Tomasz P. Woźniakowski
This article examines how historical experience of creating fiscal-military state in the United States (US) in the nineteenth century can inform contemporary efforts to strengthen the European Union’s (EU) fiscal and defence capabilities. This article highlights how reliance on indirect taxation – through tariffs and excise duties embedded in the prices of goods – enabled the US federal government to finance common defence without provoking widespread resistance. The article argues that the key lesson from US fiscal-military history for financing European security is the feasibility of using ‘invisible taxes’ to sustain ‘visible defence.’ Furthermore, it asserts that EU borrowing is unsustainable in the long run unless backed by the EU’s own power to tax. The article concludes with fours insights for the EU: 1. Any new EU taxes should be indirect and designed to minimise their impact on both member states and individual citizens. 2. EU fiscal capacity should be inextricably linked to common defence, much as the US tariff was. 3. Borrowing by the EU without an accompanying fiscal mechanism is a precarious strategy for national budgets. 4. Theories of federalism should move from the margins to the mainstream of EU research.