In a letter to Jean Nicolas DéMeunier—commenting on his article concerning the US in DéMeunier’s Encyclopédie Méthodique—Thomas Jefferson wrote (June 22, 1786),

Every one thro[ugh] whose hands a bill passed, lost on that bill what it lost in value, during the time it was in his hands. This was a real tax on him; and in this way the people of the united states [sic] actually contributed…millions of dollars during the war, and by a mode of taxation the most oppressive of all, because the most unequal of all.

The hidden tax that funded the war, which Jefferson described as “the most oppressive of all,” was that of inflation via paper money. On June 22, 1775, Congress issued $2 million paper “bills of credit” (“Continentals”), but this would soon expand greatly. Rothbard explains the nature of this inflation,

Paper issues fraudulently pretend to be equivalent to units of specie and are used by the issuer to bid away resources in society from the producers and consumers, in the process depreciating the money itself. Its nature and consequences are equivalent to the process of counterfeiting.

Fiat paper monies were accepted because they were, at first, viewed as true money-substitutes and because there was a future promise of redemption: “...for everyone recognized that paper money would only circulate if some sort of redemption were pledged for the future.” This needs to be clarified before the MMT crowd gets too excited and misreads this as a case of chartalism. Keep in mind that multiple commodity monies already existed, independent of government intervention.

Rothbard described how this promised pseudo-redemption would work and how it further taxed the people: each colony would promise to redeem a pro rata share of the Continental paper issue beginning in 1779. The redemption would not be in specie, but taxes on the paper Continentals themselves, which would retire the money. In other words, through inflation, the Congress would expropriate purchasing power to itself and earlier recipients to pay for expenses, thus taxing the American people through depreciation of the money; then the people had the promise made that they would be taxed again at the end of the war to retire the inflated money instead of receiving specie. …

These are examples to which many more could be added. Suffice it to say that the policy of inflation to fund the American Revolution was one of the most costly methods of taxation and even threatened the success of the independence movement, not to mention its post-Revolution consequences. While the American Revolution is often considered a libertarian revolution, it is clear that a state-centric model—government inflation, standing armies, etc.—not only threatened the cause, but virtually ensured post-war centralization of government powers. War, even the American Revolution, is the health of the state because it is almost impossible to avoid fighting a war on state-centric terms.