Unexpected lessons from odd taxes

Over centuries, taxes have been levied on things as peculiar as beards and windows. They teach us how people might react to one of the few certainties of life
Unexpected lessons from odd taxes
Express illustration | sourav roy

“Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.”  The bit about death and taxes is a familiar quote and is usually attributed to Benjamin Franklin. Indeed, what I have cited is what Benjamin Franklin wrote in a letter to French physicist Jean-Baptiste Le Roy in 1789. The earliest use was probably by Christopher Bullock in a 1716 play. And there was Daniel Defoe in his 1726 book, The Political History of the Devil: “Things as certain as death and taxes can be more firmly believed.” Despite advances in medical science, there is certainty about death. Despite our fond hopes to the contrary, there is inevitability about taxes. However, the form taxes take varies over time and space.

There have been taxes that seem bizarre. But that’s because we are unfamiliar with the context. For example, there was a beard tax, usually identified with Peter the Great (1672-1725), the Russian Tsar. Why did he introduce this tax? There were multiple reasons. First, religion—the Russian Orthodox church—required men to wear beards. Peter the Great wanted Russia to modernise and become like Western Europe, where clean-shaven was the norm. He couldn’t afford a ban, because religious beliefs would take umbrage.

Hence, he used the disincentive of a tax on beards. Economists who argue against bans should approve. Peter the Great’s common sense was in line with what we call nudge or behavioural economics today. Second, there was an equity motive. Wealthy merchants were charged more and poor farmers were charged less. Ignoring the fact that this was a tax on beards, this is precisely what we try to do through tax policies. Third, there was a revenue-cum-fiscal motive. Actually, the beard tax didn’t bring in much revenue. Enforcement was an issue. (People had to carry beard tokens as evidence they had paid the tax. Who was going to check these?)

Delinked from beard taxes, when we think of fancy taxes, we do need to ponder about enforcement. Russia’s beard tax was repealed by Catherine the Great (1762-1796). There are suggestions, with no evidence, that Henry VIII levied a beard tax too. But we do know Francis I (1515-1547) levied a beard tax in France, with revenue as the motive. This wasn’t levied on the general populace, but only on priests. That must have made enforcement easier. Enforcement was also easier because this tax drew no distinction between which priest had the beard, the wealthy priest in court, or the poor village priest. It was regressive.

But people also respond to taxes, a phenomenon policymakers often don’t anticipate. There are contemporary reports that wealthy court priests continued to sport beards, while village priests shaved them off. At the other end, since religion required sporting beards, in 1936 Yemen (then North Yemen) imposed a tax on men who didn’t have beards.

If a beard tax sounds odd, what about a urine tax that was imposed in Rome? This wasn’t a tax on urinating, but on distribution of urine from public urinals that was used in different processes such as tanning leather and laundering clothes. In films and TV serials, we see  Roman senators wear white togas. These became white through cleaning, which required ammonia, which came from urine.

In Rome, those who bought urine from public urinals paid a urine tax. This was first introduced by Nero, emperor from 54 CE to 68 CE. But we associate the idea more with Vespasian, emperor from 69 CE to 79 CE. According to accounts, Vespasian’s son Titus complained. He found the idea repulsive and Vespasian retorted, “Pecunia non olet (Money does not smell).” The Latin expression has passed into English literature and occurs in multiple places. We owe the Titus anecdote to what Suetonius wrote about the lives of the twelve Caesars. However, translations of Suetonius in English don’t seem to use the Latin expression. For example, “When Titus found fault with him for contriving a tax upon public conveniences, he held a piece of money from the first payment to his son’s nose, asking whether its odour was offensive to him. When Titus said ‘No,’ he replied, ‘Yet it comes from urine.’”

When I first visited England, I wondered why old houses were so dark. They possessed few windows. Indeed, England, Scotland and Wales had window taxes. Part of the reason behind such odd taxes was that income taxes were unpopular. They are of recent vintage. (When we hear people in India suggesting income taxes should be abolished, we should remember that the government requires revenue and we will have odd taxes instead. Abolition of income tax doesn’t mean there will be no taxes.)

The window tax was based on the number of windows in a house. You could argue it was progressive. Larger houses, belonging to the  wealthy, would have more windows. Window tax was introduced in England and Wales in 1696 and in Scotland in 1748. It was also easy to enforce. You could count the number of windows from the outside. Adam Smith mentioned it in The Wealth of Nations (1776). He didn’t quite approve, pointing out that a relatively poor person in the countryside might have a larger house with more windows than a relatively rich person in a city. In other words, it might be regressive, not progressive.

I said earlier that policymakers don’t always anticipate individual responses. As a reaction to the window tax, new houses had fewer windows. This explains why old houses were so dark. Alternatively, existing houses boarded up their windows. Roughly around 1850, the window tax was abolished. There is a belief, with no real evidence, that the expression ‘daylight robbery’ comes from the window tax. The window tax robbed people of daylight. The effect of the glass tax—introduced in Britain in 1746, abolished in 1845—was similar. Though imposed on all kinds of glass, it also applied to glass used in windows. Net result—fewer windows, smaller windows.

To quote from Lancet in 1845, “The deficiency of light in town habitations, in a great measure caused by the enormous cost of glass (because of the tax), is universally admitted to be one of the principal causes of the unhealthiness of cities.”

(Views are personal)


Bibek Debroy | Chairman, Economic Advisory Council to the Prime Minister

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