Tax Law

A Closer Look At The Tax Dispute That Started The 'Star Wars' Saga

An analysis of what this tax on trade routes actually did, why it upset the Trade Federation enough for them to blockade and later invade Naboo, and the aftermath.

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1280px-Star_Wars_LogoNext Wednesday is May 4 — “Star Wars Day.” It is an unofficial holiday commemorating the Star Wars franchise. Expect a number of your friends to greet you with “May The Fourth Be With You.”

You may recall that the opening crawl of “Episode One: The Phantom Menace” stated that turmoil had engulfed the Galactic Republic. The taxation of trade routes to outlying star systems is in dispute. Hoping to resolve the matter with a blockade of deadly battleships, the greedy Trade Federation has stopped all shipping to the small planet of Naboo.

So today, let’s look at what this tax on trade routes actually did, why it upset the Trade Federation enough for them to blockade and later invade Naboo, and the aftermath.

According to “Star Wars: The Essential Chronology,” the tax law in question, known as Senate Resolution BR-0371, created a tariff or a toll for the use of hyperlane trade routes. A hyperlane is an area of space that has been deemed safe for faster-than-light travel with no risk of colliding into another planet or a black hole. The official reason for the law was to raise money to pay off the Galactic Republic’s growing fiscal debt and to support relief and development projects in outlying systems.

This is the classic rationale for any tax: To raise revenue to pay for public services and government expenses. But taxes tend to have consequences. In this case, the tax raised revenue as intended, but the Trade Federation lost profits. The financial pain was so bad for the Trade Federation that they were willing to blockade and later invade an entire planet to resist it.

“The Phantom Menace” shows the chain reaction of events after the implementation of the tax and the subsequent blockade of Naboo. It begins when the Republic’s Supreme Chancellor Valorum secretly dispatched two Jedi warriors to the Federation’s flagship to settle the conflict. But the Federation’s viceroy attempted to kill the Jedi as soon as they arrived. Needless to say, the negotiation never stood a chance.

To make a long story short, Supreme Chancellor Valorum failed to repel the Trade Federation’s invasion of Naboo. As a result, Queen Amidala was convinced by Naboo’s senator Palpatine to petition for a vote of no confidence against the supreme chancellor to resolve the crisis. What Amidala did not know was that Palpatine was the alter ego of Darth Sidious, who secretly convinced the Trade Federation to invade Naboo and blame it on the tax.

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The no-confidence vote succeeded and Valorum was removed. Palpatine was later elected as the new supreme chancellor, probably because of sympathy for his home planet. Palpatine later restructured the Galactic Republic into the Galactic Empire and then became its Emperor. And we all know what happened after that.

Here on planet Earth, taxes also have consequences. While we don’t have hyperlanes to tax, taxing transportation choke points like the Suez Canal or the Panama Canal can result in higher prices, shipping delays (by taking the longer way around), or both. Imposing tariffs on imported products ostensibly to protect domestic production can lead to retaliatory tariffs by the targeted country or countries. Taxes have led to a number of resistance movements. The most famous of these came from residents of 13 former British colonies in the 18th century who claimed it was unfair to tax them if they were not represented in the British Parliament.

While taxes are primarily designed to raise revenue for the government, sometimes they can unintentionally (or intentionally) be the catalyst for something greater. Hopefully, when lawmakers consider tax reform in the future, they will make sure that their proposed tax laws will not result in a planetary invasion or the installation of an emperor hell bent on ruling the galaxy.

Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at stevenchungatl@gmail.com. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.

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