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Federal Taxation in America: A Short History

 by W. Elliot Brownlee, Woodrow Wilson Center and Cambridge University, 2004

Distinguished historian W. Elliot Brownlee traces the sweeping changes in federal taxation policy that have invariably occurred during times of great national emergencies, from the early republic through the George W. Bush presidency. In crafting new tax systems, political leaders needed to “convince the mass of tax payers that their sacrifices were fair.” This was not always easy. The enactment of the modern income tax in 1913 only fell on 10 percent of income earners. The Hoover administration raised taxes on the rich and Franklin Roosevelt’s administration raised them even further. But it was not until payroll with holding was instituted in 1943 that income taxes were expanded to the vast majority of Americans.

The Whiskey Rebellion: George Washington, Alexander Hamilton, and the Frontier Rebels Who Challenged America’s Newfound Sovereignty

by William Hogeland, Scribner, 2006

When debt-ridden small landowners in frontier western Pennsylvania took up arms to resist the Washington administration’s newly instituted tax on domestic whiskey pro duction in 1791, they dis covered the truth of Benjamin Franklin’s famous adage written only two years earlier: “In this world nothing is certain but death and taxes.” Secretary of the Treasury Alexander Hamilton, intent on creating revenue sources for the new federal government, had convinced Congress to enact a tax on distilled spirits. The tax fell heaviest on cash-strapped frontier farmers and artisans who relied on small whiskey production to maintain their families. After a full blown secessionist insurgency developed, President George Washington raised 30,000 federal troops to suppress the rebellion and preserve the new nation.

The Great Tax Wars: Lincoln to Wilson

by Steven R. Weisman, Simon & Schuster, 2002

On July 1, 1862, President Abraham Lincoln signed the first federal income tax law in the history of the United States. Congress rescinded the income tax after the war, but this was just the start of a battle to impose a permanent federal income tax in America. An economic collapse in 1893 led Congress to reenact an income tax in 1894. A year later the Supreme Court ruled in Pollock v. Farmers’ Loan and Trust Co. that the tax was unconstitutional. Populist Democrats continued the battle for the tax, but it took President William H. Taft, a moderate Republican, to persuade hard-line Republican opponents to help make it a reality. Faced with huge budget deficits (modest by today’s standards) and rising popular protests against concentrated wealth, Congress passed a constitutional amendment in 1909 to allow for an income tax, which was finally enacted four years later.

The Limits of Symbolic Reform: The New Deal and Taxation, 1933-1939

by Mark Leff, Cambridge University, 1984

For all of Franklin Roosevelt’s talk of redistributing the wealth, when it came to actual tax pol – icy, rhetoric was more important than substance in the New Deal. After a recession struck in 1937 and left the economy worse off than in 1929, Roosevelt launched an attack on the wealthy, whom he called “economic royalists.” Conservative Democrats in Congress, however, sought to revive business confidence by lowering taxes on small and corporate businesses. When Congress brought Roosevelt the veto-proof Revenue Act of 1938, Roosevelt was forced to sign it. Leff shows that progressives, aside from some of FDR’s rhetoric, did not set out to redistribute wealth. Their goal was to expand the tax base to raise more government revenue for the expansion of social programs.

Showdown at Gucci Gulch: Lawmakers, Lobbyists, and the Unlikely Triumph of Tax Reform

Jeffrey H. Birnbaum and Alan S. Murray, Random House, 1987

In 1986 Ronald Reagan signed the Tax Reform Act that reduced individual tax rates across the board, took 6 million low-income Americans off the tax rolls, increased capital gains taxes from 20 to 28 percent, reduced the top corporate rate and expanded the Earned Income Tax Credit. Journalists Birnbaum and Murray provide a riveting account of how a fortunate confluence of political players triumphed over Gucci-shoed Washington lobbyists. The ad hoc team included a president who sought to simplify and lower taxes on average Americans, a politically attuned White House staff and liberal Democrats and moderate Republicans who under took tax reform because they saw economic fair ness and political gain. In signing the final bill on the White House lawn in 1986, Reagan declared, “I feel like we just played the World Series of tax reform. And the American people won.”


Originally published in the June 2009 issue of American History. To subscribe, click here