 Welcome to George H. Smith's Excursions into Libertarian Thought, a production of Libertarianism.org and the Cato Institute, narrated by James Foster. A misunderstanding, the Townsend Act, and more trouble in the American colonies. In 1767, the annual cost of maintaining the British Army in the American colonies exceeded 400,000 pounds sterling. Parliament had repealed the Stamp Act the previous year, so except for some minor revenues generated by the Sugar Act, English taxpayers were footing the bill. These English taxpayers were growing restless. Already burdened with high taxes and a staggering debt from the Seven Years' War, they now faced new taxes on straw, canvas, linen, and other items. In addition, a huge land tax, another holdover from the war, compelled farmers to sell wheat at exorbitant prices. England was embroiled in a financial crisis as food riots erupted throughout the land. Many Englishmen resented the inequity of the tax system. The distinguished historian Robert Palmer estimated that taxes were 26 times higher in England than in America. Taxes in America were typically minimal, indeed virtually nonexistent in some cases. When they were equipped, one suspects that no taxation without representation meant no taxation with representation either. William Johnson, an American residing in England, commented on the disparity. Great pains have been taken to irritate the people of England against America, especially the freeholders, and to persuade them that they are to pay infinite taxes and we none. They are to be burdened that we may be eased, by the word that the interests of Britain are to be sacrificed to those of America. Despite the failure of the Stamp Act, Charles Townsend, Chancellor of the Exchequer, decided to tax the colonies again. In the summer of 1767, he pushed the Townsend Revenue Act through Parliament. This act levied new import duties on all glass, paper, paint, and tea entering the colonies. The Townsend Act breezed through Parliament. Even previous opponents of the Stamp Act nodded their approval, and there was little concern that the new taxes, which were quite small, would provoke resistance in America. This complacency seems curious, considering the fierce resistance to the Stamp Act just two years earlier. Why did British politicians think Americans would accept the new taxes? To understand the reason for this assumption, we need to understand a fundamental misunderstanding that emerged about the American position on taxation, a misunderstanding that was unintentionally aggravated by Benjamin Franklin, who was in London representing American interests at the time. Most Americans distinguished between trade regulations and taxes. Parliament, these Americans believed, did have a right to regulate American trade, but Parliament did not have a right to levy taxes in America without the consent of colonial assemblies. Taxes were specifically designed to generate revenue, not so with trade laws. Import duties might yield some revenue, but this was an incidental byproduct of their chief function, which was to regulate commerce. Benjamin Franklin summarized this distinction and testified before Parliament in 1766 during a hearing on the Stamp Act. Here is how Franklin answered some of the questions put to him in a crucial and highly interesting exchange. Member of Parliament Mr. Franklin, did you ever hear the authority of Parliament to make laws for America questioned till lately? Franklin The authority of Parliament was allowed to be valid in all laws, except such as should lay internal taxes. It was never disputed in laying duties to regulate commerce. Member of Parliament What is your opinion of a future tax imposed on the same principle with that of the Stamp Act? How would Americans receive it? Franklin Just as they do this, that is, the Stamp Act, they would not pay it. Member of Parliament Have you not heard of the resolutions of this House of Commons and of the House of Lords asserting the right of Parliament relating to America, including a power to tax the people there? Franklin Yes, I have heard of such resolutions. Member of Parliament What will be the opinion of the Americans on those resolutions? Franklin They will think them unconstitutional and unjust. Member of Parliament Was it an opinion in America before 1763 that the Parliament had no right to lay taxes and duties there? Franklin I never heard any objection to the right of laying duties to regulate commerce, but a right to lay internal taxes was never supposed to be in Parliament, as we are not represented there. So far, Franklin had accurately represented the American position. He denied Parliament's right to tax the colonies while conceding its right to levy duties for regulating trade. Later, however, confusion set in when a hostile Member of Parliament pressed Franklin to defend this distinction. Member of Parliament Mr. Franklin, you say the colonies have always submitted to external taxes and object to the right of Parliament only in laying internal taxes. Now, can you show that there is any kind of difference between the two taxes to the colony on which they may be laid? Franklin I think the difference is very great. An external tax is a duty laid on commodities imported. That duty is added to the first cost and other charges on the commodity and, when it is offered for sale, makes a part of the price. If the people do not like it at that price, they refuse it. They are not obliged to pay it. But an internal tax is forced from the people without their consent if not laid by their own representatives. Here, Franklin distinguished between two kinds of taxes, internal and external. The Stamp Act imposed internal taxes, whereas import duties were external taxes. According to Franklin, Americans opposed internal but not external taxes. This was a very misleading way of putting the matter. Although Franklin correctly noted American acceptance of import duties, in theory, if frequently not in practice, in dubbing these duties external taxes, Franklin inadvertently facilitated passage of the Townsend Act. Franklin's testimony left a lasting impression on members of Parliament, persuading them that Americans would pay taxes so long as those taxes were external, that is, so long as they were collected through import duties. Charles Townsend regarded the distinction between internal and external taxes as absurd, but if Americans wished to draw this distinction, so be it. As Townsend informed Parliament, I do not know any distinction between internal and external taxes. It is a distinction without a difference. It is perfect nonsense. If we have a right to impose one, we have the other. Yet, since Americans are pleased to make that distinction, I am willing to indulge them and choose for that reason to confine myself to regulations of trade by which a sufficient revenue may be raised in America. This is why the Townsend Revenue Act passed without significant parliamentary opposition. Even many of America's friends in Parliament believed that the Townsend duties merely imposed the kind of external taxes that Benjamin Franklin said Americans would pay without protest. Parliament had been badly misinformed on this issue. Most American spokesmen rejected all taxation by Parliament, both internal and external. True, as I noted previously, Americans conceded Parliament's right to levy import duties, but they conceded this right only for the purpose of regulating trade, not for the purpose of raising revenue, and the Townsend duties were expressly designed to raise revenue. Predictably, therefore, Americans opposed the Townsend Revenue Act. Late in 1767, the American lawyer John Dickinson presented the basic objections in Letters from a Farmer in Pennsylvania, the most popular and influential pamphlet in America prior to the publication eight years later of Thomas Payne's Common Sense. Dickinson set the record straight. Americans opposed all taxes levyed by Parliament, internal and external. It is said that the duties imposed by the Stamp Act were internal taxes, but the present Townsend duties are external, and therefore the Parliament may have a right to impose them. With this I answer with a total denial of the power of Parliament to lay upon these colonies any tax, whatever. Dickinson continued with an argument that would become extremely important to the American resistance movement, a point that would be repeated time and again in future conflicts. As an attorney schooled in English common law, Dickinson clearly understood the legal significance of precedence, so he insisted that unjust taxes must be opposed at the outset, regardless of the amount of money involved. Some persons may think this act of no consequence because the duties are so small. That is the very circumstance most alarming to me, for I am convinced that the authors of this law would never have obtained an act to raise so trifling a sum as it must do had they not intended by it to establish a precedent for future use. To console ourselves with the smallness of the duties is to walk deliberately into the snare that is set for us, praising the neatness of the workmanship. In short, if they have a right to levy attacks of one penny upon us, they have a right to levy a million upon us. For where does their right stop? Americans feared the townsen act for another reason. Revenues raised from it were to be used to pay the salaries of colonial governors and judges. This proposal struck at the heart of a revered American tradition. Although the crown appointed governors in eleven colonies, their salaries were paid by the colonial legislatures. This power of the purse enabled American assemblies to check the power of governors and judges by withholding their salaries. The townsen act sought to overthrow this traditional safeguard by releasing governors and judges of their financial dependence on colonial legislatures, and this alarmed many Americans. As Dickinson put it, no free people ever existed or can ever exist without keeping to use a common but strong expression, the purse strings. Where this is the case, they have a constitutional check upon the administration which may thereby be brought into order without violence. But where such a power is not lodged in the people, oppression proceeds uncontrolled in its career till the governed, transported into a rage, seek redress in the midst of blood and confusion. Other provisions in the townsen act cracked down on smuggling, a board of customs commissioners was sent to America to oversee enforcement of the trade laws. These commissioners were not well received when they arrived in Boston. Joseph Harrison, collector for the port of Boston, described the hostile atmosphere. A dangerous and seditious combination has been formed to resist the execution of those acts of parliament and indeed of all others that impose any duties payable in the colonies. In order to effect this, commissioners have been employed all this last winter in circulating a vast number of inflaming and seditious publications tending to poison and incense the minds of the people and alienate them from all regard and obedience to the legislature of the mother country. A general discontent began to prevail and soon showed itself by an almost universal clamor against all duties, customs, and custom house officers. Even the penny a gallon duty on molasses found out to be oppressive and illegal, the common cry being, pay no duties, save your money, and you save your country. So that running of goods and smuggling has become public virtue and patriotism. Brutal punishment was sometimes meted out to customs officers after passage of the Townsend Act. When a minor customs officer in Philadelphia, William Shepard, tried to confiscate smuggled Madeira wine, his life was threatened. Refusing to be intimidated, Shepard ventured out on the streets of Philadelphia after dark. He described what happened next. Upon my return home, about a quarter past ten o'clock, two men of a sudden came up to me. One of them, without saying a word to me, struck me as hard as he could in the pit of my stomach, which immediately deprived me of breath and I fell down. He took the advantage with some weapon. I apprehended a knife and slipped my nose. I suppose his intention was to slid it up to my eyes. He did not altogether succeed in this, though he did in part, having cut the inside thereof considerably and more than a quarter of an inch clear through. I received several blows upon my face, which bruised it greatly and caused a large swelling. After this assault, Shepard wanted nothing more than to quit his job and return to England. He was sick to death of dealing with hostile and unruly Americans. I could not think of tearing amongst a set of people under my present circumstances, whose greatest pleasure would be to have an opportunity of burying me. The few acquaintances that I had in Philadelphia were afraid of being seen to keep company with me, so I was in a manner alone in the city without a friend to assist me in any trouble. I was obliged to confine myself at home at night, as I did not know what murderous intentions the people had determined to execute against me. As I passed through the streets, I was the object that everyone stared and gazed at. I at present think myself unable to persevere any longer in Philadelphia.