The Income Tax And How It Grew

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Yet, for all the hairsplitting, arbitary discriminations do exist, mostly of little benefit to lower-bracket taxpayers. For instance, the cost of regular transportation to and from work is not an allowed deduction, though it weighs heavily in the family budget. A taxpayer, however, has been permitted to deduct the cost of clarinet lessons for a child whose orthodontist recommended them. Certain minerals, notably oil and gas, are called wasting assets and enjoy extraordinary tax favors. But when a group of twenty-five photographers’ models, known as Shy, Inc., citing the section of the revenue code that deals with the depletion of natural resources, pointed out that they too possessed assets that got used up and therefore requested “reasonable allowance for obsolescence,” the bureau gave them a dusty answer. “American beauty,” it said, “never becomes obsolete.”

The fundamental doctrine of fairness is only intermittently honored by Congress. Frequently the taxing power is used to achieve aims of a remote and miscellaneous character. During the world wars the excessprofits tax was levied in part to strengthen the war spirit of labor and the armed forces. Oleomargarine was long taxed (1886–1950) not for revenue but to favor the dairy industry, and tobacco and beverage alcohol are heavily taxed, in part at least, as an instrument of social discipline. The Revenue Act of 1918 included a tax provision (later declared unconstitutional) aimed at discouraging the use of child labor, and in recent times Paul R. Ehrlich, the population biologist, and Vice Admiral Hyman G. Rickover have each advocated taxation to help control population.

The income tax itself, and the spending programs it largely pays for, generates a continual flow of protests, some responsible, some idealistic, some self-serving, some highly imaginative, some governed by the comic muse. Various elites from within the Standing Order, such as the American Bar Association, the National Association of Manufacturers, and the National Small Business Association, have propagandized for a constitutional amendment that would fix a top limit, such as 25 per cent or 35 per cent, on personal and corporation income taxes. Right wingers such as the John Birch Society have advocated outright repeal of the Sixteenth Amendment. One woman went to jail rather than see her money used for foreign aid, and a group of college students invoked history by re-enacting the Boston Tea Party. Dressed as Indians, they boarded a schooner in Boston Harbor and tossed tea chests overboard bearing such legends as “Government Waste,” “Inefficiency in Government,” and “Tax Duplication.”

Two women, blooded in battle, stand out like modern Molly Pitchers in the fight against the income tax. Miss Vivien Kellems for over two decades has devoted her not inconsiderable talents to an assault on the whole concept of a graduated tax on incomes as being un-American and, in fact, thoroughly communistic. Included in her credits for leadership have been the fact that she did graduate work in economics at Columbia University and was eligible for membership in the Daughters of the American Revolution eleven times over. For a decade or more she eagerly but unsuccessfully sought martyrdom. But when she refused to collect the withholding tax from the employees of her cable-grip plant in Westport, Connecticut, the wily Treasury men refused to seize her body but attached her bank account under an obscure provision found in Section 2707(a) of the Internal Revenue Code of 1939, dealing with the tax on pistols.

A movie actress of similar metal, Corinne Griffith, smart and pretty though she refers to herself unconvincingly as ”… plain little ole me,” organized the Crusade for the Abolition of the Individual Income Tax in Beverly Hills, California. She opposed the funding of senators’ travel junkets and federal expenditures for studying the psychology of the octopus. In support of her adversary position regarding military expenditures Corinne explained that she had never been in “an actual shooting war,” although she had been married most of her life.

Discussions of the income tax seldom proceed very far without recourse to the word “loopholes.” This useful term in its metaphoric sense is often applied to an ambiguity or omission in a statute that affords an opportunity for evading its intention. Sir Thomas Browne, John Dryden, and Andrew Marvell understood the word in this extended sense in the seventeenth century, Macaulay and Thomas Jefferson in the nineteenth. Loopholes may be inadvertent or intended. To make the subject more complicated, one year’s loophole may become another year’s honored principle of equity. In 1950, for example, the profits of inventors were regarded as a loophole by the Ways and Means Committee, but four years later the committee thought just the opposite. The word “loophole” is now so heavily charged with emotional overtones that those who are both enlightened and polite prefer gentle synonyms, such as differentials and preferentials, shelters and tax havens, exceptions and dispensations. Economists and students of finance who are not involved in the political process condemn all tax favors because they depart from the principle that the rates should be applied equitably.