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President Donald Trump gave his audiences the lessons of history that diverge from the record of fact in his speech from Rose Garden, which launches the World Trade War by announcing the most drastic tariffs in modern history.
“Then, in 1913, for reasons unknown to humanity, they established income taxes so that citizens, not foreign, start paying the money they need to run the government. And in 1929, it all came to a very sudden end in Great Fear pression.
So why did we enact income tax? Did anyone know what reasoning was? And did the actions in 1913 lead to the Great Repression in 1929?
There is a clear consensus among historians about these points. No, income tax was not a mistake.
But it was strange. It’s both a 40-year struggle and an accident.
In 1913, the state ratified the 16th Amendment, giving the federal government the authority to “collect taxes on income from derived sources.”
However, this was not the first income tax effort.
During and after the civil war, the United States imposed an initial tax on revenue to fund the massive costs of the war. They were placed in relatively high incomes, but were cast as both a way to generate the revenue they needed and to maintain fairness, simply by collecting only moderate proportions.
Yes, yes, one of the main selling points of taxable revenue was that it was a way of achieving “fairness” at the burden of war. In response to allegations that only poor men are fighting and dying, President Abraham Lincoln and his Republicans have confirmed that the law requires that taxes paid by people be publicly disclosed. Naturally, wealthy men in the Golden Age of Dawn did not like to view tax information on New York Times pages. Wealthy profits were forced to abolish income taxes in 1871, and the federal government returned to funding with user fees and income from customs duties.
However, efforts to hold back the rich continued. Congress moved in 1894 to reintroduce income taxes. Populist Kansan politician William Jennings Bryan gave a famous speech on the floor of Congress. He responded to the argument that if the wealthy had to pay such taxes, they would leave the US and then proposed as a 2% highest income, he said:
“Of all the average man I’ve ever known, I mean I’m willing to say about him that his patriotism is less than 2% deep.
Congress passed the law. But a year later, the Supreme Court came to Pollockv. For Farmers’ Loan and Trust Company, 5-4 was debatable. The Lincoln Party is now celebrated, dominated by wealthy Northeast interests. That 1894 platform predicted the party’s “funeral” by declaring that income tax “provides an odium on the party’s gaze sufficient to support it.”
Populists like Brian never gave up. A young Democrat from Tennessee said a young Democrat named Cordell Hull in his 1908 speech on the floor suggested that he handed out another income tax.
Hal’s efforts didn’t gain much momentum at the time, but he didn’t give up. He was obsessed with anyone and everyone about income tax, so when his own party leader saw him approaching, they “walking in a different direction,” he later recalled.
He will soon succeed, but Republicans thanks to the help of the party who opposed income tax.
In 1909, the country was facing a severe decline in federal revenue and an increasing deficit after the financial panic of 1907. At the same time, the federal government needs were explosive as new responsibilities such as keeping food and medicine safe and trying to maintain a growing empire abroad. A few years ago, Congress had allocated $1 billion in spending for the first time (about $30 billion in dollars today).
To address these issues, Republicans turned to tariffs. Tariffs were not only the cornerstone of Republican economic policy, but also the key to the party’s political power. Economist Henry George said that whenever a new tariff bill came out for consideration it was like “throwing a banana at a monkey cage.” Lobbyists from every corner of American industry have descended into the capital, pushing for lower corporate fraud and, if possible, someone else to nurture them.
Tariffs and collection on things like cigarettes and alcohol were deeply unpopular with the public. They were regressive, and workers made up a much larger percentage of income than the rich. In one of his speeches, Haru attacked the new dominant class of oligarchs.
“It appears that people in this class think they are almost immune to all sorts of taxation,” Hal said. He closed his speech with warnings to his council colleagues. “The public’s sentiment is exciting.”
In Washington, lawmakers had the bounty of novel ideas to raise money. Some members of the Congress proposed inheritance tax, others proposed profit tax for the corporation, and yet others wanted some versions of stamp duty on commercial documents. As president, Theodore Roosevelt supported income taxes, but he did not do much to promote it legislatively. Most Republican senators, many of whom were billionaires themselves, had mild dislikes and a certain dislike of income taxes for some of the proposals.
Rhode Island’s Senate Majority Leader Nelson Aldrich was a billionaire and stepfather to John D. Rockefeller Jr., and perhaps the most powerful politician in the country at the time. Teddy Roosevelt was called “The Kingpin.” In 1909, Aldrich was about to pass a new tariff bill. Hull’s Democrats raised the issue with him, but not the only one. He also faced rebellious factions within his own party, the progressive Republican. These were primarily Midwest and Western leaders, who described the interests of the people they worked for, as well as reforms to improve public safety and strengthening trade unions. They also supported income tax.
Aldrich attempted a series of legislative operations to delay votes on anything related to income tax. The supporters were not tolerated, and the next step was that he and then President William Taft put weight behind the corporate income tax, claiming it was less evil than the individual’s income tax. The wealthy didn’t like it, but it went by surprisingly easily, and expects Republicans to die in income tax. In a private letter to a friend, the President explained: [the corporate income tax] Now I’m pleased that I can use it later as a way to prevent income tax. ”
Tuft proved to be overly optimistic. Income tax supporters continued pushing, trying to raise funds directly from the wealthy. The debate continued as Congress simply could pass the Income Tax Act or the Supreme Court recently terminated whether constitutional reform was necessary. Hal pointed out that the court structure has changed and argued that the law could be convened as judiciary.
One progressive Republican then proposed an income tax revision.
Aldrich attacked what he perceived as an enemy misstep. He threw support for the measure as a way to place supporters for the national income tax. In exchange, sufficient lawmakers agreed to support Aldrich’s tariff bill.
Of course, Aldrich did not support an income tax amendment, but he believed it was too radical to ratify by three-quarters of states, the minimum required by the constitution. Key politicians assumed that the defeat of the amendment would likely kill income taxes for years, if not generation.
Hal agreed to the analysis and was disappointed. “Republicans have long understood that Republicans will never support a valuable cause until they are forced by the sentiment of the public. They are too stupid to devise and enact healthy laws, and to develop and implement healthy administrative policies, this pirate organization will not wait until Democrats point ahead,” he said in a speech on the floor.
And to protect the wealthy, Nelson Aldrich, a senator in history than most other American politicians, introduced what turns out to be a historic measure that explicitly allows income taxes on the rich. A few days later, there was little fanfare and the amendment passed the Senate with a unanimous 77-0 vote.
Shortly afterwards, Congress passed Payne Aldrich’s tariff bill, giving Aldrich his victory.
However, Aldrich was miscalculated, and Hal was too dark and dark. After a slow start to the ratification movement, political winds changed and enough states emerged. The amendment was ratified four years later. He then fell on his hull and wrote almost on his own what became the Income Tax Act of 1913.
Hal’s plans proved foresight. He foresaw that if the US was caught in a war with an attack on shipments, imports would dry up and tariff revenue would plummet. When the United States took part in the war with Germany in 1917, Congress had to raise the income tax rate to generate the money needed to pay for sending soldiers to Europe.
No, President Trump, the origins of income taxes have not been lost in history.
But did the tax, as Trump argued, cause a great pression 16 years after its enactment? Serious economists don’t think so. One data point is: In the 1920s, Republicans regained their presidency. Andrew Mellon, one of the wealthiest men in the country, became Secretary of the Treasury. One of the main reasons he worked was income tax reductions, and its introduction into the worst economic disasters of the 20th century was actually characterized by lower tax rates.
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The evidence is equally clear about Trump’s argument that continuing reliance on tariffs to fund the government has circumvented the Great Repression. In June 1930, President Herbert Hoover supported the American industry and raised taxes on imported goods significantly, hoping to increase domestic employment. Hoover has sidelined the arguments of his own economists who warned that other countries would respond with their own tariffs, warning that they were touching on the trade war that all countries lost.
Economists now agree that Hoover’s tariffs have deepened the economic downturn that began with the 1929 stock market crash. President Franklin Delano Roosevelt gradually reduced tariffs during his presidency, and his democratic and Republican successors continued that pattern until the 21st century.
Today’s situation is similar to the number of years before income taxes. The American economy is once again evident by wealth inequality, with the biggest gap between the rich and the poor as seen from the golden age. We are debating how to reduce the federal deficit, how to fair and appropriately tax the rich, and what the right size of government will be. Last week, Trump went back to history, bringing US tariffs back to Smoot Holy levels, sparking global selling in stock markets around the world.
