The Ratification of the Federal Income Tax Amendment

The ratification of the federal income tax amendment was the product of two contemporaneous and interrelated movements that swept the United States during the first two decades of the twenti- eth century. The first was what Clifton K. Yearley has styled the “revolution in taxation†—the drive at all levels of government to create a tax system that was more predictable, productive, and equitable than was the existing complex of property levies, excise taxes, and tariffs.’ The primary goal of this revolution was to reach the wealth engendered by the rapid and large-scale industrializa- tion of the late nineteenth century. It aimed to create a system of taxation based on two guiding principles: (1) “the ability to pay†and (2) “from whatever source derived.†The former meant that taxes should fall heaviest on those best able to bear them; the latter, that income from stocks, bonds, and dividends ought to be taxed at least as heavily as that from salaries and wages. Generally this was translated into progressive income and inheritance taxes, which fell almost exclusively upon those in the upper income brackets. There can be little doubt that the task of ratifying the amendment was greatly eased because of the understanding that any tax levied under its authority would fall only upon the wealthiest 3 percent to 5 percent of the population; the claim that “only the rich will pay†was heard in state legislatures across the land...