[Guide to the Market Economy] Tax System and Politics

“England’s William III taxed people according to the number of windows… Louis XVI’s excessive taxes became the fuse for the French Revolution”

Have you ever heard of the term “window tax”? A window tax refers to a tax levied according to the number of windows in a house. As absurd as it sounds, this tax was created in 1696 under William III of England. At the time, William III needed enormous funds to suppress a Catholic rebellion in Ireland, and in order to cover those costs he introduced new taxes, one of which was the window tax.

Royal Expenses and Taxes

Before the window tax, there was something called the hearth tax. As the name suggests, the hearth tax imposed a levy based on the number of fireplaces installed in a home. But it was abolished after concerns were raised about invasion of privacy. To count the number of fireplaces, inspectors had to look inside people’s homes, and it could not have been easy for them to expose their private space to government inspectors. Most of the public strongly resisted the hearth tax, and in the end it was repealed. What replaced it was the window tax. Windows, after all, could easily be counted from outside the house.

When the window tax was first introduced, William III was highly pleased with himself. He thought people would simply pay up in full. But his confidence proved to be arrogant self-delusion. People who felt burdened by the tax began, one after another, to block up their windows. This shows just how great the burden of taxation and the resistance to it were—so great that people were willing to give up bright, warm sunlight themselves. After the window tax was introduced, buildings in England took on a very strange appearance, as existing windows were sealed up and newly built structures were constructed without windows.

Better to Eliminate the Windows

Strictly speaking, the window tax can be seen as a kind of “wealth tax.” The more money people had and the wealthier they were, the more likely they were to live in larger houses with more windows. But in reality, it was nothing more than a trick to wring taxes out of people indiscriminately, regardless of how rich or poor they were. Since any hole in a wall was treated as a window and taxed heavily, the burden people felt was considerable. In the end, this distorted tax policy produced the bizarre outcome of people “blocking up their windows,” depriving them of comfortable living environments with ample sunlight and ventilation.

In the 17th-century Netherlands, too, there was a tax system similar to England’s window tax. Taxes were imposed according to a building’s width. As in England, this also became a heavy burden, and Dutch people eventually began changing the shapes of their buildings to avoid the tax. They started constructing buildings that were uniformly tall and narrow.

In the 18th century, the French people also suffered under excessive taxation. Louis XVI imposed onerous taxes, including a window tax, in an effort to resolve the government’s fiscal collapse. Louis XVI’s window tax was assessed not according to the number of windows, but according to their width. Such a brutal tax system provoked resistance from the bourgeois class and ultimately led to the French Revolution of 1789. As this shows, excessive and irrational taxation can not only make people’s lives miserable but also bring about extreme outcomes such as the division and collapse of a state regime. It is a striking irony that taxes, which are supposed to finance the operation of the state, can instead cause instability both in people’s lives and in political power itself.

Distorted Taxes and the Survival of the State

Taxes are a kind of expense that a public community such as the state forcibly collects from its members. Accordingly, setting and collecting taxes requires clear and rational standards and principles that members of the community can accept. Yet from time to time, distorted taxes emerge that defy common sense and logic. England’s “window tax,” discussed above, is a representative example.

Whether in East or West, tax policy has always been present behind many of the landmark events of history. When a country prospers, sound tax policy is often part of the story; conversely, when a country declines, excessive tax policy is often present. Because taxes directly affect our lives, the question of what tax policies are implemented and how they are enforced is important enough to determine not only people’s livelihood and stability, but even the survival of a nation.

■ Food for Thought

Those in power are always tempted to collect and spend more taxes. History is full of stories of taxes imposed under all kinds of pretexts. Taxes have been collected based on the number of windows and fireplaces, and levied according to the width of buildings. Taxes carry political explosiveness. When those in power treated taxation lightly, the map of power itself has sometimes been redrawn.

Sung-no Choi, President of the Center for Free Enterprise (CFE)

---

Original title: [시장경제 길라잡이] 세금제도와 정치

Author: Sung-no Choi

Date: 2019-01-21

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=15&idx=11379