In 1913, America ratified the 16th Amendment to the Constitution—explicitly granting Congress the power to tax incomes. Ever since, the income tax has been the main source of revenue for the U.S. government.
"The entire trajectory of the United States in the 20th and now into the 21st century is completely different than it would have been otherwise," says Joseph Fishkin, a law professor at the University of Texas at Austin. "When you think about fighting World War II, the Cold War—none of this would have been possible if not for the revenue from the income tax."
Today, as Congress is poised to pass a bill that would significantly overhaul the tax code, it's particularly illuminating to look back at the period in American history when this modern tax system came into being. It, too, was a time when technological advancements were transforming industries and the nature of work itself, and when the gap in wealth between top earners and average citizens had dramatically widened.
What's more, then as now, policy debates over taxation represented even bigger debates over the role of government, how best to "promote the general welfare" and what kind of society America should be.
This episode of The Washington Post's “Constitutional” podcast examines these questions and the history of the 16th Amendment with Fishkin and W. Elliot Brownlee, author of "Federal Taxation in America: A History."
Check out the “Constitutional” Web page and subscribe to get new episodes free on Apple Podcasts, Stitcher or wherever you listen to podcasts. For updates about the series, you can also follow podcast host Lillian Cunningham on Twitter: @lily_cunningham
Transcript of “Episode 13: Taxes”
LILLIAN CUNNINGHAM: The gap between the rich and the poor is wider than it’s ever been in American history--and the rapid pace of technological change is further widening that gap.
Some people at the bottom of the social ladder are seeing their jobs disappear, replaced by new machines that can do the work faster and cheaper.
A handful of people at the top--bankers, heads of industry--are making more money than the rest of the population combined.
And a really important tax bill that has implications for every American’s income--rich, poor, middle-class--just recently passed Congress. One New York Times report called the bill “odious” and “unpopular.”
The year is 1894.
I’m Lillian Cunningham with The Washington Post, and this is Constitutional.
CUNNINGHAM: Taxes have always been a feature of America. They power the government by helping to pay its operating costs, whether those are external (like financing wars) or internal (like constructing highways). But the type of taxes that Americans pay hasn’t stayed the same over the country’s history.
It wasn’t until the early 20th century that the United States established the tax system it has today--an income tax system. That’s where every year, the federal government takes a certain percentage of money from each citizen based on his or her income.
The income tax is considered a “progressive” tax--because the tax rate progresses. People with lower incomes tend to pay a lower tax rate, and people with higher incomes tend to pay a higher tax rate.
America came to rely on this as its main source of revenue after 1913, when the 16th Amendment to the U.S. Constitution was ratified. Because it was the 16th Amendment that gave Congress the explicit power to collect income taxes.
JOSEPH FISHKIN: And the entire trajectory of the United States in the 20th and now into the 21st century is completely different than it would have been otherwise.
CUNNINGHAM: This is Joseph Fishkin, a law professor at the University of Texas at Austin.
FISHKIN: When you think about fighting World War II, the Cold War--none of this would have been possible if not for the revenue from the income tax. And the entire American Century was basically financed by the income tax.
CUNNINGHAM: This fight for a constitutional amendment to allow Congress to collect income taxes came about during the Gilded Age in America, at the turn of the 20th century, when inequality was rapidly growing and when the new railroad tycoons and oil barons and financiers were amassing extreme wealth in this newly industrial America.
FISHKIN: The constitutional fight over the income tax is one that's incredibly revealing and resonant today because it's about what the shape of the economy ought to be and what the Constitution has to say about that. So I think today when inequality is back up to the levels it was in the Gilded Age, it's especially useful to look back and think about what this fight was about.
CUNNINGHAM: And why the arrival of the 16th Amendment--the income tax--so dramatically transformed the contours of America as we know it.
Taxes, more broadly speaking, were of course nothing new to the United States. Back in the 1700s, the colonies had operated within England’s taxation system. That originally meant they paid taxes on trade (and the English government set those tax rates); but that each colony could decide for itself what other taxes it wanted to collect from its own citizens.
W. ELLIOT BROWNLEE: They give the Americans a lot of flexibility in deciding what taxes to impose on themselves internally.
CUNNINGHAM: This is W. Elliot Brownlee, a professor of economic history at UC Santa Barbara and author of the book “Federal Taxation in America.”
BROWNLEE: American colonies could and did enact property taxes, sales taxes on domestic consumption. They imposed something called a head tax--a tax that would just be distributed among the citizens of a colony on an equal basis. Every citizen would pay the same level of taxes.
CUNNINGHAM: It’s not really until the 1760s that England starts to meddle more with taxes in the colonies. England quits its hands-off approach of letting the colonies mostly manage their own taxes, and it starts imposing more taxes of its own on them.
BROWNLEE: At that point England significantly expands domestic taxation and runs into the problem that the Americans had gotten very used to managing their own taxes and to a fairly low level of internal taxes.
CUNNINGHAM: So they are not happy with these additional costs. This eventually becomes one of the main reasons the colonies declare their independence and fight the Revolutionary War--which, when it’s over, frees them from having to pay those taxes to England, but also introduces a new set of fiscal problems.
BROWNLEE: The American Revolution was probably the most expensive war in American history, as a share of national product.
CUNNINGHAM: The war cost is estimated at about 2.5 billion in today’s dollars--but that would account for much, much more of America’s GDP back then than it does today.
BROWNLEE: So the challenge became enormous and it was a challenge that the former colonies had difficulty meeting initially.
CUNNINGHAM: Until the framers drafted the U.S. Constitution in 1787, the young United States didn’t really have a strong structure in place for collecting money to pay off these debts or for making any future infrastructure investments it needed in order to grow the nation.
BROWNLEE: So they had a new society which had high aspirations but lacked the means to fulfill those aspirations through taxation.
FISHKIN: It was a very, very weak central government. Basically all it could do is ask the states for money, and the states tended to not pay. So a big part of the Constitution was an effort to give the federal government the power to collect some taxes. This immediately became embroiled in questions about slavery, in relation to which states should pay what. And a compromise was reached--a famous compromise, the three-fifths compromise--which was about both political power and about taxes.
CUNNINGHAM: Political power--because counting each slave as three-fifths of a person affected the population numbers in the South and, consequently, the number of representatives those states had in Congress. And taxes--because this population count was also the basis for how much in taxes each state would pay into the federal system.
FISHKIN: In other words, if they're going to get extra political power, they also should have to pay extra tax.
CUNNINGHAM: So while there’s a tendency to think of taxes as a dry, dense topic today; from the very beginning in this country, taxes have been tied into some of our most important moral decisions--like whether certain people’s humanity and welfare counts more than others’ in America.
The main language about taxation comes in Article I, Section 8, which outlines the powers that Congress has. And the very first power it lists is that: “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States.”
BROWNLEE: So the result was a very straightforward and broad definition of the taxing power of the new Congress. The power the Constitution gives is very robust. The Constitution did limit taxation in one way and I think only one way, and that was in section 9 of Article 1. It specified that no capitation or other direct tax be imposed on states except according to the distribution of population.
CUNNINGHAM: Direct taxes were a particular category of taxes that included things like poll taxes and some kinds of property taxes. So what was this one line about?
BROWNLEE: So this provision sits in the Constitution in a very odd place without much definition, but a definition and purpose that was very clear to the founders. It was a limitation designed to protect slavery from the possibility that future federal governments could try to attack slavery by taxing slave property, to the point where it would make owning slaves financially impossible. So this was a provision of the Constitution in which the founders were engaged in sectional politics, trying to keep the union together rather than carefully considering financial policy. It's not really part of the financial strategy. This is a tactic intended by the Founding Fathers to accommodate to the political power of slave owners and thereby hold the new union together.
CUNNINGHAM: Okay, so just remember they stick this one technical line in there for that reason. But otherwise, the Constitution gives Congress almost unlimited power to tax as it sees fit for the health of the country.
BROWNLEE: The Americans adopted what was essentially the model of the British fiscal state. And this is primarily because American financial leaders, especially Secretary of Treasury Alexander Hamilton, had acquired intimate familiarity with the British fiscal state, had studied it thoroughly through reading economic literature.
CUNNINGHAM: And they knew that broad taxing powers were key to building up a robust nation. It first helped America to pay off its Revolutionary War debt. Then one of the next big uses of tax revenue in early America was to pay off the debt that President Thomas Jefferson borrowed to pay for the Louisiana Purchase.
BROWNLEE: The tariffs also funded subsidies for roads, canals, lighthouses, river and harbor improvements, internal improvements. And much of the money eventually was turned back to the states in the form of a kind of revenue sharing.
Jefferson turned out to be in practice not so far different in terms of tax policy from Alexander Hamilton. Both believed in taxation according to the ability to pay.
CUNNINGHAM: That is, both thought that citizens who made more money and spent more money should pay more taxes. But the concept of an income tax wasn’t even on their radar at the time, so they did their best to spread out the tax burden in other ways.
FISHKIN: The federal government for the entire first century basically of its existence relied almost entirely on indirect taxes, what are called excises and tariffs. We still have excises today. If you ever buy a pack of cigarettes, you pay a federal excise tax. It's like a dollar a pack. Or if you buy gasoline, there's a federal gasoline tax. Those are excises. Tariffs are taxes on imports from abroad. And so for pretty much the whole 19th century, the federal government subsisted on those taxes, which is not enough for a modern 20th century state. In fact it wasn't enough to fight the Civil War. And so during the Civil War the federal government briefly imposed an income tax.
CUNNINGHAM: President Abraham Lincoln and the Congress authorized it around the start of the war in 1861. The rate varied a bit over time, and depending on how much you made (if you were very poor, you didn’t have to pay it at all), but for most people it was around 5 percent--a 5 percent tax on their income. Collecting that income tax helped the government raise the funds it needed for the Union Army’s war effort.
FISHKIN: There's this kind of frightening quote from a radical writer around the first World War who said war is the health of the state. I think anyone should find that a little chilling but it's also sort of true, which is that nothing builds up a robust government like war. And so the story of the income tax is largely a story of the government needing more revenue to fight wars. That’s how we end up with it in the Civil War. Because if you're going to have a state with a powerful army, you're going to need more revenue than you're going to get from taxing, you know, tobacco and whiskey and imports.
CUNNINGHAM: In the years and decades following the Civil War, the country went through some rapid and radical changes. The federal government had grown in size and scope because of the war. And society itself was also dramatically transforming. Cities were growing bigger, companies were growing bigger. Industrialization was taking hold. And the Gilded Age was on the horizon, flashing with gold.
FISHKIN: So the end of the 19th century was this moment in American history in which for the first time ever you had nation-spanning corporations. You had railroads and steel companies and other big monopolies that were more powerful than state governments, and their owners were building fortunes that were bigger than anything America had ever seen. And meanwhile you had the emergence of an industrial workforce who were very poor, and who were agitating for unions, and who were beginning to express radical ideas in opposition to this new Gilded Age economic order.
BROWNWELL: The economy grew but also economic inequality grew. The unequal distribution of income and wealth became more intense. The gap would be comparable to the kind of gap that exists now between the top 1 percent and the bottom 50 percent of the American population. It's a very similar kind of distribution.
CUNNINGHAM: The Civil War income tax had ended and the country was back to a system that relied mostly on tariffs for its revenue. But these tariffs were falling out of favor among some people, especially in the West and the South. The tariffs--or taxes on imports--were driving up demand for domestic products, which was disproportionately benefiting manufacturers in the Northeast of the country. And, because everyone paid the same tariff on goods that they bought, regardless of what their income level was, it meant that poor and working-class families would feel the loss of that money to tariffs much more than wealthy families did.
BROWNWELL: A nationwide movement grew to enact federal taxes that conformed more closely to the ideal of taxing according to the ability to pay.
CUNNINGHAM: That’s how the idea of an income tax, like there was during the Civil War, gets revived--that way the people who earn more, pay more. Especially since, in addition to taxing salary income, this new income tax would also apply to income someone generates from other sources, like property or, importantly, stocks or interest or corporate profits.
FISHKIN: They thought in this new era, with huge new fortunes being built up in the Gilded Age, it would be better to start taxing those huge new fortunes and not just taxing ordinary people.
BROWNWELL: It also became part of a larger movement attacking monopoly power, the new concentration of power in the hands of corporations and the special privileges of the wealthy. The income tax movement is designed to improve the distribution of income and reduce monopoly power, hopefully increasing economic opportunity for all Americans.
CUNNINGHAM: There was enough momentum for it that the U.S. Congress passed a bill in 1894 to institute the first peacetime income tax. And one of its biggest champions was a young congressman from Nebraska by the name of William Jennings Bryan.
FISHKIN: He recognized that there was just enormous popular unrest out in the hinterlands of America about the fortunes that were building up in New York and in the other sort of centers of power at the expense of ordinary Americans, or so they thought.
CUNNINGHAM: And so Bryan, with his particular gift for oratory, helped push this new bill through the House of Representatives and into law. It was a tax of 2 percent--only 2 percent--on incomes over $4,000 dollars (so that’s like an income of $90,000 today).
FISHKIN: The initial tax was not big, but everyone could see that this tax had a lot of potential. It had the potential to completely transform the federal government by providing it with vast revenue, and it also could potentially actually take a big bite out of large fortunes.
CUNNINGHAM: That is, until the Supreme Court struck it down as unconstitutional.
FISHKIN: The story of how the income tax became one of the most polarizing issues in American politics, and kind of the central axis around which so much political fighting happened at the turn of the century, is really a story of the Supreme Court's unexpected intervention in the debate about taxes.
CUNNINGHAM: In 1895, the year after the income tax bill passed, a case--Pollock vs. Farmers Loan and Trust--went before the Supreme Court. Charles Pollock was a man from Massachusetts, and he was challenging the constitutionality of this income tax.
FISHKIN: And the Supreme Court, which everyone pretty much expected to uphold this tax as they had upheld a century of previous modest innovations in taxation by the federal government, instead decides to strike it down.
CUNNINGHAM: And their rationale here is a bit complicated but they do this by saying it should count as a “direct tax”--and remember there was that one line in the Constitution about how direct taxes need to be apportioned to the states according to population.
BROWNLEE: So the court picked up an artifact of the controversy over slavery that was embedded in the Constitution and used it in a totally different context.
FISHKIN: And this meant that an income tax couldn't be enacted at all, because it would be crazy to say we're going to have an income tax but each state has to pay according to its population, whether it's a rich state with tons of income or a poor state with very little income. What that would mean in effect is much higher tax rates for people in poor states than people in rich states. And the Supreme Court was completely aware that that would make it impossible to ever enact an income tax. And the reason they decided this was basically a fear of socialism.
The Supreme Court in the late 19th century was very unusually almost entirely populated by members of the elite bar who had been the lawyers of the new railroads monopolies, steel companies and other sort of high powered corporate forms of the Gilded Age.
CUNNINGHAM: One of those justices was Stephen Johnson Field. Just to give you a visual, he had a long beard and curly hair that circled his head--he was bald on top. He had a piercing gaze behind his small glasses.
FISHKIN: So Field is a New York lawyer who'd moved out to California in the gold rush in 1849 and made money speculating on land in the really rough environment of California in the mid 19th century. He became a politician. He then became chief justice of the California Supreme Court. Along the way he fought a duel with another judge. And in fact he survived an attempted assassination by the previous chief justice of the California Supreme Court, whom Field had ruled against in a divorce case and Field's bodyguard ended up shooting and killing him.
He was however a believer in the Union during the Civil War. And for that reason, and to get some Western representation, Lincoln ended up putting him on the Supreme Court during the middle of the Civil War. So Field believes strongly in free enterprise. He was associated with the elite railroad lawyers and other lawyers of the emerging monopolies of the West. He became a trustee of Stanford University, Stanford being a famous railroad baron, and Field saw the income tax as a form of socialism.
CUNNINGHAM: He wrote in his Supreme Court opinion, explaining why the income tax should be struck down, that: “The present assault upon capital is but the beginning. It will be but the stepping stone to others larger and more sweeping till our political contests will become a war of the poor against the rich, a war constantly growing in intensity and bitterness.”
FISHKIN: So that's pretty dark.
The question of what is the relationship between the federal government and individuals making money--that was a hot area of constitutional debate in the late 19th century. Both the left and the right thought that the question of exactly how does the government regulate the economy, what kind of economy are we going to have, what kind of inequality are we going to have, what kind of redistribution are we going to have--those questions were hot constitutional questions at this time, even though today they don't feel like constitutional questions at all. So issues like anti-trust, issues like the gold standard, the income tax, these were all major constitutional debates, both in the courts and in politics.
I mean the original conception of how the political economy was going to work in the United States if you read people like Thomas Jefferson was we were going to be a land of small producers and they weren't going to be dependent on others. And then as the 19th century rolls along, we get this massive economic upheaval, and it quickly becomes clear in the late 19th century that in fact we don't have an economy of small producers. It's not the case that every hireling is going to become an owner or a small proprietor. In fact what we have is an industrial revolution in which we are going to have large-scale corporate capitalism with huge enterprises and many, many workers and the workers are going to live on wages.
And the question is: What does that do to our ideas about citizenship and the ideas about how our economy is supposed to work under our Constitution? So that was the sort of underlying economic driver of this constitutional debate.
CUNNINGHAM: The Supreme Court decision was 5-4 against the income tax. And much of America, even some of its wealthiest citizens, couldn’t believe the court had ruled to strike it down.
FISHKIN: But what do you do with that? I mean what do you do when you disagree with the Supreme Court?
CUNNINGHAM: The Supreme Court’s strike down of the income tax in the Pollock case in 1895 added fuel to the populist fire.
FISHKIN: Pollock absolutely electrified American politics and in particular populist politics. It was opposed fervently by millions of people. Chief Justice Taft, who was no lefty, later said nothing has ever injured the prestige of the Supreme Court more than that than the Pollock case.
BROWNLEE: The movement on behalf of income taxation grew over the next two decades, and in particular it won growing support from middle class and urban areas. Support previously had been largely from farmers and small-town Democrats in the South and the West. More Republicans joined and more middle-class and urban people joined as well.
FISHKIN: Some people thought--and in fact William Jennings Bryan thought--Congress should just enact the federal income tax statute again and this time the court should recognize its error and uphold that it. And that wasn't actually so crazy, because after Pollock there were some signs that the Supreme Court was backing off. There was an inheritance tax that was enacted by Congress that the Supreme Court upheld a few years after they'd struck down this income tax. And there were a couple of other less important cases where the Supreme Court upholds some taxes following Pollack. So it was possible that you could just enact another income tax and the Supreme Court might change its mind.
CUNNINGHAM: In 1896, William Jennings Bryan ran for president and he gave a speech at the Democratic convention that has become one of the best-known speeches in American politics. It’s referred to as his “cross of gold” speech.
FISHKIN He said: “When I find a man who's not willing to pay his share of the burden of the government, which protects him, I find a man who is unworthy to enjoy the blessings of a government like ours.” You know we should all be willing to pay this tax. We should enact it. The Court should uphold it.
He said in that speech: “Upon which side shall the Democratic Party fight, upon the side of the idle holders of idle capital or upon the side of the struggling masses?” And famously his speech ended with this peroration:
ARCHIVAL RECORDING: “You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold.”
CUNNINGHAM: Bryan didn’t win the presidential election, but support for an income tax became more and more mainstream over the coming decade. Fears about inequality and corporate power kept increasing, at the same time that government wanted to make more and more infrastructure investments and was finding that it couldn’t generate enough revenue under the current tax system.
BROWNLEE: In 1909, some of the most fervent advocates of income taxation, many of whom were now Republicans, believed that Congress should just move forward and restore the income tax. The leading proponent this point of view was representative Cordell Hull, of Tennessee.
CUNNINGHAM: Taft was president by this point (he would later serve on the Supreme Court himself) and he worked with Congress on a two-step process to usher in the income tax. First:
BROWNLEE: Congress enacted a partial income tax and this was a tax on corporate incomes alone. They called it an excise tax meaning it was like a sales tax. But Congress actually adopted a tax on corporate income before the personal income tax. The second part of this deal was that Congress sent to the states a proposal to amend the constitution to specify that Congress had the power to tax incomes from whatever source derived without apportionment among the several States and without regard to any census or enumeration.
CUNNINGHAM: This was the language of the 16th Amendment. And what it’s saying between the lines basically is--forget that bit in the Constitution about direct taxes that had to do with slavery. Congress can in fact tax incomes however it wants. An income tax is absolutely, and in any form, constitutional. That’s the 16th Amendment. It took four years for the states to ratify this 16th Amendment, but:
BROWNLEE: This process of ratifying the 16th Amendment turned out to solidify a national consensus behind the importance of income taxation.
CUNNINGHAM: Here’s some proof of how overwhelming the consensus had become for an income tax. In the 1912 presidential election, all four presidential candidates from different parties endorsed it. It was endorsed by the Democratic candidate, Woodrow Wilson, who won the election; by the Republican incumbent, President Taft; by the progressive candidate, Teddy Roosevelt, who was trying to reclaim the presidency; and by the socialist candidate, Eugene Debs.
By 1913, the fate of the income tax was sealed. Enough states had ratified that it became the 16th Amendment to the U.S. Constitution. This finally clarified Congress’s income taxation power and, as a consequence, it permanently overturned the Supreme Court decision from now two decades earlier in Pollock that had struck the income tax down.
CUNNINGHAM: I asked Joe Fishkin and W. Elliot Brownlee what America would look like today if we hadn’t ever passed the 16th Amendment--if we hadn’t switched over to a tax system in the 20th century that allowed for, and came to rely on, income taxes as the main way to fund the American government.
FISHKIN: I think there's almost no way to imagine how different the government would be. We would stop having the United States as we know it, and would be back to a small confederation of states. It would be a completely different country.
That familiar story of a United States with the world's largest military and the United States leading the world during the Cold War? All of that could only have been done with the revenue from the income tax. So the income tax I think changed the course not only of American but of world history.
CUNNINGHAM: No sooner had the 16th Amendment passed, in 1913, than the U.S. government needed it to raise funds to fight in World War I.
FISHKIN: And quickly within not very many years the federal income tax becomes the primary source of revenue for the federal government. By the time we reach the depression, and FDR’s efforts to fight the depression, the income tax is central to the federal government's revenue base. And then even more so when we get into World War II.
BROWNLEE: What changed most dramatically I think with the introduction of the income tax was increased the ability of the federal government to expand its spending on national defense without facing significant popular resistance. And it increased the ability of the federal government to respond more effectively to popular demand for large scale programs that promoted social welfare. So you got a more flexible, supple tax instrument.
CUNNINGHAM: It was so flexible, in fact, that at a certain point during World War II, the tax rate on some of the wealthiest Americans reached about 90 percent--to help the government pay for the war.
FISHKIN: The inequalities of the Gilded Age were essentially erased by a combination of the depression, the war and the income tax to fund the war, so that in the 1950s and 60s you had just a much more equal society than the United States had ever been.
BROWNLEE: But the progressive effects have been dramatic only during wartime and they've been consistently eroded since World War Two, with the most significant erosion coming during this century: the 21st century.
That reason is a kind of a political flaw in the highly progressive tax system is creating significant incentives for the wealthiest Americans to lobby for the carving out in the tax codes of exemptions.
FISHKIN: The question of how progressive it should be is a question of political economy. Just how much do we want to bring the fortunes of the rich lower or how much do we want to allow people to enjoy the fruits of what they build and produce? And so these are tough questions then and today.
The fight about whether to have an income tax or not was a fight about what kind of state we want to have--that in a way we're still having.
When you have a fight today about something like the estate tax we need to think of it as in part a constitutional fight, because it's a fight about what kind of economy we're going to have. Are we going to have large dynastic fortunes that are passed down through generations or are we going to have something more like equality of opportunity, where in each generation people are going to have to work and make money for themselves?
We think about the Constitution today as a document that basically inspires litigation in court. But the Constitution isn't just that. It's also a document that puts obligations on the political branches. And one of the political branch’s highest obligations is to maintain a political economy in which people have the wherewithal to fulfill their role as citizens in a republic--and that means that people need to be able to maintain a secure foothold in middle class. That's what Social Security was about. And that's what a lot of tax policy is about.
CUNNINGHAM: If we think back to the preamble of the Constitution, and the idea the framers put forward of “promoting the general welfare,” we realize that the constitutional power to tax is one of the greatest tools that Congress can use to shape that general welfare and to write the American story.
FISHKIN: The way I think about congressional powers there are really four big ones. There's the power to tax, the power to spend, the power to regulate commerce among the several states, and the reconstruction powers. So those are the four. And one interesting piece of the story, taking it all the way up to the present, is that in recent years in significant ways all of those have been pared back. There's one power that has not been pared back at all. And that remains just as robust as ever when it the amendment first came into effect, and that's the power to tax.