Oliver M. Dickerson and Where the Money Went

This morning the New York Times reported that the Bush-Cheney administration plans to ask for $121 billion for the U.S. Army in fiscal year 2008, rather than the $138 billion the Army sought. (Last year’s budget was $112 billion.) However, the same story also said the administration was expanding “what costs can be included in so-called supplemental spending bills,” which until recently were emergency measures only. Such bills are still kept out of the normal budgeting process and not counted as part of the U.S. government’s deficit. So we really don’t know what the administration's Army funding plans are, or where the money's coming from.

Earlier in the week, the newspaper broke the story that the commission of the I.R.S. told staff in Louisiana and Mississippi that “He prefers that we do not resume any enforcement actions until after Dec. 31 due to the upcoming elections, holiday season, etc.” The paper noted, “four former I.R.S. commissioners, who served under presidents of both parties, said that [easing off tax collections] because of an election was improper and indefensible.”

All of which put me in mind of an article I read about tricky government budgeting and revenue-collecting during the pre-Revolutionary period. The article is Oliver M. Dickerson’s “Use Made of the Revenue from the Tax on Tea,” which appeared in the New England Quarterly in 1958.

I find Dickerson's work hard to evaluate. On the one hand, he probably spent more time studying the U.K. Treasury Office papers about the North American Customs office than anyone else. He published several other provocative articles and the book The Navigation Acts and the American Revolution based on that research.

On the other hand, Dickerson was almost hostile to the British government of the 1760s-70s, and his theories leaned toward the conspiratorial. He presented the Customs establishment as a corrupt “racket,” and even took seriously Bostonians' flimsy accusations that its personnel had participated in the Massacre of 1770.

So Dickerson’s articles offer lots of fascinating information about how the British colonial administration worked—subsidizing friendly newspaper printers, for instance—but then the last couple of pages make me feel like I’ve been steered off a cliff. That leaves me less confident about all that interesting information that came before.

For instance, the article I cited above says that after the Townshend Act of 1767, which put new duties on tea, glass, lead, paper, and painter's colors shipped to North America, “Total collections on articles other than tea were so unimportant that they were repealed in 1770.” Dickerson had access to these numbers. But is his interpretation reliable? Or was he putting the worst possible spin on the British government's choice to repeal all but the tea tax?

Dickerson does seem to have the goods on where the Townshend Act revenue actually paid for. It was widely said in 1767, and often since, that the British government imposed those new duties in order to pay for the Seven Years’ War and the costs of defending the colonies. Dickerson argued that that's not where the money went. He wrote:

Under previous acts all revenue arising from parliamentary taxation applicable to the colonies was collected by the Customs Commissioners in London, and paid into the Treasury to be expended by Parliament for the defense of the colonies. The Townshend Revenue Act…set up the innovation that revenue arising under this act should first be used “to make a more certain and adequate provision for the charge of the administration of justice and the support of civil government in such of the colonies as it shall be found necessary.” . . .

The net effect was to impose the vast charges incident to the operation of the new system upon the receipts from the Navigation and Sugar acts and to open the entire American revenue to the political patronage system.

Thus, the older Navigation and Sugar Acts revenues were tapped to pay for an expanded Customs bureaucracy, leaving less for London to put toward defense. The new Townshend Act revenues instead covered the salary of certain royal appointees:

Four classes of colonial officials were selected as coming under the provisions of the act. These were governors, lieutenant governors, attorneys general, and chief justices, and other provincial judges. In addition some of the admiralty judges were paid all or part of their salaries in the same way, apparently without color of law. Payments were limited to officers in the three provinces of Massachusetts, New Jersey and New York.

Gov. Thomas Hutchinson (shown above) received £1,500 a year after 1771, for example; the governors of New York £2,000.

Previously, the colonies’ legislatures had set and paid those governors’ salaries. We might assume that locals were happy to be relieved of that cost. In fact, being able to limit and delay salaries for royal appointees was the only leverage that the legislature, and thus the people, had over those men. They couldn’t be voted out of office, after all. By providing governors, judges, and other officials with salaries, the London government both gave them a personal interest in seeing Customs laws enforced and insulated them from local opposition.

Furthermore, when Dickerson totaled up all the salaries and other expenses drawn from the Townshend Act revenues, he came out with £36,200. But he found the total revenue collected was £33,155. The difference, he wrote, was made up from the older duties. So the new system was actually draining away money that had previously gone in part to colonial defense, and putting it toward more salaries for Customs officers and other royal appointees.

At least, that's what Dickerson found. Now I don't particularly feel like spending decades rooting through Treasury Office files at the U.K.'s National Archives to confirm his numbers. But I don't want to dismiss them out of hand, either. It's always worth thinking about how the government's collecting money and where it's really going.