Pest pest test. Test. Test. Test. To our system of taxation and its the modern richard burr is well known, he says that its the custom house was the locusts of tax power in the 19th century, its the modern corporation that has become our custom house today. Its the information that the corporations contain that allows us to do all the kind of Third Party Withholding and other things that leads to this kind of change in political arrangements. Now i used up a lot of my time. I want to conclude, though, a couple of slides on a importance of constitutional law. The 16th amendment allows for the creation of taxes in the response to the pollock case which strikes down the 1894. It was, again, here i found some terrific information. Theres Important Role that the new york senator and actually drafting. So richard and i were talking earlier how important it was to demonstrate to grad students. Junior scholars about what the archives can tell you. I spent several weeks looking for a lot of paper and i stumbled response this is up in the college park this sort of pack and forth between the Treasury Department about how to write the actually language of the 16th amendment. Its hard to see here but this is his handy work. Hes a very clever wall street lawyer who is thinking carefully about the language of the resolution needs to be worried in the particular way. Theres seven or eight drafts that go back and forth about how whatever source derived. Its a keyword not only it becomes part of the income tax law. You cant get it from published sources. Let me conclude with the present day applications. When i give this talk, especially to an audience not familiar with archives or scholarship they kind of go what are you talking about . That period is gone. Right. The civic identity. You know, the ability to pay. How if influenced the federal government. Great segment. Is the short answer. During the progressive era wisconsin is really the incubator to use the term. At the laboratory of democracy. Its one of those states. Its there in 1911 where we see the first state level income tax. So its it becomes an important component. He sees it work at the state level and has an Important Role of convincing the reformers, the intellectuals. So Edwin Sullivan said its not possible. That wisconsin emboldens National Lawmakers to do it themselves a few years later. Theres much a state. Does that help . Yeah. Yes. Very much so. Thats one of the keys to this. It allows social democrats in milwaukee, for example, to galvanize support for. Because it requires the constitutional amendment. The state constitutional amendment. And part of the argument, were going to keep rates high. This is meant to, in a sense, emil area rate the dysfunction of the state level property tax, for example. So the property taxes, in theory, ought to be sort of graduated. People have more property. Should be paying more. At this time, we see a radical transformation. Sister about stocks and mortgages to large farmers that have mortgages that are not being taxed. How do we counter that . Its a counter balance to that. Thats exactly how it is. Does that the state story is very important. I have a whole chapter. Probably too long of a chapter but i found it interesting. So, umm, what was happening on the spending side during the period and in particular i guess a couple of questions. And i think now theres a great disjoint in discussions about taxing and discussions about spending. I wonder if the progress tag nists in your book and other policy makers in your time were similarly segmenting the discussions or were they talking about taxing and spending together. Yeah, so, that really gets at this point. I didnt gate chance to elaborate but its fact i try to suggest one of the arguments i make is during this period we actually see that segmentation occurring more explicitly. And put it in a Historical Perspective and what im trying to see now is back when there was a benefit principle the two were linked. The ability to pay comes along and in a sense its an unintended consequence. So this is the deck the cards that have been dealt in this kind of regressive consumption and they want to do away with it. So they do everything against it. And in that sense, by pushing the ability to pay is the counter they focus exclusively on the extransaction side. They receiver the link between spending and raising revenue. And that what i think is my about this. So the musgrave argument im trying to revitalize is that might not have been a great thing. Because if you take a look at other countries, other industrialized countries in the world that are trying to address poverty and inequality, its a fact of consumption taxes. Right. Why arent we seeing it . What is scandinavia actually doing . Its one example. An illustration. They so were fixated on ability to pay. Were obsessed with trying to they sever that link between spending and revenue extraction. They were never going to do it. Roger smith has a cultural argument about how and ethnicity is also influenced our policy making, i mean, all those things are there. Im just adding another layer to suggest that this intellectual legacy is pretty strong, too. Our welfare state and and the charts have dwindled. But in some ways raising revenue isnt the goal. So scholars sometimes say look at the tariff system. But thats the point. Its a protective tariff. It wasnt like there was a lot of demand for federal revenue. Things change. So the wars become important. Theres a ratchet effect. Military spending stays very high. It comes down. It never goes back. Theres an incremental road to federal spending and the question becomes where is the revenue. Part that have story its a very good question. Okay. Our Highway Trust Fund is broken and thats based on fuel taxes. Gasoline and diesel fuel but they have not raised no politician had the guts, including obama, to raise the gasoline tax. Its been the same since the 1990. Yeah. And should we pay for Highway Infrastructure out of the general fund or should we, you know, how should we do this . Wow. Let me take the first. Im a historian. [ laughter ] as a historian i i study a lot of periods and the future is not one of them. Im not sure where we should be going but at other times [ inaudible ] the response in the past has been increased. And youre right in todays political environment it seems unlikely. So its other sources. So maybe Discretionary Spending ought to be going toward transportation infrastructure. Theres talk of it. Barack obama talked about our dysfunction dysfunctional infrastructure. Its mostly rhetoric. I agree with your point. But if history is any guide, there becomes a crisis. And im not sure what again i dont know. But when they predicted the Highway Trust Fund in the red yeah. And took money from the general fund. Yeah. Yeah. But that was a budgetary crisis. I mean, the crisis that usually galvanizes the kind of what were talking about is more far reaching. There are moments. Opportunities. Kind of windows for reform and that might be the time. I mean, theres a lot of historical truth to that. You said its the direct yeah. And apparently some Supreme Courts are taxes. Yeah. And the political repercussions. Yeah. No. Thats a great question. So for the direct tax clause, thats in the constitution. It doesnt define it. The phrase is is a direct tax. It has to be a portion by population. Thats the language. And income tax was not deemed to be a direct task. There was no never an explicit challenge to that. It was presumed an income tax would be filed. In fact, in my chapter on the lead up to the pollock decision, a trained lawyer is consulted by both sides of the pollock decision. Theres a lot of launches representing him and they contact him as well as the government lawyers to get hes the expert. Hes done all the historical work on it. He thinks this is a nonstarter. This is the no going to be challenged. Weve always had this. He does an incredible study on the colonial era in massachusetts to all the way up and tries to convince the pollock lawyers, in particular, theyre wasting their time. In fact, he says that. Theyre paid lawyers and theyll do their job. They selectively used some of his research and not the way he was appreciative of. He writes an article in response. To his surprise and the surprise of every expert, they deemed a tax on rental income. That was the key part. Tax on rent was a reriftive of land tax and it was a direct tax. It was not a portion so it was struck down. And the experts all shocked by this. The law reviews of what is doirt doing and the actual case is tricky. They hear it once and theres a missing justice and they hear it again. And different justice votes a different way, it appears. Thats why a book on that might be interesting. Youre right the courts interpret the tax clause and the pollock case very differently than all the Supreme Court cases. So the experts are shocked. When after it is running for president. Hes a lawyer. He knows it. On the campaign trail he said we probably should have an income tax. He might be able to implement it despite the decision that suggests hes not in agreement. When he becomes president , of course, he backs off. Its trying to figure out how he can write the 16th amendment so there wont be any future challenges. Right. So he adds this is an income tax. The constitutional restriction. And so he plays an Important Role in the political economist plays an Important Role. But at the end of the day, its really about social politics. Its social. Right. To ratify the constitutional amendment is not an easy thing to do its not surprising. Its the south being hurt by the tariff. Its a shift in the tariff and the income tax. Its very important sectional implication. And so you see this slowly going through. New york becomes crucial state in the 136th amendment battle. So i just riff off john bunkers great book on the 16th amendment. Where he was testifying before the new York Assembly. Its about the 16th amendment. And governor hughes is the governor at the time. He actually comes out against the 16th amendment. Hes worried its going to give the federal government too much power vees is a have a the states. Hes worried theyre going to tax state intersectiest on bondr example. Hes worried. And sellman says and they go to law School Together and theyre friends. He has a terrific, umm, presentation before the new York Assembly where he said governor hughes doesnt understand. If he were a student of mine, i would have flunked him dead. Im not saying the testimony is the lynchpin but new york thats where 30i8 of the income tax comes in. And the 16th amendment, as well. And i dont know if thats a response to your question. Yeah. More questions . Well, umm [ inaudible ] tonight look back. Youre watching American History tv. Explore our nations past. Created by americas Cable Television company. Brought to you today by your television provider. Historian and author discusses her book tax and spend the welfare state, tax politics, and the limits of liberalism. Looking at tax policy and American Attitudes from taxes from the end of the new deal to the 1986 tax reform act. This talk is one in a series