"By income taxes we strive to redress the balance and at the same time make the builders of great fortunes pay proper toll to the society which has made their success possible." George Lorimer, 1934

The 16th Amendment to the Constitution is what started the income tax in 1913.


Founded A.D. 1728 by

Benjamin Franklin


by Benton McMillin

May 17, 1913 edition


The income-tax question is one that will not down. For the best of reasons this is true. Way down in the hearts of the masses of mankind there lurks a strong sense of justice, on which is founded the opinion that vast accumulations of wealth in the hands of individuals or corporations should help to support the Government under which they are acquired, by which they are protected and without which they would vanish.

And why not? Why tax the widow's mite and the orphan's bread, and not tax these accumulations? Why lay tribute on what we eat and wear, and leave untaxed millions in the hands of those who can never personally consume it, and with whom it is surplus?

If there ever was a time when the concentrated wealth of the land should bear its share of our enormous expenses of government it is now.

There is a necessity of an income tax now that did not exist when our Government was conducted economically. In all the history of the Government of the United States there never was such an era of prodigality as that on which we have fallen. The Prodigal Son in his most prodigal day was parsimonious when compared with some exhibitions of extravagance that have characterized our Government in recent times.

There are reasons, besides its intrinsic justice, for the enactment of this tax. By this means the revenues can be increased or diminished by increasing or reducing the rate on income without materially disturbing business. Not so with tariff taxes, where a general revision, whether upward or downward, produces more or less business disturbances until the manufacturers , merchants and people adjust themselves to such change.

Again, in case of sudden war it is grossly unjust to let accumulated wealth, yielding great income, escape the increased burdens caused thereby and place all on consumption, stamps, and so on, where no man pays in proportion to his wealth.

Strangely enough, immediately after the destruction of the income tax by the Supreme Court's decision of five to four we were in the midst of our first foreign war for half a century, and had to send troops beyond the seas to the opposite side of the globe. By reason of this, and that wanton recklessness in expenditure which is too common with our National Government in recent years, Federal expenses have gone far beyond the billion-dollar mark; and consumption- not accumulations- has had to bear the heavy load.

Cleveland's Policies Become Popular

Under these conditions the more money we expended the more excuse for increasing the tariff taxes and the higher duties were raised. Many became thereby interested not in economy but increased expenditures, and extravagance ran riot.

For the years 1893-4-5-6, appropriations aggregated $1,860,630,575. During the Administration just closed the appropriations aggregated, for the years 1909-10-11-12, $4,069,342,738. This shows an increase of about one hundred and twenty per cent in Government expenses in sixteen years. Should all this increase be placed on the necessaries of life?

I believe that, with the great reform the people have forced by amending the Constitution, when wealth has to contribute its fair share to support the Government there will be closer scrutiny of expenditures and public officials will be held to a stricter account.

In 1884 the Democratic party elected Mr. Cleveland president. They had elected Tilden in 1876; but the victory, "like Dead- Sea fruits.... turned to ashes on the lips," and that great statesman was doomed to forego the greatest American honor. When Cleveland came to the presidency tariff taxes had been raised under the plea, first, that war expenses should be met; then that infant industries should be encouraged and protected; and, finally, that American labor should be protected against the pauper labor of Europe.

He realized that the time had come to give some heed to the American people. In his message to Congress he uttered a clarion note for "just taxation"; for reform of our tax system; for a tariff for revenue and not for robbery; a tariff to support the Government instead of one to breed trusts. He was in advance of people. They did not stand back of him and support him. Though he had given an honest, able and economic administration, he was defeated for reelection; but he and his party never faltered- never took the back track. They called on the battle again- without changing the battlecry, which was: Just taxation- tariff reduction- and won triumphantly. But unfortunately differences had arisen in the party and country concerning currency, silver and gold, and the parties divided on it. In the midst of this the tariff question loomed up. If we of the Democratic party had held to this alone we should have retained the administration of the country. We did not- and lost.

But our tale: Wilson, of West Virginia, was made chairman of the Ways and Means Committee. He had presided over the convention that nominated Cleveland for his third race. This still further put him in favor with the President and caused him to be promoted to the head of the committee.

When it came to the organization of the subcommittees the author of this article, being the oldest member in the service on the committee, was permitted to select the sub-committee of which he would be chairman. In Congress he had always been for tariff reform, and all expected he would choose the subcommittee of tariff revision. To the surprise of his friends, he chose the subcommittee on internal revenue, which would have jurisdiction of income taxation. When his friends asked him for an explanation of his choice he said: "Tariff revision is inevitable. It will come, whoever works for or against it. But with that we should have an income tax, to force the enormous wealth now held in few hands to help support the Government. It is not doing it now and will not even when the tariff is revised and reduced. I am resolved this benefaction shall come; and I am going to force an income tax, which is the reason I take charge of this subcommittee and question."

In framing the income tax of 1894 every effort was made to avoid the possibility of constitutional objection by the courts. There was a long line of Supreme Court decisions sustaining income-tax laws, beginning with the Hylton case, one hundred years before. This was followed by numerous decisions upholding the income-tax law enacted to meet the expenses of the great war between the states. That law was, in the main, followed in the draft of the new. When drafted we submitted it to the Treasury Department, then presided over by that able Kentuckian, Honorable John G. Carlisle, with the request that every feature should be eliminated that ran counter to any of the many Supreme Court decisions; and it was done. Honorable W.J. Bryan was on the subcommittee to prepare the bill, and did great and painstaking work on its construction. Then, as since, an earnest believer in an income tax, he put all his great power into the work.

He urged that no return should be required of those who had an income of less than thirty-five hundred dollars a year (note: the average worker made around $520 per year in 1913), because it would save the trouble of making returns by those not subject to the tax, and would strengthen the bill. His contention prevailed, as it should. He labored incessantly in the construction and passages of the measure. The decisions of the Supreme Court did not stop his exertions; he urged an amendment to the Constitution, and when it was proposed became one of its most strenuous advocates. When New York hung in the balance he delivered an address there, urging the Empire State to vote for the amendment.

We reported the bill from the subcommittee to the full committee. Then the fight began. Two-thirds of the committee were strongly if not bitterly opposed to making it a part of the tariff bill, which was competent under the rules of the House and committees. Among this number was the chairman, Honorable William L. Wilson. Democrats and Republicans alike opposed doing this. Many of the com-mittee opposed any and all income taxation. The able and alert Tom Reed, theretofore and afterward speaker of the House- and always, after Garfield left that body, the leader of his party in it- was leading the minority on the Ways and Means Committee. It was believed by the enemies of the bill that a majority of the House favored it. Hence their fear of advancing it. When I moved to consider the bill by the committee a motion to adjourn was promptly made and carried. I felt discouraged but not dismayed, and resolved not to be defeated. I told the chairman we were entitled to a fair consideration of the measure and urged another call of the committee. He issued it.

Meantime the President conferred in person with me concerning it, and was very solicitous about the fate of the tariff bill, which had already been reported to the House and was to be finally acted upon in a few days. He had favored a corporation tax in his message, but feared attaching the income tax to the tariff bill, and candidly said so. I asked him whether he did not believe an income tax was just, in that it made men support the Government in proportion to their wealth. He admitted that. I said: "Then, Mr. President, you are the best illustration in my knowledge of the propriety of going ahead whenever you are right. You justly and properly led your party to defeat in your second race for the presidency rather than surrender tariff reform. Your courage has brought us back to victory. When you admit the justice of an income tax you admit the propriety of my fight on this question, and I must and will keep it up."

What Republicans Were Afraid Of

I saw one of his fears was- and the same was true of many others- that such an amendment would endanger the passage of the tariff bill through the Senate. I argued with him that, so far from its defeating the bill in the Senate, it was the only possible means of passing it through the Senate; that the Populist senators held the balance of power there; that they would never be for the tariff bill without the income feature and would never be against it with that added- which afterwards proved true.

When the committee assembled again, in obedience to the chairman's call, the same farce was enacted. The enemies of income taxation moved to adjourn the committee and prevent action- and succeeded speedily and triumphantly. They were now entirely confident of victory. I again urged on the chairman the injustice of such tactics and that I did not intend to submit to defeat in that way. He finally said he would call another meeting the following day. I in no degree held him responsible for the committee's dispersal and for breaking his quorum.

As I walked out of the committee room Tom Reed sauntered out with me. His eyes had twinkled merrily each day a quorum had been broken and adjournment taken. He may have remembered how often, while he was speaker, I had helped do the same to him. He said: "McMillin, they've got you, haven't they?" I replied: "No. 'He laughs best who laughs last.'" I continued: "You honestly believe the passage of an income tax by the Democratic party will injure that party, don't you?" "I do," he replied promptly. I said: "Well, I think it will help us. And as you are convinced to the contrary, and want to do what will aid your party at the same time you serve your country, I want you to help me keep a quorum in that committee room tomorrow by keeping your men there, and I will get the bill out which will injure the party now in power." He said he would see what he could do.

When the committee next met there was a disposition to break a quorum, but neither Reed nor the Republicans joined in it this time, and it utterly failed. The next move by the Democrats who had fought us from the start was to call for the reading of the report, supposing it was not fully prepared. Had the report not been ready that would have forced postponement. I began the reading; and the member, seeing it was prepared, withdrew his demand for the reading. Then we took the vote and a majority voted to report the bill; but all effort to get a majority to agree to allow it to be offered as an amendment to the tariff bill failed. It must be put in as a separate measure. But when reported the House could do what it pleased with it.

That was the last day it could be reported in time to get it on the tariff bill however. Hence the fight for time by its enemies in the committee. Hence, too, the absolute necessity of reporting from the committee that day. Had that day been lost in the committee or in reporting to the House the bill would never have been added to the Wilson Bill or passed through Congress. There would have been no Supreme Court decision overruling the Hylton case and all other decisions on the subject for an entire century. There would have been no amendment to the Constitution such as has just been overwhelmingly adopted, setting forever at rest the contention that all wealth should not bear its proportionate share of the Government's expense. Income tax by all this is on a firmer basis than ever before.

An eventful day that!

We were not yet out of the woods however. The bill must be reported that very day. The House had already met and gone into Committee of the Whole when the Ways and Means Committee adjourned. It was Friday, and by general order the House was to take a recess at five o'clock, the night session being for consideration of pensions.

I went to Speaker Crisp and asked him to take the chair a few minutes before five o'clock, that I might report the income tax bill. He was friendly to the measure and agreed to do so. When he did, seeing that I was there to report and knowing it could not go on that tariff bill if not reported that day, the fight was renewed by General Tracy, of New York. He moved to adjourn. Crisp put the motion promptly. There was only three minutes' time before automatic recess began. The speaker declared the motion lost on a viva-voice vote. I jumped to the isle, in front of Tracy, for the speaker's recognition and rapidly made my report; the speaker announced it, and in the same breath said: "And the hour of five having arrived the House is in recess until eight o'clock this evening." An eyelash finish- closer than any other I ever had or saw on a great question in twenty years' congressional experience. Had Tracy moved to take a recess instead of adjourn, I should have lost, for there was no quorum present and it would have required hours to get one. Meantime the House would have gone into recess by previous order and income tax would have failed.

The last shoal was not yet past. Nothing but a caucus could now force this on the tariff bill. Mr. Bryan and I conferred. He urged the caucus; and after consulting other friends we determined to call one. He drew up a caucus call, which we circulated, and got the necessary signatures. There was great division and much feeling when we met. The committee was divided; the caucus was divided: and friends were divided. During the meeting two of the ablest Democrats in the country- one from the East, the other from the West- came near coming to blows over it, and friends had to keep them apart.

The Burden of Taxation

The chairman, Mr. Wilson, was forward to present the cause of the opposition to the income tax bill. I was to represent his friends. Unlimited time was given to both. After as brief a presentation as we could make the vote was taken and I was instructed by eighteen majority of the caucus to offer the income tax bill as an amendment to the tariff bill. I executed my trust, the House adopted it, and it went to the Senate and the statutes as a part of the tariff law. Mr. Cleveland let the bill as thus amended become a law without his approval, because of the increase in tariff rates forced on it by the Senate.

Though through much tribulation the income tax had gone on the statute books, and thereby a small part of justice to a taxridden people had been done, its troubles were not yet ended. The wealth of the country had in great measure been able to free itself from war burdens very soon after the Civil War. The income tax was repealed; the tobacco tax was reduced; the tax on spirits was reduced. But the tax on clothes and on the necessaries of life- tariff taxes- had been increased. There were still millions of war debts, war claims and war pensions to be paid; but those ablest to pay were the least willing to pay. Hence these reductions in the taxes of the opulent, and increases in taxes of the masses of the people. Accumulated wealth had freed itself from the war burdens- why submit to this new tax? Perish the thought! True, this form of taxation- income- had contributed three hundred and fifty million dollars to carry on the war. True, it had been fortified by a century of unbroken decisions, sustaining its justice and constitutionality. But this "innovation on property right" was not to be endured, and was not submitted to. They rushed to the courts as cities of refuge. They went not in vain. One member of the Supreme Court, Justice Field, had been on the bench when the Supreme Court had decided the Springer case and other cases sustaining the income tax, and had- as I remember it- concurred therein. But this did not stand in the way. He was one of the first to antagonize the law and to hold that the decisions before were wrong.

It was a great occasion when the cause came on for hearing in the Supreme Court. Able lawyers from the four quarters of the country came to Washington to witness or participate therein. There were men there known as able lawyers throughout the country. Both age and youth came. There was on the Government side the great Massachusetts lawyer and statesmen, Attorney-General Olney. Ass-isting him were Judge Carter and others, "not known merely because their fathers were."

On the side of the opposition to the tax, the first to appear, opening the case, was Guthrie, of New York, not extensively known prior to this time outside his state; but very widely known afterward by reason of his great presentation of his side of this important cause.

Following him against the tax came the genial gentleman and diplomat and able lawyer, Joseph Choate. Seward, of New York, was there, descendant of Lincoln's famous Secretary of State; Edmunds, of Vermont, also, renowned not only as a great lawyer But as having been an honest and able senator. While in the Senate, such was the friendship between him and Judge Allen G. Thurman, of Ohio- "the noble old Roman"- that, though Republican and Democrat, from Vermont and Ohio, they were justly called "Damon and Pythias of the Senate." Yes, they were all there, and many others far-famed. All limit was removed from the debate.

It was a go-as-you-please contest. The court had granted this because of the magnitude and importance of the controversy. And well it might, for, though some spoke as long as two or three hours, interest never flagged for a moment. In opening, Guthrie spoke about two hours and wasted no time, covering his case with marked ability. For three hours Judge Carter and Mr. Choate each instructed and interested both court and audience.

Finally, when it came to the closing of the Government, it was done by no less famous and distinguished an advocate than Attorney-General Olney. By able action he had hitherto justified the wisdom of President Cleveland in selecting him. By every word and act, in a remarkable argument, he that day showed he was the right man in the right place. He spoke but fifty-five minutes, yet he had not said a superfluous word, nor did it seem he had left unsaid a necessary thing. It was a great presentation of a great and important cause- the case of Pollock against the Farmers' Loan and Trust Company at its first hearing, in 1895.

A majority of the court held that, as to the tax on incomes derived from real estate, it must be apportioned under the Constitution, because it was a direct tax; but as to whether a tax on incomes arising from personal property must be apportioned in order to conform to the Constitution the court stood four to four- a tie, the result of which was to sustain the constitutionality of the law. But those seeking to set aside the law as unconstitutional were not dismayed by their failure and were determined that nothing short of freedom from this tax would satisfy them.

If there is one citizen more determined and vigilant than all others it is he who is bent on resisting a tax. They sought and obtained a rehearing before the Supreme Court. At the first hearing Justice Howell E. Jackson, of Tennessee, was prevented by illness from participating. On the second hearing, at the risk of his life, he determined to attend and aid as best he could in causing a just decision.

When Justices Reverse Themselves

I need not go into the details of the second hearing; but Justice Jackson lined up on the side of those who had held the law constitutional, delivering an able opinion setting forth his views. Much interest naturally attached to his action. If he opposed the law it would fall without any one of those favoring it in the first trial changing. If not some justice must reverse himself or the income tax must be paid. One justice did reverse himself. This change resulted in the court declaring, by five to four, the tax unconstitutional, notwithstanding Justice Jackson's decision for the law. Able opinions by him, by the Nestor of the bench, Justice John M. Harlan, and by Justice White- since made Chief Justice- availed nothing in the face of the fact that two justices were reversing themselves- one, his very recent action taken, and the other, overruling decisions in which he had participated growing out of the income tax law passed to meet the expenses of our Civil War.

True, the justices agreed that taxes imposed on incomes from occupations or business did not have to be apportioned; but the object sought had been obtained- the most vital revenue-yielding features were destroyed and the law emasculated.

Behold the result of this revolutionary decision- revolutionary in that it overrode the decisions of generations! It can be shown that if that means of revenue had been retained from then until now it would have yielded enough revenue to pay our bonded debt.

There is no denying that deep regret and disappointment followed this extraordinary decision. It met with strong adverse criticism- in many cases bitter. There was a demand on all sides for an amendment to the Constitution to take away the power of the Supreme Court to nullify the income tax. I felt that, as the people had curtailed the powers of that tribunal once before- by the adoption of the amendment to prevent them from taking jurisdiction, as in the celebrated Georgia case- they could and should do it again. I therefore at once introduced a resolution in the House of Representatives for a Constitutional amendment to prevent the recurrence of such injustice as I felt had been done in the Pollock decision.

I was so late in the term I thought it not probable that it could be passed at that session and submitted to the legislatures of the states. But the reform was needed, the work had to be done, and the sooner agitation was begun the sooner reform would come. The movement gained new momentum day by day. Favorable response came from every part of the country. Other events also helped along the movement. Rigid economy had been the Democratic policy. President Cleveland had enforced it rigorously. The appropriations during his last Administration were, for the four years, $1,860,630,575. But there came an era of extraordinary expenditure and unprecedented appropriations. The Billion-Dollar Congress was ushered in, with its wanton waste and extravagance. We spend more dollars through Congress in one year in Harrison's Administration than there are seconds in thirty years! The laborer and the farmer began to say: "If all this money is to be raised by taxes on consumption, and none from incomes, what is my fate to be?"

We went out exploiting other countries- sent armies to China, to Cuba and to the Philippine Islands. High-priced civilian officers and establishments followed in their wake. It was all costly, and nothing came from tax on incomes. At last the people rebelled and resolved on reform of their tax system; and they struck for an income tax again.

Congress was called to revise the tariff bill by President Taft in 1909. Whether it was revised upward or downward has been a disputed point; but, whether one way or the other, the people were not satisfied. There had been talk in favor of a tax on corporations. The leaders among those who favored revision upward, or a standpat tariff, came to believe there was strength enough in Congress to pass an income tax and shrank from it.

There had also been many changes on the Supreme Bench. It was better, as protectionists saw it, to allow the submission of an income tax amendment to the Constitution than to grapple with the income tax law again.. This would at least give time and a "breathing spell." Besides, the amendment feeling was so strong they despaired of defeating it in Senate or House. The following resolution and amendment was introduced in the Senate by Senator Brown, of Nebraska, in 1909:

"Resolved, By the Senate and House of Representatives of the United States of America in Congress assembled- two-thirds of each house concurring therein- That the following article is proposed as an amendment to the Constitution of the United States, which, when ratified by the legislatures of three-fourths of the several states, shall be valid to all intents and purposes as part of the Constitution.

"Article XVI. The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment, among the several states, and without regard to any census or enumeration."

It passed the Senate July 5, 1909. It was adopted in the House of Representatives July 12, 1909. After enrollment it was deposited with the secretary of state July 21, 1909- a fast record!

The First State to Come Across

Doubtless many who quietly submitted to the passage of the amendment resolutions through the Senate and House did so because they believed the same forces that had fought the tax before could take care of it in the broader field where the fight was so unequal. By securing only one more than one-fourth of the states to oppose it they would defeat it. They did not know what a revolution had been set in motion among the people. They could not believe the same great force which was demanding that the tariff be revised downward also demanded that all taxes should be imposed, whether income or tariff, which more certainly and surely would secure equality of tax burden.

It was assented to- or rather tolerated- by the standpatters only as a breakwater against an income tax law in the tariff revision made at the extra session called by President Taft in 1909 for that purpose. Another thing tolerated rather than favored was the new tax imposed on the income of corporations, and for the same reason. The support of the corporation tax by certain stalwart standpatters cannot be accounted for in any other way.

At first some states that were supposed to be for the amendment either failed to ratify or rejected it. There being forty-eight states in the Union, thirty-six were required to ratify it. The earnest and progressive advocates of the amendment justly feared and trembled when they saw the systematic and powerful opposition organizing against them; but they wisely met reaction with action, determined that it should not fail for lack of aggression.

Alabama was the first to act favorably, on August 17, 1909- less than thirty days after submission. The great state of Illinois also acted early and favorably.

New York presented one of the most stubborn of all the battles waged on the important question. At first it was rejected. Opposition to ratification was led by Governor Hughes, chief executive of the state, now a justice of the Supreme Court. He insisted that the amendment would authorize the imposition of an income tax by the Government on the income obtained from bonds of the several states. He went so far as to include this argument in a message to the legislature.

Approbation from Elihu Root

Honorable Elihu Root came forward in an able and exhaustive argument in favor of the amendment, in which he combated the position of Governor Hughes. He showed that these taxes had been sustained by the decisions of the Supreme Court of the United States for one hundred years prior to their being nullified by that same body in the Pollock decision in 1895. He cited as proofs of this the Hylton case, decided in 1796, and also the Springer case of 1880, both unapportioned taxes- one on pleasure carriages, the other involving the sale of Honorable William M. Springer's home, which he allowed to sell for income taxes to make the case and test the law. He argued, as others had done before, that the Government had relied on this tax to raise vast revenues and help carry on the war of 1861-65. He contended that it was unwise to take from the Government the power to marshal its financial forces to save it in direst extremity. As to the effect of the amendment and the power it conferred, he said:

"I do not consider that the amendment in any degree whatever will enlarge the taxing powers of the National Government, or will have any effect except to relieve the exercise of that taxing power from the requirement that the tax shall be apportioned among the several states. The effect of the amendment will be, in my view, the same as if it said: 'The United States may lay a tax on incomes without apportioning the tax, and this shall be applicable whatever the source of the income subjected to the tax'; leaving the question, What incomes are subject to national taxation? to be determined by the same principles and rules which are now applicable to the determination of that question."

New York reversed her former action and in 1911 joined the movement for ratification. Then the work became easier. State after state voted to ratify, and but few refused outright to vote for it. As the feeling against the injustice of the tariff schedules increased, the income tax amendment grew in popular favor. The great revolution in the Northwest against the one was no less a revolution for the other. It became a platform declaration and shibboleth of the Democratic party.

West Virginia was the thirty-fifth state to adopt it. Then there was a number of states standing ready to be the thirty-sixth and final one, to complete a work begun a sixth of a century ago and adopt the first amendment to the Constitution in more than forty years. The Fifteenth Amendment was adopted in 1870, giving the franchise to the former slaves. Delaware beat Wyoming for the thirty-sixth place only by a few hours. The same day New Mexico acted and New Jersy was ready to do so. It was ratified, with many states to spare.

Thus has ended one of the most important contests in the history of our Government. It strengthens the arm of the Republic that was paralyzed by the Pollock decision. It equalizes the burden of the people- relieving the weak, yet doing no injustice to the strong and opulent. Most of the great nations of the world have an income tax- some of them of very long standing. It is hard to tell how many of them would progress without it. We have done so only by reason of the boundless resources of our rich forests, new territory, coal, iron, and other minerals, many of which we are wasting without due regard to the future. But as our cities become crowded, our soil worn out, our resources diminished, so that no longer the poor could have homesteads for the simple asking and settling, taxation of wealth instead of poverty was an absolute necessity. The people saw it, felt it, demanded the reform- and have forced it.

The signs of the times indicate two sources- both just and feasible- from which the American people will and should insist on getting permanently a large part of the vast revenues to run this Government. They are- first, whisky, wines, beer and tobacco, because, being subjects of voluntary consumption, they are more properly taxable than the necessaries of life; second, incomes, because thereby each taxed citizen pays in proportion to his ability.

This is not the case where revenues are derived solely from consumption, for it takes as many yards of cloth to clothe comfortably and as many pounds of sugar, coffee, salt, rice, meat and vegetables to feed bountifully a poor man as a rich one. Hence, when taxation is on consumption, as with tariff taxes, the burden is borne unequally- the poor paying more and the rich less that their fair share. Therefore these two sources and tariff duties will be our reliance on the future. Heretofore we have taxed want instead of wealth.

England's Source of Income

The growth of income tax sentiment throughout the world has been rapid the last third of the century. The graduated income is much more popular with the masses than a flat or uniform rate on all incomes, whether large or small.

The systems of income tax differ so widely in different countries that it is difficult in the small space available here to give anything but a brief summary. The United States has been a follower- not a leader- in income taxation. We have seen it tried in other countries sufficiently to profit by their experience.

The United Kingdom was one of the first of the great nations to adopt a general income tax. It was first invoked there as a temporary war measure in 1798 and repealed in 1815. It was reenacted and has been a permanent part of their revenue system since 1842. Not only is the law in force in England, Ireland, Scotland and Wales, but an income tax exists in most of England's colonies.

The exemption is one hundred and sixty pounds. England derives more than one-fourth of her revenue from this source. Much of the tax is collected at the source, thereby avoiding in a measure individual returns. The persons in England with incomes of less than one hundred and sixty pounds, and their families, in 1904 numbered 37,875,000, and their income was $4,400,000,000; the number with incomes of seven hundred pounds and upward, and their families, was 1,375,000, and their annual income was $2,900,000,000; the number of persons with incomes between one hundred and sixty and seven hundred pounds, and their families, was 3,750,000, and their annual income was $1,225,000,000; the number of income tax payers in London was 58,600. This tax is Scotland yields about one-tenth of that in England, and Ireland yields about one-third as much as Scotland. In 1909 this tax yielded $165,103,380 in England.

Japan's present system of graduated income tax was adopted in 1899. and amended by fixing extraordinary additional rates in 1905-6 for war purposes. The ordinary rates are from one per cent on three hundred yen- one hundred and fifty dollars- to five and five-tenths per cent on one hundred thousand yen or $50,000; all below three hundred yen is exempt. It yielded in 1910 $14,864,920, which was 9.27 per cent of what was raised by taxation. The extraordinary war tax, now made permanent, is from nine to forty per cent of the ordinary rate, and therefore also graduated. But on some kinds of income the tax goes as high as twelve and a half per cent. Japan has no inheritance tax.

By a reform system of taxation, adopted in 1909, Hungary has a graduated income tax on all incomes ranging from five-tenths of one per cent to five per cent. With an income of two thousand kronen ($406) the rate reaches one per cent., and one hundred and fifty thousand kronen ($30,450) it is five per cent. Even higher rates are paid for certain compensation paid for services. A higher rate is paid on land rent of absentees than on similar incomes of residents.

India has an income tax system dating back to 1886. The tax in graduated. The rate is about two to two and a half per cent and yields $7,057,213, paid by 255,762 persons; the cost of collection is but one and seven-tenths per cent.

Switzerland,as a whole, has no general income tax law, but in all the cantons collection is made on both earned and unearned incomes at a specified rate for the canton and also for the commune. The laws are too numerous to quote and too variant to generalize. The tax is graduated. Some idea of the system is obtainable from the city of Berne, which collects from two to five per cent for the city and from two and a half to six and one- quarter per cent for the canton.

Where Uncle Sam is Liberal

Denmark's income tax law of 1903 is graduated, ranging from one and three-tenths to two an five-tenths per cent, and is paid by all people living in Denmark. An exemption of two hundred and fourteen dollars is allowed for people living in the cities, one hundred and sixty dollars for people in the county districts; and a further reduction is made of twenty-six dollars for every child in Copenhagen and eighteen dollars for children in the country. No distinction is made between earned and unearned incomes. There is also an inheritance tax, which is levied not upon the source of the income but upon incomes from all sources; it costs one and five-tenths per cent to collect, yields $2,150,000, and is paid by thirteen percent of the entire population.

The states of the German Confederation contain about twenty income taxes. In most estimates the method of assessment relied on is the return made by the taxpayer, disclosing his income. Collection at the source has not been adopted extensively by these countries.

There has been a progressive income tax in force in Austria since 1898; prior to that time, as far back as 1849, there was an income tax, but the rate, reaching some cases ten per cent, produced discontent and evasions. The taxation commences at about six-tenths of one per cent on the first grade above the exemption; it reaches one per cent at the twelfth stage, two per cent at the twenty-seventh, three per cent at the forty-third, and about three and a half per cent at the fifty-sixth. An income of four thousand pounds pays about four per cent, and above that approaches closely to five per cent. In 1905 the tax yielded about $11,000,000 and in 1907 $13,069,398. The general idea is to have it weigh less heavily on small than on large incomes. It is really a second tax on property already taxed.

Prussia has a graduated income tax system, the underlying principle of which is taxation according to capacity. Incomes under five hundred pounds pay from sixty-six one-hundredths per cent to three and fifteen one-hundredths per cent. It begins with an income of forty-five pounds. In 1903 the number of income tax payers was 38,977,821; and of corporate bodies paying the tax, 2598. The taxable incomes amounted to $2,272,884,505 and yielded $46,589,575. The law of 1893 taxed more heavily funded than earned incomes. This source yields about one-third of the tax revenue. It yielded in 1908 the round sum $88,000,000.

The Swedish income tax is graduated and recognizes the principle of exemption of a small income. The tax in Norway is graded on a scale of from two to five per cent, and in 1904 yielded $1,506,100. The income taxpayers numbered 99,316, or four and four-tenths of the population; the system works satisfactorily there. The Norwegian income tax on companies is levied at the source, but on salaries is not deducted before payment. It yielded in 1909, $7,955,494.

Income tax collected by all countries in 1908 is placed by Kennan at $413,000,000. The amount collected by England was $165,000,000; by Prussia, $88,000,000; Italy, $50,000,000; Spain, $18,000,000; Saxony, $12,275,000; Austria, $12,000,000; and by Holland, India and Norway, each about $7,000,000- in all, from these countries, $366,275,000, or about ninety per cent of the whole. And in thirty-seven countries examined fifty per cent of the total revenues was raised by income tax.

A tabulation of fifty-six countries shows an average exemption of $406.30; but, grouping England and fourteen of her colonies, and Hawaii, the average exemption is eleven hundred dollars; and the average exemption of the remaining group of forty-seven countries is but $153.13.

The most liberal exemption in the world is that of 1894 in this country, which is also proposed in the bill to be enacted by the present Congress- to wit, $4,000. It is more than three times that of any other English-speaking people and more than seven times the average of all countries' exemptions from income taxes.

One objection made to income taxation is that it is inquisitorial. Properly constructed it is not so inquisitorial as many of our other taxes, both state and national. Our taxes on whisky and tobacco are more inquisitorial than any income tax passed or proposed in this country. Both the manufacture and sale of these are under inquisition and guard at every step. The forms of assessment and collection of our income tax are not so inquisitorial or the return so open to inspection as those for collection of most of our state taxes. No tax can be properly levied or collected without inquiry as to the nature and amount of the property on which it is placed.

The proposed income tax bill, carefully prepared by Judge Hull and his associates of the Ways and Means Committee, imposes a normal tax of one per cent a year upon the net income of all persons over and above $4000, and upon all corporations, joint stock companies and insurance companies without exemption. For the purpose of graduating the tax imposed upon individuals, in addition to the four-thousand-dollar exemption allowed, an additional tax is imposed upon all individuals whose net income exceeds twenty thousand dollars.

Like the English law, which has worked very successfully, it requires collection at the source; and it is estimated that two-thirds will be thus collected- to that extent avoiding personal declaration and report. The returns are safeguarded against publicity. Of course the amount of revenue will depend upon the rates finally adopted by Congress. Congress will be guided, doubtless, in fixing these rates, by the reduction in revenue to result from the cuts that are made in the general tariff schedules and the reductions resulting from a very extensive free list, which is understood to be the policy of the committee and Congress.

If sugar and wool are not put on the free list it is understood that the rates of duty on them will be heavily cut, which would inevitably result in reduced revenues. Many agricultural implements, binder-twine, and the necessaries of life, it is understood, will go to the free list. I cannot find an opinion anywhere that the income tax will be framed to yield less than one hundred million dollars; and sentiment ranges in favor from that figure to one hundred and twenty-five millions.

Wilson and the Public Weal

President Wilson is deeply interested in a thorough reform of our tax system. He has studied it carefully and has called an extra session of Congress to consider the whole question. He is keeping in close touch with the House and the Senate, and is urging remedial legislation. His past record demonstrates that he may be relied on to carry out party pledges and the platform on which he was elected. He has the courage of his convictions and is not afraid to act.

We may also judge, from both his declaration and his record, that he stands ready to initiate reform whenever and wherever the public weal demands it. It may be predicted with perfect confidence that, whatever other tax fails, the income tax will not fail. Wherever there is a revolution it will be against some other form of taxation instead of this.

It is founded on the rock- not the sand- and will stand against all storms.

Author's Note- I acknowledge my indebtedness to the works of Seligman on The Income Tax, of Kennan on Income Taxation, and to Judge Hull's data on the subject, all of which have been consulted in the preparation of this article.

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