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Income Tax Laws and Contingency

Jerold Waltman

• University of Southern Mississippi

“Origins of the Federal Income Tax.” Mid-America 62(October 1980):147–160.

On three separate occasions, in 1861, 1894, and 1913, the Congress of the United States enacted a national income tax. Studying the motives and maneuvers which brought these laws into being, Prof. Waltman finds material which, he believes, elucidates the general process of policy formation. In his search for patterns in the development of policy, Waltman seeks to answer two basic questions: (1) What factors put the income tax on the national political agenda? and (2) What were the sources of the specific details incorporated in these three pieces of legislation?

An examination of each law reveals quite clearly that the income tax as a policy alternative emerged from quite different agenda items. In 1861, the dominant problem was public finance. The outbreak of the Civil War made it imperative that Congress devise new means for raising revenue. From deliberations on this question, the income tax emerged.

In 1894 and 1913, on the other hand, the dominant question was not revenue but social justice. The Populist Movement of the late 1800s and the Progressive Movement in the early part of our century both championed a tax on incomes as a way to achieve “the redistribution of wealth and the equalization of burdens.” George Tunell wrote concerning the 1894 law: “The income tax was not regarded primarily as a fiscal measure. Little was known as to how much it would yield and apparently no one cared very much to know.”

The varying motivations leading up to the three income tax laws demonstrate that the same policy may be adopted in order to solve quite different problems. In Prof. Waltman's view, therefore, students of public policy would be wise to avoid creating policy categories around such government department clusters as finance, housing, transportation, and the like.

The three income tax laws also illustrate the powerful role that precedent plays in the selection of specific policies. Regardless of the functional problems they had been designed to attack, the 1861, 1894, and 1913 bills are virtual carbon copies of each other. In the case of public policy at least, new wine seems to store quite well in old bottles.

The same laws also serve to inject caution into attributing too much weight to environmental variables in the process of policy formation. For example, if, in 1861, the Ways and Means bill for a national property tax had been even slightly more palatable, it is doubtful that an income tax would have emerged from that congressional session. Likewise, in the latter two cases, one could not say that Populism or Progressivism “caused” or, more weakly, “led to” the adoption of the income tax. Without the prominence of tariff reform as an issue, the item would have stayed on the fringe of serious political activity. All three income tax laws grew out of the old-fashioned pull-and-tug of politics, with a large degree of happenstance.

Prof. Waltman explicitly denies that his argument implies that all is happenstance or that each instance of policy making is unique. That would lead to the destructive conclusion that no generalizations can be made about policy formation. Instead, he is suggesting that any model which purports to “explain” public policy must not ignore the complex and often tortured processes whereby decisions are reached.