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The Income Tax And How It Grew
… and grew, and grew, and grew …
December 1973 | Volume 25, Issue 1
Men of large means felt that the republic had been saved. Mr. Choate received a well-earned fee, reputed to have been $200,000, and the 4,047 known millionaires in the United States rejoiced as the bridegroom rejoiceth over the bride. Among the public at large there was consternation, discontent, and alienation, for the outcome of the issue convinced the middle class, small businessmen, trade unionists, and the agricultural West that they had no voice in their government. For a time the issue appeared to be dead. But the Spanish-American War, bringing new needs for revenue, revived the criticism of the way the 1894 income-tax issue was handled as an example of judges’ making social policy under the guise of interpreting the law. The option of amending the Constitution remained open. But that was a slow procedure. It took, in fact, twenty years to get the amendment, pass the necessary enabling legislation, and make the first assessment. And when the income tax finally arrived, it was indeed discriminatory against the rich. Yet communism did not follow as the prophets of gloom had promised. In fact, as Professor Elmer Ellis has noted, “nor were all comforts and riches quite lost.”
The Populist surge had reached its high-water mark in 1892 under such colorful leaders as Jerry Simpson, the “Sockless Socrates” of the prairies; the white-maned orator from Iowa, General James B. Weaver; Mary Ellen Lease, the “Kansas Pythoness”; and the political and literary theorist Ignatius Donnelly of Minnesota, who insisted that Plato’s lost isle of Atlantis had actually existed and that Bacon wrote Shakespeare’s plays. No less idiosyncratic was the southern agrarian Populist Benjamin R. Tillman, governor of South Carolina and United States senator, who yelled at frantic mobs, “Send me to Washington and I’ll stick my pitchfork into his [Cleveland’s] old ribs!”
Bryan’s brilliant 1896 campaign for the Presidency drew all the scattered Angries into the Democratic Party. The canvass reflected the metrophobia of the fast-fading small town, the malaise of the Nebraskans who had chanted at the formation of the People’s Party of the United States: “What is Home without a mortgage?” Sharply felt, also, was anger at the defeat of the income tax, the hope of both fiscal and moral redemption through free silver, the fear of abstractions such as “the money power,” a sense of being victimized by a vaguely defined conspiracy. These are only a few of the complex factors that produced disenchantment in the 1890’s. Yet when the votes were counted in the campaign of ’96, it was clear that Bryan had not been able to convince the country as a whole that his millenium would be as prosperous as McKinley’s here and now. Even the shaggy farmer of the middle border, as William Allen White (at that time a Republican stalwart) phrased it, took off his faded overalls and dusty boots, shaved, washed his shirt, and put on a derby.
The War Revenue Act of 1898, passed to finance the Spanish-American War, raised money through the sale of bonds, pushing part of the burden into the future, and through the imposition of nuisance taxes on institutions employed or enjoyed by the working classes, such as pawnbrokers, circuses and other shows, bowling alleys, and billiard rooms. The existing rates on tobacco and beer were nearly doubled. An income tax was discussed but not considered seriously. The Republican congressional majority had no desire to put the Supreme Court in an embarrassing position, even as their spokesmen talked of sacrifice for “one cause, one country, one flag.” And certainly the men at the levers of power did not wish to run the risk that an income tax might be continued by Congress in peacetime. One novelty did appear, a graduated tax on legacies, enacted as a concession to popular sentiment. Fortunately the hostilities were brief, which relieved the pressure.
When Theodore Roosevelt became President following the assassination of McKinley in September, 1901, he proceeded with a caution that has been largely overlooked because of his later reputation as tribune of the people. His position on such issues as the tariff, the inheritance tax, and the income tax failed to justify either the worst apprehensions of the bosses or the eager hopes of the party of reform. This is perhaps not surprising in view of the fact that his counselors at the time included the archconservative senator from Rhode Island, Nelson W. Aldrich, Ohio’s Mark Hanna, two partners in the House of Morgan, and the president of the Pennsylvania Railroad.
After Roosevelt was elected President in his own right in 1904, he began to show a new independence. But his New Nationalism could scarcely be termed radical except from the point of view of such standpatters as Aldrich or the troglodyte Speaker of the House, Joseph G. “Uncle Joe” Cannon. As a matter of fact Roosevelt was trying to reinvigorate the economic system, not radicalize it—to prune away excesses and remedy abuses but not upset the values of individualistic capitalism. Under the program of the New Nationalism even the misbehavior of the giant corporations, as Roosevelt saw it, did not invalidate the ancient maxim abusus non tollit tisam —”abuse is no argument against proper use.”