Stoves, hearths, houses, light, windows are just some of the examples of what we’ve taxed. Winston Churchill described taxes as a “necessary evil.” The question this book explores is how much evil is necessary? Taxes shape civilizations. Indeed, there has been no civilization that did not tax. Every war has been paid for with taxes. Surnames came about to distinguish people for the purposes of levying poll taxes. In the developed world, the most expensive purchase you’ll ever make is not your home, it’s your government through your tax bill, averaging a full 20 years of your life in the UK. Frisby’s book is a breezy, informative look at various topics through the lens of tax. I particularly liked some of the historical examples, the chapter on Hong Kong, and John James Cowperthwaite, the architect of Hong Kong’s free market, low-tax prosperity with his policy of “positive non-intervention.” Hong Kong has a 276 page tax code, 1.5% the size of the UK’s (10 million words and 21,000 pages. The USA’s tax code is 2.4 million words and another 7.7 million on regulations). Complexity is a subsidy. He was even against compiling statistics because he knew they’d be use for central planning the economy. “If I let them compute those statistics, they’ll want to use them for planning,” he explained to Milton Friedman. When met with pleas from the Legislative Council for GDP statistics, this is his reply:
"Such figures are very inexact even in the most sophisticated countries. They do not have a great deal of meaning. That other countries make use of them is not, I think, necessarily a good reason to suppose that we need them. I am not entirely clear what practical purpose they would serve in Hong Kong … The need arises in other countries because high taxation and detailed Government intervention in the economy have made it essential to be able to judge (or to hope to be able to judge) the effect of policies … We are in the happy position, where the leverage exercised by Government on the economy is so small that it is not necessary, nor even of any particular value, to have these figures available for the formulation of policy."
Frisby writes, “Later in life he was asked what poor countries should do to turn their economies around. The first thing he said was ‘abolish the office of national statistics’.” Today, Hong Kong ranks amongst the ten richest nations in the world, with a per capita income 40% higher than the UK’s. It’s also ranked #1 as on economic freedom indexes. The book explores taxes and religions, the Black Death in Europe, which killed 50 million, 60% of the entire population. England’s population shrank by two-thirds, from 6 to 2 million. But wages went up and profits went down. America was founded on “No taxation without representation,” but what we’ve learned is that taxation with representation is a lot more expensive! His take in that the Civil War was not fought over slavery but taxation. President Lincoln introduced the first income tax, 3% on incomes over $800, and the Internal Revenue Service. Then the 16th Amendment and the tax withholding in 1942, during World War II, is covered. He makes the interesting point that Prohibition came about since the income tax replaced taxes on alcohol, which accounted for some 40% of government revenue prior to the income tax. And revenue loss during the Great Depression is why Roosevelt repealed Prohibition in 1933—he needed the tax revenue. Interesting, was the repeal of Prohibition why Roosevelt won the presidency, rather than his New Deal? There is a chapter exploring the future of work, one on crypto money, the taxman’s nightmare, and how AI and data are helping governments close the tax gap. I don’t agree with everything Frisby’s writes, such as his generation is poorer than its parents. Really? Would he trade their standard of living for his? Or his idea of a land tax. Or how subscriptions could work for public services. It’s an interesting idea, and I love the subscription business model, but how it would apply to government has yet to be answered, though perhaps it could if taxes were more local. I do agree that the overall tax burden should be no more than 15% of GDP. Frisby acknowledges American tax historian Charles Adams (I believe Adam’s was Canadian, not American). And Adams’ books are masterpieces, especially his For Good and Evil. If you enjoy Frisby’s book, and want to dive even deeper, and still be entertained and educated, Adams work is a must read. Overall, this is a worthwhile read for anyone with an interest in tax history and future.