The History of British Taxation in the American Colonies

The Boston Tea Party, 1773
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The attempts by Britain to tax its North American colonists in the late 1700s led to arguments, war, the expulsion of British rule and the creation of a new nation. The origins of these attempts lay, however, not in a rapacious government, but in the aftermath of the Seven Years' War. Britain was attempting to both balance its finances and control the newly acquired parts of its empire, through asserting sovereignty. These actions were complicated by British prejudice against the Americans.

The Need for Defense

During the Seven Years' War, Britain won a string of major victories and expelled France from North America, as well as parts of Africa, India, and the West Indies. New France, the name of France’s North American holdings, was now British, but a newly conquered population could cause problems. Few people in Britain were naïve enough to believe that these former French colonists would suddenly and wholeheartedly embrace British rule with no danger of rebellion, and Britain believed troops would be needed to preserve order. In addition, the war had revealed that the existing colonies needed defense against Britain’s enemies, and Britain believed that defense would be best provided by a fully trained regular army, not just colonial militias. To this end, the post-war government of Britain, with a major lead taken by King George III, decided to permanently station units of the British army in America. Keeping this army, however, would require money.

The Need for Taxation

The Seven Years' War had seen Britain spend prodigious amounts, both on its own army and on subsidies for its allies. The British national debt had doubled in that short time, and extra taxes had been levied in Britain to cover it. The last one, the Cider Tax, had proved highly unpopular and many people were agitating to have it removed. Britain was also running short of credit with banks. Under huge pressure to curb spending, the British king and government believed that any further attempts to tax the homeland would fail. They thus seized upon other sources of income, one of which was taxing the American colonists in order to pay for the army protecting them.

The American colonies appeared to the British government to be heavily undertaxed. Before the war, the most that colonists had directly contributed to British income was through customs revenue, but this barely covered the cost of collecting it. During the war, huge sums of British currency had flooded into the colonies, and many not killed in the war, or in conflicts with natives, had done rather well. It appeared to the British government that a few new taxes to pay for their garrison should be easily absorbed. Indeed, they had to be absorbed, because there simply didn’t seem to be any other way of paying for the army. Few in Britain expected the colonists to have protection and not pay for it themselves.

Unchallenged Assumptions

British minds first turned to the idea of taxing the colonists in 1763. Unfortunately for King George III and his government, their attempt to transform the colonies politically and economically into a safe, stable and revenue-producing—or at least revenue-balancing—part of their new empire would flounder, because the British failed to understand either the post-war nature of the Americas, the experience of war for the colonists, or how they would respond to tax demands. The colonies had been founded under crown/government authority, in the name of the monarch, and there had never been any exploration of what this really meant, and what power the crown had in America. While the colonies had become almost self-governing, many in Britain assumed that because the colonies largely followed British law, that the British state had rights over the Americans.

No one in the British government appears to have asked if colonial troops could have garrisoned America, or if Britain should ask the colonists for financial aid instead of voting in taxes above their heads. This was partly the case because the British government thought it was learning a lesson from the French-Indian War: that the colonial government would only work with Britain if they could see a profit, and that colonial soldiers were unreliable and undisciplined because they operated under rules different from those of the British army. In fact, these prejudices were based on British interpretations of the early part of the war, where cooperation between the politically poor British commanders and the colonial governments had been tense, if not hostile.

The Issue of Sovereignty

Britain responded to these new, but false, assumptions about the colonies by trying to expand British control and sovereignty over America, and these demands contributed another aspect to the British desire to levy taxes. In Britain, it was felt that the colonists were outside the responsibilities which every Briton had to bear and that the colonies were too far removed from the core of British experience to be left alone. By extending the duties of the average Briton to the United States—including the duty to pay taxes—the whole unit would be better off.

The British believed sovereignty was the sole cause of order in politics and society, that to deny sovereignty, to reduce or split it, was to invite anarchy and bloodshed. To view the colonies as separate from British sovereignty was, to contemporaries, to imagine a Britain dividing itself into rival units, which might lead to warfare between them. Britons dealing with the colonies frequently acted out of fear of reducing the crown’s powers when faced with the choice of levying taxes or acknowledging limits.

Some British politicians did point out that levying taxes on the unrepresented colonies was against the rights of every Briton, but there weren’t enough to overturn the new tax legislation. Indeed, even when protests began in the Americans, many in Parliament ignored them. This was partly because of the sovereignty issue and partly because of contempt for the colonists based on the French-Indian War experience. It was also partly due to prejudice, as some politicians believed the colonists were subordinate to the British motherland. The British government was not immune to snobbery.

The Sugar Act

The first post-war attempt to change the financial relationship between Britain and the colonies was the American Duties Act of 1764, commonly known as the Sugar Act for its treatment of molasses. This was voted in by a large majority of British MPs, and had three main effects: there were laws to make customs collection more efficient; to add new charges on consumables in the United States, partly to push the colonists into buying imports from within the British empire; and to change existing costs, in particular, the importing costs of molasses. The duty on molasses from the French West Indies actually went down, and an across the board 3 pence a ton was instituted.

Political division in America stopped most complaints about this act, which started among affected merchants and spread to their allies in assemblies, without having any major effect. However, even at this early stage—as the majority seemed slightly confused as to how laws affecting the rich and the merchants could affect them—colonists heatedly pointed out that this tax was being levied without any expansion of the right to vote in the British parliament. The Currency Act of 1764 gave Britain total control of the currency in the 13 colonies.

The Stamp Tax

In February 1765, after only minor complaints from the colonists, the British government imposed the Stamp Tax. For British readers, it was just a slight increase in the process of balancing expenses and regulating the colonies. There was some opposition in the British parliament, including from Lieutenant Colonel Isaac Barré, whose off the cuff speech made him a star in the colonies and gave them a rallying cry as the “Sons of Liberty,” but not enough to overcome the government vote.

The Stamp Tax was a charge applied on every piece of paper used in the legal system and in the media. Every newspaper, every bill or court paper, had to be stamped, and this was charged for, as were dice and playing cards. The aim was to start small and allow the charge to grow as the colonies grew, and was initially set at two-thirds of the British stamp tax. The tax would be important, not just for the income, but also for the precedent it would set: Britain would start with a small tax, and maybe one day levy enough to pay for the colonies’ whole defense. The money raised was to be kept in the colonies and spent there.

America Reacts

George Grenville’s Stamp Tax was designed to be subtle, but things didn't play out exactly as he had expected. The opposition was initially confused but consolidated around the five Resolutions given by Patrick Henry in the Virginia House of Burgesses, which were reprinted and popularized by newspapers. A mob gathered in Boston and used violence to coerce the man responsible for the Stamp Tax’s application to resign. Brutal violence spread, and soon there were very few people in the colonies willing or able to enforce the law. When it came into effect in November it was effectively dead, and the American politicians responded to this anger by denouncing taxation without representation and looking for peaceful ways to persuade Britain to scrap the tax while remaining loyal. Boycotts of British goods went into effect as well.

Britain Seeks a Solution

Grenville lost his position as developments in America were reported to Britain, and his successor, the Duke of Cumberland, decided to enforce British sovereignty by force. However, he suffered a heart attack before he could order this, and his successor resolved to find a way to repeal the Stamp Tax but keep sovereignty intact. The government followed a twofold tactic: to verbally (not physically or militarily) assert sovereignty, and then cite the economic effects of the boycott to repeal the tax. The ensuing debate made it quite clear that British Members of Parliament felt the King of Britain had sovereign power over the colonies, had the right to pass laws affecting them, including taxes, and that this sovereignty did not give the Americans a right to representation. These beliefs underpinned the Declaration Act. British leaders then agreed, somewhat expediently, that the Stamp Tax was damaging trade and they repealed it in a second act. People in Britain and America celebrated.


The result of British taxation was the development of a new voice and consciousness among the American colonies. This had been emerging during the French-Indian War, but now issues of representation, taxation, and liberty began to take center stage. There were fears that Britain intended to enslave them. On Britain’s part, they now had an empire in America which was proving expensive to run and difficult to control. These challenges would eventually lead to the Revolutionary War.

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Wilde, Robert. "The History of British Taxation in the American Colonies." ThoughtCo, Apr. 5, 2023, Wilde, Robert. (2023, April 5). The History of British Taxation in the American Colonies. Retrieved from Wilde, Robert. "The History of British Taxation in the American Colonies." ThoughtCo. (accessed June 2, 2023).