(Ajay K. Mehrotra is a professor of law and history at the
Indiana University Maurer School of Law. The opinions expressed
are his own.)
By Ajay K. Mehrotra
April 15 By midnight on April 15, roughly 140
million Americans will have filed their federal income tax
returns and breathed a sigh of relief. Politicians from both
parties, however, will spend most of the day criticizing our
current tax system.
Conservatives bemoan that not enough people are paying
taxes. They insist that a minority of "job creators" and
"makers" are underwriting the social benefits that go to the
"takers." Liberals cite the growing concentration of wealth and
lament that the rich don't pay their fair share. In this new
Gilded Age, they say, the 1 percent should be paying far more of
their annual earnings.
Yet neither party seems willing to reform our tax system
dramatically. Both avoid talking about the vital link between
taxes and government spending. This was not always the case.
More than a century ago, during the first Gilded Age,
lawmakers embraced progressive taxation. Responding to the
massive inequalities between plutocrats and workers,
policymakers used graduated taxes to rebalance the tax burden,
reminding Americans about their shared duties to each other.
As the nation struggles through another period of rising
inequality and social dislocation, history shows there are
effective ways to address these issues.
The reformers' goal then was to reallocate the burden of
financing a bourgeoning modern industrial state. They were not
seeking to radically redistribute wealth, as some Tea Party
conservatives claim or as some on the left may hope. The
Progressives wanted to replace tariffs and excise taxes on
alcohol and tobacco - the existing system of indirect,
regressive and hidden taxes - with a direct, graduated and
transparent tax system. They wanted to create a new fiscal
By taxing individual incomes, business profits and wealth
transfers instead of ordinary consumption goods, activists were
trying to force those segments of society that had the greatest
taxpaying ability - the wealthy individuals and corporations,
then largely in the Northeast - to share the burden of
underwriting a modern democratic state. Progressives a century
ago, like their liberal counterparts today, believed citizens
owed a debt to society in relation to their "ability to pay."
This curt yet crucial phrase captured the idea that people
who had greater economic power also had a greater social
obligation to contribute to the public good - to contribute not
just proportionally but also progressively more. Influential
thinkers and political leaders - including Francis A. Walker,
president of the Massachusetts Institute of Technology, and
William Jennings Bryan, three-time Democratic presidential
nominee -- used the term "ability to pay" to illustrate the
widening circle of social responsibilities in a modern society.
The Progressive Era was, after all, a time when the social
dimensions of American democracy were paramount. "The
identification with the common lot," as the influential social
reformer Jane Addams noted, was "the essential idea of
Creating a new tax regime based on the ability to pay had
significant consequences. Not only did it provide sorely needed
revenue while addressing growing inequality, it also fostered
greater social solidarity and bolstered faith in government - a
lesson lost on many lawmakers today.
Progressive Era politicians knew that adopting graduated
taxes to counterbalance the existing regressive tariff and
excise tax was one way to show that all Americans were
contributing to the greater collective good. Graduated taxes
reflected the importance of shared sacrifice.
Reformers believed progressive taxes could be used to
reconfigure the relationship between citizens and the state to
renegotiate a new social contract and forge a new sense of
Activists also contended that a lawmaker's duty, as part of
this new social contract, was to ensure that the tax burden
would be shared fairly by all Americans. If policymakers held up
their end of the bargain, reformers argued, citizens would come
to trust, even welcome, the growing powers of the modern state.
Americans would come to see how the public sector could
enhance their private lives, creating the basis for economic
development and prosperity, while also providing assistance in
times of stress and crisis. They would view government not as an
enemy, but as an ethical agency "whose positive aid," Richard T.
Ely, the progressive economist, explained, "is an indispensable
condition of human progress."
Indeed, making sure that the wealthy contributed their fair
share was one of the key motivations for a progressive tax
system. "I have no disposition to tax wealth unnecessarily or
unjustly," Tennessee Representative Cordell Hull, one of the
chief architects of the 1913 progressive income tax, said: "but
I do believe that the wealth of the country should bear its just
share of the burden of taxation, and that is should not be
permitted to shirk that duty."
Hull's comments still resonate today. Warren Buffet's
argument that he should be taxed at a higher rate than his
secretary, the calls from Occupy Wall Street's 99 percent to
"tax the rich" and even the Obama administration's partial
victory last year in raising top tax rates on the wealthiest
Americans are legacies of a progressive tax system based on the
notion of "ability to pay."
This tax day it may be useful to reflect on how an earlier
generation of bipartisan reformers and lawmakers responded to a
similar set of concerns - by creating the foundations for and
the promise of a more progressive fiscal order.
(Ajay K. Mehrotra)