America's Fiscal Constitution (72 page)

9
. Quoted in Kelley,
The Transatlantic Persuasion
, 325.

10
. Jeffers,
An Honest President
, 194.

11
. Kelley,
The Transatlantic Persuasion
, 326.

12
. McMath,
American Populism
, 26.

13
. White,
Railroaded
, 68.

14
. Veblen, “The Price of Wheat,” Tables of Prices of Wheat and Other Articles at 156.

15
. Hofstadter,
The Age of Reform
, 174.

16
. Cleveland, “Third Annual Message.”

17
. Ibid.

18
. The political battle over import taxes became more heated even as their size and significance diminished as a percent of the total national income and total federal revenues. In 1866 federal customs collections were $179 million and rose in the next thirty-four years to $233 million. They fell to a low of $130 million in 1878—at the tail end of a recession—then jumped to a high of $220 million in 1882 before leveling off. In contrast to revenues from import taxation, revenues from sales taxes, principally taxes on alcohol and tobacco, rose steadily with national income.

19
. Cleveland, “Fourth Annual Message.”

20
. Sherman could also count on some support from Western “Silver Republicans,” a faction that tried not to anger the powerful Farmers Alliance. Between 1889 and 1890 six new Western states—Idaho, Montana, Washington, Wyoming, and the two Dakotas—joined the Union, adding to the region’s power in the Senate and Electoral College.

21
. McMath,
American Populism
, 141.

22
. Adams,
Johnson’s Universal Cyclopaedia
, 521.

23
. Studenski and Krooss,
Financial History
, 228–229, and Jeffers,
An Honest President
, 281–283.

24
. John Sherman quoted in Sundquist,
Dynamics of the Party System
, 147.

25
. Brands,
American Colossus
, 474.

26
. Bryan quoted in Witte,
Federal Income Tax
, 73.

27
.
Pollock v. Farmers Loan & Trust Co
., 15 S. Ct. 673, 695 (1895) (Justice Field, dissenting).

28
. Hobbs and Stoops,
Census 2000 Special Reports
, 11.

29
. See Appendix A.

30
. Bureau of the Census,
Historical Statistics, 1789–1945
, Series P 99–108 at 299.

31
. Taus,
Central Banking Functions
, 96.

32
. Faulkner,
Politics, Reform, and Expansion
, 266.

33
. Mark Hanna quoted in Samuels and Samuels,
Teddy Roosevelt at San Juan
, 21.

C
HAPTER
8

1
. Parker,
Recollections
, 250.

2
. Davis,
Financial History
, 486–487.

3
. Theodore Roosevelt quoted in Chace,
1912
, 99.

4
. Bureau of the Census,
Historical Statistics, 1789–1945
, Series P 99–108 at 300.

5
. Roosevelt to General Leonard Wood, March 9, 1905, in Bishop,
Theodore Roosevelt
, 366.

6
. Dalton,
Theodore Roosevelt
, 334.

7
. William McKinley’s speech in Buffalo, New York, on September 5, 1901, in Peck,
Twenty Years of the Republic
, 654.

8
. Bureau of the Census,
Historical Statistics, 1789–1945
, Series P 89–98 at 296.

9
. Ibid., Series P 99–108 at 300.

10
. Roosevelt’s speech in Minneapolis, on April 4, 1903, in Roosevelt,
Compilation
, 255.

11
. Roosevelt quoted in Morris,
Theodore Roosevelt
, 444.

12
. Weisman,
The Great Tax Wars
, 202.

13
. Roosevelt, “Sixth Annual Message.”

14
. Bruner and Carr,
The Panic of 1907
, 67.

15
. Willoughby,
The Problem of a National Budget
, 137.

16
. Ibid., 138.

17
. Stewart,
Budget Reform Politics
, 184.

18
. Weisman,
The Great Tax Wars
, 216.

19
. Nelson Aldrich quoted in Chernow,
The Warburgs
, chap. 10, “Shy Warrior.”

20
. Kimmel,
Federal Budget and Fiscal Policy
, 85.

21
. Wilson,
Constitutional Government
, xxx.

22
. US Censuses of Population and Housing, “Table 1. United States Resident Population by State: 1790–1850,”
http://lwd.dol.state.nj.us/labor/lpa/census/1990/poptrd1.htm
.

23
. Wilson,
A Day of Dedication
, 103.

24
. Chace,
1912
, 166. These proposals were also part of the contemporaneous platforms of British Liberals led by Lloyd George and Winston Churchill, a reformer just eight years younger than Theodore Roosevelt.

25
. Appendix A shows historical debt in comparable terms by subtracting “paper money” in the form of greenbacks and gold and silver certificates from the national debt. After 1913 their functions were replaced by the Federal Reserve note, or modern “paper money,” and those notes were no longer included in the debt account. From the Civil War until World War I, the “official” debt statistics on the US Treasury’s website are not meaningful for historical comparisons because they include non–interest-bearing notes serving as currency, including notes issued for gold and silver deposited at the Treasury.

26
. Studenski and Krooss,
Financial History
, 144–145.

27
. Witte,
Federal Income Tax
, 75–79.

28
. See Appendix A.

C
HAPTER
9

1
. Morgan,
Deficit Government
, 7.

2
. Claude Kitchin quoted in Tindall,
The Emergence of the New South
, 42.

3
. Witte,
Federal Income Tax
, 8.

4
. Kitchin quoted in Tindall,
The Emergence of the New South
, 43.

5
. McAdoo,
Crowded Years
, 369.

6
. Kitchin quoted in Keith,
Rich Man’s War, Poor Man’s Fight
, 14.

7
. Kitchin quoted in Tindall,
The Emergence of the New South
, 53.

8
. Woodrow Wilson quoted in Gilbert,
American Financing of World War I
, 84.

9
. Ibid., 83.

10
. Emergency Loan Act of April 24, 1917.

11
. Gilbert,
American Financing
, 84–91.

12
. William McAdoo quoted in Mehrota, “Lawyers, Guns, and Public Moneys,” 184.

13
. McAdoo quoted in Ippolito,
Why Budgets Matter
, 101.

14
. Kitchin quoted in “Kitchin Excuses New Tax Bill.”

15
. A commitment to taxes based on ability to pay was shared by other powerful members of tax-writing committees, including Senator Furnifold Simmons from North Carolina, chairman of the Senate Finance Committee; Senator John Williams of Mississippi, chairman of the Subcommittee on Income and Estate Taxation; and Representative Cordell Hull of Tennessee, who had drafted the original income tax.

16
. Gilbert,
American Financing
, 94. An excellent source for monthly revenues and outlays can be found in Firestone,
Federal Receipts
, Table A-3.

17
. Gilbert,
American Financing
, 96–97.

18
. Firestone,
Federal Receipts
, Table A-3.

19
. Gilbert,
American Financing
, 91.

20
. William McAdoo quoted in Gilbert,
American Financing
, 90.

21
. Studenski and Krooss,
Financial History
, 295–296.

22
. Mellon,
Taxation
, 13.

23
. Bureau of the Census,
Historical Statistics, 1789–1945
, Series P 144–151 at 307.

24
. Studenski and Krooss,
Financial History
, 288–292.

25
. James Macdonald,
A Free Nation Deep in Debt: The Financial Roots of Democracy
(Princeton, NJ: Princeton University Press, 2006), 403.

26
. Gilbert,
American Financing
, Table 40 at 135.

27
. Kimmel,
Federal Budget and Fiscal Policy
, 86.

28
. Department of the Treasury,
Statistical Appendix
, Table 32 at 155–159.

29
. Bureau of the Census,
Historical Statistics, 1789–1945
, Series P 152–165 at 375.

30
. Shultz and Caine,
Financial Development
, 558.

31
. Macdonald,
A Free Nation Deep in Debt
, 422.

32
. See Appendix C.

33
. Department of the Treasury,
Annual Report
, 4.

34
. Hofstadter,
The Age of Reform
, 275.

35
. Wilson quoted in Chace,
1912
, 269.

36
. James Cox quoted in Smith,
FDR
, 180.

37
. McGerr,
A Fierce Discontent
, 312.

38
. Mellon,
Taxation
, 9, 25.

39
. Ibid., 94.

40
. Commission on Economy and Efficiency, “The Need for a National Budget,” 10.

41
. After the Civil War, Congress created appropriations committees that obtained spending authority historically exercised by the Senate Finance Committee and House Ways and Means Committee. The control of spending by appropriators was then eroded by “reforms” in 1884 designed to spread spending power among more committees. The House Ways and Means Committee and Senate Finance Committee retained jurisdiction over all tax bills.

42
. Stewart,
Budget Reform Politics
, 205.

43
. O’Brien, “Charles Gates Dawes,” 102.

44
. Dawes,
The First Year
.

45
. Hicks,
Republican Ascendancy
, 49.

46
. Murphy, “The Business of America.”

47
. Dawes, “Business Organization of the Government,” 117–118.

48
. Bureau of the Budget,
Report to the President
, 10–11.

49
. Bureau of the Census, “Corporate and Personal Income,” in
Historical Statistics, 1789–1945
, Series P 89–98 at 296.

50
. OMB, Historical Tables, “Table 2.3—Receipts by Source as Percentages of GDP: 1934–2018.”

51
. Dewey,
Financial History
, 515.

52
. Studenski and Krooss,
Financial History
, 349.

53
. Mellon,
Taxation
, 133.

54
. Waltman,
Political Origins
, 95.

55
. Bureau of the Census,
Statistical Abstract
.

56
. Compare Bureau of the Census,
Historical Statistics, 1789–1945
, Table Series P 144–151 and 307, with Mellon,
Taxation
, 34.

57
. Bureau of the Census,
Historical Statistics, 1789–1945
, 307.

58
. Ibid.

59
. Tax Policy Center, “Historical Individual Tax Parameters,” 2013,
http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=543
.

60
. Ibid.

61
. In the 1920s, as federal tax rates came down, so did the premium paid for tax-exempt bonds. From 1921 to 1931 the annual yields on high-grade corporate bonds ranged from a high of 5.16 percent in 1921 to a low of 4.04 percent in 1928. During those same years, the average annual yield of high-grade municipal bonds ranged from 5.02 percent in 1921 to 3.97 percent in 1928. Homer and Sylla,
Interest Rates
, Table 47 at 349–350.

62
. Andrew Mellon quoted in Cannadine,
Mellon
, 358.

63
. Bureau of the Census,
Historical Statistics, 1789–1945
, Series 144–151 and P 152–164. Americans who reported making less than $25,000—all but the wealthiest—paid a total of $103 million. Investment income accounted for 60 percent of reported taxable income in 1926, since by then only wealthy Americans had any tax liability. These estimates of revenues are based on the fiscal year 1926, and the share of personal taxes by income group and personal investment is based on the calendar year 1927.