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tax income stagnated, such as the sales taxes known as alcabalas and pulques.
It is also possible “ as historians John TePaske and John Coatsworth have
suggested “ that in¬‚ation might have reduced the impact of the Bourbon
state™s ¬scal offensive and diminished their effects.67 If price increases were
greater than tax contributions and were accompanied by stagnation in wage
levels (as argued by Van Young), then it is possible that the tax system might
not have been considered as the principal cause worsening the economic
situation for the lower strata.68 There may have been greater discontent at
price increases and the relative fall in wages, although there is a scarcity of
historical monographs on popular response to these trends. Instead of a ¬scal
rebellion, it would appear that discontent led colonial Mexican taxpayers
to carry on what one author has described as disguised resistance to tax
payments.69

Fiscal Pacts in Colonial Society
In all discussion of tax systems, a major issue concerns the contemporary
social perception of the relative fairness of the ¬scal charges. Today tax sys-
tems are described as regressive or progressive: in the former case, exactions
fall unequally on sectors with less income, while with the latter, taxation
rates increase proportionally with income. New Spain™s tax system was,
in many regards, regressive since the preponderance of indirect taxes “
especially on pulque and the sales tax “ fell heavily on items of popular
consumption; furthermore, certain direct taxes like the tribute were only
paid by the poorest social groups. However, these terms and concepts were
not used in the ancien regime; the underlying idea was that of ¬scal justice.
Fiscal justice was associated with tax exemptions or immunities granted
to speci¬c social groups. When New Spain is compared to a number of
European societies, it becomes clear that tax exemptions were more common
in European Catholic monarchies than in Spanish America. In the Spain of
Charles IV, for example, the greatest fortunes rarely paid taxes; while in
New Spain, signi¬cant proportion of the richest men “ among them the
owners of silver mines “ were obliged to make important payments to the
government. In fact, most individuals in colonial Mexico had to contribute

67 See John TePaske, “Economic Cycles in New Spain in the Eighteenth Century: The View from the
Public Sector,” in Richard Garner and William Taylor, eds., Iberian Colonies, New World Societies: Essays
in Memory of Charles Gibson (Pennsylvania: State College, 1985), pp. 119“142 but compare with R.
Garner and S. E. Stefanou, Economic Growth and Change in Bourbon Mexico, pp. 34“35.
68 E. Van Young, La crisis del orden colonial, Chapter 2, offers the most complete and penetrating discus-
sion, to date, on income levels and wage trends in Bourbon Mexico.
69 See the suggestive essay discussing disguised opposition to taxes at a time of growing ¬scal pressure
˜
by Ana Lidia Garc´a Pena, “El impacto popular de las reformas ¬scales en la ciudad de M´ xico,
± e
1780“1820,” in C. Marichal and D. Marino, eds., De colonia a naci´n, pp. 85“133.
o
76 Bankruptcy of Empire

taxes to the colonial administration “ a fact that tends to reveal a degree
of ¬scal uniformity even though tax rates proved markedly different for
different social groups.
The regressive character of New Spain™s ¬scal system was possibly reduced
by this greater uniformity and by relative ef¬ciency in collection of rev-
enues.70 When compared to Spain™s disjointed tax system at the end of the
eighteenth century (with very marked differences in terms of norms and
collection methods) or the French ¬scal system, which offered a great many
selective exemptions to privileged corporations, that of New Spain appears
more transparent.71 It may be an exaggeration to claim, as Herbert Klein
did, that the Bourbon reforms had achieved “perhaps the most modern tax
system in the Atlantic world,” but his argument calls attention to the con-
siderable ef¬ciency in tax collection in New Spain during the late Bourbon
regime.72 On the other hand, Humboldt himself considered that there were
too many corrupt tax collectors in colonial Mexico.73 But, possibly, these
features caused less rejection than the traditional tax systems in Spain or
France where the continuous use of tax farming submitted taxpayers to
multitudes of small injustices that were considered as injurious as the tax
collection itself.74
In any case, it is worth rethinking how the tax system functioned in legal
and political terms in a colonial society. The fact that there was neither
legislature nor popular press in colonial Mexico implies that discussions
about the tax system were limited. This situation clearly contrasts with
the intense debates on taxes in societies with a parliamentary tradition.75
Therefore, it is important to keep in mind that in New Spain the juridical
formulation of many taxes responded to a corporative concept of the functioning
of colonial society. Quite a number of traditional taxes were applied to a
group, guild, or corporation and these were considered to be the counterpart

70 Both H. Klein Las ¬nanzas americanas, p. 129 and Luis J´ uregui “La anatom´a del ¬sco colonial:
a ±
˜
la real hacienda de la Nueva Espana, 1784“1821,” Ph.D. thesis, El Colegio de M´ xico, 1994, e
pp. 170“189, calculate relatively low costs for tax collection, and so it may be presumed that it
was relatively ef¬cient.
R. Pieper, La Real Hacienda bajo Fernando VII, provides the best analysis of Spain™s tax system in the
71
decades 1760“1790.
˜
H. S. Klein, “La econom´a de la Nueva Espana,” 592.
±
72
This view is found in A. Humboldt, Ensayo politico, p. 545.
73
Most studies that have examined the tax regime in prerevolutionary France emphasize the importance
74
of the perception of tax injustice and argue that it was a motive for discontent with the government.
´
See, for example, David R. Weir, “Les crises economiques et les origines de la r´ volution francaise,”
e ¸
Annales, Economies, Soci´t´s, Civilisations, 4 (1991), 917“947; Alain Gu´ ry, “Les ¬nances de la monarchie
ee e
francaise sous l™Ancien R´ gime,” Annales, Economies, Soci´t´s, Civilisations, 33, 2 (March“April 1978),
¸ e ee
216“239; P. Mathias and P. O™Brien, “Taxation in Britain and France,” 601“650.
Particularly the English and Anglo-American cases: see the discussion in H. Root, The Fountain of
75
Privilege, Chapter 8 and, more recently, D. Stasavage, Public Debt, passim.
Imperial Tax State 77

for some type of legal concession. For example, tribute were only collected
from Indian communities, in return for which they had been granted a series
of legal and territorial concessions from the sixteenth century.76 So too, the
mining tax (diezmo minero) applied only to silver producers as a concession
for the right to exploit the viceroyalty™s rich mines, which in principle
belonged to the Spanish crown, according to regalist tradition. Similarly,
from 1783 certain taxes collected by the Mexico City Mining Tribunal also
re¬‚ected a corporative character.77 Other examples of this interchange of
taxes for privileges are found in the case of the merchants: the collection
of the aver´a tax by the Mexico City Merchant Guild, for example, was a
±
contribution with a speci¬c purpose; it was used to support the mercantile
Tribunal del Consulado, an organization that rati¬ed the exclusive jurisdiction
of the great merchants of the capital over all commercial disputes as well as
their oligopolistic control over a great number of commercial transactions
in the viceroyalty.78 Finally, it can also be argued that the taxes paid by the
Church were conceived as instruments that guaranteed the traditional legal
autonomy of ecclesiastical institutions.
All this suggests that the functioning of the New Spain™s tax system
was not equivalent to that of parliamentary regimes, such as those of the
Anglo-American colonies.79 The Spanish American colonies “ which paid
a far greater level of taxes than their northern neighbors “ were obliged to
adhere to the rules of an absolutist government that severely limited polit-
ical autonomy and excluded all possibility of legislatures in the different
viceroyalties. Taxes in colonial Spanish America were key elements in the
functioning of a complex hierarchy of traditional corporations and social
groups that operated within an equally complex judicial structure with sec-
ular roots. And it is precisely for this reason that we use the term “colonial
¬scal constitution,” suggesting that despite the harshness of the regime,
over the long run there appears to have existed a certain consensus in New


76 Key concessions were guarantees to communal land and the protection of General Tribunal of the
Indians. See W. Borah, El Juzgado General de Indios.
77 See Walter Howe, The Mining Guild of New Spain and Its Tribunal General, 1770“1821 (Cambridge,
Mass.: Harvard University Press, 1949).
78 See detailed discussion on the attributes of the Mexico City Guild in Guillermina del Valle, “El
Consulado de Comerciantes de la Ciudad de M´ xico y las ¬nanzas novohispanas, 1592“1827,” Ph.D.
e
thesis, El Colegio de M´ xico, 1997, and on the Veracruz Merchant Guild in Matilde Souto Mantec´ n
e o
“El Consulado de Comercio de Veracruz, 1796“1821,” Ph.D. thesis, El Colegio de M´ xico, 1996.
e
79 In a classic study, George Beer emphasized that the English colonies in North America “were
expected to provide the funds for their own local, public affairs and to a great extent with this
object in view large powers of self-government were granted to them. . . . Under these conditions
each colony, whether in the Antilles or on the continent had developed a vigorous political life of
its own, in which the popular branch of the local legislature, through its control of the purse, had
become the most important factor”: G. Beer, British Colonial Policy, pp. 146“147.
78 Bankruptcy of Empire

Spain with regard to the legitimacy and functionality of the colonial tax
system.
Such an implicit political/¬scal agreement would, perhaps, help to
explain how it was possible that the numerous reforms of the ¬scal sys-
tem, including the multiplication of taxes at the end of the eighteenth
century, did not produce generalized rebellions in New Spain. But it does
not fully explain the extraordinary degree of compliance with the Spanish
crown that demanded ever greater contributions in the last decades of that
century with relatively scant local recompense.80 For it should be recalled
that almost half of all taxes paid in New Spain were not spent within the
viceroyalty but rather were exported abroad (as a kind of tax surplus) to
support empire and metropolis.

Fiscal Bene¬ts of Empire for the Metropolitan Treasury
Although our analysis has so far concentrated on the ¬scal burden that
the inhabitants of New Spain were obliged to cover during the last half
century of the colonial era, it is also important to underline, what we
may term, the ¬scal bene¬ts derived by the metropolitan government from
the colonial tax system. The overseas remittances of precious metals and
coin on account of the royal treasuries of colonial Mexico and the rest of
Spanish America represented a “unilateral” contribution of New Spain to
the empire.81 During each successive decade, a huge volume of royal silver
left the viceroyalty with a remarkably low degree of recompense.82 Of all
the income received from the Indies by the General Treasury at Madrid, the
viceroyalty of New Spain alone contributed with more than 60 percent in
the period 1780“1810 as we have seen in the ¬rst chapter of this book. (See
Figure 1.3) These transfers clearly represented costs for the colony but even
more clearly bene¬ts for the metropolis.
Following a secular tradition, the Spanish crown expected local taxes to
cover local expenses (administrative and military), but also pressured the
high-income treasuries of New Spain and Peru to remit signi¬cant amounts
of silver coin to other colonies and to the metropolis itself. The sums remit-
ted were extremely large. (See the Appendix, Tables 1.1 and 1.2) According
to various authors, in the last ¬fteen years of the eighteenth century, approx-
imately 20 percent of total income registered by the General Treasury of

80 Although it may be anachronistic to say that the crown provided few “public goods,” it is well known
that the colonial administration invested very little in education, health, or other social services,
which were assumed basically by local institutions and the church.
81 See J. Coatsworth, “Obstacles to Economic Growth in Nineteenth Century Mexico,” American His-
torical Review, 83, 1 (1978), 80“100.
82 John Coatsworth, Or´genes del atraso, pp. 108“109, presented the ¬rst estimates of this drainage and
±
of possible effects on the colonial economy.
Imperial Tax State 79

Madrid can be attributed to American silver shipments.83 Historians Bar-
bier and Klein have argued: “When the related receipts from the C´ diz royal
a
treasury are added in, American-related funds may have accounted for one-
¬fth of total Madrid Treasury revenues in this period, making the Indies
the largest ultimate source of Madrid income.”84 Their estimates are based
on the sum of remittances of tax silver from the Americas plus revenues
obtained from trade taxes at C´ diz-derived Spanish American trade.85 But
a
the Klein/Barbier ¬gures are probably too low, since recent research has
demonstrated that much of the tobacco monopoly™s income in Spain was
also derived from colonial inputs.86
Most of these transfers sent to Spain were covered with ordinary tax revenues
obtained from the colonial treasuries of Spanish America. However, from
the 1790s the enormous increase in the demands of imperial ¬nance led to
the rati¬cation of a long list of loans and donations which were raised from
Crown™s subjects abroad. This new colonial debt policy was directly related
to increases in military and ¬nancial expenditure by the Spanish government
as a result of new wars, ¬rst against revolutionary France (1793“1795) and
then the naval wars against Britain (1796“1801 and 1805“1808) which
impelled a formidable increase in the debts of the monarchy.
Once again “ and as in the case of the tax regime “ silver from New Spain
was the linchpin to much of the new ¬nancial policy. An example of the
importance of American remittances to cover imperial debts can be found in
the case of the foreign loans taken by the Spanish government in Amsterdam
from the 1780s. All such loan contracts speci¬ed payment with Mexican sil-
ver. (See Appendix III.3.) Hence, as soon as news was had of ships arriving to
C´ diz from Veracruz, Dutch bankers immediately pressed for the shipment
a
of the precious metals to Holland to cover the debt service.87 The impor-
tance of Mexican silver for the Spanish internal debt was equally marked. For
the majority of authors who have dealt with vales reales (a new kind of public

83 J. Cuenca, Ingresos netos del Estado espa˜ ol; J. P. Merino, “La Hacienda de Carlos IV,” 139“181; Leandro
n
Prados de la Escosura, De imperio a naci´n: crecimiento y atraso econ´mico en Espa˜ a, 1780“1936 (Madrid:
o o n
Alianza, 1988).
J. Barbier and H. Klein, Revolutionary Wars, p. 328. It should be underlined that the series of “Indias”
84
income registered as going to the Madrid Treasury by J. Barbier and H. Klein, Revolutionary Wars,
pp. 323 and 338, must be contrasted with other series, including the aforementioned data collected
by J. Cuenca, Ingresos netos del Estado espa˜ ol and J. P. Merino, “La Hacienda de Carlos IV.”
n
On this subject, also see Leandro Prados de la Escosura, “La p´ rdida del imperio y sus consecuencias
e
85
econ´ micas,” in L. Prados de la Escosura and S. Amaral, eds., La independencia americana: sus consecuencias
o
econ´micas (Madrid: Alianza Universidad, 1993), pp. 253“300.
o
C. Marichal, “Bene¬cios y costes ¬scales,” p. 480.
86
On this question, see the excellent studies by Marten G. Buist, At Spes Non Fracta, Hope and Company,
87
1770“1815: Merchant Bankers and Diplomats at Work (The Hague, the Netherlands: Martinus Nijhoff,
1975) and James C. Riley, International Government Finance and the Amsterdam Capital Market, 1740“
1815 (Cambridge, U.K.: Cambridge University Press, 1980).
80 Bankruptcy of Empire

bond that began to be issued in 1781), the receipt of American silver was
the determining factor in the quotation of the market values of vales reales.
These bonds became the favorite instrument of extraordinary ¬nance in
the later years of the reign of Carlos III as well as of the administration of
Carlos IV.88 News of the arrival of important shipments of silver to C´ diz

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