The Income Tax And How It Grew


The Republican Congress sponsored the resolution proposing the Sixteenth Amendment for a complex of reasons. First of all Aldrich, like President Taft, did not want the constitutionality of the income tax to be resubmitted to the Supreme Court, because the respect in which the Court was held might be severely damaged whichever way it decided. Both knew that the insurgent Republicans in association with the Democrats had the votes to put through the resolution. Also, they faced a Treasury deficit of a hundred million dollars’big money for those days. More elasticity had to be found somewhere. So the income-tax amendment was, in essence, the price that had to be paid to save the Payne-Aldrich tariff. Also operative was a sense that the government needed greater freedom to tax in times of national emergency. This consideration was strengthened by the still-vivid recollection of John Hay’s “Open Door” note in 1899, the imperialistic adventures of the Spanish-American War, Theodore Roosevelt’s interference in Colombia in 1903 to secure the independence of Panama and the Canal Zone, the new American presence on the world stage in mediating the Russo-Japanese War in 1905, and tension with Japan, known in the first decade of this century as “The Yellow Peril.” Finally, as already indicated, going the amendment route was appealing because it pushed the day of reckoning into the future.

As a spokesman for the conservative position, Sereno E. Payne, chairman of the House Ways and Means Committee and co-author of the tariff bill, supported the idea of submitting the income-tax question to the states because he wanted the United States to have “the longest pocketbook” in time of war. But he made abundantly clear his aversion to such an exaction in time of peace: “I believe with Gladstone,” he said, “that it tends to make a nation of liars. … [It is] a tax upon the income of honest men and an exemption, to a greater or lesser extent, of the income of the rascals.”

If the Payne-Aldrich tariff cemented the alliance between politics and Big Business, it also produced public discontent among the voters and contributed substantially to the Democratic capture of the House of Representatives in the fall of 1910. On February 3, 1913, Wyoming became the thirty-sixth state to ratify the Sixteenth Amendment, providing the necessary approval of three-fourths of the states. Connecticut, Florida, Rhode Island, and Utah rejected the proposal, and Pennsylvania and Virginia failed to act. The Secretary of State, Philander C. Knox, affixed the Great Seal of the United States to the document on February 25. It was the first modification of the Constitution to be adopted in forty-three years and expressly authorized the collection of income taxes not apportioned according to the population test. Brooks, the White House valet, was already packing up President Taft’s personal baggage, and Woodrow Wilson took the oath of office a week later under overcast skies on a temporary stand erected on the east portico of the Capitol.

It is one of those fascinating paradoxes in which history abounds that our permanent income tax, made possible by the action of one of the most reactionary Congresses ever to control the machinery of government, was now about to be shaped into law according to progressive Democratic ideas. With the Democratic Party firmly in control of both the executive and legislative branches of government as the result of the 1912 election, the Ways and Means Committee reported out a tariff bill that reduced the duties on all schedules, greatly extended the free list, raised the deficit to an estimated seventy million dollars, and imposed an income tax to make good the losses. The act, known as the Underwood-Simmons Tariff, with sections explaining and justifying the income tax drafted by Cordell Hull, was approved on October 3, and the money meter began to tick retroactively from March 1, 1913.

The Ways and Means Committee described the bill as the answer to a long-standing need for an elastic and productive system of revenue and declared hopefully that “all good citizens … will willingly and cheerfully support and sustain this, the fairest and cheapest of all taxes. …” Those who constitute the present generation may look back with astonishment to that February long ago when the newspapers gave only an inch or so of space to the tax law as the last states raced to ratify. Much more important, it seemed, was the fighting before Adrianople or the death of the explorer Robert Falcon Scott after reaching the South Pole.