The Effects of Municipal Taxation: Roman Empire Edition
Right now, I’m reading The Rule of Empires by Washington University history professor Timothy Parsons (who was my history advisor when I was an undergraduate there, incidentally). In it, Parsons describes how foolish economic regulations and excessive taxation in the late Roman Empire drove people from the cities:
Emperor Diocletian tried to arrest this inflationary spiral in A.D. 301 with an unenforceable decree fixing wages and basic commodity prices. Faced with significant shortfalls in the western half of the empire, tax collectors concentrated on the cities and towns, where magistrates faced fines and confiscations if they failed to produce sufficient revenues. Not surprisingly, the wealthy and privileged fled to the countryside, where the reach of imperial authority was inherently shorter.
This exodus helped ingrain feudalism in the countryside as the rich bought up large estates. For the record, I don’t think city earnings taxes, no matter how high, will lead to a resurgence of feudalism, but incentives still change the way people behave now just as much as they did 1,700 years ago. If people can avoid a tax — and the rich can avoid them most easily because of how mobile they are — many of them will do so. Although we don’t know precisely the level of taxation in Roman cities, it was almost surely higher than 1 percent. Nonetheless, all else being equal, higher taxes tend to drive people away, whether we are talking about early 4th-century Rome and Londinium (London) or contemporary Kansas City and Saint Louis.