August 30, 2013

Tax Credits, Tort Reform and Tea in Boston Harbor for the Common Good


On December 16, 1773, One hundred sixteen men, several of whom were dressed as members of the Mohawk tribe, threw 342 chests full of tea into Boston Harbor.

The rest of the story involves tax credits, government bailouts, monopolies, American ships and yes, even tort reform in 2013.  

It is natural to think that the Boston Tea Party as it has become known was a reaction to high taxes imposed by the British Parliament.  

However, to understand the issues that precipitated the event that for decades was simply known as “the destruction of the tea” we have to go back to December 31, 1600, when the British Crown chartered and granted favored status to a business known as "The Governor and Company of Merchants of London, trading with the East Indies" for the importation of agricultural goods and products from the area of India and the Middle East. 

In time, the mega-corporation that had its own military, counted opium among its commodities and for several decades was the world’s largest drug-dealing operation became known as simply, “The East India Company,” or the “EIC”.  Many members of parliament owned interests in the EIC and eerily like 21st century politics, the company’s paid lobbyists were always available to “help” make laws.

Through favorable legislation, government incentives and protectionist policies, the EIC reaped huge profits and lined the pockets of England’s merchants and members of parliament.  Enter the American colonies.  The EIC eyed the emerging American market, however, 85 percent of the tea drank in America was smuggled Dutch tea. In 1767, lobbyists for the East India Company compelled parliament to grant it a tax credit rebating to the company a chunk of the tax on tea that was re-exported to the colonies so that it could compete with the smuggled tea.  

In 1772, the tax rebate expired.  Sales plummeted, warehouses were full of unwanted tea and the EIC, perhaps England’s most profitable commercial entity was in dire financial trouble.  May 1773 dealt a blow to free enterprise when the lobbyists of the East India Company convinced parliament to enact the “Tea Act”, restoring the tax credit and allowing the company to bypass colonial businessmen who had previously bought and sold tea.  In July 1773, the East India Company selected agents in the colonies who would simply be hired to sell tea on commission. 

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