The Hidden Progressive History of Income Tax

[xchrom]

http://www.alternet.org/labor/hidden-progressive-history-income-tax?akid=9361.277129.2KDGDd&rd=1&src=newsletter706781&t=14

The income tax was the most popular economic justice movement of the early 20th century. What happened?



***SNIP

Our ancestors knew this was not true. The income tax was the most popular economic justice movement of the late 19th and early 20th century. This truly grassroots movement forced politicians to act in order to stay in office, leading to the 16th Amendment to the Constitution in 1913. That’s right, the income tax was so popular that the nation passed a constitutional amendment so that the right-wing Supreme Court couldn’t overturn it.

Income and Tax Inequality in the Late 19th Century

Everyday Americans hated the tax system of the Gilded Age. The federal government gathered taxes in two ways. First, it placed high tariff rates on imports. These import taxes protected American industries from competition. This allowed companies to charge high prices on products that the working class needed to survive while also protecting the monopolies that controlled their everyday lives. Second, the government had high excise taxes on tobacco and alcohol, two products used heavily by the American working class.

These forms of indirect taxes meant that almost the entirety of federal tax revenue came from the poor while the rich paid virtually nothing. This spawned enormous outrage. The poor had a model in creating an income tax—President Abraham Lincoln, who instituted the nation’s first income tax to pay for the Civil War. Lincoln’s Revenue Act of 1861 created a graduated tax on everyone who made at least $800 a year, allowing him to pay for the war. Although a grand success, Republicans pulled away from it as they backed off of racial equality in the late 1860s and it was overturned in 1872.

At first, Americans did not protest much against the end of the income tax, but with skyrocketing income inequality of the Gilded Age, grassroots movements sprung up to find solutions. Many Americans were attracted to simple one-size-fits-all ideas like Henry George’s Single Tax, intended to pay for all government expenditures by taxes on land transactions that supporters also hoped would draw urban dwellers back to the farms.

[pansypoo53219]

1. one of the GOOD things napoleon did. instituted fair taxes.

and they he made damn sure they were collected.

[NecklyTyler]

2. The government had high excise taxes on tobacco ????

Anyone bought a pack of cigarettes lately?

[William Seger]

3. True of false: "A flat tax is a fair tax"

Right-wingers look at the progressive tax rate and see it as, "The higher your income, the higher your rate, so it punishes success. A flat tax is a fair tax." In fact, the way it should be viewed is, "The lower your income, the lower your rate, down to zero at some point." The reason is simple: The lower your income, the more impact any tax has on your basic quality of life, because both the necessities of life and the luxuries have fixed prices. Even if the flat rate was only 10%, if you make $20,000 and year, you're barely surviving anyway, so that $2000 would have a much greater impact on your quality of life than the $20,000 that a $200,000-per-year earner would pay. A flat tax would be very unfair, and progressives should always strongly oppose it.

[ProgressiveProfessor]

4. That depends if you approve of the Governement using tax policy as a means of social engineering

Most excise and sin taxes are flat taxes.

[meow2u3]

5. Flat taxes are regressive taxes

The poor pay a higher portion of their income in excise, sales, and sin taxes than the rich and the middle class. The most regressive tax is the payroll tax, in which the rich pay a fraction of a percent of their income in this tax, and which Obama was unable to fulfill that promise directly because of repukes in Congress, who make the laws to begin with.

The income tax, a direct tax, is designed to correct the inequity of flat, indirect taxes.

[ProgressiveProfessor]

6. Indeed they are

Even so nations with progressive tax systems are still good with flat excise taxes. I am not sure how you could make excise taxes more progressive. More progressive income tax is still only a partial solutions

[SickOfTheOnePct]

7. Exactly

I don't see any possible way to make excise taxes progressive.

As for payroll taxes, they are only partially regressive, as I believe that there is no cap on the Medicare portion of the tax.

[SickOfTheOnePct]

8. While I agree that excise and sales taxes are regressive

A flat income tax is not.

I'm not in favor of a flat income tax, I prefer a more progressive model than we have now.

[ProgressiveProfessor]

9. My bigger concern is the attempt at social engineering

which is normally poorly done at best. Take for example...smoking. Taxed to death "to discourage young people from starting", and the revenue is increasingly being used for non- smoking related things. Classic fail for many reasons

- If its successful, the usage and revenue will drop, leaving programs dependent on it high and dry.
- Tax it too much and it goes to other markets, like Native American smoke shops and the high taxes have hissy fits.

Given what I have seen over the years, I am for a vastly simplified taxation regime based on revenue generation, not behavior control. I have no problem with excise taxes that relate to optional activities, but not those that are required for basic living. Then a progressive income tax can do what it should.

[SickOfTheOnePct]

11. Excellent points, all n/t

[pampango]

10. Tariffs and excise taxes meant that almost the entirety of federal tax revenue came from the poor

while the rich paid virtually nothing. This spawned enormous outrage.

Everyday Americans hated the tax system of the Gilded Age. The federal government gathered taxes in two ways. First, it placed high tariff rates on imports. These import taxes protected American industries from competition. This allowed companies to charge high prices on products that the working class needed to survive while also protecting the monopolies that controlled their everyday lives. Second, the government had high excise taxes on tobacco and alcohol, two products used heavily by the American working class.

Today, we are supposed to hate paying taxes. They are our “tax burden.” We vote for politicians who will reduce our taxes, even if that means destroying the welfare state. Conservatives’ century-long war against taxes has paid off by convincing everyday Americans to think taxes are a horrible thing that pays for government waste.

Our ancestors knew this was not true. The income tax was the most popular economic justice movement of the late 19th and early 20th century. This truly grassroots movement forced politicians to act in order to stay in office, leading to the 16th Amendment to the Constitution in 1913. That’s right, the income tax was so popular that the nation passed a constitutional amendment so that the right-wing Supreme Court couldn’t overturn it.

The income tax became such an overwhelming political movement during the 1890s that Congress, despite so many members' close relationship with the plutocracy, passed an income tax law that would have forced the rich to begin paying income taxes for the first time since 1870. ... But the Supreme Court in 1895 declared the federal income tax unconstitutional in the case of Pollock v. Farmers’ Loan & Trust Company. This was the same set of judges who ruled segregation constitutional in the case of Plessy v. Ferguson...

Great article, xchrom. Thanks for posting it.