Transcripts For CSPAN3 Progressive Era Tax Reform 20240711

Im richard mcculley. Todays talk is the last of 2014. A year when weve really been treated to some splendid presentations by some of the centers most significant researchers. That said, we end the year with a bang by hosting todays guest who will discuss his significant and timely book, making the modern american fiscal state law, politics and the rise of progressive taxation, 18771929. Published by Cambridge University press. We will resume this talk on january 15 when we host rebecca edwards, professor of history. Her talk is titled, sex on the frontier fertility in americas antebellum empire. Rebecca edwards is a very eminent historian who would you would expect to get quite but a presentation of that title, i think this is something they cannot be missed. Professor mehrotra is the associate dean for research, professor of law. A fellow at Indiana University. He received his j. D. At Georgetown University law center and his ph. D. At the university of chicago. He has served as the codirector of the Indiana University center of law, society and culture. Before arriving at Indiana University, he was a doctoral fellow at the American War Foundation in chicago. After law school, and prior to his graduate training in history, he was an associate in the structured finance department of the new york office of j. P. Morgan. Hes among a very small group of individuals who have left wall street to pursue a degree in history. He is editor of the new fiscal sociology, taxation in comparative and Historical Perspective published also by Cambridge University press. We should have time for q a afterwards. If you have a question, please raise your hand so we can pass around the mic and then after that, there are copies of ajays book for purchase at the back of the room. Thank you. Ajay thank you all for coming. Let me begin by saying thank you to richard for inviting me to this. We met at the policy history conference last summer. He was kind enough to come to one of the panels where i was presenting some recent research, an elaboration of some of the work from the book project. We got to talking about how important the National Archives were to my project and my entire Research Agenda and many other people. Theres a real revival in political history. Rebecca edwards is certainly one of those pioneers. I think youre going to have a great talk when shes here next week. Richard was kind enough to invite me out here. Thank you all for coming out here. Let me also take this moment to really thank the archives and archivists everywhere. Historians cannot do what we do without the great work of the archivists and Staff Members in a place like National Archives and library of congress and other places. We know that. I know we try to make acknowledgments in our books for all the great archivists out there, but really, it is the fodder for all history. It is the primary sources that you guys put together that are very important to our profession. I want to take a moment to thank you for that. I thought i would take about a half hour or 40 minutes or so to go over the general outlines of the book. Before i do that, i wanted to give you some background on how i became interested in writing about u. S. Fiscal policy during this particular period. As richard mentioned, the book that im going to discuss today is in the making of the modern american fiscal state. Law, politics and the rise of progressive taxation from 1877 to 1929. I thought i would spend some time going over what the main arguments and claims i try to make in the book. Then i want to focus more on the sources of historical evidence. As i do so, i want to try to weave in some of the very valuable sources i found here in this building as well as elaborate of congress and some of the other places where, again, the primary, the unpublished primary sources of the historians true desire for getting to the unmediated past. There are a lot of important sources that i will try to weave in to my presentation. So, as richard mentioned, i am a legal historian. Ive been trained both as a lawyer and a historian. I also teach and write about a topic that most historians do not want to focus on. That is tax law and policy. I think tax is one of those areas that, at least for the american historical profession, has been neglected. At least in this country, its quite surprising. Im actually in town for a conference the next couple of days at the german historical institute. Every year, they put together a wonderful conference on taxation. All these folks from europe, the germans, and for them, fiscal history is it. There is so many people doing it. They have so much vast knowledge and come over here and wonder what is wrong with the americans. How come you dont pay enough attention to these issues of fiscal policy. We try to say we are getting there. Give us a chance. We are catching up in a sense. And so, this has been my research from the very beginning. This book is part of a larger Research Agenda. When i look at the political causes and consequences of changes in american tax policy. So, at its core, my book really is about the intellectual, legal and administrative foundations of what i referred to as our Current System of direct and progressive taxation. Those two key words are direct and progressive, they are really important. Like all historians though, my motivations arent just motivated by historiography, they are really shaped by our own present social and political climate. Arthur schlesingers once famously said that all historians are prisoners of their own generation. As much as you want to write about different generations, we are, of course, impacted by what is going on around us. And so, i have been working on this book for longer than i care to remember. From the dissertation to the transformation of the book process. During that time, weve heard from many social commentators and scholars that the United States has entered a new gilded age. This is, of course, not tremendous news. As ive said, lots of scholarly commentary about this. Lots of folks about the growing inequality and the concentration and mail distribution of wealth that has occurred. Not just in the United States, but in the western industrialized world, since about the 1970s through the president. All you have to do is read every other day and be reminded of that. Of course, the sensational reception of is another example of how this has become a really important issue not just for scholars, but for social commentators and for all concerned citizens. So michael in this book is to take us back to the first gilded age. We are in the second gilded age, if we are there, there was clearly an earlier period if where there was this massive inequality. This sort of incredible concentration of wealth symbolized by such mansions as this one. This is of course the vanderbilt a state in ash more. Its now a big tourist attraction. But this 250room home, this humble abode as a summer home for the vanderbilt, is just one of example of the opulence of this massive inequality. Of course, contrasting against that was the ravages of industrialism. The late 19th century is of course the period when massive organization, migration and industrialization has the other end of the spectrum. This, of course, is from the 1930s. This is a famous picture from the great depression. But you get the point, the massive inequality that existed in the gilded age was a fundamental part that is sort of driving my concerns about this book. So the puzzle that drove me when i first started thinking about this, what was the reaction to this kind of inequality . I noticed there was a fundamental fiscal transformation in the United States at the turn of the 20th century. I teach tax law, so you cant talk about fiscal policy in tax law without numbers. You see theres this dramatic transformation from the late 19th century and the sources of revenue for the federal government. Its custom duties, it is indirect. And ostensibly, regressive taxes. About 90 of government revenue in 1880. If you scan if you go to the 1930s, you see the income tax takes up almost 60 , as a legacy of world war i. Of course, this is a fundamental transformation in the way our federal government finances itself. This was the real puzzle. How did we make this shift . How did we go from this indirect and highly regressive system of consumption taxes to a more direct system. The income tax is a direct tax as we would say in referring to the base. Its graduated rates. Its not dramatically graduated as we would expect although during world war i, there is quite a spike where the rate goes up to 77 . How does this shift occur . What was the driver behind it. Part of it, of course, is geopolitical. You can see world war i is the puppet upon which this is much of the historiography, touch of the historical social science literature, gives a lot of emphasis to war. War and state building go hand in hand and taxes sort of a handmade in the gets there. Except the chronology does not quite work for you because income taxes are well before world war i. 1913 before the war even starts in which we have a 16th amendment and then the first set of federal income tax laws. So part of my contribution to the literature is to challenge it a little bit. Sort of the charles tilli view of the world that war, states make war and war makes states. Its all about war as the independent variable. An old parlor trick among historians. We go to the social scientists and say that beat one variable. Theres lots of different variables. Its not just one independent variable that explains such fundamental structural changes in society. So i want to ask myself whatever the motivations for this fiscal transformation. What were consequences. This is what i was trying to get in this book. Im not going to spend the entire time going over it. I will talk about what i see is the main consequences of not just transformation a Public Finance, but how that itself leads to a another a new fiscal policy. A new kind of state craft. Its driven and contained within five different elements. One, of course, is this desire to reallocate the fiscal burden. Moving it away from progressive consumption taxes. Its really about reallocating the burden of how you finance what, at this time, is the burgeoning emergence of modern regulatory and administrative social welfare state. The roots are all there in this progressive area period. The question is how are you going to finance it . Are we going to do it in a more equitable and effective manner . This is not all that new. Literature has talked about how we rise of income tax and a graduated direct tax has had its effect. But whats been underestimated, i think, is how this also has had a sort of social or cultural implication. I argue in the book, the second element of this new fiscal policy, is how it created this new sense of civic identity and fiscal citizenship. That is not a trend that ive coined, its a very important turn to my book and its become more popular in tax reform debates. A text lawyer by the name of larry zeleny at, who has a new book out called learning to love for 1040 in which he advocates for the maintenance of a return based income tax system. Part of it is this notion of fiscal citizenship. The actual process of paying taxes. Actually engages citizens with the state in a positive kind of way. Or at least, a potentially can be. So certainly in my period, thats certainly one of the drivers of this move away from a hidden kind of regressive consumption tax. To a more direct visible transparent kind of tax system. Thats an important part of the book. Also third, i am at heart a political and historical legal historian. When you think about the turn of the 20th century and political historiography, this is a time when you see a transformation away from the party period. A period when things like the tariffs are the defining issues of that separate republicans and democrats to the move to what is known where special interests rise. There is a more fractured sense of politics and how lawmaking occurs. Of course, fiscal policy is at the center of that. A move away from the tara. Its part of the shift and alteration in political arrangements. Those are the sort of three main elements. The other two that i dont sort of peace out and the book, but i alluded to, there are more consequential is how, at the end of the day, the income tax becomes a fiscal workhorse. It happens in world war ii where we move from a class tax to a mass text that generate the kind of revenue that is important for us. But the foundations, again, you get the intellectual, legal, administrative foundations are all there in the progressive era. It just gets accelerated, i argue, in world war ii. In underwrites this modern, as ive said, administrative regulatory social welfare state. You have to have the revenues to do these kinds of things. Its at this early stage and early progressive state where these foundations are built. And then the fifth, which is a little bit more progressive octave, or perhaps a little more present is, so my historian friends always push me a little bit on this. But i try to make the argument that the foundations, theres also a paradox or an unintended consequence that comes from this kind of move towards direct and progressive taxations, in a way from consumption tax. That is, i argue, it kind of exacerbates, or i describe, a fiscal my opiate that americans might have. This comes from some my comparative historical workouts. Im looking at the value added tax in europe for example. If one looks it value added today, i think it shows us two things. One, that there is a myth, there is an under text american. We are overtaxed, part of me. We dont pay as much as others, but its not as if we are overtaxed in that sense. But more importantly, what is missing is almost all modern industrial countries have some kind of consumption tax in the form Something Like a value added tax. The conspicuous absence of a value added tax and United States is really at least from the tax law policy perspective is sort of jarring. In some ways, the president im trying to make with this book is not to explain why. That would take another book all by itself. But at least two gesture this fixation on a progressive income tax may have foreclosed the opportunity for other kinds of taxes, possibly the movement to that. So in some ways, know that in the United States, the question of its a little bit more like one question why no socialism in america. Right . I think the two kind of go hand in hand. And so ill take a little bit again about this, going a little bit more in that direction. But at least one of the consequences i see is how did this foundational period of really narrowly imagination, and vision, of tax reform. As they really thought about the income tax versus consumption tight taxable was possible. I dont think i can i can prove my point, but i think theres evidence to suggest at this period had unintended or paradoxical consequence. Let me get to the first three claims, because these are really important. About shifting attacks spurt. So we saw here, this move again, away from progressive tariffs association with the tariff. In the excess taxes on alcohol and tobacco. To really tax individual income business profits, and wealth transfers, intergenerational direct wealth transfer. Direct tax. Indictment targeting wealthy individuals and corporations in the northeast. And this is a sectional story, too. This wave been falling and by others, so i am weaving and synthesizing some of the historiography that exist. But one thing i really focus on, is what they were willing to. These three words at this time become very powerful. And this is why my book is kind of a combination of intellectual in political history. And look at the reformers who initially are populous farmers and some sense. Populist farmers to intellectuals, some of the key protagonists in my book today will call him economists, put back in the data would call themselves political economists i think the distinction is very important, you nothing about the economy and much more broader ways as we come today. But it was these political economists, one was the leading tax theorist at this time. The labor activist in the university of wisconsin. I argue they are the pioneer of american financial, its theoretical finances. And they push this. They are all german trained. So there was a chance of ttransatlantic stored to be trained, as i tell in my book and it follows this notion of the ability to pay. That our tax system should have as its a fundamental cornerstone, the notion that those who earn have a social duty, obligation to contribute more. Not just proportionately, but progressively more. More to this notion of graduating rates is an idea driven by this concept. Of course, theres no coincidence that the economist revived at the time would have utility analysis taken in the United States, coming from the transatlantic story. Here, they were talking about notions of utility. How to last dollar to live in a built home to match dollars to the local new york labour. So i traces language from the political economists, the treatise is, and again this is a time where business economists are progressive reformers, too. Theyre not just writing for specialized audience of intellectuals directly trying to write for this is in the north american review. Theyre really trying to reach a broader and what theyre trying to do, its getting a social response or social reaction against the existing regime of regression taxes. And they are using this language of inability to pay not just as an intellectual tool, but as a political tool. As a way to galvanize a movement. And so their ideas are picked up by politicians. So this is where the lawmakers come in the archival store has been very important to trace how this moves from the halls of academic seminars and journals and popular magazines to what the lawmakers are saying actually in the halls of congress. And so this is one of the main points about this. And the other thing that they are pushing is that they are not trying to radically redistribute wealth. Thats never been the goal sort of shifting the tax burden. I think we sometimes forget with the origin of our tax is about. In some ways, our historiography, at least are currently glistening. Im thinking here in the work of a historian and another Political Economic historian. Its this view that this was a lost opportunity. That this was coopted, the income tax was really coopted by conservatives. We could have been scandinavian was sort of the premise. We couldve had this really radical change in this progressive area and we missed out. And so its really a conservative ploy, just kind of sign with the masses and will have this token in context. Its the argument that others have made. And i think thats just wrong. Because if you take a look at the primary source there were some people that were not completely wrong. There are some people, the very famous conservative republican from rhode island who said he was going to cut a brief in the income tax to cut the socialists. A clean he makes acquainted blissfully. So there is some evidence of that. But thats not whats going on. Hes not the only lawmaker they are. So i think we lose sight in the historiography but the income tax was really meant to radically distribute wealth. I think popular political discourse sometimes focuses on the right. I think we had a goal of using for like modern dainty party. In his sense, has the sense that our tax limits is about punishing capital, you see these kind of posters about tax enough already. This was one of the core elements, i think, of the modernity party. So there is of course huge dissonance to some of the tea party, and this is one of my favorite posters from the tea party. Dont take out of my medicare. People couldnt really understand the public versus a private. So youre trying to address, again i dont want to disappoint, i am trying to regress both the new left historiography. The one about scandinavia. And the current political dialogue that things more radical. That was never the goal in any of this. So if you go back to this, what the goal really was, its about reallocating the finance. And supporting a modern industrial state. It wasnt just the intellectuals, in fact they started to argue with some socialist issues. Heres a source i found in this building. I dont if its too small, but this is a letter, a petition, from the secretary of massachusetts movement to his congressman. Which i found here in the petition was in box 180, upstairs somewhere. And this is a quote, thats in the book. The American Farmers here are paying more for a disproportionate taxation and believing that our Internal Revenue tax only comes and equalize the burden of taxation. What a phrase. Its about equalizing the burden, not about making and progressive. Finally want to represent a congressmen or senators suffered to play such a lot in the start you. This was about the first income tax eventually being taken down. So, this is a social movement. Started with this kind of populist peoples bernie. So you actually see this, its not just the greater political voice. There is political parties, and then it becomes a resounding theme, and intellectuals kind of harness. So this moves from social movement in the intellectuals who harvest the social movement and become a potential bridge between the people on the ground and then the lawmakers. Because of course what im trying to write about his ideas and action. Not just his ideas of intellectuals talking about intellectual, but how theyre trying to influence lawmakers, so one of the most important lawmakers was a man who is in any way the political father. Here to, holds a suggestion that its not been well. He says i have no disposition of tax unnecessarily, but i do think the wealth of the country should share the burden of taxation. Now of course, just share, is it prudent concert. It was a very critiqued definition of what that meant. But at this time, this initially, and slowly, gradually, had a bipartisan notion of a shift from a regressive towards a progressive. There was at least one way to ensure that kind of gesture. And then again you saw on these back in the popular culture. So it was a cartoon that was to cover up my book, i took it here in the libra of congress, and you can see here that the title of the cartoon is in human on the job. The treadmill is governed so this is going. The regulatory socialist, a working class completing all the work. And finally, the heavy set is the idle rich. Thats what its labeled as. And you can see the colors income tax. Its a color that bringing the rich politician to the treadmill. Theyre not taken it doesnt turn out to equalize all wealth and income. But to get them on board to doing their fair share. And then this quote, from a government statistician at the time, talks about this concern. There is always a danger which rich will get to large and lay the country, in which case most effective practical remedies or progressive taxes on incomes and inheritance. So i direct in graduate taxes, to move away from indirect and regressive. So this is whats really driving this. And i think we still hear of this today. So if you think back, to just a couple of years ago, when this buffett was talking about his own tax life when he compared to his secretarys. It was an example of this concern about ability to pay. I think we also saw it in california, for example. Which people forget, theyve raised their taxes in california some years ago. So people often think you can talk about tax increase, its completely off the table. He doesnt have to be. Hasnt always been that way, one of the things ive tried to show, i guess you could label my book as a near progressive kind of a reminder. Americans are not always being antitax. And too often, people draw a direct line from say the revolution of the tea party, to newt gingrich. Thats how American Political Culture has always been would always be. Thats just not right. And thats part of the offshoot of this book. Today, we saw some of the occupy movements, some of the other things going. I think the Obama Administration partial victory in raising taxes on the highend. Not as high as they wanted, to level in that partial victory couple of years. It suggested this notion still has resonance today. Now the other claims that i would mention, quickly so we have time for q a i mentioned this notion of specific identity. So reformers during this progressive era really believe that you can gain taxes to reconstitute, invigorate the social contract, the relationship between citizens and the state. And you can use taxes to help citizens reenvisioning, madden, their ethical or social obligations to the broader community. Thats what taxes issues are about. Its about larger Voter Community state that can help with things like crisis management, economic development, and other things that the Public Sector does for us. And so this is really at the ways,of what, in many were trying to argue progressivism was all about. This was an age where social development of democracy where the key concepts. The identification with the common lock, as jean adams put it, its essentially a democracy. This is clearly the progressive era notion, and thats why its time we see this in this structural transformation that leads to the fiscal state. And i think we also see it in the sense of replacing what they saw as an old and out loaded notions that taxes were based on government benefit. And that was a sort of ideological rationale used for much of the existing taxes. And certainly at the state level, the property tax for example, even the tariffs to a lesser extent. There was a notion that there was this quid pro quo, that people paid taxes for the direct benefit the government gave them, for protecting your property, for example. The intellectuals look at particularly really attacked benefits, they say thats really an outmoded notion. Theres no real such thing as an isolated one and one relationship. So they use this ocean of ability to pay, as a counter to the benefits. Theres a suggestion that theres a social obligation in congress with a taxation as one week to fulfill that social obligation. And the third thing that i tried to stress in the book is how this movement to an income tax or a direct tax its not just an income, corporate profit taxes as well as wealth transfer in the state tax. It also transformed politics. We get new tax law policies and regulations that are very different from the tariff. So, its no longer about law, wondering about what going to be on the duty list and how much its gonna be. Its about having to find something called income, which to this day, is an important concept. And its continuously litigated in this cost for those regulations. So that sends us move, to a different pace, a graduate base i argue really because that sense tax law becomes a landmark for the purdue administration. I think the new deal still becomes the High Water Mark for a lot of this, but a lot of the agencies following up really with whatalong treasuries are doing. So, the treasury regulations in this time period help us define what is also this income, what counts as a taxable unit. All of these things are really important in developing and you sort of politics. Now were Less Beholden to the party period and the politics of horse trading over which items to put on the duty list and how much and who to appoint to the customs houses. These are all part of the party period. Now, its about bureaucratic experts. So, i have a separate chapter on the Critical Role the treasury lawyers plate during world war i, in particular, in building the administrative infrastructure of this fiscal policy. This spills over into other aspects. Another example of this is we see, relatively simple collection methods to this much more detailed and sort of need for professional knowledge about the tax rate and the process of remittance. Its no coincidence that this is a time when the modern corporation please an important plays an Important Role. When i first met richard, the policies were about how important the Corporate Tax was. Its less about taxing corporations then it is about the knowledge, the information that corporations start accumulate during this period. That becomes very important through the process of withholding. Withholding is this really important cornerstone to our system of taxation. Richard bird is a wellknown Public Finance economist. He has a terrific line. He says if the custom house was the locust of tax power in the 19th century, its the modern corporation thats become our custom house of today because its the information that a corporation contains that allows us to do all the kind of thirdparty reporting that leads to this kind of change and change in political arrangements. Now, ive used up a lot of my time. I want to conclude just a couple of quick slides on the importance of constitutional law and all of this. Because the 16th amendment is what allows for the creation of income taxes in sort of a response to the pollack case, which strikes down that 1894 income tax case. Its again, here, that i found some terrific information. Theres this really Important Role that the new york senator played in actually drafting, and so richard and i were talking earlier about how important it is to demonstrate to grad students and junior scholars about what the archives can tell you. I spent several weeks here looking through a lot of the papers and i stumbled upon up in college park. This sort of back and forth between route and the Treasury Department about how to actually write the actual language of the 16th amendment. Its hard to see here, but this is his handiwork. Hes a very clever wall street lawyer whos really thinking carefully about how the language of the resolution needs to be worded in this particular way. Theres like eight or seven drafts that go back and forth about how exactly are we going to have things like, from whatever source derived, a very key word thats not only part of the 16th amendment, it becomes part of our income tax law. You cannot get that from the published sources. This is why the archives are so important. I probably dont make enough of it in my book. And my next project, im thinking of toying with another book, a second book on the pollack decision. There is no, at least not since twist, i think, that weve had a book that really takes a closer look at the income tax, supreme income tax decision. It plays an important part in my role in my book, and i have two chapters, but im thinking to go in that direction to talk a little bit more about important constitutional amendment has been. So let me conclude now with just presentday implications. When i give this talk, especially to an audience not familiar with archives or kind of go, they what are you talking about . That period is gone. Civic identity, ability to pay, no one really believes that. I have to concede that times have changed. Theres no doubt about that. But i would also say even todays revolt against taxation, even the tea party, shares important routes with our modern shares roots with our modern fiscal policy. Theyre responding. Its long history than im talking about, i think continues to press upon us today. So let me end there. Thank you very much for your attention. Im happy to take questions. Thank you again. So, my experience has been that in developing federal policies, very often state governments test out interesting ideas first. Yes. Very good. Can you describe the history of direct taxation and income taxes at the state level and comment on how that influence d the federal government . Yes, thank you, great segue. Wisconsin is the answer in some ways, the short answer. During the progressive era, wisconsin is really the incubator, to use brandeiss term. Its one of those states. And its there, in 1911, where we see the first state level income tax. Its no coincidence, theyve becomes an important proponent of the income tax at the federal level. He sees it work at the state level. It also has a very Important Role in convincing the reformers and intellectuals. Edward seligmann says its impossible. States cant do this because too many things our national now, even in the early 20th century. The states are kind of kidding themselves. It really has to be a National Level where state should not bother. Its administratively too difficult is his argument. Richard doubts him. I have an entire chapter on what is going on at the sub National Level. And its wisconsin that becomes a leader. Theres other states that do other things on administration. But on the Actual Development and effective implementation of income tax, its wisconsin that becomes the bellwether, not just for other states, but for the national government. And one of the important innovations they have is this third party reporting. So they have this very crude form of withholding, where its not the modernday notion of withholding, but its reporting. Its requiring banks and other and Financial Institutions that are remitted and paying interest and dividends and things of that sort to actually report when theyre paying and to whom. That becomes a very important administrative innovation at the federal level. Theres very much a story about both states experimenting with things. Ohio does some interesting things administratively, sodas indiana, and the actual implementation of a direct progressive taxation successively and wisconsin, i think emboldens National Lawmakers to do it themselves just a few years later. Theres very much as a state to national story. Does that help . Yeah. Was it limited to just the rich . Yes, very much so. Thats one of the keys to this. It allows social democrats in milwaukee, for example, to galvanize support for it. Because it requires a constitutional amendment in wisconsin, as well, a state constitutional amendment. And part of the argument is that were going to keep rates high. And this is, again, made to ameliorate the existing dysfunction of the state level property tax, for example. So, the property tax, in theory, ought to be this sort of graduated sense. People who have more property should be paying more. But at this time, we see a radical transformation in the notions of property and wealth. Its no longer about land and real estate. Its about intangible wealth. Its about stocks. Its about securities. And in wisconsin, its about mortgages to large farmers that have mortgages that are not being taxed. So, the argument at the state level is a property tax, which may have functioned fine in a sort of preindustrial, precapitalist world, was ok. Now, we have this intangible wealth, our property taxes not getting to it. On the books, its opposed to, but in effect its not. How do we counter that and come up with another tax as a sort of counterbalance to that . Its aimed at the elite. Thats exactly how it is pushed through. The state story is very important. I have a whole chapter, probably too long a chapter, but i found it very interesting. Focused reallyk on taxing side and not so much on the spending side. Yes. And one point you made early on was that developments in your period maybe exacerbated fiscal myopic. Yeah. Again, we were wondering what was happening on the spending side during your period, and in particular, i guess a couple of questions. Number one, just empirically, to what extent was Government Spending growing . And what was Government Spending its money on . And does that change during your period . And then two, and i guess this i is motivated from sort of observations of our current politics. I think now theres a great this disjoint and taxing in discussions about spending. I wonder whether the protagonists in your book and other policy makers at the time were sort of similarly segmenting those discussions, or were they talking about taxing and spending together . That really gets at this point about fiscal myopea. One of the arguments i make is that its during this period that we actually see that segmentation occurring much more explicitly. So, and this is, again, not an argument im making innovatively. But Richard Musgraves made this argument in the mid 20th century when he was sort of attacking that ability to pay. That notion is being too powerful. So ive just taken his argument and putting it back into Historical Perspective. So what musgrave and peacock and what im trying to say now is back when there was a benefits principle, the two were linked. Spending and extraction were tied together. Ability to pay comes along, and i argue, and, in the sense, its unintended consequences. This is what reformers are wrote responding to. This deck thats been handed to them is this progressive system of consumption taxes. And they want to do would away with it. Its their foil. Its their bete noire. So they want to do against it. By pushing ability to pay as the counter, they focus exclusively on the extraction side. They severed the link between spending and raising revenue. And thats what i think is myopic about this. That might not have been such 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 back through consumption taxes. Right . So why arent we scandinavia . If you look, what is scandinavia actually doing . I use that example obviously as just one example, as an illustration. Its got an incredibly regressive vat texas everything. It has nothing exempt last that i checked. Its an incredibly progressive tax system, but yet its spending side is incredibly progressive. National health care, national education, all the spending that ameliorates the regress in this of the extraction process. And part of the fiscal myopia that im suggesting is the reformers in this period were so fixated on their ability to pay. Were so obsessed on focusing only on the extraction that they severed that link between spending and revenue extraction. I think theres been a legacy. Its not purely an intellectual story. Theres classic work on comparative taxation in democracy. Its about institution. Scandinavia has a parliamentary system and so its more possible. The u. S. Has all these veto points, so the u. S. Was never going to do it. Roger smith has a cultural argument about how a scripted notions of race and ethnicity have also influenced our policy. All those things are there. Im just adding another layer to suggest that this intellectual legacy is pretty strong, too. And to get to your second question, there isnt a lot of spending in this early paired and theres the retching effect. In the beginning of my period, one of the largest accounts for federal spending is on civil war veterans pensions. Its a pretty significant number in the 19th century. It starts to dwindle later on. But in some ways, raising revenue isnt the goal of the tariff system. So scholars sometimes say look at the tariff system. It didnt raise a lot of revenue. You sort of go well, thats the point. It was a protective tariff. There really wasnt meant to raise a lot of revenue at that it wasnt that there was a lot point. Of demand for federal revenue at that time period. Things change after world war i. The worst to become important. Theres this ratchet effect. Military spending states a very high, it comes down, but it never goes back to the prewar period. There is spending on world war i veterans, as well that leaves other social policy. This is also the time, of course, where the regulatory states, federal trade commissions, all these now federal agencies that did not exist in the late 19th century. So theres a sort of incremental growth if federal spending that is beyond National Defense and the question becomes where is the revenue going to come from. Thats part of my story is describing the forces that led to it. Does that help . Very good question. I have a question about what you think of finding our transportation infrastructure. Our Highway Trust Fund is broken. And thats based on fuel taxes , gasoline. But they have not raised, no politician has had the guts, including obama, to raise our gasoline tax. Theyve been the same since 1990. And should we pay for Highway Infrastructure out of the general fund . How should we do this . Wow. Well, so let me take the first out. Im a historian. As a historian, i saw a lot of periods, but the future is not one of them. So, im not sure where we should be going. But in other times, in other times where we had these kind of taxes, the response, the response in the past has been increased. But youre right. In todays political environment, that seems unlikely. Until we turn it in other context, in order sources, so maybe part of the discretion ary spending will be going towards transportation. There is talk, president obama does talk about our dysfunctional infrastructure and how we need a new one. But mostly just rhetoric. So i agree with your point that in the current environment, we dont seem to be spending money. But if history is a guide, it becomes a crisis mode. Im not sure what theyre trying to get in the future, i dont know. He predicted the highway i dont know. He predicted the Highway Trust Fund, when he took money from the general fund for the highway trust. Yeah, but that was a budgetary crisis. I mean the crisis they usually galvanizes a kind of reform are talking about, is more farreaching than that. So, when theres a next bridge catastrophe, or Something Like that, human lives are taken, that might be the moment. So, thats why theres our fiscal history teacher, where you have all these moments and opportunities as kind of windows for reform. And that might be the time when progressive reformers who either want to increase to gasoline tax, or found within might have been able to do that. Its a shame you waste a crisis like that. Theres a lot of historical truth to that. [inaudible] income is a slippery term. Another slippery term is direct tax. Apparently some in the Supreme Court, some things [inaudible] others in the Supreme Court didnt agree. Could you elaborate on the use of that term in the constitution that seems to have given the momentum . Yeah, thats a great question. So, for the direct tax clause from the constitution in the counting period requires that any taxes, it doesnt define, it but every texas to be abortion by population. That government before the 16th amendment changed that. But thats not how the courts interpreted it. For many years, an income tax was not deemed to be a direct tax. There was never a direct, explicit challenge to that. But for the most part, the way the court defined direct tax, it was presumed that income tax would be fine. In fact, i put in my chapter on the lead up to the pollock decision, the trained lawyer is consulted by both sides of the publics existence. Theres a bunch of new york wall street lawyers who are representing pollock. And they contact him, as well as the government lawyers, to get his opinion. Hes the expert. Hes done all this historical work on it. And he thinks this is a nonstarter. The courts wont be challenged, from the colonial era massachusetts all the way up to all the cases and tries to convince the pollock lawyers that theyre wasting their time. Course, are paid lawyers, so theyre gonna do their job. And they selectively use his research, and not the way he was appreciative of, so he writes an article in response. But its all moot because to his surprise, and the surprise of every expert, they deem attacks on renting income. That was a key part, attacks on rents, was a derivative of land tax. And therefore it was a direct tax, and they had to be a portion. And in because dealers run a portion of his truck. And the experts are all shocked by this. I mean, the law reviews are all full of what is this guy doing . And since that time, theres been tons of historiography. Because the actual cases are really tricky here, like the ones with the missing justice. Indifferent justices who vote in different ways appear. So, theres a book on that if youre interested. So, the right to court to interpret the direct tax clause, in the public, its very different than on the Supreme Court cases that have been, at least similar on that topic, before. So the experts are shocked. And in fact, when taft is running for president , hes a lawyer. He knows it. He thinks, on the campaign trail , he says the pressure of the income taxes, he doesnt say they made a mistake, but he says we might be able to implement an income tax despite the politics decision, which suggests he is not in agreement with the pollock decision. When he becomes, president of course, he doesnt want to challenge the integrity of the court, and pushing in fact helped broker the compromise that leads to the 16th amendment. So, the image i have here is fascinating. And when my wife and i stumbled upon that, its rude going through each word. Trying to figure out how he could write the 16th amendment, so that there wont be any future challenges. So, the language of the 16th amendment says without apportionment. Deemed an will be income tax but it will not be deemed apportionment. Its a direct response to the actual constitutional restriction. And so, root places a very Important Role on the economy, but at the end of the day, its about social politics, social movement. To ratify a constitutional amendment is not an easy thing to do. So its not surprising we go back to the farmers. Alabama is the first state to ratify the 16th amendment. Theres this influx of Southern States because what the income tax is gonna do is checks the tax the northeast industrial sector. Its the south being hurt by the tariff. Its a very important section implication. So you see this slowly going through. New york becomes a very crucial state in the 16th amendment battle. I just really riff off john bunkers great book on the 16th amendment, where someone is testifying before the new York Assembly about the 16th amendment. And governor hughes, Charles Evans hughes is the governor at the time and he actually comes against the 16th amendment because hes worried its gonna give the federal government too much power visavis the states. And hes worried that its gonna tax the state interests on on bonds, for example, things like that. So hes really worried. And Charles Evans was to columbia, we went to lawsuits, together they were friends. And he has a terrific presentation that says governor hughes doesnt understand the economics of taxation. If he was a student of mine, i wouldve flunked him dead. Its what he says. Because thats not whats gonna happen. Actually, the Capital Market will sort out this long implicit tax. The markets will sort out. If theres an exemption for certain countries and others. So governor hughes is going down the wrong path. And im not saying that his testimony was linchpin, but new york, thats where 80 of income tax comes from new york, pennsylvania, and massachusetts when its implemented. So new york is one of the states you would expect to resist. But, in fact, goes along with the 16th amendment, as well. Does that help . I dont know if it was around about response or not. Give it some flavor. More questions . Well, if a j gives us an example of why we should purchase his book, it was a great discussion of clarity on what can be an intimidating and prideful topic. So, thank you so much for a wonderful presentation. Thank you. Thank you all for coming. [captions Copyright National cable satellite corp. 2020] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] this is American History tv on cspan3, were each weekend, we feature 48 hours of programming exploring our nations past. White House Association host jeffersonss book white house. This is a map that is done in our day by a very talented current harder for by name of hawkins. He took maps, documents, and records of washington in 1801 and constructed this map based on that evidence. You could see the potomac rivers twice as wide as it is today. To the upper left you could see georgetown. This preceded washington, d. C. , by a couple of decades in age. In the middle you could see the president s house. In the center of this village if , the central part of the city was all that was at the time with these little brick shops and such. To the lower right you could see the capital building. It was surrounded by a very small community. Not even half built at that time. Only the senate wing had been completed. Below that is the third village, it was built up around the Washington Navy yard. Everything else is open country. Of the british diplomats in washington would call this 4. 5 square miles of empty land. Hard to visualize today. Presidedhat jefferson over as president. Learn more about jefferson in the white house sunday here on American History tv. Next, on lectures in history, university of utah political per finance Political Science Professor James curry teaches a class about the creation of the Electoral College and explains how it works as part of the president ial election process. Professor curry taught in class prior to this president ial debate which took place on october 7th on the university of utah. Author brandon wynford discusses book John Herbie Wheeler john hervey wheeler. 10 00 p. M. , three films to watch mark veterans day. Professor curry in that case i am going to share my screen and Start Talking about the Electoral College, everybodys favorite thing. Today we are going to start our week of talking specifically about the Electoral College, what it is, how it works, why it is important. Why George C Edwards doesnt like it. Why most political scholars kind of hate the Electoral College, it is not very popular among the Political Science sector. We are going to go into George C Edwards book, hopefully read