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Tax and Spend
The Welfare State, Tax Politics, and the Limts of American Liberalism

Molly Michelmore
University of Pennsylvania Press, 2013

Molly Michelmore is an associate professor of history at Washington and Lee University.

She writes that it was farmers in the South and the West, small-business owners and middle-class consumers who put the income tax on the national agenda. She writes that after the Civil War "the federal government relied on a combination of consumption taxes and high tariffs to raise revenue." The consumption tax was a burden on "regular people." The income tax distributed the burden to the inordinately wealthy.

In 1892, agrarian politicos called Populists put a graduated income tax In their platform. Their purpose was to end 'oppression, injustice, and poverty' and to restore 'equal rights and equal privileges for all.' Republicans and Democrats took notice, writes Michelmore: "In 1894, Congress imposed a 2 percent tax on incomes over $4,000."

In 1895, the Supreme Court ruled it unconstitutional (Pollack v. Farmers' Loan and Trust). Justice Henry Billings Brown dissented, accusing the court of surrendering the 'taxing power to the moneyed class.' The court's decision made the income tax more popular. Michelmore writes:

At their 1896 convention, Democrats endorsed such a tax as the best way to ensure that the "burdens of taxation" be "equally and impartially laid" so that "wealth may bear its due proportion of the expenses of Government." By 1908, both parties supported a national income tax. The following year, Congress sent an income-tax amendment to the states for ratification.

In 1913, the 16th Amendment gave Congress the power to "lay and collect taxes on incomes." Congress passed an income-tax law that spring, and the nation's first 1040 form (three pages) was issued.

Early on the income tax affected very few. It was expanded to meet the needs of World War One, and it was expanded again, from a 'class tax' to a 'mass tax', to help pay for World War Two.

The 'mass tax' had become a major ingredient for paying government expenses, with few happy to pay.