TAXES: The Big Bite

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The Frozen Smile. So the income tax was crushed to earth again. It is possible to fix the day, the hour, the minute, almost the very second when it began to rise again, a rise that was to lead without serious check to the Great Disgorging of mid-March 1952. President Theodore Roosevelt, who had been annoyed for some time at what he called "the dull, purblind folly of the very rich men," made a speech on April 14, 1906, at the cornerstone laying of the new House Office Building. Congressman Champ Clark, long the Democratic House leader, gave this account of the historic occasion: "The President made a flamboyant Fourth of July speech for ten minutes, an uplift speech for 15, skinned the muckrakers within an inch of their lives, and delivered a few light taps on Democratic ribs. The mouths of the eminent Republican magnates were spread in smiles reaching from ear to ear. They were having the time of their lives when suddenly, without any connection whatever with anything he had said, apropos of nothing, he declared vehemently for both a graduated income tax and a graduated inheritance tax. The Democrats were jubilant and applauded hilariously, while the smiles froze on the faces of the Republicans . . . The President seemed to be delighted with the sensation he had created and the consternation he had wrought among Republican statesmen. Their curses on him for that speech were not only deep, but loud."

The fat—and, before all was done, much of the lean—was in the fire. The Democratic platform of 1908 (candidate: W. J. Bryan) declared for a constitutional amendment permitting an income tax. The Republican platform did not, but the candidate, William Howard Taft, announced that he was for it. In the heavily G.O.P. Congress of 1909, the income-tax group, led by a fiery Tennessean named Cordell Hull, introduced their measure—aimed, as Hull said, at the Carnegies, the Vanderbilts, the Morgans and the Rockefellers. The leading "plutocrat" of the Senate, Nelson Aldrich of Rhode Island, first tried desperately to stave off the bill, finally offered the constitutional amendment legalizing an income tax. Hull and his group thought that Aldrich was trying to trick them, that the conservatives would kill the proposed amendment in the state legislatures.

If Aldrich was up to tricks, they did not work. The amendment passed the Senate unanimously, passed the House 318 to 14, and was soon ratified by the legislatures. John D. Rockefeller was one of the few dissenters. Said he: "When a man has accumulated a sum of money within the law, that is to say, in the legally correct way, the people no longer have any right to share in the earnings resulting from the accumulation."

The Payoff. Under the tax passed in 1913, a married man with two children and $10,000 a year paid $60. There were a good many complaints. The tax brought in $28 million. As a weapon against the rich, the income tax was little better than a flintlock. In 1902, there were 2,000 U.S. millionaires. In 1920, there were 42,000. There are many more today. Reason: millionaires rarely get to be millionaires by thriftily saving income; they do it through increasing capital values.

Almost from the beginning, however, the tax began to assume a form and function which its sponsors never intended—a broad and major levy against the people as a whole.

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