• A Book Review of Rebellion, Rascals, and Revenue: Tax Follies and Wisdom through the Ages, by Michael Keen and Joel Slemrod.1


What do you think would happen if suddenly beards and bachelorhood were taxed? Ridiculous, you say? Not so! In the later 17th century, Tsar Peter the Great instituted a beard tax to change the unkempt behavior of boyars, low-ranked Russian aristocrats. Did more men shave? Absolutely. And a tax on bachelorhood? Of course, that will increase marriages, right? Maybe. But it might also create a market for “professional refusers” like it did in Argentina around 1900 as young men wanted to “prove” an offer had been rejected so they could avoid the tax. As these examples illustrate, a tax system is not just about raising revenue in efficient ways (as much as some public finance economists wish it was!). It’s used in all kinds of ways, for all kinds of reasons.

Rebellion, Rascals, and Revenue: Tax Follies and Wisdom through the Ages by Michael Keen and Joel Slemrod delivers a book on taxation that is part history, part primer, and full of surprises—even for those familiar with both topics. The few missteps don’t detract too much from their larger success, although this reviewer certainly hopes they are corrected in future work.

The Window Tax

I’ll start, as the authors do, with the “window tax.” For the many of you already familiar with this, feel free to skip the rest of this paragraph. It’s a well-known and often used example in writings about strange taxes. Even today, you can find pictures of homes with boarded up windows in London, a century and half after the tax was ended.

The window tax existed in Britain from 1697 to 1851. It is exactly what it sounds like: a tax on property based on the number of windows that it had (though with different rates depending on the number of windows, see below).

Keen and Slemrod use this example to illustrate the conflict and tradeoff between different tax principles like fairness, ease of administration, and their favorite, the excess burden (the non-revenue costs of the tax, when people change their behavior in ways that make them worse off).

Fairness: From a fairness perspective, the window tax seems like a good one. In general, richer people will have bigger houses, which will have more windows, so the window tax could be a way of implementing a progressive tax, consistent with the ability-to-pay principle (which says that those with a great ability to pay taxes should pay more). This fact may not always hold though, as Adam Smith keenly observed (see below).

Ease of Administration: Prior to the window tax, Britain had a tax on fireplaces (the “hearth tax”), which was in place from 1662 to 1689. Compared with the later window tax, the hearth tax was difficult to administer, since the number of fireplaces in a house could not be easily observed from outside the home. You had to enter the home, which, not surprisingly, many Brits found intrusive. Relatively speaking, the window tax was easier to administer, as it could be observed without entering the home (and without trying to assess the market value of the home, as with a property tax). The tax assessor can just count the windows, and move on to the next house.

Excess Burden: But there is also the potential for a huge excess burden from the tax. If households respond to the tax by boarding up windows, or if new homes built have fewer windows, people are worse off. They don’t have to pay the tax, true, but they also miss out on the benefits of the sunshine that would otherwise stream through their windows. Economists call this loss of benefits a “deadweight loss,” or more precisely in the context of taxation, what we call the “excess burden.”

Adam Smith, Prominent “Window Tax” Critic: As Keen and Slemrod note, Adam Smith complained about the window tax in the Wealth of Nations.2 Specifically, Smith said it was unfair, even though progressivity was one of the goals. Smith gives the example of a poor person living in the country, compared with a rich person in an urban area. The poor person might actually have a house with more windows, given how cheap land is in rural areas, and thus will shoulder a larger burden of the tax. Perhaps it wasn’t such a fair tax after all.

But What Happened? Here is where this book really shines. The authors not only know the history of taxes, they are also well-versed in the best current research on taxes.

On the window tax, they do an excellent job of summarizing research published in 2015 that examined microdata on the window tax.3 Initially, the window tax didn’t apply to dwellings with fewer than ten windows. Guess what the microdata Oates and Schwab examined shows? Lots of houses with exactly nine windows. Whether this means new houses were built with exactly nine windows, or whether houses with ten or eleven windows boarded up a few, we can’t say from the data. Moreover, when the threshold for taxation was lowered to eight windows in 1761, suddenly there were a lot of houses with exactly seven windows.

The “excess burden” of the tax is implicit in the shrinking number of windows in these houses. The authors found that for every dollar of taxes collected from the tax, there was an excess burden of 23 cents, a very inefficient tax. And for those who reduced their number of windows below the exemption threshold, all their behavior is excess burden, since the tax raises no revenue on those with nine windows (in the original version of the tax).

The story Keen and Slemrod tell of the window tax is well done in that it takes a familiar tale of tax lore, talks clearly about the incentives to change behavior under the tax, and then shows us what the best current research says about this tax, which we can then use to compare with other taxes.

Follies in the History of Economic Thought

The authors gave their book the subtitle “tax follies and wisdom throughout the ages,” but they do commit a few follis of their own. These follies do not detract from the book overall, but they are so glaring that they need to be briefly corrected.

Keen and Slemrod’s discussion of the history of economic thought goes astray when they say that Thomas Robert Malthus’s “views of population dynamics prompted Thomas Carlyle to label economics as the ‘dismal science'” (page 155). This is the standard story, often repeated by critics of economics, but economists should know their own history better. As David Levy and Sandra Peart have carefully explained, Carlyle called economics “the dismal science” because “economics assumed that people were basically all the same, and thus all entitled to liberty.”4 Carlyle and other progressives argued in favor of a racial hierarchy and questioned the abolition of slavery in the British Empire.

The authors also do an injustice to more recent history of economic thought in their discussion of Geoffrey Brennan and James Buchanan’s work on taxation. According to Keen and Slemrod, Brennan and Buchanan “thought of government as a ‘leviathan’ (a biblical sea monster) concerned not with citizens’ welfare but only with maximizing its own size.” In this context, Leviathan is clearly a reference to Hobbes, and surely the authors know this. Most uncharitably, for a reader interested in learning about Brennan and Buchanan’s theory, the authors give no references to the relevant papers in the Journal of Public Economics and later book The Power to Tax.5 After quickly dismissing the leviathan model, Keen and Slemrod go on in the next paragraph to say, “An alternative way to limit government size… is through constitutional restrictions.” But this is exactly what Brennan and Buchanan propose, as would be clear by just reading the title of their 1977 paper “Towards a tax constitution for Leviathan.”6

What’s Next for Taxes?

In the final chapter of the book, Keen and Slemrod look to the future. Given all the history they have shared with us, what might future tax changes look like? What should they look like?

As the authors acknowledge, good tax reform is hard. They quote United States Treasury Secretary William Simons saying in the late 1970s that the United States “should have a tax system which looks like someone designed it on purpose.” This sentiment is nice, but it’s not realistic. Even major tax reforms in the United States, such as in 1986, didn’t truly start over from scratch and design a tax system of which economists would approve. Instead, tax reforms usually try to chip away at bad tax policy, often add new (hopefully better, by some criteria) revenue raising devices, but most tax changes take place at the margin. A rate adjustment here, and an exemption added or subtracted there. Taxes are the outcome of an outgoing political debate and negotiation, not some that is designed fresh from whole cloth.

For example, it’s widely acknowledged in tax policy discussions that the United States is a tax outlier in two clear ways compared to other developed countries. First, we don’t have a value-added tax, a fairly new taxing device in the history of taxation, but one that is now universally adopted in the developed world, and much of the developing world too. In brief, a value-added tax (VAT) is a tax on consumption, but it works very differently from a sales tax, with taxes collected at each stage in the production process (only on the “value added” at each stage, hence the name). Second, the United States generally has much lower taxes as a percent of our national economy than our peers. These two facts are related: with a VAT, the United States would be much closer to, say, the average level of taxation in Europe.

Will the United States have a VAT in the near future? The authors do think it’s plausible, especially since recent Republican (Ron Paul and Ted Cruz in 2016) and Democratic (Andrew Yang in 2020) presidential candidates have proposed VAT-like taxes, even if they didn’t always call it that. But whether it will be a replacement for an existing tax (the Republicans’ preferred path) or a new revenue stream to fund new programs (the Democratic preference), it will inevitably be messy and uniquely American. For example, how would the VAT interact with our existing large consumption tax in the United States: the state and local retail sales tax? Would it tax the same “base” of consumer goods (warning: every state has a different tax base for its retail sales tax)? Would the retail sales tax be applied on top of the federal VAT, since the VAT is baked into the price of the goods on the shelf?

“The fact that we’ve mostly gotten through the COVID pandemic without any new major tax instruments at the federal level suggests that the moment for a major new tax may have passed in the United States.”

The possibility of a VAT in the United States demonstrates that reform is possible, but it is almost always likely to be more incremental than revolutionary. And major expansions of taxation in the United States and elsewhere usually require a war or some other crisis. For example, while the United States federal income tax was established during peacetime, the rates were lower until a few years later when the United States entered World War I, and it only became a tax that applied to most households during World War II. Similarly, the payroll tax in the United States was established to fund the Social Security program during the crisis of the Great Depression. The fact that we’ve mostly gotten through the COVID pandemic without any new major tax instruments at the federal level suggests that the moment for a major new tax may have passed in the United States.

To Conclude, a Personal Anecdote

Twenty years ago as an undergraduate student, I saw Joel Slemrod give two public lectures at my university. These two lectures nicely encapsulated two of the main objectives of Slemrod’s recent book with Michael Keen, titled Rebellion, Rascals, and Revenue. First, how do taxes impact people’s behavior and, second, how can taxes be made simpler, fairer, and more efficient?

The first talk by Slemrod was based on his paper with Wojciech Kopczuk, which investigated whether or not people responded to changes in estate tax rates by dying earlier or later (for example, the United States estate tax was temporarily repealed in 2010).7 In the case of estate taxes, they do find some adjustment of behavior—the alteration of death dates close to the end of the year. That’s the first lesson of their book: taxes change people’s behavior, they don’t just raise revenue.

The second of Slemrod’s talks I witnessed was “Which is the Simplest Federal Tax System of Them All?” In that talk Slemrod discussed various options for tax reform, such as consumption taxes, a flat income tax, and others. Here we have the second major theme of the book: how can we reform the tax system, including ways to make it simpler, but also ways to make it “fairer” (and what that means exactly), and finally how to make the tax system more efficient.

For more on these topics, see

The authors are humble throughout the book, as they never try to claim they have “the” answer to how to fix our tax system. As one of the section titles in the last chapter of the book puts it: “Fair Taxation, Whatever That Is, Is Hard to Achieve.” This stance is a refreshing one, since most authors that set out to write a 400-page book on taxes would usually have One Big Idea about how to fix the tax system. Not Keen and Slemrod. They are content to give us an interesting history, connect it to principles of taxation, and offer some suggestions, but they leave it up to the reader to make use of all this information in shaping their own ideas about the future of taxes in the modern world.


[1] Michael Keen and Joel Slemrod, Rebellion, Rascals, and Revenue: Tax Follies and Wisdom through the Ages. Princeton University Press, 2021.

[2] Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations. Book V, Chapter 2, “Of the Source of the General or Public Revenue of the Society.” Library of Economics and Liberty

[3] Wallace E. Oates and Robert M. Schwab, “The Window Tax: A Case Study in Excess Burden.” Journal of Economic Perspectives, 29(1), 2015.

[4] David Levy and Sandra Peart, “The Secret History of the Dismal Science: Economics, Religion, and Race in the 19th Century.” Library of Economics and Liberty, January 22, 2001.

[5] Geoffrey Brennan and James Buchanan, The Power to Tax. Library of Economics and Liberty.

[6] Geoffrey Brennan and James Buchanan, “Towards a tax constitution for Leviathan.” Journal of Public Economics. 8(3), 1977.

[7] Wojciech Kopczuk and Joel Slemrod, “Dying to Save Taxes: Evidence from Estate Tax Returns on the Death Elasticity.” The Review of Economics and Statistics. 85(2), 2003.

*Jeremy Horpedahl is Associate Professor of Economics at the University of Central Arkansas. He blogs at Economist Writing Every Day.

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