Making the Modern American Fiscal State Law, Politics, and the Rise of Progressive Taxation, 1877–1929 At the turn of the twentieth century, the U.S system of public finance underwent a dramatic transformation The late nineteenth-century regime of indirect, hidden, partisan, and regressive taxes was eclipsed in the early twentieth century by a direct, transparent, professionally administered, and progressive tax system This book uncovers the contested roots and paradoxical consequences of this fundamental shift in American tax law and policy It argues that the move toward a regime of direct and graduated taxation marked the emergence of a new fiscal polity – a new form of statecraft that was guided not simply by the functional need for greater revenue but by broader social concerns about economic justice, civic identity, bureaucratic capacity, and public power Between the end of Reconstruction and the onset of the Great Depression, the intellectual, legal, and administrative foundations of the modern fiscal state first took shape This book explains how and why this new fiscal polity came to be Ajay K Mehrotra teaches law and history at the Maurer School of Law at Indiana University, Bloomington He is co-editor of The New Fiscal Sociology: Comparative and Historical Approaches to Taxation (Cambridge, 2009) Research for this book was supported by the American Academy of Arts & Sciences, the National Endowment for the Humanities, and the William Nelson Cromwell Foundation Cambridge Historical Studies in American Law and Society Series Editor Christopher Tomlins, University of California, Irvine Previously published in the series: Yvonne Pitts, Family, Law, and Inheritance in America: A Social and Legal History of Nineteenth-Century Kentucky David M Rabban, Law’s History Kunal M Parker, Common Law, History, and Democracy in America, 1790–1900 Steven Wilf, Law’s Imagined Republic James D Schmidt, Industrial Violence and the Legal Origins of Child Labor Rebecca M McLennan, The Crisis of Imprisonment: Protest, Politics, and the Making of the American Penal State, 1776–1941 Tony A Freyer, Antitrust and Global Capitalism, 1930–2004 Davison Douglas, Jim Crow Moves North Andrew Wender Cohen, The Racketeer’s Progress Michael Willrich, City of Courts, Socializing Justice in Progressive Era Chicago Barbara Young Welke, Recasting American Liberty: Gender, Law and the Railroad Revolution, 1865–1920 Michael Vorenberg, Final Freedom: The Civil War, the Abolition of Slavery, and the Thirteenth Amendment Robert J Steinfeld, Coercion, Contract, and Free Labor in Nineteenth Century America David M Rabban, Free Speech in Its Forgotten Years Jenny Wahl, The Bondsman’s Burden: An Economic Analysis of the Common Law of Southern Slavery Michael Grossberg, A Judgment for Solomon: The d’Hauteville Case and Legal Experience in the Antebellum South Making the Modern American Fiscal State Law, Politics, and the Rise of Progressive Taxation, 1877–1929 AJAY K MEHROTRA Indiana University, Bloomington 32 Avenue of the Americas, New York, ny 10013-2473, usa Cambridge University Press is part of the University of Cambridge It furthers the University’s mission by disseminating knowledge in the pursuit of education, learning, and research at the highest international levels of excellence www.cambridge.org Information on this title: www.cambridge.org/9781107043923 C Ajay K Mehrotra 2013 This publication is in copyright Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press First published 2013 Printed in the United States of America A catalog record for this publication is available from the British Library Library of Congress Cataloging in Publication data Mehrotra, Ajay K., 1969– Making the modern American fiscal state : law, politics, and the rise of progressive taxation, 1877–1929 / Ajay K Mehrotra, Indiana University pages cm Includes index isbn 978-1-107-04392-3 (hard covers : alk paper) Taxation – United States – History Fiscal policy – United States – History Taxation – Law and legislation – United States – History I Title hj2373.m44 2014 336.200973–dc23 2013013590 isbn 978-1-107-04392-3 Hardback Cambridge University Press has no responsibility for the persistence or accuracy of urls for external or third-party Internet Web sites referred to in this publication and does not guarantee that any content on such Web sites is, or will remain, accurate or appropriate For my parents, Neena and Vishnu 416 Making the Modern American Fiscal State may be tenuous, but it is no less real The recent revolts are a reaction to the turn-of-the-century fiscal transformation The intellectual, legal, and administrative origins of our fiscal polity continue to set the agenda for today’s conservative uprisings The early-twentieth-century foundations also continue to shape current debates about tax policy and the relationship between citizens and the state The rise of the New Right, like the formal fiscal retrenchment of the 1920s, is a belated response to the social democratic victories of an earlier era And just as Andrew Mellon had to come to grips with his institutional context and the sequence of historical events he inherited, so too have the heirs of the Reagan Revolution acknowledged the limits of their achievements For all the talk about tax cuts, a commitment to the notion of ability to pay continues to resonate among many Americans Popular opinion polls continue to show that most Americans support increased taxation on the rich Despite all the claims to “starve the beast,” the modern fiscal polity has endured.13 The long history of the making of the modern fiscal state, chronicled in the previous pages, continues to press upon the thinking of today Yet one could still claim today that the story told in this book about law, politics, and the making of the American fiscal state is a tale of lost opportunities – that the early intentions of progressive tax reformers have been marginalized, and that our current tax system is simply a muddle of incoherent, special interest giveaways and loopholes There is certainly some truth to that popular perception But such a perspective is remarkably ahistorical Judging the American fiscal state based solely on what it does not today obscures what it did during its early years The effective displacement of a regressive, hidden, and highly politicized tax system was in and of itself a tremendous achievement That accomplishment may have lost some luster over the years, but it can still remind us of what was, and is, possible Roughly a century after the establishment of the modern fiscal state, many scholars have concluded today that our current income-based tax system is an economically inefficient means of raising public revenue In 13 C Eugene Steuerle, Contemporary Tax Policy (Washington, D.C.: Urban Institute Press, 2008), 3; Bruce Bartlett, The Benefit and the Burden: Tax Reform – Why We Need It and What It Will Take (New York: Simon & Schuster, 2012), 226–9; Greg M Shaw and Laura Gaffey, “American Public Opinion on Economic Inequality, Taxes, and Mobility: 1900–2011,” Public Opinion Quarterly 76:3 (2012), 576–96; William A Niskanen, “Limiting Government: The Failure of ‘Starve the Beast,’” Cato Journal (fall 2006), 553–8 Conclusion 417 calling for a shift to a progressive consumption tax, these economic evaluations illustrate the sharp analytical logic that often drives most current academic and policy debates.14 Yet, these models elide the complex historical and incremental development of the political, economic, and social ideas and institutions within which current policymakers must operate In their ahistorical assessments, these current studies frequently overlook how earlier conceptions of fiscal citizenship, social belonging, and collective responsibility drove Progressive-Era tax reformers to stress the significance of a robust public sphere.15 Clouded by the anti-statist rhetoric and anti-tax ideology that appears to dominate present debate, most ordinary Americans, likewise, have lost sight of how and why activists from earlier generations searched for a stronger source of financing for the positive state As the current income tax system marks its centennial, lawmakers and politicians have taken every opportunity to decry the failings of the present system In the name of “tax reform,” political leaders have vowed to rectify these defects with fundamental changes to the progressive income tax regime Recent calls for a “flat tax,” for instance, exemplify the current assault against the principles of direct and progressive taxation.16 Meanwhile, the turn of the twenty-first century has brought with it a new era of rising inequality.17 As the United States enters a second Gilded Age, 14 15 16 17 See, e.g., Daniel S Goldberg, The Death of the Income Tax: A Progressive Consumption Tax and a Path to Fiscal Reform (New York: Oxford University Press, 2013); Alan D Viard and Robert Carroll, Progressive Consumption Taxation: The X-tax Revisited (Lanham, Md.: Rowman & Littlefield, 2012); Joseph Bankman and David A Weisbach, “The Superiority of an Ideal Consumption Tax over an Ideal Income Tax,” Stanford Law Review 58:5 (2006), 1413–56; Laurence S Seidman, The USA Tax: A Progressive Consumption Tax (Cambridge, Mass.: MIT Press, 1997) By contrast, other public finance experts have recently come out in support of higher marginal income tax rates, while acknowledging the political and social constraints that accompany present-day policymaking Peter Diamond and Emmanuel Saez, “The Case for a Progressive Tax: From Basic Research to Policy Recommendations,” Journal of Economic Perspectives 25:4 (2011), 165–90 One recent tax reform proposal, calling for an income tax on wealthy Americans supplemented by a value-added tax, echoes what the U.S tax system might have looked like in the 1920s if a national sales tax was adopted to supplement the income tax Michael J Graetz, 100 Million Unnecessary Returns: A Simple, Fair, and Competitive Tax Plan for the United States (New Haven: Yale University Press, 2008) Neal Boortz and John Linder, The Fair Tax Book: Saying Goodbye to the Income Tax and the IRS (New York: Regan Books, 2005); Steve Forbes, Flat Tax Revolution: Using a Postcard to Abolish the IRS (Washington, D.C.: Regnery Publishers, 2005) For more on rising inequality and its causes, see Thomas Piketty and Emmanuel Saez, “Income Inequality in the United States, 1913–1998,” Quarterly Journal of Economics 118:1 (2003), 1–39; “How Progressive Is the U.S Federal Tax System? A Historical and 418 Making the Modern American Fiscal State new social movements – representing the “99 percent” – have once again emerged to challenge the growing concentrations of wealth and opportunity As these new movements search for ways to combat the seemingly inexorable forces of our post-industrial condition, it may be instructive to look back at the first Gilded Age, and how an earlier generation of progressive activists responded to changing circumstances by envisioning and implementing dramatic reforms.18 By turning to an earlier period in American history, when serious comprehensive tax reform was not only conceived but also achieved, we can recall the emotional and imaginative energies, the social and economic conditions, and the political will necessary for fundamental fiscal reform In the process, we can appreciate the hard-fought roots of our current tax system and the social and economic justice ideals that it represents, as well as the unintended and paradoxical consequences of an earlier generation of thinkers and policymakers In this sense, this study about the making of the modern American fiscal state is about much more than just the intellectual, legal, and administrative foundations of a new form of governance It is ultimately a tale about American democracy – about the winners and losers of a process seeking to change the structures of wealth and opportunity in the United States 18 International Perspective,” Journal of Economic Perspectives 21:1 (2007), 3–24; Paul Pierson and Jacob S Hacker, Winner-Take-All Politics: How Washington Made the Rich Richer – and Turned Its Back on the Middle Class (New York: Simon & Schuster, 2010) Larry M Bartels, Unequal Democracy: The Political Economy of the New Gilded Age (Princeton: Princeton University Press, 2008); Sarah Van Gelder, This Changes Everything: Occupy Wall Street and the 99% Movement (San Francisco: Berrett-Koehler, 2011) Index “ability to pay,” 10, 19, 63, 96–97, 114, 127, 153, 161, 193–194, 218, 238, 239, 255–256, 276, 357, 405, 411 See also taxpaying faculty Adams (H C.) and, 63, 115–6, 150–2 American Federationist and, 148–150 Bailey on, 267 Ballantine on, 363–364 Bullock and, 210–211 Bureau of the Corporations on, 256–257 Brown on, 139 Bryan and, 127 Clapperton and, 256 Ely and, 63, 119 Fithian on, 127 Hall on, 127 Hull on, 266, 287–288 income and, 150 Leffingwell on, 337–8 McKenzie on, 382 Mellon on, 401 Mill and, 111, 161 National Industrial Conference Board on, 379–380 Plehn and, 193–4, 218 Roper on, 360 Roosevelt, Franklin D and, 413 Seligman and, 63, 113–114, 116–117, 119–120, 158–161 Walker and, 159–160 West on, 227 Winslow on, 238–239 academic freedom, 51, 108–109, 165 Adams, Henry Carter, 10, 38, 86–87, 94, 97, 107–110, 112–113, 218, 325–326, 388 background of, 100 Cooley and, 151 Seligman and, 158 Adams, Thomas S., 189, 216, 231–234, 261, 335–336, 339, 383–390, 406–407 Wisconsin income tax and, 229–231, 236–237, 240 U.S Treasury Department and, 335–336, 339, 372, 383–388 Addams, Jane, 12 Adler, Felix, 100 alcohol, 3, 68 excise levy on (1880–1913), 72–73 Aldrich, Nelson W., 264, 268–269 Alger, Horatio, Jr., 100 Allen, Frederick Lewis, 322 Allen, William V., 125–127, 131 Amalgamated Association of Iron and Steel Workers, 72 American Committee on War Finance, 302 American Economic Association (AEA), 93, 96, 159, 180, 372 American Farm Bureau Federation, 381–382 American Federationist, 148, 152 American Federation of Labor (AFL), 71–72, 148 American Iron and Steel Association, 49 American Protective Tariff League, 49 American Social Science Association (ASSA), 37–38, 84, 186 American Socialist Party, 81 American Tax League, 353, 378, 399, 405 Anti-Monopoly Party, 81 Anti-Saloon League, 74 Arno, Mary, Arnold, J A., 378, 399, 405 Association for an Equitable Federal Income Tax, 302 419 420 Index Bacharach, Isaac, 377–378 Bailey, Joseph W., 264–267 Bailey-Cummins (income tax) bill (1909), 268 Ballantine, Arthur A., 296, 362–364, 390, 396, 406, 408, 414 post-war career of, 33, 343 Roper and, 362–364 “Treasury lawyers” and, 307–321 Baruch, Bernard M., 299 Beale, Joseph H., 372–375 benefits theory, 10, 61–67, 153, 185, 388 See also “ability to pay;” consumption tax Adams on, 112 Cooley on, 61–64 and reciprocal obligation, 111–112 Ely on, 112 Seligman and, 113–117 Berger, Victor, 79–80 Blakey, Roy and Gladys, 28 Board of Tax Appeals (BTA), 396, 406 Board of United States General Appraisers, 58–59 Borah, William E., 264, 276–278, 400 Seligman and, 281 Boston Chamber of Commerce, 377 Boston Home Market Club, 49 Brandeis, Louis, 185, 191, 369 Brindley, John, 216 Brown, Henry Billings, 139 Brownlee, W Elliot, 29 Brushaber v Union Pacific Railroad Co (1913), 276, 366–367 Bryan, William Jennings, 32, 127–128, 143, 242, 322, 396 Bryce, James, 186 Buenker, John D., 271 Bullock, Charles J., 189, 216, 261, 263, 325–326 Bureau of Internal Revenue (BIR), 286, 305–314, 321, 323, 340 Bureau of War Risk Insurance, 357–358 Burroughs, W H., 62, 117, 365 Business Men’s National Tax Committee, 353, 378 California, 196, 415 Commission on Revenue and Taxation, 217–218 Cannon, Joseph G., 264 Capital Issues Committee (CIC), 316 capitalism corporate, 187 See also corporations post Spanish-American War, 245 industrial Adams (H C.) and Seligman and, 180 Ely and, 149 managerial, 285 progressive, 170, 180 cards, playing, Carey, Henry C., 51, 93 Carl, Conrad, 1–3, 31, 33–34 Carnegie, Andrew, 225 Carter, James C., 136 Carver, Thomas N., 176–179 Cases on Taxation (Beale), 374–375 Chicago, 197 Choate, Joseph H., 132 Seligman and, 133 Civil War pensions, 49, 68 corruption and, 88 Clapperton, George, 224, 256 Clark, John Bates, 174–175 Cleveland, Grover, 47 Clifford, Nathan, 58 Clubb, John Scott, 278–279 Cockran, Bourke, 128 “collection at the source,” 240, 283–284, 288 See also “stoppage at the source”; withholding tax collectivity, H.C Adams on, 258 Commerce Department, 350 Committee on Public Information, 323 commodity value (determining), 174 Commons, John, 242, 289 Congressional Joint Committee on Taxation, 396 consumption tax, 43, 53, 354, 388 See also benefits theory; indirect tax Cook, Walter Wheeler, 374 Cooley, Thomas M., 29, 37–41, 97, 135–136, 341, 365, 372 importance of, 84–85 Coolidge, Calvin, 397–398 Corporation Trust Company, 372 corporations, 245–247 See also capitalism, corporate; tax economic disparities and, 248–249 fiscal citizenship and, 253–254 “great merger movement” of (1895–1904), 223, 250–252, 334 Index as legal persons, 256 “monster” (King), 249, 250, 253, 289 subnational levies on, 222 taxes and, 222–228 Adams (H C.) and, 252–253 Anglo-American differences in, 259–260 Delaware, 223 flat rate, 268 interpreting, 254–255 “legible,” 256–257 New Jersey, 223 Pennsylvania, 223 Seligman and, 252–253 Walker and, 252–254 cost of living, 243–244 Cravath, Paul, 308, 312 Creel, George, 323 Croly, Herbert, 186 Cummins, Albert C., 264, 267 deductions (tax), 361 deference, judicial (to partisan taxation), 56–61 deLeon, Daniel, 80 democracy essential idea of (Addams), 12 “shareholder,” 251 Democratic Party, 82, 143–144 tariffs and, 47–54 dependent care, state spending on, 196–198 Dewey, John, 15, 349, 352, 355, 408 direct tax, 131–135 See also indirect tax; tax constitutional meaning of, 132–135 Ely on, 346 Seligman on, 132–135 U S Constitution and, 57 Distribution of Incomes in the United States (Streightoff), 248 dividends (stock), 367–371 Dix, John A., 275 Dover, Elmer, 406 Due Process Clause, 366–367 See also U S Constitution, 5th and 14th Amendments to duties customs (as tariffs), 58 import, 1–4, 6, 354 Cooley on, 38 pre-Civil War – 1890s, 45–53 421 Economic Interpretation of History, The (Seligman), 170 Edgeworth, F Y., 175–181 Edmunds, George F., 132 education, state spending on, 196–197 Edwards, Rebecca, 51–53 Eisner v Macomber (1920), 367–371, 374, 394 Ely, Richard T., 86–87, 97–98, 218, 388 background of, 99, 103–106 endowment tax, 160 Essays in Taxation (Seligman), 158 excess profits, 304 Adams (H C.) and, 246 tax, 304, 333–343, 353–354, 376, 400, 408, 413 See also tax Adams (T.S.) and, 385 capital (invested) and, 125, 335–336 challenges to, 340–341 Excess Profits Tax Advisory Committee, 406 excise tax, 354 See also tax corporate, 247–252 hidden, 72–75 regressive, Farmers’ National Committee, 339 federal estate tax, 404, 408, 410 See also inheritance tax; tax Federal Income Tax (Holmes), 372 Federal Reserve System, 248, 330 Fels, Joseph, 250 Field, Stephen J., 138–140, 147, 165, 183 Finanzwissenschaft (Science of Finance, Wagner), 105 First Great Law & Economics Movement, 11, 97 fiscal citizenship, 40, 61–67, 84, 96–97, 111, 126–127, 146, 153, 188, 236, 253–254, 257, 280–281, 288, 295, 297, 305, 307, 321–333, 346–348, 352, 359, 380–381, 395, 400–401, 409, 413, 417 defined, 12–13, 322 Fischer, Irving, 325 Fithian, George W., 127 Food Administration, 299 Foote, Allen Ripley, 271 Ford, Henry, 318 422 Index Fordney-McCumber Tariff (1922), 395, 400 Frear, James, 382–383 free trade, 46–48, 50–1, 53, 70–71, 89, 91, 93–94 Free Trade League, 50 Freund, Ernst, 257 Friday, David, 354, 384 Friedman, Lawrence, Fuller, Melville, 138 Furner, Mary, 96 Garner, John Nance, 398, 405 general property tax See property tax George, Henry, 30, 68, 71, 76–78, 91, 147, 174, 200, 246 German Historicism, 103–107, 169 and the American “science of finance,” 109–118 Gierke, Otto von, 257 gift tax, 404 Gilbert, S Parker, 312, 397 Gladden, Washington, 99 Glass, Carter, 343, 376 Glenn, Garrard, 283–285 Glory of Paying the Income Tax, The (Roper), 323 Gompers, Samuel, 77, 122 Goodnow, Frank J., 263, 372 Gordon, Robert W., 310 graduated tax See also progressive tax; tax Independent political parties and, 81–82 Leffingwell on, 326, 337 Marxism and, 378 resistance to, 79–80, 138–139, 147, 153–154, 165, 268, 324–325, 337, 364, 378 Seligman and, 114, 155, 159–164, 278–80 socialism and, 164–166 Seligman and, 165–166 Granger Movement, 81, 123 Great Upheaval (1880s), 67 Green, William R., 399, 405 Greenback Party, 79, 81–82 Guthrie, William D., 132 Haig, Robert Murray, 160, 354, 384, 389–394 Seligman and, 389–390 Simons and, 391–392 Hall, Uriel S., 27, 127 Harding, Warren G., 349, 377, 405 Harlan, John M., 253 Haugen, Nils P., 231–236, 261 Havemeyer, Henry O., 50 Hays, William H., 349–350, 360, 376, 396, 408 Henderson, E C., 329 Hewitt, Abraham, 77 Hill, David, 129–130, 155 Hilliard, Francis, 56, 63, 365 Hobson, Richmond P., 75 Holmes, George K (statistician), 92, 126, 248, Holmes, George E (tax lawyer), 372–373, 390 Holmes, Oliver Wendell, Jr., 369 Holmes, Stephen, 20 Hopkins, Albert L., 312 Houston, David F., 344, 376 Hoxie, Robert, 122 Hughes, Charles Evan, 269–276 Hull, Cordell, 12, 264–267, 276, 296, 394–395, 398 Seligman and, 287–289 Hurd, Augusta, Hylton v U S (1796), 136, 138 Illinois, 196 immigration (1870–1900), 94–95 income 16th Amendment and, 369 categories of (Adams), 150–151 defining Haig, 390–394 U S Supreme Court, 365–371 differentiating sources of, 146, 148–152, 370–371 earned and unearned, 130, 148–152, 281–282, 402 economic, 392–393 labor, 402 legal (taxable), 392–393 modified gross (T S Adams), 385 net, 361 tax base and, 380 from services and property, 150–151 sources of, 402 Adams (H C.) and, 281 as test of “ability to pay,” Adams (H C.) and, 150 Index income tax, 15, 185, 384–385 See also direct tax; tax 1894, 87, 121–140 shortfalls of, 130–131 1913 See Underwood-Simmons Tariff Act (1913) 1920 Columbia University conference, 390 Adams (H C.) and, 116 Adams (T S.) and, 229 assessing (Wisconsin, 1911), 239–240 Bullock and, 229 centralizing assessments of, 233 civic responsibility and, 363 as a “class” tax, 399, 413 corporate, 280–281, 400, 408 Cooley and, 245 differentiated, 276 Ely and, 115, 119 Farmers’ Alliance of Rile County (Kansas) petition to reform, 123 fiscal equilibrium and, 278 flat rate, 417 Hull on, 27, 287–289 “inquisitorial,” 126, 202, 277, 284–285, 288, 342 institutionalizing direct and graduated taxes, 28 as invasion of privacy, 202–203, 277 judicial acquiescence and, 365–375 “legible,” 246, 284 local assessment (Bullock on), 205 Massachusetts Grange No 157 and, 123–124 New York Chamber of Commerce and, 124 opposition to, 124–125, 126, 128, 130, 138–139, 165–166, 229, 237, 262, 268–269, 277, 324–325, 349–350, 364 patriotism and, 323 radical populism and, 277 rates (1920–30), 351–352 replacing tariffs, 65 Seligman on, 25, 116, 229 social justice and, 363 theory of (Roper), 361 Wisconsin (1911), 32, 191, 228–241 Adams (T S.) and, 231–248 Seligman on, 237 423 Income Tax, The (Seligman), 134, 179–180, 278 Indiana State Tax Commission, 206–208 indirect tax, 38 See also consumption tax; direct tax inflation, 243–244, 392 inheritance tax, 81–82, 157, 162, 166, 224–228, 253, 405, 409–410 See also tax; wealth-transfer tax Connecticut, 226 federal, 225, 253, 261–262, 302 Illinois, 225 Michigan, 225 Minnesota, 225 New York, 225–227 Ohio, 225 Pennsylvania, 225 Wisconsin, 226, 232 Investment Bankers’ Association, 334 Jackson, Howell E., 139–140 James, William, Johnson, Hiram, 220 Joint Committee on Internal Revenue Taxation, 407 Journal of United Labor (JUL), 69–71, 77 Kahn, Otto, 377 Keller, Morton, 46 Kennedy, David M., 294 Kennen, Kossuth K., 231 King, Willford I., 248–249 Kinsman, D O., 236, 263 Kitchin, Claude, 322, 324, 335–336, 338, 340, 353, 382 Knies, Karl, 103, 106, 174 Knowlton v Moore (1898), 253–254, 262 La Follette, Robert M., Sr., 231, 264, 324, 354, 398 land rent, 80 tax, 132, 138 Leffingwell, Russell C., 296, 407 post-war career of, 33, 343–346 “Treasury lawyers” and, 307–321 Legal Nature of Corporations, The (Freund), 257 legal science (liberal versus progressive), 310 Leland, Simeon E., 213–214 424 Index Liberty Bond Act, 320 “Liberty Loans,” 300–301, 319, 326, 330–331 Lindert, Peter H., 91 List, Frederich, 46 Lloyd, Henry Demarest, 50–51 Lochner v New York (1905), 370 Lodge, Henry Cabot, 277 Love, Thomas B., 295, 357–358 “Treasury lawyers” and, 307–321 Lutz, Harley, 208 Macomber, Myrtle H., 367 See also Eisner v Macomber; “realization requirement” MacVeagh, Wayne, 262 Magill, Roswell, 375 Maguire, J M., 375 Maine, Henry, 43 marginal utility analysis (marginalism), 173–184 Marshall, Alfred, 174 Marx, Karl, 147, 378, 411 Marxism, 79–80, 170–171 Massachusetts, 196 McAdoo, William Gibbs, 294, 304, 307, 310, 316, 326–328, 330, 335–336 McCarthy, Charles, 231–232, 236 McConnochie, James F, 405–406 McGovern, Francis, 238 McKinley, William, 71, 242 McMillin, Benton, 50, 125 Mellon, Andrew W., 33, 350, 354, 376, 394–408, 412 Mellon Plan (of scientific tax reform), 351, 376, 394–408 Miles, Ogden L., 343 Mill, John Stuart, 51, 63, 93, 107, 111, 161–163, 164 Mills, Ogden L., 378 Mitchell, Wesley C., 98, 262 Morgan, J P., 247 Morgenthaler, C E and Henry, 201, 203, 381–382 Moses, George H., 378 Mussey, Henry R., 407–408 National Association of Credit Men, 379 National Association of Retail Grocers, 379 National Industrial Conference Board (NICB), 379–380 national sales tax, 354, 378–383, 413–414 See also tax flat rate, 378 National Tax Association (NTA), 189, 210–211, 271 National War Labor Board, 299 New Deal, 412 New Jersey, 196 New York, 196, 196–197 16th Amendment and, 269–276 Chamber of Commerce, 325 City, 197 New York Times, 275 Newcomer, Mabel, 218–219 Noble Order of the Knghts of Labor, 30, 69–71 Norris, George W., 322 Ohio, 201–204 Olney, Richard, 136–137 Owen, Robert, 170 Pace, Homer S., 315 Panic of 1893, 87, 121–124 of 1907, 248 patriotism, 288, 297, 314–5, 319, 321–324, 326 See also sacrifice Leffingwell on, 331–332 Hull on, 288–289 McAdoo on, 331–332 Roper on, 314–315, 323–324, 359 World War I and, 297, 314–315, 319, 321–324, 326, 359 Paul, Randolph E., 28, 372 Peffer, William A., 125 People’s Party, 81–82 People’s Pictorial Taxpayer, 51 Perry, Arthur Latham, 51, 93 personal property tax, 6, 39 See also property tax; tax Bullock and, 208–211 classification and, 190 Connecticut, 211 Cooley on, 186 flaws of, 187–188 Maryland, 211–212 Pennsylvania, 211 rate diversification (Bullock on), 210–211 Philadephia, 197 Pinchot, Amos, 305 Index Pitney, Mahlon, 368–369, 371 Plehn, Carl C., 189, 193, 217–218, 221 Political Science Quarterly, 98, 263, 273 poll tax, 55, 131–132 See also tax Pollack, Sheldon D., 23 Pollock v Farmers’ Trust & Loan Association (1894), 130–140, 225, 228, 253, 366, 369 new fiscal order and, 182–184 response to, 143–184 subnational effects of, 185 Pomeroy, Eltweed, 92–93 Populist Party, 81, 143–144, 242 Pound, Roscoe, 374 Powell, Thomas Reed, 369, 375, 390 Prettyman, E Barrett, Sr., 312 Principles for Framing Tax Laws (Cooley), 81 “Principles that Should Govern the Framing of Tax Laws” (Cooley), 37–38 profiteering, war, 305, 329, 333–340 Progress and Poverty (George), 77, 147–148 Ely on, 77 Marx on, 147 progressive tax, 154–157, 163–173 See also graduated tax Adams (H C.) and, 172 early support for, 81–85 national income redistribution and, 167 opposition to, 79–80, 138–139, 147, 153–154, 165, 268, 324–325, 337, 364, 378 versus proportional, 153–154 Seligman and, 163–164, 280 Prohibition, 72–75, 360 Prohibition Party, 74, 81 property tax, 39, 43–45, 55 See also personal property tax; tax 1880–1920 reforms, 204 Adams (H C.) and, 186 administrative improvements to preserve, 189–190 assessing Adams (T S.) and, 205–207 Wisconsin (1911), 208 assessment and centralization, 204–208 California, 212, 217, 219–220 425 centralization (administrative), 172, 190, 204–208, 216, 233 classification, 208–214 colonial through nineteenth century, 191–196 Connecticut, 194, 212 corporate, 191 corruption and, 203–204 defense of, 152–154 dissatisfaction with, 191–200 early critiques of, 118–121 Ely and, 119, 186 flaws of, 187–188 “general,” 4–5, 193–196, 239 Cooley and, 39, 94 corruption and, 54–55 defects of, 94 flaws of, 199, 208 Illinois (1883), Seligman on, 199 Illinois, 194–195, 212 local control of, 189–190 Louisiana, 212 Massachusetts, 194 Minnesota, 212, 213 New York, 194, 217 Ohio, 194–195, 212 tax inquisitors and, 201–204 Oregon, 212 patronage and, 84 Pennsylvania, 194, 212–213, 217 privacy and, 202–203 Reconstruction to World War I, 185–186 Seligman and, 44–45, 119–120, 186 separation of sources, 214–222 state tax commissions, 190 “uniform,” 59 Utah, 212 Proposition 13 (California), 415 protectionism, 187, 395 See also tariffs Adams (H C.) and, 110 Ely and, 110 industry and, 89–91 regional effects of, 42 “public purpose” doctrine, 60 public services, 197 Purdy, Lawson, 214–215 Ratner, Sidney, 28 Rauschenbusch, Walter, 77, 249 426 Index “realization requirement,” 370–371, 398 reapportionment, 366 reciprocity See benefits theory Reed, Robert R., 334, 340 reform (tax), 6–19, 21–34, 405 difference between national and subnational, 189–191 forces favoring, 94, 266 reconsideration of, 187 obstacles to, 67–68 partisan polarization around, 360 post Spanish-American War factors influencing, 243–246 principles of (McKenzie), 382 sectional priorities around, 67–68, 122–123, 266–267 subnational, 32, 185–241 Report of the Maryland Tax Commission, 201 Republican Party, 242, 354, 375–379, 406 tariffs and, 47–54, 64–65 retrenchment (programmatic and systemic), 354 revenue customs, 122 debt (subnational) and, 199–200 separation of sources Adams (H C.) on, 215–216 Seligman on, 215–216, 221 state sources of, 222–241 tax imbalance and, 191, 192–193, 194–201, 220–221 Revenue Act of 1916, 302, 367, 372 of 1917, 304, 325 of 1921, 375–383, 395 of 1924, 398, 402, 404 of 1926, 399 of 1928, 399, 400 Rodgers, Daniel T., 103, 414 Roosevelt, Franklin D., 28 Roosevelt, Theodore, 77, 225, 261 Root, Elihu, 243, 271–272, 273, 277 Roper, Daniel C., 295, 305, 394, 396, 406–407 Leffingwell and, 344–345 post-war career of, 33, 343 on postwar tax system, 356–363 “Treasury lawyers” and, 307–321 Roscher, Wilhelm G., 103–104, 106 sacrifice See also patriotism direct and indirect, 178 equality of (Mill), 161 Seligman on, 162–163 minimum, 173–184 San Francisco earthquake and fire (1906), 247 Santa Clara v Southern Pacific Railroad (1886), 258 Satterlee, Hugh, 312 Schmoller, Gustav, 103, 106 Schonfarber, Jacob G., 250 Schurz, Carl, 88 Seligman, Edwin R A., 10, 86–87, 92, 98–99, 106–107, 132, 151–152, 218, 325–326, 388, 391, 393, 400, 409–410, 412 background of, 100–101 Carver and, 178 Edgeworth and, 178 George and, 147–148 Haig and, 160, 389–390 Hughes and, 269–276 Walker and, 159–160 Shaw, Samuel B., 78 Sherman, John, 58 Sherman, Thomas G., 91–92, 126 Shoup, Carl, 391, 394 Sidgwick, Henry, 176 Simons, Henry, 391 “sin” tax, 74 See also tax single tax See also tax advantages and disadvantages of, 78–79 Ely and, 147–148, 250 George (Henry) and, 31, 68, 76–81, 91, 147–148, 200, 250 partisan polarization around, 83–84 sectional priorities around, 83 Seligman and, 147–148, 250 Walker and, 147–148 Sklar, Martin J., 245 Smith, Abby and Julia, 55 Smith, Adam, 51, 93, 105, 110, 401 Smith, Rogers, 18 Smoot, Reed, 345, 377–378, 378–379 Social Gospel Movement, 77, 96, 99, 101, 169, 171, 249, 257 socialism American, 79, 139, 144–145, 147, 172–173, 183, 260 Ely and, 169, 171–173 Index individualism and (H C Adams), 166 Seligman and, 169–170 European, 107, 147, 166–167 historical materialism and (Seligman), 170 Socialist Labor Party, 79 Society for Ethical Culture, 100 Spahr, Charles, 248 Spanish-American War (1898), 146, 242–243 Spaulding, Harrison B., 259–260 Sprague, O M W., 325, 327 Spreckels Sugar Refining Co v McClain (1904), 253 Springer v United States (1881), 138 Standard Oil Company, 367 Stanley, Robert, 26 state, 10 Ely on, 166 legal responsibilities of (Adams, H C.), 181 legislatures, 56–57 “patrimony of” (Adams, H C.), 180–181 power of taxation, 270–271 statism (World War I), 298 statistical science, 249 Steinmo, Sven, 18 Steward, Clarence A., 132–135 Seligman and, 133, 155 “stoppage at the source,” 130, 240, 272, 282–283, 288 See also “collection at the source” withholding tax Story, Joseph, 86, 156 Streightoff, Frank H., 248–9 succession tax, 253, 263 See also inheritance tax; tax Sumner, William Graham, 65–66, 139 Sunstein, Cass, 20 Taft, William Howard, 264, 268 Talbert, Henry, 127 Tariff Act (1883), products included in, 3–4 tariffs, 41 See also duties, import; protectionism Christian Union on, 43 Civil War justifications for, 87–88 Cooley on, 45 corporations and, 50 corruption and, 65–66 427 divided allegiances around, 69–72 effects of, 42 forces favoring reconsideration of, 86–96 gender dynamics and, 53–54 New York Times on, 43 partisan polarization around, 88 protective, 38–39 revenue and, 87–88 “for revenue only,” 88 sectional priorities around, 49–50 Seligman on, Sidgwick on, 41 as state capitalism (Wells), 66 unprotected labor and, 71 Washington Post on, 43 Taussig, Frank W., 51 tax, 252, 261 See also specific tax type 1918 deferment of, 319–321 Anglo-American differences in, 334 Athenian and Roman “tax farming,” 202 base (defined by 1894 income tax law), 129 class responses to (Ely on), 73–74 collection, 131 compensatory theory of See benefits theory Cooley on, 57, 60 correct doctrine of (Massachusetts Tax Commission), 117–118 defining, 256 equitable allocation and uniformity of, 60 evasion (Roper on), 359 federal control and (Walker on), 261 flat rate versus graduated, 152–153 inequities in, 41–45 “insurance model” of, 62 as a one-sided transfer (Ely), 114 partisan and sectional polarization around, 47, 124–131, 264–266, 271–272, 354, 376–379 philosophical justification for (Cooley), 39–40, 110–111 political and social dynamics of, 45–56 post World War I, 356–365 power of levying, 109 professional consultants, 363 professionals, 372, 375–389, 383–389, 405–407 on rents, 137 428 Index tax (cont.) as sacrifice to public good (Burroughs), 62, 117 sectional polarization around Smith on, 64 social (Seligman on), 260–261 social cohesion justification for (Ely), 118 social contract and, 61–67 sozialpolitisch, “social welfare” theory of (Wagner), 167 special assessment, two evils of (Carver), 177 wealth inequalities and, 148–149 Tax League of America, 378 Taxation People’s Business (Mellon), 397–398 taxpaying faculty, 10, 256, 276, 388 See also “ability to pay” benefits theory equality of sacrifice and, 161 origins of, 157–164 Seligman and, 113–114, 158–161 true promise of (Seligman), 164 Walker and, 159–161 Thelen, David, 197–198, 230 Thompson, Newton W., 220–221 Tilly, Charles, 23 tobacco, 3, 68, 72 Tocqueville, Alexis de, 29, 297–298, 387 “Treasury lawyers,” 33, 405, 412 See also U S Treasury Department contributions of, 296–348, 346–348 Treatise on the Law of Taxation (Cooley), 57 Tucker, John Randolph, 73 Tumulty, George, 337–338 U S Bureau of Corporations, 256–257 U S Constitution 5th Amendment to, 340–341 14th Amendment to, 258 15th Amendment to, 56 16th Amendment to, 33, 269–276, 299, 324, 327, 411 New York ratification of, 269–276 partisan polarization around, 273–276 as a “recall” of Pollock, 369 sectional priorities around, 275 18th Amendment to, 75, 360 Article 1, Section of, 366 uniformity clause of, 156–157 See also uniformity U S Industrial Commission, 256 U S Supreme Court, 31, 33, 57–58, 87, 131–132, 365, 411 See also specific case names U S Treasury Department, 58, 294–348, 383–384, 410 See also “Treasury lawyers” jurisdictional prerogatives of, 316–321 public trust and, 316–321 Underwood, Oscar, 282–283 Underwood-Simmons Tariff Act (1913), 6, 269, 276–289, 324, 411 uniformity See also U S Constitution, uniformity clause of Cooley on, 156 Seligman and, 156–157, 273 Story (Joseph) on, 156 United States Brewers’ Association, 75 value-added (VAT) tax, 385–386 See also tax Veazie Bank v Fenno (1869), 366 Vickrey, William, 391 Volstead Act, 360 Wagner, Adolph H G., 103, 114, 148, 167–169, 234 Walker, Francis A., 93–94, 109, 159–161, 164, 253, 391 War Finance Corporation, 316 War Industries Board, 299 War Trade Board, 329 War Trade Export Corporation, 328 wealth inequality, 249–250 intangible, 149 transfer tax, 129–130, 395, 399, 404, 413 See also inheritance tax Weber, Max, 14, 16, 297–298, 317 Wells, David A., 54, 66, 139, 144, 147, 155–156 West, Max, 227, 262–263 What Shall We Do with the Income Tax? (Roper), 359–360 White, Edward, 366 Whitney, Edwin B., 263–264 Wickersham, George W., 277 Williams, John, 128 Index Williamson, Jeffrey G., 91 Wilson, H S., 233–235 Wilson, William L., 125 Wilson, Woodrow, 293, 303, 338 Wilson–Gorman Tariff Act (1894), 128–129 Winslow, John B., 237–238 Wisconsin, 32, 59–60, 196 “Idea,” 231 See also income tax, Wisconsin (1911) state tax commission 429 withholding tax, 276, 288 See also “collection at the source” “stoppage at the source” Wolcott, Oliver Jr., 134, 191 Woman’s Christian Temperance Union, 75 Wool Manufacturer’s Association, 49 World War I, financing, 293–307 World War II, 15, 22, 28, 301–302, 329, 412–414 Yearly, Clifton K., 44 ... Making the Modern American Fiscal State Law, Politics, and the Rise of Progressive Taxation, 1877 1929 At the turn of the twentieth century, the U.S system of public finance... Antebellum South Making the Modern American Fiscal State Law, Politics, and the Rise of Progressive Taxation, 1877 1929 AJAY K MEHROTRA Indiana University, Bloomington 32 Avenue of the Americas,... Violence and the Legal Origins of Child Labor Rebecca M McLennan, The Crisis of Imprisonment: Protest, Politics, and the Making of the American Penal State, 1776–1941 Tony A Freyer, Antitrust and