The quote refers to a Faustian bargain offered by the Penn's. They'd bankroll securing a township, as long as the township gave up the ability to tax them. The quote points out that by giving up the liberty to tax, for short term protection, ultimately the township would end up having neither the freedom to tax to fund further defense, or long term security so might as well hold onto the ability to tax and just figure out the security issue.

Moral: don't give up freedoms for temporary gains. It never balances out in the end.