Populism and the Income Tax

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    In the Populism lecture it was simply stated that the populists wanted an income tax as part of its platform. It was left at that, leaving to presumption any conclusions as to the nature of the tax that the populists wanted to implement. To be fair to the populists and to the subject matter an expansion is needed.
    There are two types of income taxes. One can be direct, the other indirect. The important distinction between the two is that a direct tax is general and upon rights, upon the right to own and possess property (such as on your and everybody else’s annual revenue), and an indirect tax is upon voluntarily-entered-into privileges granted by government.
    The British indirect or benefits system of taxation was adopted by the Founders to provide the day to day revenue to run the government. One of these privilege taxes or excises, as noted in the very influential Blackstone’s Commentaries, was the office duty. This was a tax upon government privilege measured by the income that the privilege produced. The British later incorporated the office duty with a general direct tax upon the incomes of the people calling the whole package an income tax in 1803.
    The WBTS prompted the first such official usage of this excise in 1862, and it was styled in part as an Income Duty. This tax, in its whole, collected a quarter of the revenue generated by all the internal excise taxes in force, was very popular with the people (99+% of the population was unaffected by it), and was easy to administer (the government has knowledge of privileges it grants). The tax was let expire in 1873 but it was still fresh in the minds of the populist’s of the 1880’s and 90’s. (And as the passage of 1894 income tax would show: so it was in the minds of the Democrats, also.)
    The farmers and others who made up the populists believed that in all fairness to the benefits system of taxation the “political entrepreneurs” who had been granted privileges that made them fabulously wealthy and thereby politically influential, should be taxed on those gains in the hope that other taxes which directly affected them (tariffs on farm implements, for instance) could thereby be lowered. The fact that such a tax, especially when graduated, would have a chilling effect on the rampant corruption systemic with “political entrepreneurs” probably didn’t slip their attention either.
    Looks like a slam dunk for the income tax as an excise, but let’s now take the contrary position that the populist’s wanted an income tax in the nature of a direct tax. Of course this period was before the 16th Amendment and the cognitive fog that it generated, so it was common knowledge that such a general on-your-right-to-exist tax had to be apportioned among the states. We know from the ratification conventions that the apportionment of such taxes was to prevent the federal government from being able to directly lay a hand on the people’s revenue, instead having the states collect the levy according to its particular method of collecting it. Typically the states, especially the western agrarian states, used an ad valorem property tax to collect their particular portion, placing the burden on poor struggling farmers. This was evidenced by the abandonment of the 1861 direct tax on these very grounds. So a direct tax was, with certainty, not what they wanted.
    Further, as the history of American direct taxes show, the styling of such taxes was confined to the term: direct tax, because apportionment would in many cases prevent the collection of the tax on the desired object, such as income. With this in mind, any populists who may have desired a direct tax would have called it just that, not an income tax.
    For a more thorough and detailed discussion of the income tax as an excise see the work of Peter Hendrickson, a fellow libertarian, at losthorizons.com. His writing is voluminous so I recommend taking his pop quiz and linking to essays discussing the answers: http://losthorizons.com/Documents/TheQuizPage.htm


    Very interesting site. Will have to add to my reading list

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