Beware the ides of April

Policy Review, Spring 1994 by Adams, Charles

THE FECKLESS FRENCH

A French writer during the Hundred Years' War said that if the Devil himself had been given a free hand to ruin France, he could not have invented a scheme more likely to achieve that objective than the system of taxation then in operation.

Indeed, the revenue system that evolved out of the taxing powers granted to the French monarch was everything a good tax system should not be. First, there was the taille, an annual land and wealth tax that fluctuated with the king's military needs. The problem was that it was not applied to the kingdom as a whole--the nobility and the clergy, along with some cities and provinces, were exempt or had reduced rates. By the 18th century, the tail was called the "peasant's tax" because almost everyone else had found some way to avoid it. Thus, the taille became an annual exercise in sowing taxpayer discontent among France's largest social class.

Next there was a burdensome excise tax, the gabelle, levied on just about everything--including food. On wine, for example, there were five kinds of excises: a tax on the vine, harvest, manufacture, transportation, and sale of the wine. The poor drank cider. The top rate of the gabelle was as high as 60 percent of the value of certain goods. It grew to be hated, along with those who collected it, called gabeleurs. An eyewitness describes a peasant tax revolt in Blanzac in 1636 in which an angry mob "tore to pieces an unfortunate surgeon whom they suspected of being a gabeleur. After stripping him naked and cutting off one of his arms, they made him walk around the fair, and then finished him off."

In addition to individual taxes, the nation's tax infrastructure, called tax-farming, was a major factor in the system's unraveling. First appearing in the Middle Ages, private tax collectors eventually formed national corporations, in which they paid lords a fixed sum of cash to collect various levies, promising periodic payments over six years in the form of notes. The French Crown could use these notes to pay its debts; they were secured by future tax receipts, just like today's modern treasury bills and notes. Thus, the tax farmers were to the ancient regime what the Federal Reserve Board or the Bank of England are to their countries. Since our government operates on the same principle, what could go wrong?

In truth, just about anything. The risks in this elementary national banking system were tax revolts, wars, droughts, plagues--or anything else that might bring about a failure of the tax harvest. The most serious danger to the system was a lack of controls: At times, when the government was short of cash, it would issue cheques against future, undetermined tax receipts, without the knowledge of the tax farmers. This fiscal irresponsibility frequently drove the system to the edge of bankruptcy.

The combined effect of the French tax system was to drive the nation toward revolution. The tax objective of the state--"what the traffic would bear"--was the amount of tax that could be extracted one step short of causing a major revolt. Naturally, the government misjudged repeatedly. Ten years after a tax revolt near Bordeaux, the finance minister confessed to the queen that it was safer for a French soldier to walk through a Spanish village--France was at war with Spain--than for a French tax man to walk the streets of Bordeaux.