BRIAN LAMB, HOST: Charles Adams, author of "For Good & Evil: The Impact of Taxes on the Course of Civilization," where does the word `tax' come from?
MR. CHARLES ADAMS, AUTHOR, "FOR GOOD & EVIL" It means to exact.
LAMB: Who invented it?
MR. ADAMS: I think taxes were invented before we learned how to write. There's--there's no known civilization that didn't tax. And taxes are as old as recorded history. In fact, some of the earliest recorded history we have makes us realize that while many things have changed in history, the taxpayers and tax collectors really haven't changed very much in 5,000 years.
LAMB: Do you have a favorite tax collector in history?
MR. ADAMS: Probably the favorite is one we don't know. There--there on the hill of the Acropolis in Athens there's a--a marble s--writing there that is in honor of the honest tax collector, and whoever that fellow was is probably my favorite tax collector. Although I think that maybe Aristides would be the most famous tax collector. He was the Athenian general, and he was appointed at the time that the Persians were about to attack the--the Greeks and tried to impose taxes upon the Greek city-states.
So the great city-states of Sparta and Athens formed a league. They--they called it the--the--eventually it was called the Athenian League. And all of the cities--and there were maybe as many as 200 cities in that in--city-state that were in Athens area--they got together and they had a--a NATO type arrangement, and they had NATO commanders and they had a common tax, and the tax was collected by Aristides. And we re--we read in ancient history that this was a golden age for the allies of Greece because of Aristides' adjust. So he may be the father of just taxation. I think he'd be my favorite.
LAMB: I read, I think, in the back that you live in Toronto.
MR. ADAMS: Yes. Yes.
LAMB: Do you pay more tax in Toronto than you would if you lived in the United States?
MR. ADAMS: Yes.
LAMB: Why do you live there?
MR. ADAMS: Well, I live there because I married a Canadian. I suppose that--that--that's the answer. Your wife always makes you over, but she--she took me back to Canada and I--I--I fell in love with Canada and I'm happy to live there. But I'm still, basically, a native son of America.
LAMB: How much more do they pay in tax than we do here?
MR. ADAMS: I would say about the same. The--the taxes come in different
directions. Up there, they have some exemptions that we don't have here
and--but I think that the numbers are--are maybe 1 percent or 2 percent more.
I've seen them, I--I--I think, at just 1 percent or 2 percent more.
LAMB: Why'd you write the book?
MR. ADAMS: I wrote the book because I felt that I--I had a message. I felt
I had peculiar qualifications for the book. Besides the--the fact that I love history and I started out to be a history teacher, I discovered that as a--as as an assistant professor, I wouldn't make as much as my wife as a first-year kindergarten teacher. So I decided that I couldn't make a living in history, but I loved it. I always researched it. I--I was in graduate school and I
switched and became a lawyer. I--in the course of law, I got involved in taxation, and I've been heavily involved in the trenches for about 20 or 25 years. And I'm inclined to agree with--I think it was the--the--the Greek historian Thucydides who said that, `No one should write about war who'd not been a soldier.' And I don't think anybody should write about taxes, really, who hasn't been in the trenches.
If you've been in the trenches of war, I think you understand war. I think from a distance, war--you--we get the wrong impression of war. And I think from a distance the academics and many of the tax professionals don't know what it's like in the trenches. And I--and I think I brought together a love of history, on the one hand, and my experience with the tax world on the
other. And that gave me a perspective about the importance and the power of taxes.
And I think that power is a good word to use because people get mad about taxes. And you think we are mad about taxes, you should have seen our ancestors--how mad they were. And I think that's the first thing that surprised me in studying taxes, is how mad our ancestors were. I mean, we started a revolution that--and--and--but it was--it was a mean revolution. People died. The Civil War, as--as you might read in my book--I say it was started over taxes, not slavery. And--and a third of a million Americans died in that war.
And--and take the French Revolution. Now we know that was tax oriented. We know that the king of France and--and his queen were beheaded. What most people don't know is that the people were so mad that they gathered up all of the key tax people and they took them down to the guillotine and they cut all their heads off. They were mad about that.
And--and I think that it's a powerful force. And if you look at it as a force for shaping history and for explaining why people react the way they do, then it becomes a fascinating subject, an am--amazing su--subject of interest. And--and--and I wrote the book because I think that our--I think our ancestors s--would speak to us today, and they would point out to us how foolish we are and--and how wise we should be if we'd listen to them in terms of how they suffered over the wrong kind of taxation. I mean, empires have--have collapsed over taxes. And--and there's a sense of viciousness that developed throughout history i--li--like in the French Revolution, when they--when they hauled down the--the tax people and cut off their heads.
LAMB: How much tax do we pay today compared to what the ancestors, forefathers did?
MR. ADAMS: I think we probably pay more. I think the systems are a little different. But I think we're a little more prosperous than they were. But if you think in terms of percentages, then I think maybe we pay less.
Let's go way back in history. One of the--one of the great celebrations, or--if we would call it that, is like Hanukkah, for example. They--it's a famous Jewish holiday and it takes place at Christmastime. And I tell my Jewish friends that--that, really, the cleansing of the temple and the candelabras was really a side show. What really--what Hanukkah was about was a revolution and a revolt over taxation. And the taxes that the Jewish people had to pay at that time to the Greeks was one-third of all the crops--and that's gross--and 50 percent of all the vineyards and all the orchards. That's a heavy tax. And when the peace treaty was worked out during that period in which...
LAMB: What--what period is that?
MR. ADAMS: Well, we're talking about 200 BC or 300 BC. There's nothing in the treaty that would allude to the Hanukkah celebration. What the treaty says is that, `We won't have to pay any more taxes.' And--and that was the great victory that th--that they--they--they achieved in fighting the Greeks at that time.
LAMB: You say in your book about the Revolution--American Revolution that--I mean, a lot of people think it was over tax, and you say that we really weren't that excessively taxed by the British.
MR. ADAMS: No, we weren't. No.
LAMB: Explain that.
MR. ADAMS: Actually, I say in the book if revolutions are the consequence of oppressive taxation, then the American Revolution should not have existed. We were a very blessed people. We had the protection of the British nation. They had recently fought and--and defeated the French. They'd opened up the Western frontier. And all the British government was asking for is that we pay some of the cost of maintaining the troops that were there in America defending us from the French. Now that was reasonable. And--and--but the Americans, they felt that they shouldn't be taxed without their consent, and--and consent to them was different than the British felt.
Now--now the principle of consent was a British idea, so the British Parliament believed in consent, too. But they felt that Parliament consented on behalf of all the Englishmen everywhere. The women--they couldn't vote, but they consented on behalf of the women, for they were taxpayers if they had private estates. There were also British colonies around the world, you see?
And so Parliament acted for all the British people everywhere and hence it acted for the Americans, so that--why would the Americans object if they had to pay for some of the cost for maintaining the armies that defended and protected them?
So, really--really, it--it wasn't an oppressive tax. The--the Americans objected to the fact that they didn't really consent to it. The consent had to be genuine and they didn't have anybody that represented them. And that was their main pitch.
LAMB: What was the Boston Tea Party all about?
MR. ADAMS: Well, the Boston Tea Party wasn't quite the s--the--the honorable event that it--that we say that it was. The--wha--what happened is that the--the British government--and we--we might get a little background on that. The--the--the first revolt in--in the colonies was--was the--the Stamp Act revolt. And--and when the British government decided to--to levy stamp taxes, it did it because they were having revolts at home. And--and what happened at home is that they had a cider tax and--and--and the British people re--revolted over it in London. And so the British government said, `Well, let's try and get the Americans to pay some of the bill. And so let's--let's make some stamp taxes.'
And so the stamp taxes were introduced, and there were revolts in the colonies. And Franklin--Benjamin Franklin--he went to--to London and--and he complained. He said, `Now you can't tax us internally'--which the stamp tax was; it was like an excise tax--`but it's perfectly all right to--to tax us externally,' like a customs, a duty. So the--the British government eventually, of course, repealed the Stamp Act.
And then they went ahead and introduced duties on the Americans, and they said, `We're doing just what Benjamin Franklin said would be acceptable.' Well, the Americans decided, `Well, we've made a mistake.' Th--it wasn't that acceptable. In fact, the British prime minister made a--an interesting comment. He--he thought the distinction between external taxes and internal taxes, what the Americans made such a big deal out, was `perfect nonsense.' That's the words he used, and he was right, it was perfect nonsense.
So the British government turned around and gave the Americans the kind of tax they said they wanted. Well, of course, the Americans would--they really didn't want any tax. A--and--and some of the--some of the members of the British government, like Edmund Burke, for example--he said, `The Americans wo--won't pay the tax, even though you think they'll pay the tax; even though Franklin said they'd pay it. When it--when it comes down to it, they won't pay any taxes they don't consent to.'
So when--the Boston Tea Party was a situation in which the--the British government was trying to compete with smuggled Dutch tea. And in dealing with the smuggled Dutch tea, they decided to reduce all the duties on the tax that--on the tea that came into the colonies fr--from the East Indies. And the result was that the tax would then compete with the Dutch tax. They then would grant special favors to those loyal merchants who had handled the British tea. And--and--and the result was that the other merchants in Boston were pretty angry about it. They disguised themselves as Indians, they went on the ships and they threw all the tea in--into the water. Benjamin Franklin thought it was terrible. He says, `We should--that was a wanton act of--of thievery and destruction of private property, and we should compensate those people.'
LAMB: What did you think--jumping way beyond those years...
MR. ADAMS: Yeah. Mm-hmm.
LAMB: ...when George Bush said, `Read my lips, no new taxes'?
MR. ADAMS: Well, I thought that he should have--and I think most people--he
should have stuck with it. And--and the reason I say that is that we've come
to look upon campaign promises as--as, `Well, maybe they'll'--you know, `Maybe
they'll do it; maybe they don't.' But I think that when it comes to taxes,
people, as I said, get mad about taxes. People take taxes real serious.
And--and I made an analogy in my book that--that there's a--there's a--there's
a contract, or covenant, between the people and their government, sort of
like a marriage contract. And that one of the--one of the conditions of the marriage between the people and their government is that for better or for worst; for richer, for poorer--like--like the wedding vow.
But there are certain aspects of the relationship in a marriage which are not for better or for worse. There's a certain sense of loyalty and responsibility to your mo--to your mate that--that you should adhere to. And--and adultery, for example, is not something that--that is for better or for worse; that's something that goes to the heart of a marriage. And I think that when a government deals with taxes, it's dealing in that very primary area. That's what revolutions have been made over.
And--and so when George Bush said, `No new taxes,' he was--he was--he was hitting at the heart of the relationship of the state to its people. And--and wh--when--when he betrayed that, he lost them.
LAMB: In what time frame did you actually write the book? This book?
MR. ADAMS: Wh--what? Say that...
LAMB: In what time frame did you actually write this book? In other words,
MR. ADAMS: Oh, 20 years. I--I started writing it in 1972.
LAMB: Twenty--this book's been in the making for 20 years.
MR. ADAMS: This book has been 20 years in the making.
LAMB: How did you do it then? I mean, ho--if you started 20 years ago, how'd you keep track?
MR. ADAMS: Well, it started out--I didn't start out to write that book. I started out because I became interested in taxes. And I was teaching a course of--of--of world history to college students, and I noticed that taxes would continually show up in history. And so I began to take a look to see what meanings we could--we could discover. And I went to one of the great libraries, like I went to UCLA library, and--and I couldn't find anything on the subject. And I says, `I can't believe this. Something so important as--as taxes and there's practically nothing that's been written to--to show the--the broad history of taxes and the influence of taxes on people?'
And--and so I--I became fascinated with it. I wrote some magazine articles; they were published. People--people liked them. A--and I--I developed a kind of a--of almost like a geometrical theorem that behind every event in history, there's a tax story. It may get lost in the drama of a great event, like the American Civil War, but there's almost always a tax story at work molding and framing civilization. And, sure enough, it seemed to be true. I--I--I studied the Russians and I maybe studied Peter the Great or I--I may study the m--the modern Russian state under Communism or I might study the French.
And--and every--and the Bible--the Bible was full of tax stories, and I--and I went to Sunday school from the time I was a toddler. I even taught Sunday school. I don't ever remember learning of a tax story, but the Bible is chock-full of them. From the very beginning all the way up to the very end are tax stories.
So you--I became fascinated with it, and--and they were--they were just amazing to me. And--and--and maybe because I was a tax professional, I became more sensitive to the issue.
LAMB: What do you mean by tax professional?
MR. ADAMS: Well, a tax lawyer.
LAMB: And what kind of law--what kind of tax law did you practice? And where were you d--doing this?
MR. ADAMS: Well, I'd practiced all over the world. I've been international, and I think that's helped me because I'm familiar with the tax systems in Canada and in--throughout Europe and in Asia. So having become an international lawyer, I could compare and have this horizontal vision o--of--of America and its tax system in relationship to the other tax systems
of the world.
LAMB: How long have you lived in Canada?
MR. ADAMS: Twenty years.
LAMB: So this tax-professional work that you did in this book has all been written from Canada.
MR. ADAMS: That's correct.
LAMB: And is it easy to keep tabs on America while you're doing this?
MR. ADAMS: Oh, yes.
LAMB: Are you a Canadian citizen or American?
MR. ADAMS: Yes, Can--Canadian.
LAMB: When did you become a citizen?
MR. ADAMS: Oh, 15 years ago.
LAMB: By the way, is--Brian Mulroney, at one point, I think was 15 percent popular.
MR. ADAMS: Yeah. Yeah.
LAMB: Did that have anything to do with tax?
MR. ADAMS: Absolutely. Absolutely. Brian, in--in fact, that's--that's a good example of taxation by consent. There's a difference between the consent of lobbying a tax law through the legislature, which Brian Mulroney did, or lobbying a tax law through Congress. And the consent, which is what the people themselves really believe and will accept--we had, in Canada, a
value-added tax forced on us against our popular will.
MR. ADAMS: About four years ago.
LAMB: And what's that mean?
MR. ADAMS: A value-added tax is sort of like a national sales tax that is rather sophisticated, but it essentially is--is a--is a national sales tax.
LAMB: And what--what's happened in those four years then in Canada?
MR. ADAMS: Well, we--we had the tax. They've collected a lot of revenue, but people hate it. People--people hate it very much.
LAMB: How much--give us an example of--this book.
MR. ADAMS: Mm-hmm.
LAMB: Let me see. This book is $29.95 here in the United States.
MR. ADAMS: Very--right. Mm-hmm.
LAMB: If there was a value-added tax, would that book cost more?
MR. ADAMS: Yeah. It would cost 8 percent more, roughly.
LAMB: And is that put on at the cash register or along the way?
MR. ADAMS: No, it's along the way. But it will show up o--on the--on the sticker price. It's, in a sense, like an excise tax. And--and--and a good contrast i--is that just a year ago in Switzerland they had proposed the same kind of a tax that America has--or that Canada has; that is, essentially a valued-added tax. It went to the Swiss voters and they defeated it. And that's--that's the distinction that I think we should make, is--is the difference between real consent and vicarious consent.
LAMB: Let me interrupt just to you tell you...
MR. ADAMS: Yeah.
LAMB: ...that when Paul Kennedy, the Yale professor...
MR. ADAMS: Yes.
LAMB: ...who wrote the--the--the two books, both on the--the current one on the best-seller list, about the 21st century, was here a couple weeks ago.
MR. ADAMS: Mm-hmm.
LAMB: I asked him if he had to advise his kids--they're 15 years old--where to live in the whole world, he said Switzerland. And you write some special things in here about Switzerland.
MR. ADAMS: Right.
LAMB: And talk about the democracy in Switzerland compared to the democracy in the United States? Is there a difference?
MR. ADAMS: Absolutely, dramatic difference. Switzerland has what became real democracy. Real democracy about the fundamental most important things in society: taxes. The Swiss government, from to time, tries to introduce new taxes, tries to raise the rates of taxes, and they almost always get turned down. And I asked a Swiss lawyer some years ago--I said--and this is when they had defeated an attempt to raise the--the taxes--income tax rates. And he--I said, `What's going to happen now?' And he said, `Well, they're going to have to live on the income that we--that they have, just like the rest of us.'
So the Swiss people will not surrender to their representatives the power to tax, and I think that's one of the--one of the great virtues of Switzerland, i--is that--one of the points that I've discovered in the book and one--one that, I think, the--the major points in terms of constitutional structure is that whenever the power to tax and the power to spend reside in the same
political body, whether it's a Congress or a president or a dictator, the power to spend will always override the power to tax.
And--and if you look back at England and Britain in it--in its early days, when--when England was rising to be a superpower, you had this separation of powers. Parliament it--you know, it can tax, but not spend. The king could spend, but not tax. And that made a balancing system. We don't have anybody who really puts the taxpayer first, and--and I--and I refer in the book to William Gladstone, who was the--the great British prime minister who--he served off and on for about 50 years.
And Gladstone explained it by butter and bread. He said that, `The problem you have with governments is that'--and he's talking about the Parliament of England at the time, or the--or the House of Commons--he said, `They lean toward the tax department that butters their bread and not towards the taxpayer who makes the butter.' And I think that's the problem right today in America. People--you know, w--with the new Congress and--and--and with the new taxes, people--people are suspicious. They're not so sure these guys are really going to reduce the deficit, and--and--and that maybe these taxes are basically going to be used just to spend.
LAMB: Back to Switzerland.
MR. ADAMS: Yes.
LAMB: If--there's six million people that live there.
MR. ADAMS: Mm-hmm.
LAMB: How does the country work? Who runs it?
MR. ADAMS: Well, it's run by the--well, its government has a--has a confederation, a federal government, and it has what you'd call state governments or the cantons. But th--the federal government, the--they don't have the power to tax. And--and even--even the salaries n--now--now they can't raise their own salary. You remem--member the Congress, not too long ago, raised its salary in a big uproar. That goes to the voters. When it comes to monetary matters in Switzerland, it goes to the voters. They will not surrender that to the government.
LAMB: How often?
MR. ADAMS: Well, when--whenever--whenever they want a new revenue measure, it's got to go to the voters.
LAMB: So if they want to raise tax at all, they've got to have a referendum.
MR. ADAMS: Right.
LAMB: Any other country in the world do this?
MR. ADAMS: In a sense, America does on the local level. Think about your school bonds and your ro--and your road bonds and things like that. Local government in America very often does not give the city council or the--the county supervisors the power to tax. That goes to the people.
LAMB: Does anything like this happen in Canada?
MR. ADAMS: No. We're worse. We're worse.
LAMB: What about other countries of Europe?
MR. ADAMS: Don't know. Don't know.
LAMB: Countries of Asia. You say in here that the legend that there's a
super race in Asia that--the four tigers and all that came out the last couple
years--is a misnomer.
MR. ADAMS: Yes. That--the...
MR. ADAMS: Well, one of the problems we have in understanding Asia is--is that here were five incredibly poor and defeated countries. You know, Japan was--was crippled. South Korea wa--was badly destroyed in the war. Hong Kong was--even had to import its water. Here are these Asian tigers, as we call them--Singapore, Taiwan, Hong Kong--and they all are now miracle economies. And the question is: Well, why are they so prosperous? How have they done so well? Even Japan--I mean, you know, Japan has--has done extraordinarily well.
Some of them practiced some socialism for a while. Many of them had the government intrude i--into businesses. But today the general philosophy in--in--in South Korea and Taiwan--they've had special commissions. They've said that the less government intrusion into--into business, the better; that business should be left alone; that taxes should be moderate; that if people can keep the benefits of their work and labor, they'll work harder. So that the real one common denominator of the success of the five great As--prosperous Asian countries has been moderation in taxation.
MR. ADAMS: Yes.
LAMB: Lee Kuan Yew is no longer prime minister, but when he was...
MR. ADAMS: Mm-hmm. Mm-hmm.
LAMB: ...people would call him dictatorial.
MR. ADAMS: Mm-hmm.
LAMB: You don't see that?
MR. ADAMS: Yes.
LAMB: Dictatorial in what way?
MR. ADAMS: Yeah. Well, politically he may have been dictatorial, but taxwise
he was moderate, you see? You see, you can have a prosperous country without
necessarily having a democratic process.
LAMB: How did Hong Kong work? Six million people, British still control it.
MR. ADAMS: Mm-hmm.
LAMB: Don't they have the same tax system as Britain?
MR. ADAMS: No. No, not at all.
LAMB: How did they get the independence?
MR. ADAMS: Well, the--the--well, probably because of the American Revolution
that's the--be--because the one thing that the American Revolution so--solved
for the British Empire is taxation by consent of the locals. So that even
though the American Revolution was a drastic solution to the problem, after the American Revolution--in fact, i--it's--I think it's 1778 that th--the--the British government passed a re--resolution saying that they would not institute taxes in the colonial areas without the consent of the people.
So the--in Hong Kong, for example, you have a legislative assembly, which is the--composed by an electorate, and--and--and they then select an administrative council. There's a governor who's sent out from Britain, but he--he's--he's not a--he's not a major player and so they govern themselves. They establish their own taxes. So they're basically, when it comes to revenue, completely independent of the British government.
LAMB: A hundred and twenty-five million people in Japan. You say the Americans came there after World War II, wrote the constitution and set up a high tax system.
MR. ADAMS: Mm-hmm.
MR. ADAMS: That--basically, we took--took the Internal Revenue Code and we mirrored it. We said, `This is the law you're going to adopt,' along with, you know, all the other things that the occupying forces did. So the Japanese adopted it. They--they accepted the Amer--merican Internal Revenue Code. Then they immediately started riddling it with holes. So--they didn't particularly want to offend the Americans, so they started making all kinds of exemptions and--and tax write-offs and special reserves. And the result was that the heavy taxes that were--that were on the books weren't really in reality; that they--they--they--they started bringing down the taxes by, essentially, you know, riddling the tax code.
In fact, there--there--there's one famous professor in the University of Chicago Law School, and he wrote an article not too long ago. And he recommended that we simply scrap our Internal Revenue Code and adopt the Japanese code lock, stock and barrel because he says, `They got a better tax code, it's much simpler, it's created tremendous prosperity. We--we need to create more capital in America. And so why don't we copy them? They copied us in--in the way you build cars and things like that.'
LAMB: If you and I lived in Japan, how would our lives be different with that tax system that they have?
MR. ADAMS: Well, most of the people in Japan don't even file tax returns, so that's--that's the first thing.
LAMB: Did you write about the special accounts?
MR. ADAMS: Yes.
LAMB: What do you call them? The postal...
MR. ADAMS: Yeah, the--the po--yeah, the postal savings accounts. Yeah.
LAMB: How does that work?
MR. ADAMS: Well, it's a--in Japan, yo--you can--you can set up sort of a--like a postal savings account in which you get interest, but you don't have to say you're the owner. And there are more of those accounts in Japan than there are people living there, which means that lots of people have many of them. But you don't have to put your name on it, so the government doesn't know who owns these accounts.
LAMB: So are they taxed?
MR. ADAMS: They're taxed. They're--now they were, but for many years they weren't even taxed at all. But now there's a 20 percent withholding tax, but--but nobody knows who owns the accounts. And--and the Japanese people want it that way. I think it's kind of a check on the government; that if the government starts to tax too much, everybody will just put all of their money in these accounts.
LAMB: How much can you put in there?
MR. ADAMS: I don't think there's any limit.
LAMB: Who holds the money?
MR. ADAMS: Well, th--they're postal savings. And remember years ago when we had postal savings certificates?
MR. ADAMS: Maybe that was before your time. Well..
LAMB: I don't remember.
MR. ADAMS: Well, when I was a young boy you could take your money down to the post office and you could buy a postal savings certificate, which was sort of like a savings bond or--or--and--and--and it would pay you 2 percent interest. So this is basically a...
LAMB: And there's no names on them.
MR. ADAMS: And no names on them.
LAMB: But there's 20 percent withholding.
MR. ADAMS: Yes. That's new. That's new.
MR. ADAMS: Another thing about Japan and--and this is something that I--I--I think is worth thinking about--is--is that Japan, basically, had a--a tax recapital gain. I mean, there was a very modest amount of money that was withheld at every stock sale over the Japanese stock exchange, but I'm talking about 1 percent or 2 percent. A--and that was just automatic; when you bought or sold stock, they withheld. Now if you lost money, you could file and maybe get a refund. But that was the tax.
About three, four years ago the Japanese finally adopted an American-style capital gains tax: 26 percent; three years for long-term capital gain. And shortly after that the Japanese stock market collapsed. I don't think that was a coincidence.
LAMB: You mean, this big collapse we watched...
MR. ADAMS: Right.
LAMB: ...came right after...
MR. ADAMS: Came right after...
LAMB: ...the capital gains...
MR. ADAMS: ...they went from practically no capital gains to 26 percent tax, which meant you had to declare it on your tax return and--and that. The--the--the--the--the thrust of--of Japanese tax reform today is in the interest of simplicity.
LAMB: I--I alm--I want to ask this--almost...
MR. ADAMS: Yeah.
LAMB: ...it sounds smart. If you are so right with all of these situations so far and all over the world, why doesn't somebody just buy your book and go with it?
MR. ADAMS: No, I think it would be a good idea. I--I think we're profoundly ignorant about taxes. That's one of the reasons I think why the book's important. If you were to read in tax li--literature today--and there's tons of it that comes out--you're not going to find hardly a word about history. We seem to be profoundly ignorant about the role of taxes in history. And--and we seem to be doing the things that we shouldn't be doing. And, in fact, I've likened it unto--I asked some friends that are heavy smokers, and--and they don't want to be reminded about the odds. They don't want to be reminded about cancer and about the various diseases and--and shortening of life expectancy.
I think we don't want to be reminded about history. We think we can beat the odds, like most smokers. We think we can tax heavily a--and--and we can get away with it. Now it may have crippled Rome. It may have crippled imperial Spain. It may have brought down the Netherlands. It--it may have caused the American Civil War, which I think it did. But I think we must think we can beat the odds.
LAMB: Go back to the Civil War.
MR. ADAMS: Mm-hmm.
LAMB: What proof do you have that the Civil War started over taxes instead of slavery?
MR. ADAMS: I think the proof is impressive, and I--and I know that a lot of people really smile when I say that. I think you--you know, I think on the eve of the Civil War, slavery was never more protected than it was at that time. I think that the slavers in the South had won the battle for slavery in 1860. The--yeah, it was a tax on the revenue slavery that caused the Civil
War. The Supreme Court had--had handed down the Dred Scott case, which gave blanket approval to slavery in the country.
The president of the United States, who was Abraham Lincoln, in his first inaugural address, he said--he--he said he had no inclination to interfere with taxes. And he said, `I quote from my speeches. I have repeated time and again I'm not going to interfere with slavery. I have no inclination to do so personally.' Congress then passed a resolution, which was to be a constitutional amendment, protecting slavery in the Southern states. They'd won the battle--they hadn't fired a shot.
But he did say something else in his inaugural address. He said, `In the South, you see, it seceded this land.' They'd walked out--born their new--new government down in Richmond, Virginia. And he said, `If they don't want the mails, that's fine. We won't interfere with their way of life. That's OK. But taxes we will collect, and except for that, there will be no invasion of the South.'
Now then Li--Lincoln was also interviewed by a B--a British correspondent from the Frasier magazine. And--and this is sort of like Time magazine, or something, would be. And in that magazine the--the writer said, `Well, he was really a very impressive man, and I really enjoyed my meeting with him.' And he said, `There's not going to be any war, and he wouldn't use any of his
military forces on the South, except to collect the taxes, to recover any forts that had been taken over,' like Ft. Sumpter, and--`but except for that, there'd be no war.'
So what Lincoln had done: had given the South an ultimatum of taxes or war. And--and the reason they seceded, not just because they were a blundering generation, but because part of Lincoln's platform was not freeing the slaves--not in the slightest--but was to raise the tariff so that the heavy taxes on goods coming into America were 47 percent. That was a very high tax.
And that meant that the Southerners would have to pay that if they were to buy foreign goods. And if they didn't pay that, they would then have to buy Northern goods that were now protected. And the prices were jacked up because there was no competition.
And they hated it. And every time they--th--they--they paid a tax th--on--on goods, they knew it was going to go up to the North, to the federal government that was under control of the Republican Party. Or if they bought goods from the North, they knew they were paying through the nose, sort of like OPEC. And when they withdrew the first thing they did in their new Constitution was they made taxes low. And then the North saw the problem.
LAMB: You've got a chart here that...
MR. ADAMS: Mm-hmm.
LAMB: ...talks about presidents...
MR. ADAMS: That's right.
LAMB: ...attorneys general and Supreme Court justices. What's the point of this chart?
MR. ADAMS: The point of that chart is to show that up to the time of the Civil War, the South dominated the federal government--presidents of United States, attorney generals, Supreme Court justices, speakers of the House predominantly all came from the South.
LAMB: This is before 1860.
MR. ADAMS: This is before 1860.
MR. ADAMS: When the war was over, no presidents--the few we got came in because somebody died in office; very few attorney generals. You can see the numbers there. So the South was really defeated in terms of having any voice in the federal government.
LAMB: On the next page--and I'll drop the book so I can look at it--you have a quote. You write--if I can find it here--no, it's the next two pages. `Lincoln was the most powerful president the United States has ever known.'
MR. ADAMS: That's right.
LAMB: Why do you say that?
MR. ADAMS: I said that because of the way he exercised the power over--over the dissidents in the war. I even said that the--the Russians did--refer to Abraham Lincoln to justify the deporting of Solzhenitsyn. Solzhenitsyn was--was thrown out of the Soviet Union because the--the Soviet Union has a law against slander against the state. That's a crime. That's what the KGB's
Lincoln had one of the leaders of the Democratic Party arrested in Ohio, which was not a war zone, ried before a mid--military court, convicted of--of expressing treasonable sentiments because he hated the war. They--they then deported him to the South. He fled to Canada, and--and he continued to be strong in the Democratic Party. And he had the 1864 convention brand the war a failure. Lincoln had people locked up. He suspended habeas corpus.
And you have to understand that the--the w--they didn't have an attitude like we have today, like in Vietnam or even in the Gulf War. America was very intolerant of anybody who wasn't supporting the war. You were sort of with us or against us. So if you expressed disapproval of the war, you were in trouble. Now--now we--we--we--we permit people today to have freedom of
expression, but it's only been in the latter half of the 20th century. In World War I many people were locked up for expressing treasonable sentiments by simply saying that they thought that the war was wrong.
LAMB: Who are your favorite leaders, that you wrote about in here, over the years--leaders that dealt with tax the way you think it ought to be dealt with?
MR. ADAMS: I'd have to say women. That might surprise you. I think that the greatest monarch that England and that Europe has ever known is Elizabeth I. She's my favorite.
MR. ADAMS: She was a remarkable woman. Not only was she remarkable in the sense that she captivated the men that v--were very able men that served under her and she outwitted all of the rulers of Europe, she--her tax system was called the miracle of the age. Just like we call the miracle economies, you know, out in--out in Asia, they call--because she lowered taxes. How could she do that? She--she came to power from a father, Henry VIII, almost like Clinton. He had deficits, I mean, that--the British government was broke.
England was a mediocre country. She ended--and Britain was on the way to become a superpower--or Engla nd was at that time. She--she lowered taxes, and yet she fought and beat the Spanish, which was the most powerful empire in the world. And she left with a very sizable, profitable treasury. The way--did she do it? One, frugality. She said that, `I will accept whatever my
subjects will give me,' and she operated an extremely frugal government. And I think that that's key number one to success. That's what the Romans had in the early days of their greatness, was a very frugal government.
She low--she not--she lowered taxes, and--and she's the author of a statement that has--has never, to my knowledge, been attributed to her: `To love and to be taxed is not given to man.' Now I've seen that recently in--in--in magazines in America, and I--and--and I've seen it around the world. Meaning that you have to expect the fact that when you tax, the people are going to
hate you. That isn't what she meant. Elizabeth said, `I will--I will end my reign as I began, with the love of my subjects.' And what she meant by that is that she wanted her subjects' love, and that consequently she would let them know of her revenue needs, but she would not oppress them.
LAMB: Again, her reign was what years?
MR. ADAMS: Would be in the 16th century.
LAMB: Madison Books.
MR. ADAMS: Yes.
LAMB: Who's that?
MR. ADAMS: That's a--a trade book of University Press of America.
LAMB: And what's University Press of America?
MR. ADAMS: It's probably the biggest ac--academic press in the United States.
LAMB: What do they think of this book?
MR. ADAMS: Well, they published it.
LAMB: What got them intrigued about the book? What made them think that this would sell?
MR. ADAMS: I went down and talked to them about it.
LAMB: Where are they?
MR. ADAMS: They're in--they're not--only about 50 miles from here--well, Lasly--they're down in Lanham, Maryland. And...
LAMB: What year did you go to see them?
MR. ADAMS: Oh, a couple years ago. And they had reservations about it; that, you know, `Well, tax books are dull and they're'--and I said, `Well, this one isn't dull.' I said, `Taxes are--are such a powerful force in life, there's no reason for history tax to be dull. It should probably be exciting.' I mean, I think I--I mentioned, well, the American Revolution wa--was--was over tax; the Civil War was over tax. I said, `Well, let's take the French Revolution. You remember--remember the guillotine, where they--the guillotine where they cut off all the heads?' And they said, `Everybody knows they cut off the king's head and they cut off the queen's head.' I--`But did you know that the French people gathered up all the chief tax people and they herded them down and they cut off the heads of every single one of them? They were mad.' And--and--and that--that--so, `All right.' They--they decided to publish the book.
LAMB: You write about Israel.
MR. ADAMS: Yes.
LAMB: You say that, using feline terminology, `If the foregoing Asians are
tigers'--meaning the places like South Korea and Hong Kong--`then Israel is a
sick cat and economically not in the big cat league at all.'
MR. ADAMS: That's correct.
MR. ADAMS: Basically, because of heavy taxation; basically, because they're a socialist state. They were founded by East European Jewish people who were pretty well persuaded by the importance of socialism and even Marxism. And--but their socialist economy is dragging. A--and yet they've had the love and the devotion and the support of the Jewish people all over the world, particularly in America. You'd think they'd be the most prosperous country in the world.
LAMB: Let me read this. `For the past decade the net immigration of Jews to Israel'--Jews to Israel--`is a minus. More Jews are leaving Israel than are entering. How come their population's gone up to five million?
MR. ADAMS: Well, whe--when I wrote that statement, it was before the influx of--of the--of the Russians. Except for the Russians, who were refugees, who will go anyplace they can go, the Jewish people, the m--more successful entrepreneurs and businessmen are leaving Israel.
LAMB: `Israel's decline begins with excessive, dumb taxes.' What kind of tax--also, later on you say, `Israel is a mess.'
MR. ADAMS: Yeah.
LAMB: What kind of dumb taxes do they have in Israel that they...
MR. ADAMS: Well, because it's too high. You--you--you look at the num bers in there, they just--they're just too--they're crippling taxation. I can't give you the numbers now, but they're crippling.
LAMB: Who's the--who's the greatest taxer in the history of American presidents?
MR. ADAMS: I guess we'd have to say Roosevelt was, you know?
MR. ADAMS: Yeah. I think so, yeah.
LAMB: When did the progressive tax--when did withholdings start in the United
MR. ADAMS: They started in World War II.
LAMB: But for what reason?
MR. ADAMS: Government needed the money.
MR. ADAMS: Sure.
LAMB: And people like it?
MR. ADAMS: No. See--see, it used to be you filed your taxes on April 15th and you paid them. The withholding tax gave the--the government the money early. Well, you know, there's a time value to money, so withholding taxing creates more money.
LAMB: Any other country in the world have a withholding tax?
MR. ADAMS: Oh, yeah. Everybody does. Japan does. In fact, in Japan most people don't even have to file returns; the tax is withheld.
LAMB: If you had to pick a country in the world to go to, besides Canada and the United States--or maybe including Canada--certainly including Canada and the United States...
MR. ADAMS: Mm-hmm.
LAMB: ...that has the best tax environment, is there a single country to pick?
MR. ADAMS: Probably Hong Kong.
LAMB: Second country?
MR. ADAMS: Well, any of the Asian tigers. I mean, you know, I--I
would--I--they're all solid.
LAMB: What about the tax in Switzerland? Is that higher or lower? And even
thought they vote on it...
MR. ADAMS: Well, Switz--Switzerland's fairly high tax country. Most people
don't realize that. It's fairly high tax.
LAMB: But they like it.
MR. ADAMS: Well, I don't know if they like it, but Switzerland has maintained very strong military forces. Every Swiss citizen is in the army. They--they spend a lot of money on national defense. And--and they felt that because they were strong enough, Hitler decided that he didn't want to invade them. And so--and they have felt that--that their--their--their military
forces are necessary, just like America does.
LAMB: In the opening, they actually--you actually call it a foreword, you have Alvin Rabushka...
MR. ADAMS: Yeah.
LAMB: ...senior fellow, Hoover Institution, Stanford University.
MR. ADAMS: Yeah.
LAMB: How come?
MR. ADAMS: You want to know the story of that?
MR. ADAMS: I--I was doing research on Israel--on modern Israel, and he--and he is one of the very famous advisers to the Israeli government. And I couldn't find one of his latest books. Now he's--at the University of Toronto, we have 17 books listed and--but this one I couldn't find. It was on modern Israel. So I called up the Hoover Institution to see if they had it, and--and they didn't have it. And they said, `Well, why don't you call Mr. Rabushka at home?' So, `All right. I'll call Mr. Rabushka at home.'
And so I called him at home and I proceeded to ask him about the book. And he told me about it, and he was--and then he said--he says, `Are you the Adams that--that writes about taxes?' Because I had written a previous book.
LAMB: What was the name of your previous book?
MR. ADAMS: It was called "Fight, Flight and Fraud: The Story of Taxation."
LAMB: What year?
MR. ADAMS: 1970--1983. And he said, `That's the finest book about taxes ever written in the English language.' And I--and I said, `You really believe that?' He says, `I have two copies.' I said, `I've got a new edition, much more revised.' He--I said, `Would you write the foreword?' He said, `I've love to.' So that's the story of the foreword.
LAMB: Did he tell you why it was the best book ever written...
MR. ADAMS: No.
LAMB: ...on tax?
MR. ADAMS: He just--he just said it was. And--and he--as he says in the foreword there, he says he placed it at the top of the list of any book--any reading on the subject of taxes, so it's still pretty much the same opinion.
LAMB: Have you ever advised any American politicians on--in their political campaigns?
MR. ADAMS: No.
LAMB: Would you ever do that if...
MR. ADAMS: I'd love to.
LAMB: Who would--who's your favorite? Do you have a favorite right now that's out there wanting to run for president?
MR. ADAMS: Well, I--no, my favorite would be David Pryor, who's the Democratic senator from Arkansas.
MR. ADAMS: Because he was the one that authored the taxpayers' bill of rights. And when he came up with it, he couldn't find anybody to co-sponsor it--not even a co-sponsor. And eventually it got on the bandwagon and--and it was adopted. It--it's--it's just a step in the right direction. Now he wants taxpayers' bill of rights number two. He didn't go far enough because...
LAMB: Did he get the first one passed?
MR. ADAMS: Yes. Yes. Well...
LAMB: What'd he get out of it?
MR. ADAMS: Well, y--there are some benefits, but it--but it doesn't get to the heart of the problem. A--as--as you know, toward the end of my book, I--I make some pretty hard-hitting suggestions as to how to reform the system. And I--I think that--that he just dealt with some administrative abuses that were, I thought--were--were--needed correcting, but they didn't get to the heart of
LAMB: Where does he get his ideas? Do you know? Do you think they...
MR. ADAMS: Oh, I think from taxpayers. I--I--I think that--you know, th--I used to--one of my law partners I s--when I practiced in the United States was a congressman, and I was a junior--junior member of the firm. And I used to have to read a lot of letters that came in from constituents.
LAMB: He was a congressman when you worked with him?
MR. ADAMS: Yeah. He was a senior partner.
LAMB: Wh--what was his name?
MR. ADAMS: Charles Teague. He died about 16 years ago.
MR. ADAMS: Yes, California.
LAMB: And while he was a congressman, he also practiced law.
MR. ADAMS: Well, not really, but he--in those days, th--they associated with the law firm, so there was some practice he could do, yes.
LAMB: And you had to read his mail.
MR. ADAMS: I read some of his mail.
LAMB: And what happened?
MR. ADAMS: Well, there's one other--one of the suggestions that I made for reform. I--I realized, in reading the mail, that people were pretty unhappy about taxes, and I realized he was powerless. He--he would write back, he would do his job, but nothing ever become of it. He complained to the district director, and it'd just sort of get sloughed off and that would be
it. And he'd do the best he could. But he didn't really have the ability to act as a watchdog over his p--people in his district, and--and that's one of the failures, I think, of the system.
I think a congressman ought to be able to look out for his constituents or, you know, the members of--of his district. And--and when the IRS misbehaves, I think he ought to be able to have a little clout. He's our representative. That's what democracy's all about. He--who--who do you go to? You go to your representative. And if he's powerless, then--then--then the IRS becomes a law unto itself. There's no redress. There's no checks and balances. And it's the lack of checks that is the problem with the system.
LAMB: Where were you born?
MR. ADAMS: Salt Lake City, Utah.
LAMB: Did you grow up there?
MR. ADAMS: No. Grew up in Southern California.
LAMB: What'd your parents do?
MR. ADAMS: My dad was in the cattle business.
LAMB: Your mom?
MR. ADAMS: Just a housewife. I mean--I say `just'; she was a housewife.
LAMB: And wh--where did you first get your interest in history?
MR. ADAMS: I got my interest in history my first year of college, and I--and I...
MR. ADAMS: At Whittier College. And...
LAMB: Same place that President Nixon went.
MR. ADAMS: Yeah, absolutely. Yeah. President Nixon. But--and--and I got permission to take a course in Russian history and Far Eastern history, and from then on I was hooked. But I had some wonderful teachers. They just absolutely inspired me.
LAMB: Anybody teach you about tax?
MR. ADAMS: No. Not a word.
LAMB: You left there and went where?
MR. ADAMS: Went to UCLA.
LAMB: To do what?
MR. ADAMS: To study law.
LAMB: Nothing in between? Just, bingo...
MR. ADAMS: Right on through.
LAMB: ...law degree.
MR. ADAMS: Yeah.
LAMB: What year did you get out of law school?
MR. ADAMS: 1953.
LAMB: Then what?
MR. ADAMS: Then I went up to Ventura and I practiced law in the firm that was called Teague & Dickson. And Mr. Teague was a congressman; I was a junior member of the firm.
LAMB: How long'd you stay there?
MR. ADAMS: Ten years.
LAMB: Then what?
MR. ADAMS: Well, in the course of--of--of that 10 years I got interested in taxes. And I didn't study tax in law school with the idea of being a tax lawyer. In fact, I avoided tax. You know, it was--I--I wanted to--to in--rev--you know, do more interesting things than tax. But the first case that I got when I--when I--when the firm hired me, when I was waiting for the bar results, they--they put a file on my desk and they said, `We got a tax problem. Solve it.' And, of course, since I was a junior and hadn't even passed the bar yet, I--I--I handled the case. And I--and I apparently did a wonderful job, and from then on I was an expert.
LAMB: When you talk about being in the trenches, is that where it was?
MR. ADAMS: Well, no. That's where it started, yeah. Then...
MR. ADAMS: ...as the years went by I got more and more involved with taxation. And one interesting story, which might have something to do with the book: My experience in--with--in the early days with the Internal Revenue Service was very positive. There were some--the--the agents in--in--in Ventura were--were really outstanding. And the one fellow who--there was retiring and he got to know me and--and I got to respect him. He told me on the eve of his retirement--he says, `Now don't repeat this,' but he said, `The new agents that are coming out from Washington are being taught to harass and intimidate taxpayers.' And he said, `You know, it never used to be that way.' And he says, `You lawyers ought to do something about it because if you can't, nobody can.' But he says, `Don't quote me because I'm--I'm going to retire.'
Now that was qu--quite a bit of information to pass on to me, but I always kept that within me. And I said, `Well, maybe someday I can do something about it,' and I think that book is doing something about it.
LAMB: You met your wife somewhere in this process...
MR. ADAMS: Mm-hmm.
LAMB: ...and moved to Canada.
MR. ADAMS: Yeah.
LAMB: Where was that?
MR. ADAMS: I met her in California. She was a young widow and--and I--I--she had a Russian restaurant. And she's a Russian, and she took me back to Russia and--and--and--and she took me back to Canada. And it was during the Vietnam period and I enjoyed Canada. And so I thought I'd do something different, so I--I decided to live in Canada.
LAMB: Did you ever live in Russia?
MR. ADAMS: No. We visited it a few times, you know, to see her family and stuff like that.
LAMB: How did she get over here in the first place?
MR. ADAMS: She was one of those unfortunate young childr--young girls who--who was trapped in the German zone and was shipped to Germany to ship--to work in the labor camps. So when she was 13 years old she left Russia, never saw her mother again and was--was in--in a--in a German labor camp. She had the good fortune of being freed in the--in the American zone.
LAMB: Now when you look at what's going on in Russia right now, with the whole upheaval...
MR. ADAMS: Mm-hmm.
LAMB: ...tax have anything to do with it?
MR. ADAMS: Well, in a sense, tax has everything to do with it--in a sense, because Communism is the ultimate form of taxation. And you'll see what happened to the Russians--the Russians have been--maybe their great mission in the world has been to protect the West because they had Communism, which was a Western idea that was g--given birth in Germany and--and England, where Marx was and his followers. They had it forced on them against the popular will, and they lived under that system and they suffered. A--and--and they can show to the world what a terrible calamity that enforced system is.
So maybe sacrifice in the name of the world has been the Russian's great mission. So the chaos that's in Russia today is because of living under the ultimate form of taxation: from each, according to his ability, and to each, according to his need. That's the maximum--that's progressive taxation in its ultimate form--from each.
LAMB: You say that John Stuart Mill, a Brit...
MR. ADAMS: Mm-hmm.
LAMB: ...invented this whole idea that slavery was a reason for the Civil
War. How'd he do it?
MR. ADAMS: Well, he just believed. He--he popularized the idea.
LAMB: In this country.
MR. ADAMS: Well, yes, in this country, too, because he was very, very famous. So while he wrote for the Frasier magazine, many of his articles were published over on this side. And-- he was a very, very famous writer--brilliant writer. You know, his--his writings today are still published. And he said taxes was the--or, not taxes, but slavery was the cause of Civil War.
LAMB: You, in the back...
MR. ADAMS: Mm-hmm.
LAMB: ...almost near the end of the book, have the Laffer--the famous Laffer curve. What is it?
MR. ADAMS: Well, the Laffer curve--and I've added a little bit of my own to it, like the negative and the positive--the Laffer curve says that when you--when you start levying a tax, you--you get to the point, as the curve swings up, where you reach the maximum amount of revenue that you will collect and that, thereafter, if you keep raising the rates, you get less and less and
less. So when you tax at 100 percent, you get nothing.
Now Laffer developed this from--from--from statistics, and--and the--one of the most interesting statistics is--in--in the book there is that the first income tax was very mildly progressive i--in 1916, and the rate was 7 percent for the top bracket. Five years later the top bracket was 77 percent. In 1916, there were about 220 people that reported $1 million worth of income. In 1921, five years later, there were only 20 people about--that reported $1 million worth of income, so that nine out of every 10 $1 million earners disappeared.
Now the statistics which you show deal--deal with the little lower level; with the $300,000 level. And what you had is that during that same period if you were--made more than $300,000, that four out of every five taxpayers dis--disappeared. So the more you tax, the less you get.
LAMB: Was Mr. Laffer successful? And who is he, by the way?
MR. ADAMS: He was an economist at the University of Southern California.
LAMB: Do you know him?
MR. ADAMS: No.
LAMB: Do you think his idea, that was adopted by President Reagan, was
MR. ADAMS: Yes.
LAMB: How come we're $4 trillion in debt?
MR. ADAMS: Well, because they spent too much. But they raised a lot of
money, and the revenues went up. It's just that--you see, that's the problem:
the power to spend and the power to tax. Even though we lowered--lowered
taxes, revenues went up, but expenditures went higher. They just can't
control their spending appetites.
LAMB: What's your favorite chapter in here?
MR. ADAMS: That's an interesting--I think maybe my favorite chapter is the
one on the Enlightenment based on the old Navy expression, `No one got the
word.' You know, that--that's an old Navy expression, `No one got the word.'
And during the Enlightenment, which was the ideas that were the founding of
the United States and the f--and the founding of even m--modern world, they
had the word on taxation. They were very bright guys about it, and--and I've
listed the points that they raised. And I--and I think we've lost sight of
those things. I--I--I think they speak to us and--and they warn us and they
say, `Look, look what you're doing. You know, you're crazy.' You...
LAMB: How many printings have you had on this book so far?
MR. ADAMS: They're on the second one now.
LAMB: How many books are out there?
MR. ADAMS: Well, the first one sold out in about three weeks. And the second
printing will be 5,000 copies.
LAMB: What'd you--how many did you print in the first one--10,000?
MR. ADAMS: No, no. They only printed 1,700. See, they had their doubts.
LAMB: But things are moving.
MR. ADAMS: Well, yeah. They--well, they sold out in three weeks.
LAMB: What's the--we got about a half a minute. What's the best thing that
people will say about this book in 10 years if it's been successful, as far as
MR. ADAMS: It--it ma--made taxes the people's business again; tried to make
taxes understandable and something that the people can become involved in.
LAMB: Charles Adams, author of "For Good & Evil: The Impact of
Taxes"--underlined--"on the Course of Civilization," we thank you for joining
MR. ADAMS: Thank you.
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