“Taxes are the price we pay for a civilized society.” -Oliver Wendell Holmes, Jr. – Supreme Court Justice
“April is the cruelest month.”-T.S. Eliot, Poet
Among the many ways that our beloved Founding Fathers proved their wisdom was their rejection of an income tax, preferring to raise revenue through duties, imposts and other indirect forms of taxation. It took a constitutional amendment, our 16th, to produce the madness and “cruelty” that abounds leading up to this weeks April filing deadline. And that amendment was the result of a too-clever-by-half strategy by leaders of the Republican Party—a strategy that backfired.
The story begins early in the 20th Century when our nation’s “Captains of Industry” (sometimes called robber barons), such as John D. Rockefeller, J.P. Morgan, Andrew Carnegie and others, were amassing obscene fortunes through monopolistic practices that stifled competition and suppressed the wages of the average worker. As a result, the cry went up to “soak the rich” through a direct tax on incomes above a certain level. Sensing a political opportunity, congressional Democrats introduced a series of income tax bills, only to see them repeatedly defeated by conservative Republicans.
These victories were costly for Republicans, however, because they were soon labeled “the party of the rich” (still are), which bode ill for upcoming elections. As a result, Republicans decided to turn the tables on Democrats by pretending to support a constitutional amendment approving a direct federal income tax. GOP leaders reasoned that this “support” would deflect voter anger on the one hand, while on the other hand preserve the status quo because they were convinced the necessary three-fourths of the states would never approve such a controversial amendment. Thus did Republicans, who for years had successfully stymied income tax legislation, join with Democrats to approve an amendment calling for just such a thing. The House vote was 318-14 in favor. The Senate vote was unanimous.
But Republicans badly underestimated the groundswell of public enthusiasm for a “soak the rich” income tax, and to their amazement and horror, state after state quickly voted for ratification until, in 1913, the 16th Amendment was added to the Constitution. It gave Congress the power to “lay and collect taxes on incomes, from whatever source derived …” A new era had begun.
Alas, if it all looked so innocent in 1913 when only about one percent of the population even earned enough money to pay the federal income tax, it doesn’t look so innocent now when only about one percent of the population (thanks to the advice they get from their accountants and lawyers) even understands the federal income tax.
And guess what, dear reader? They are the same group of people, and neither you nor I belong. Happy Tax Day.