The Income Tax And How It Grew


After the Panic of 1907 Roosevelt expressed the judgment that the United States, like most industrially advanced nations, should have an income tax and an inheritance tax. But he did not press for action, and indeed his power for action diminished with the approach of the end of his déclive term. There were rumors that the President wished to tamper with the tariff, ark of the Republican covenant. If so, wiser heads prevailed. Tariff revision and new taxation were left as dubious legacies for T. R.’s successor and political heir, William Howard Tait. Joseph Keppler, the trenchant political cartoonist of the period, caught the moment well when he cast Roosevelt in the role of Hamlet, seated in deep meditation and leaning heavily on the arm of his chair: “Thus the tariff does make cowards of us all.”


In 1908 the Republican platform pledged the party to a revision of the tariff. While the language used was somewhat delphic as to whether revision meant upward or downward, it was generally assumed by the public then struggling with the H.C.L. (High Cost of Living) that the revision would be downward. It was Taft’s understanding that this pledge was in the nature of a contract. Bryan, the Democratic standard-bearer and by now something of a toothless lion, tried to revive the spirit of ’96. But the Republicans reminded the electorate once more that they had freed the slaves and saved the Union. Furthermore, they endorsed the Ten Commandments, except possibly the fourth. Taft, easily if not enthusiastically elected, promptly called a special session of Congress to frame a new tariff law.

The bill thai emerged from the . House provided tor moderate reductions. But the Senate was firmly under the control of the powerful Aldrich, who saw nothing grotesque in the idea of “The Senator from Sugar,” “The Senator from Steel,” or “The Senator from Wool.” Some six hundred items went up in the Senate version of the bill. All were necessities of life, consumed by the people generally. The reductions were on items that needed no protection anyway.

Finley Peter Dunne’s Mr. Dooley explained the free list to his friend Mr. Hennessy: “Th’ Republican party has been thru to its promises. Look at th’ free list if ye don’t believe it. Practically ivrything nicessary to existence comes in free. Here it is. Curling stones, teeth, sea moss, newspapers, nux vomica, Pulu, canary bird seed, divvy-divvy, spunk, hog bristles, marshmallows, silk worm eggs, stilts, skeletons, an’ leeches. Th’ new tariff puts these familyar commodyties within th’ reach iv all.”

A friendlier estimate of the Payne-Aldrich Tariff Act came from Representative Asher C. Hinds of Maine: “Massachusetts,” he said, “never went away from Congress carrying more in her craw than she has got in that tariff bill.” But the new law was widelydenounced throughout the country as being, in the words of the New York Times , a “fine old farce … revised by its friends”; and The Financier , contemplating the schedules, recalled the Cheshire Cat of Alice’s Adventures in Wonderland —the longer you watch the bigger the grin becomes.

Reluctantly President Tail signed the Payne-Aldrich bill into law in August. 1909. He wrung a lew concessions from the Republican leadership, but they were minuscule, rather like eetting a fifty-dollar discount on a Pierce Arrow. A coalition of Republican insurgents and Democrats had attempted to include a provision for a graduated income tax. The Senate balked but compromised with President Taft to the extent of accepting a corporation tax and sponsoring a joint resolution submitting a constitutional amendment to the states. This, if approved, would make possible an income tax at some future time. It was the strategy of promising pie in the sweet—and distant—by and by.

Taft would have preferred an income tax at once. But since the Supreme Court had held such a tax to be unconstitutional only fourteen years earlier, his view was that the better course would be to accept the 1895 decision, avoid another court review, and remedy the constitutional infirmity. The corporation tax, one per cent on net above five thousand dollars, which was one-half of what the President had asked for, was called an excise tax on the privilege of doing business as an artificial entity. The Court reviewed it and sustained it. (In 1914 the corporation tax was merged into the income tax.)