For 126 years after the Constitution was ratified, save for a brief period during the Civil War, income taxes didn’t exist in the United States.
Even when the Constitution was amended to allow the federal government to collect income taxes, few actually paid them. But slowly over time, through what is known as the Totalitarian Tip-Toe, the income tax hit every American.
“The 16th Amendment,” Jeffrey Tucker wrote in a classic Laissez Faire Today article, “represented a fundamental change in the nature of the American regime. From that point forward, there was a shift in ownership over national wealth. It belonged first to the government, and then to you only as the administrative apparatus permits.”
The mystery of the roads, revealed
So… how in the world did things get done without citizens throwing obscene amounts of money at the government?
How, pray tell, did politicians not starve to death without gobs of play money to cut crony deals and siphon off their pounds of flesh?
Without taxes, how did our fine government institutions waste money on electronic shark repellent devices, accidentally hacking themselves and, of course, inadvertently hacking the world. (WannaCry, anyone?)
How in the world was a park built? How were schools constructed? My gosh, what about the roads?
One word, dear LFT patron. (Or, more accurately, two words smooshed together.)
When lottery made America
Lotteries — the earliest forms of crowdfunding — were responsible for the building of early America.
And there’s little more we would like to see than a resurgence of communities voting with their dollars on what projects to fund, subverting the current system which allows self-interested officials throw the money around willy-nilly.
That’s right. Make lottery great again.
Nobody is closer to the problems than those directly affected by them. Nothing is more snobbish and smug than the presumption by busybodies that those directly affected by problems, especially those stuck on the lower rungs of society, are incapable of coming up with their own solutions.
But with the early lottery system, you find that money was much more effectively allocated when individuals were given the power to vote with every dollar.
Individuals placed money into those organizations and projects which they found important in their communities. And while local and state lotteries were wildly successful, one such lottery was not — the federal.
As Steve Swain writes on the Ephemera Society blog:
“… in stark contrast to the success lotteries found on the state and the local levels, the national lottery was a dismal failure. On November 18, 1776, the Continental Congress enacted a national lottery in four classes, consisting of 100,000 tickets in each class. From this seemingly well designed, elaborate lottery, It was calculated the Congress would obtain $1,500,000 from the four classes, a considerable amount of money in 1776.”
The final tally for the federal lottery? Less than $100,000.
If Americans were given the choice to fund federal government programs today, I think the results would be similar. After all, if you start with the wild presumption that what what you earn is yours alone, you will naturally start looking a little deeper into where your money might be going. And you will often realize your money is better spent uplifting your immediate surroundings, the place in which you live, than it is on paying strangers to spy on your neighbors and tele-bomb strange lands.
Imagine what our libraries, symphony halls, parks and recreational centers would look like today if the money had stayed where it belonged.
To dig deeper into how the early lotteries worked, and how they built early American communities from the soil up, we invite Sarah Laskow of Atlas Obscura.
Worth thinking about.
Early American Government Ran on Lotteries, Not Taxes
The corrupt Louisiana State Lottery company, which issued this 1889 ticket (shown front and back), gave lotteries a bad name.
In the late 19th century, Ainsworth Rand Spofford, the sixth Librarian of Congress, went looking through America’s early newspapers for the earliest notice of a lottery he could find. What he found had been published in February 1720, in the American Weekly Mercury. This lottery was not the colonies’ first, Spofford cautions — only the first for which he could find a printed notice. The ad promised 350 tickets would be sold, for 20 shillings a piece.
The prize? “A new brick house, corner of Third and Arch,” in Philadelphia.
Lottery-Funded Public Goods
As Philadelphia came to surpass Boston as the colonies’ largest city, its growth was funded in no small part by lotteries.
“It was looked upon as a kind of voluntary tax for paving streets, erecting wharves, buildings, etc., with a contingent profitable return for such subscribers as held the lucky numbers,” wrote Spofford in 1893.
Philadelphians used lotteries to build a battery on the Delaware River to defend the city, span creeks with bridges, and fund roads that led from the countryside into the city. But it was far from the only city in the American colonies that depended on people’s willingness to try their luck. In the 17th and 18th centuries, lotteries were a thriving business, both public and private, and without them, early America couldn’t have been built.
A ticket for a lottery in Massachusetts, 1758. RON SHELLEY/PUBLIC DOMAIN
The tradition of lotteries came to America from Europe, where they first started gaining traction in the 16th century. According to one scholar, the first lottery used to raise government revenue and offer a cash prize was held in Florence, Italy, in 1530. Soon France picked up on this innovative means of raising money, and the British crown adopted the lottery in 1569.
By the 1700s, lotteries were a popular way to raise money for all sorts of projects and were seen less as a sinful pastime than a civic duty. In the early 18th century, The Independent reports, the Archbishop of Canterbury lent his good name to lotteries funding the British Museum and Westminster Bridge.
Lotteries for Survival
From the earliest days of colonial history in America, lotteries were essential to the project’s survival. In the summer of 1612, the Virginia Company held a lottery to raise additional funding for the struggling settlement at Jamestown. (A tailor named Thomas Sharplisse won the largest prize – 4,000 crowns, a small fortune.)
Three years later, the company tried the same gambit, with a focus on the greater good that would come from white people colonizing the New World. “As pitched by the Virginia Company, buying a lottery ticket was an act of charity that could save a savage’s soul,” Matthew Sweeney writes in The Lottery Wars.
The Continental Congress used lotteries to raise money, 1776. RON SHELLEY/PUBLIC DOMAIN
Lotteries didn’t just save the Virginia Company’s settlers from starvation, though. When the colonies revolted against the crown, lotteries helped the new United States of America survive. In 1776, the Constitutional Congress held one to benefit the soldiers of the Revolution. (Since the value of the new country’s currency was fluctuating wildly, it was less successful than hoped.)
Once the colonies won the war, the new states leaned heavily on lotteries to raise revenue, in part because they were not eager to tax newly independent citizens who’d just rebelled against taxation by a central authority. Lotteries funded the growth of the country’s earliest colleges, including the College of New Jersey (later Princeton), Dickinson College, Harvard, and Yale, of many, many churches, and of iconic buildings, including Boston’s Faneuil Hall, which needed to be rebuilt after it burned down in 1761.
A Massachusetts lottery ticket, 1744. GOVERNMENT OF MASSACHUSETTS/PUBLIC DOMAIN
A Reputation for Corruption
But in the 19th century, the popularity of lotteries waned as they were haunted by corruption. It was easy enough to announce a lottery, sell tickets, and abscond with the money without offering a prize.
In New York and Massachusetts, lotteries were banned in the 1830s, and later in the century most states followed suit. Government lotteries wouldn’t become popular again until the second half of the 20th century, when states started using them once again — to raise revenue without raising taxes.
Reprinted from Atlas Obscura.