Molly Michelmore is an associate professor of history at Washington and Lee University and the author of “Tax and Spend: The Welfare State, Tax Politics, and the Limits of American Liberalism.”
The federal income tax celebrates its 100th birthday this month. With so few fans of the tax in and outside Washington, few are likely to celebrate.
But maybe we should.
The income tax was once quite popular. In fact, it was farmers in the South and the West, small-business owners and middle-class consumers — people who might belong to the tea party today — who put the income tax on the national agenda.
After the Civil War, the federal government relied on a combination of consumption taxes and high tariffs to raise revenue. Both bore most heavily on regular people while doing little to tap the fortunes of the Gilded Age’s robber barons.
Popular hostility toward these moneyed interests helps explain the initial popularity of the income tax. In their 1892 platform, a group of agrarian radicals known as Populists demanded a graduated income tax to bring an end to “oppression, injustice, and poverty” and to restore “equal rights and equal privileges for all.” Republicans and Democrats took notice; in 1894, Congress imposed a 2 percent tax on incomes over $4,000.
The new tax lasted less than a year. In 1895, the Supreme Court ruled it unconstitutional in Pollack v. Farmers’ Loan and Trust . In a scathing dissent, Justice Henry Billings Brown accused the court of surrendering the “taxing power to the moneyed class.” Justice John Harlan called the ruling a “disaster.”
But the court’s decision made the income tax more popular. At their 1896 convention, Democrats endorsed such a tax as the best way to ensure that the “burdens of taxation” be “equally and impartially laid” so that “wealth may bear its due proportion of the expenses of Government.” By 1908, both parties supported a national income tax. The following year, Congress sent an income-tax amendment to the states for ratification.
Added to the Constitution in February 1913, the 16th Amendment gave Congress the power to “lay and collect taxes on incomes.” Congress passed an income-tax law that spring, and the Treasury issued the nation’s first 1040 — a three-page form that required only one page of instructions to complete.
At first affecting very few, the tax was temporarily expanded in 1916 to offset the costs of World War I. Still, few Americans — all quite wealthy — owed any tax to the federal government. Things changed in 1942. To help pay for World War II, Congress shifted from a “class tax” — paid by only the very rich — to a “mass tax.” An intensive public relations campaign, featuring such pop-culture icons as entertainer Danny Kaye, songwriter Irving Berlin and even cartoon character Donald Duck, convinced Americans of their patriotic duty to pay their “taxes to beat the Axis.”
The government’s insistence that the “real authors” of the new tax burden lived in Berlin and Tokyo and that only a national emergency could justify the new tax helps explain why the federal income tax became so unpopular after World War II. In the late 1920s, Republican Supreme Court Justice Oliver Wendell Holmes had defended taxes as “what we pay for civilized society.” In the postwar period, few politicians — even liberals — were willing to make this case.
Instead, beginning with the New Deal, liberals promised both low individual tax burdens and economic security for the rising middle class. They also divorced what postwar liberalism did best — providing economic security and mobility to the majority of Americans — from the burden of taxation. Social Security’s chief architects sold it as a plan for “organized and intelligent thrift” funded by “contributions,” rather than by taxes. The recipients of veterans’ benefits, farm subsidies or tax breaks to buy a home, pay for health insurance or reduce college costs were, and continue to be, honored as “taxpayers.” Meanwhile, beneficiaries of welfare, food stamps and Medicaid were and are demeaned as parasitical “tax eaters” and “takers.”
In so doing, the liberals of the past made it easier for middle-class Americans to see what they pay to the government than what they get in return.
Little wonder, then, that the nation’s tax politics have been reduced to a bipartisan debate about the size and distribution of cuts. Even President Obama’s plan to avert the “fiscal cliff” was mostly a package of tax reductions (which the president described as giving a tax break to “every American, including the wealthiest” among us). Such rhetoric may help win elections, but it won’t resolve our impasse over taxing and spending.
The U.S. Constitution promises to “insure domestic tranquility,” to “provide for the common defense” and to “promote the general welfare.” Taxes make these things possible. Taxes pay for the good roads, clean air and water, safe food and drugs, and strong military that Americans value. Taxes make it possible for businesses to thrive, for children to attend school and for hospitals to care for the sick. Tax dollars pay the salaries of firefighters and police officers. Taxes pay for the emergency workers, shelters and services needed when the nation is devastated by natural disasters such as Hurricane Sandy.
So maybe the federal income tax should get a birthday party. It has, after all, given us civilization.