Pay Taxes with Degraded Currency

On a few occasions, tax resistance movements have broken out while the government has been simultaneously raising taxes and raising money more sneakily by degrading the currency. Tax resisters can take advantage of this by paying their taxes with degraded currency, or by delaying the moment of payment until the amount due is no longer a significant expense.

Here are a few examples:

  • In the aftermath of the French Revolution, the new order was slow in getting its new tax system established, and people put off payment as long as possible. When they did begin to pay, they did so with assignats, a type of currency that was issued by the revolutionary Assembly without much regard for soundness. According to one account:

    During , the peasant begins to discharge a portion of his arrears, but it is with assignats. In , the assignats diminish thirty-four, forty-four, and forty-five per cent. in value; in , forty-seven and fifty per cent.; in , fifty-four, sixty, and sixty-seven per cent. Thus has the old credit of the State melted away in its hands; those who have held on to their crowns gain fifty per cent, and more. Again, the greater their delay the more their debts diminish, and already, on the strength of this, the way to release themselves at half-price is found.

  • During Reconstruction, supporters of the opposition Democratic Party in South Carolina “pay their taxes to the State in worthless bills of the ‘Bank of the State,’ which the State is compelled by the decision of the courts to receive in payment of taxes,” reported the New York Times.

    By the terms of the charter of this bank the faith and credit of the State is pledged to the redemption of its bills, which for years after the war could be bought for 5 or 10 cents on the dollar, but since the decision of the United States Supreme Court compelling the State to receive these bills for taxes, they have increased in value, though to the State they were more worthless even than Confederate money, since they cannot be used in defraying any of the expenses of the Government, but are destroyed as fast as received.

  • During the Ruhrkampf between the Wars in Germany, the goverment tried to resist the demanded reparation payments in part by taking actions that degraded its currency.
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