10% ag tax “a relic of barbarism”

In the 800s, Islam enshrined the 10 percent ushr tax rate on farm yields in the Hadith.  The tax may have been appropriate for the Middle East in the Ninth Century, but it hasn’t worked out so well since then.

As I have pointed out on Money Jihad several times, my concerns about the ushr are its use to fund jihad (especially as ushr collections on poppy yields by the Taliban in Afghanistan today), its imposition by religious fiat rather than by the consent of the governed, its excessive penalties for non-payment, the difficulty it presents for making accurate assessments of crop yields after expenses, its discriminatory impact against farmers, and its overall anachronistic nature.

As it turns out, the America South had its own brief flirtation with a harvest tax during the Civil War.  Beset with increasing war debts, the Confederate Secretary of the Treasury Christopher Memminger proposed a 10 percent in-kind tax on agriculture.  The Confederate Congress added various rates for income and ad valorem taxes to constitute the Tax Act of April 24, 1863.  Given the legislation’s focus on the crop tax, the act was usually called the “Tithe Tax.”  The following is a remarkable passage from Richard Cecil Todd’s 1954 book, Confederate Finance:

Many of the farmers…became dissatisfied and contended that the tax should be placed on the profits of their crops and not on the gross value.  The farmer believed that a graduated tax, payable in currency, should be applied to the income from his products in the same manner in which it was applied to the income from salaries and other sources.  To him the tithe or tax-in-kind looked large and discriminatory in comparison with the 2% currency tax on salaries over $1,500.  As a result of this dissatisfaction, public meetings were held during the summer of 1863 and resolutions were drawn up denouncing the tax-in-kind.  One of the resolutions passed by the farmers stated that the act of April 24 in “taking from the hard labors of the Confederacy one-tenth of the people’s living, instead of taking…currency, is unjust and tyrannical, and we solemnly protest against that act.”  Another pictured the tax as being “oppressive, and a relic of barbarism, which alone is practised in the worst despotisms.”  Still another stated that “We are in favor of a just and equitable system of taxation so that all classes may bear their burden equally; [but] we are…opposed to the tithe system…discriminating against and taxing the labor and industry of the agricultural classes.” (p. 142)

A relic of barbarism?  It looks like even the pro-slavery South found crop tithing to be barbaric and despotic.  What does that say about Islam, and what does it say about Pakistan, which still imposes an ushr?  It tells you that Pakistan is more committed to having an Islamized tax system than having an effective one, and that jihadists are a more important constituency in Pakistan than are farmers.

In Sec. Memminger’s defense, however, there were good reasons for the Tithe Tax in wartime.  Among Memminger’s arguments were to “Relieve the currency from an issue of the amount necessary to purchase the articles levied in kind, and assist greatly in restoring all prices to their usual and normal condition,” and to “Render much more productive the tax itself…because being certain in quantity it would not be subject to the fluctuation which would attend any further expansion of the currency.”

This argument for in-kind taxation in an era of inflation is also a familiar one for those acquainted with Roman public finance toward the end of their empire.  Emperor Diocletian and his successors had devalued the denarius into oblivion.  The currency became so worthless that the Romans resorted to in-kind taxation.  Memminger, concerned about Confederate inflation, clearly understood that being able to feed the troops with in-kind yields was more important than collecting increasingly worthless Confederate dollars.

Thus, one can make a plausible argument for an agricultural tithe for a particular place during a particular time.  Even in the Bible, the Hebrews were instructed, “You shall tithe all the yield of your seed, which comes forth from the field year by year,” (Deuteronomy 14:22), but this was localized to Jerusalem for the purposes of subsidizing the Temple and the Levite clergy at the time.

But to enshrine a permanent tax rate for all of a religion’s adherents for all time handicaps industry and prevents flexible financial policy-making for future generations.  We can only hope that the jihadists and their revenue measures meet the same fate as the Confederates.