a local tax to the city of Denver for the use of my office downtown.

[00:13:25] Then, of course, if you go to the grocery store, we all know that if it says $4 for this thing of whatever it is, It’s not going to be that of the register because we’re going to tack on the sales tax. It’s worth noting that in most other countries, they just put that into the price. So if it says $4 on the shelf, it’s actually $4 at the register. But in the United States, we always want to do things as complicated and as hurtful as possible when it comes to having to pay our taxes. And so we put it on the register so we can all watch the tax get added at the very end.

[00:13:52] Then of course, there’s also the excise tax. So if you are gambling or you are using alcohol or tobacco or marijuana or even gasoline, these things come with excise taxes. Excise taxes basically fall into two broad categories. Usage tax, so that’s what the gas tax is, the idea being that we’re going to tax the gasoline and use that tax to be able to maintain the infrastructure required for the cars that are then using the gasoline, which creates a whole bag of crazy when it comes to EVs. But there’s also what we call sin taxes, which are things that we levy as excise taxes on things we want people to stop doing. Sugary drinks are the most recent for this, but we’ve been doing this with tobacco and alcohol basically from day one. It’s not a new thing.

[00:14:36] But excise taxes are also applied to hotels. And we do that because we didn’t want to raise property taxes. And so what we did is we said we’ll just raise hotels or licensing taxes, or all sorts of other stuff.

[00:14:51] And last, there’s property taxes. These are, if you own a house, you have to pay property taxes. And if you don’t, even if you have the house paid off, so the bank doesn’t have a claim to it, the government always has a claim to your property if you don’t pay your property taxes.

[00:15:04] Which, if you stop and think about it, is very similar to managing this piece of land on behalf of the United States government for a fee. And if you don’t pay that, then they’re gonna come take it away from you. But I digress. It almost sounds like there’s a king somewhere. Anyway.

[00:15:18] And to be completely fair, property taxes are not a US-level type of thing, they’re a local level thing. So your local municipality and sometimes state will have property taxes. Now, there are a variety of other taxes, and there are a ton of fees that are also levied on the average individual. And I’m going to gloss over a lot of those. Things like the inheritance tax and the gift tax, the vast majority of Americans are never going to be able to give a gift big enough or to have an estate big enough to pay either one of those taxes so we’re not going to actually worry about them right here.

[00:15:48] But I do want to take a moment to talk about fees because another way that governments fund themselves are with fees. So if any of you know who Scott Walker is, former governor of Wisconsin. Before he was governor of Wisconsin, he was the county executive from Milwaukee County. When I lived there, he was the executive, and he said that he was going to lower my property taxes. And ladies and gentlemen, he did.

[00:16:09] But instead of paying my taxes, which then enabled the garbage man to come and pick up my garbage, which was something I could say, “Hey, I don’t actually require garbage collection because at the time I was working on a zero waste initiative, so I didn’t even have any garbage.” And then they would lower my taxes that way. He just cut the taxes, but then put it in a fee that I couldn’t get out of. So even though I wasn’t using the service for garbage collection, I still had to pay the garbage collection fee. And then he cut my property taxes again, but now I had a fee for sewer, and I had a fee for water, and I had a fee for everything.

[00:16:38] So by the time that Scott Walker finished cutting all of my property taxes, the fees that he had tacked on actually meant that I was paying more to the county of Milwaukee than I had been previously. It’s an interesting thing of how we play this game and it’s this exact thing that will piss people off so much when it comes to taxes, fees, and of course licenses.

[00:17:01] Because if you want to run a bar, you have to have a business license and a liquor license. And ladies and gentlemen, there are two different stripes of those, one’s for beer and wine, and one for hard liquor. It gets complicated. And a lot of our issues when it comes to our anxiety around taxes have to do with this complex tax code. And when you say it’s complex, that really doesn’t quite describe the entire gravity of the situation.

[00:17:26] Let me give you a great example. There’s been a lot of hay that’s been made and a lot of articles have been written about people fleeing the state of California for a lower tax environment like Texas. Of course, California has a highly progressive income tax structure, which means that the more you earn, the more you pay, whereas Texas doesn’t tax income at all. This goes back to they have oil, so they’re surviving on a lot of royalties for oil revenue.

[00:17:50] But is that actually true? Would you, if you moved from California to Texas, pay lower taxes? And the answer is, it depends. Are you above 50k a year, or are you below 50k a year? Because if you’re below 50k a year in terms of your income, chances are good you’re all in going to pay more in Texas than you would if you had stayed in California. And the question everyone goes is, but why?

[00:18:15] And the answer is, because while Texas doesn’t collect a state income tax, because the property taxes are multitudes of California’s. And that doesn’t even get into the sales tax, and all the excise taxes, and all the fees that they impose. Texas has done basically a two-step around this tax problem by saying we’re not going to tax income, we’re going to tax everything else, essentially. And what that’s done is it’s moved the tax burden from the highest earners down to the lowest earners. And they pay the lion’s share of taxes in Texas, where in California it’s exactly the opposite. You pay a lot more is the more you make. And these calculations are really hard, but it it really does show how complex of an issue that this can be, and how much of our spending in terms of our tax burden is actually hidden from view because politicians designed it that way in some places, and made it really onerous like the sales tax and others.

[00:19:07] This system should infuriate you. It infuriates me, and I’m a CPA, even though I’m not a tax CPA and nothing I say is considered tax advice, this is hard for me to wrap my head around. And it’s this way in part because of how the United States formed in the first place.

[00:19:22] Because remember, one of the things that the American revolutionaries really wanted was home rule. The idea that someone in Georgia should have more say over what someone in Georgia is doing than say someone in Massachusetts does, and vice versa. That we wanted people to be able to have local controls, local areas that rule there in their own right, even if they are subordinated to a higher authority, which in many places is the county, and then the state, and then of course, the federal government. And that’s basically our power structure.

[00:19:56] But we allow control to trickle down all the way into these individual municipalities. Where I live in Colorado, there’s several of those around here, and there are some cities that even straddle county lines, so the city is actually subordinated to two separate counties, which makes things extra fun.

[00:20:12] But what this does is that when you’re trying to build something like a road or public infrastructure, including transit, water, electricity, anything else, there’s no central planning, there’s no central vision, which means that by its very definition, there’s a diffused veto power. We literally have to get every single person who’s affected, even in the most tangential way, to agree or be paid off to agree to whatever the thing is we want to do. Whether it’s building the highway, or building power lines, or putting in new gas infrastructure, you name it. And this raises the cost for everything.

[00:20:46] It’s notable when we put in the US highway system that we ran them through a lot of areas that were majority African-American. And people have pointed to that and say there was clearly a racial element, and I’m not going to debate that. There clearly was. But there’s another element that goes there too. Those are also the poorest areas in the city, which means that they had the least amount of money to fight back, and that was a big factor in this as well. But the complications within the tax code can give us fits. And because we perceive the clear and present danger of making a mistake in our taxes and somehow going to jail, which happens next to never, we sweat this stuff a lot.

[00:21:28] And the result for all of the local control and the complexity of the tax code, and all the different ways that we hide fees and local taxes and smaller taxes, is that the United States, as an average citizen pays higher taxes all in than almost every other country.

[00:21:43] So when you look at a country like Denmark where the highest income tax is 50% and you’re like, my God, they’re paying so much more in taxes. They’re not, because they don’t have all the extra other taxes that we have to put up with. The property taxes, the sales taxes, the local taxes, the state income taxes, all this stuff is radically different because it’s rolled up into one area that’s then diffused throughout the rest of the country.

[00:22:08] Is that a better system? I have no idea. There’s pros and cons to everything of course, but the United States, we do all in, pay higher taxes than most other countries. Because of all the patchworks of different local controls and veto powers, we do receive a lot less in return for every one of our tax dollars. And the reason for that has everything to do with what happened on July 4th, 1776 and what they stated in the Declaration of Independence.

[00:22:37] And I want to close today by saying, it’s worth being curious. History is very informative. I can’t do this show without understanding a lot of what’s going on in a historical context.

[00:22:49] So much of what we have today and what we’re dealing with today has its roots in something that happened over a hundred years ago. And the more we start to understand, the better off we’re going to be. And so after my professor posed me the question, “Why did we rebel?” I guess I had never asked that question before in any critical sense. And so I went and I bought the leather-bound copy of the founding documents of the United States of America and other articles. And I started off on page one, the Declaration of Independence. And I read through it. And then I read the Constitution and all the amendments thereof. I have a copy of the Federalist Papers within arm’s reach of me right this very moment, and I’ve read the vast majority of them. It’s worth being curious.

[00:23:35] And so today on July 4th, on fireworks day, I want to ask you to be safe, to enjoy your barbecue, to be able to spend time with your fellow Americans and kinship of this wonderful country that we live in, and to take time to engage your curiosity and maybe go read or listen to the Declaration of Independence.

[00:23:57] Happy 4th everyone.

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