Pay Taxes with Degraded Currency

Tax resistance movements have sometimes erupted while the government has been raising money sneakily by degrading the currency. Tax resisters can take advantage of this by paying their taxes with the degraded currency, or by delaying the moment of payment until the nominal amount due is no longer a significant expense to them (or a significant gain to the government).

Example French Revolution

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

During the year 1792, the peasant begins to discharge a portion of his [tax] arrears, but it is with assignats. In January, February, and March, 1792, the assignats diminish thirty-four, forty-four, and forty-five percent in value; in January, February, and March, 1793, forty-seven and fifty percent; in May, June, and July, 1793, fifty-four, sixty, and sixty-seven percent. Thus has the old credit of the State melted away in its hands; those who have held on to their crowns gain fifty percent, 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.

Example Reconstruction

During Reconstruction in the post-Civil War United States, supporters of the opposition Democratic Party in South Carolina paid their state taxes “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.

Notes and Citations

Taine, Hippolyte “The Revolution” We Won’t Pay: A Tax Resistance Reader (2008) pp. 140–53
“Political Intelligence: Tax-Payers of South Carolina” New York Times 8 January 1877