Saturday, April 21, 2012

The Boston Tea Party ... a result of lower taxes

Taxes were a big issue that led to the Boston Tea Party in December 1773, but not in the way many of us might believe. In fact, a reduction in taxes led to the incident, in which American colonists vaguely disguised as American Indians boarded ships laden with tea and tossed it overboard, into Boston harbor.

The tea was owned by England’s East India Company, which had developed a near-monopoly over England’s trade with other regions of the world by the mid to late 1700s. The British government depended heavily on import and export tariffs generated by trade, so a strong East India Company was vital for England’s well-being. When the company faced financial difficulties in the early 1770s, Britain passed its Tea Act of 1773. The Tea Act allowed the East India Company to ship tea to the American colonies directly from India, without first taking it to England to be sold to middlemen who would then send it to America. The Act also reduced the duty on the company’s tea as it was imported by American colonies.  And too, there’s ample evidence that by reducing the cost of tea legally imported by the Americans, the British also hoped that the colonists would overlook a smaller tax and pay it, thus acknowledging Britain’s right to tax them – which had become a major sticking point in recent years.

As intentioned, the Tea Act lowered the price of the East India Company’s tea in America. The company and the British government expected those lower prices to lead to increased demand, thereby helping to prop up the company and ensure its future contributions to British government coffers. The result was something else, as historian Barbara Tuchman wrote in her 1984 book The March of Folly: From Troy to Vietnam.

The price reduction in the cost of East India Company tea made it less expensive than Dutch tea that was illegally brought to America. That threatened the livelihood of American smugglers, whose illicit activities had reduced by  two-thirds the amount of English tea imported by the colonies.  American merchants who had worked as wholesalers for legally imported English tea were also hurt financially by the Tea Act, which eliminated their middleman role in the trade. Also, many American patriots saw through – with anger – the British ruse to entice colonists to overlook the relatively small tax on the tea and thereby accept it.

Many of the tea-bearing ships arriving at American ports after the Tea Act were turned back, but not in Boston. There, three ships were boarded by “Mohawks,” who tossed tea from 342 chests into the harbor in three hours.

The destruction of the tea enraged even American sympathizers in Britain. The British government responded by closing the port of Boston “to all commerce until indemnity had been paid to the East India Company and reparations to the customs commissioners for damages suffered, and until ‘peace and obedience to the Laws’ was assured sufficiently that trade might be safely carried on and customs duly collected,” writes Tuchman. This and additional strong measures, which in hindsight might be viewed as over-reactions, brought only more American opposition to British rule and tended to unify American colonists. And we know the rest of that story.

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