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 a draw from, but a presentation of that title, i think this is something that 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 mal 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 krugman 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. And so my goal 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, much 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 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. So 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 era 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 the 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 book, but i in the 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 precedent 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