77 results
3 - Fiscal Policy in Japan and the United States since 1973: Economic Crises, Taxation and Weak Tax Consent
- Edited by Marc Buggeln, Humboldt-Universität zu Berlin, Martin Daunton, University of Cambridge, Alexander Nützenadel, Humboldt-Universität zu Berlin
-
- Book:
- The Political Economy of Public Finance
- Published online:
- 09 March 2017
- Print publication:
- 23 February 2017, pp 57-82
-
- Chapter
- Export citation
9 - Victory for a Retro-Liberal Regime
- W. Elliot Brownlee, University of California, Santa Barbara
-
- Book:
- Federal Taxation in America
- Published online:
- 05 July 2016
- Print publication:
- 18 July 2016, pp 245-272
-
- Chapter
- Export citation
-
Summary
On January 20, 2001, when George W. Bush took the oath of office as president, the period of divided government came to an end. In the November 2000 elections, Republicans maintained control of both houses of Congress, and the new Republican president, despite the irregularity of his own election, set out to establish control over the legislative agenda. President Bush had a definite top priority for his domestic program: using much of the budgetary surplus that had emerged from the 1990s to fund a large tax cut.
During the Bush administration, organized anti-tax movements moved to the center of national politics, and the growing inequality of economic power assumed greater force in shaping tax policy. A combination of capital-favoring and retro-liberal tax cuts followed in 2001. They were reminiscent of Reagan's cuts twenty years earlier. But the Bush administration did not reverse course as Reagan had in 1982, and Bush never attempted base-broadening reform as Reagan had in 1986. Also, the Bush cuts in discretionary domestic spending were larger, reinforcing the regressive effects of tax policy. Meanwhile, in financing major military efforts, the Bush administration eschewed tax increases. The resulting deficits were unprecedented in scope, shifting public finance to a heavy reliance on borrowing. The already weakened World War II tax regime finally gave way, replaced by what deserves to be called a retro-liberal regime.
George W. Bush and the 2001 Tax Cuts
In bidding for the presidency, George W. Bush consistently made tax cutting the centerpiece of his agenda for domestic policy. As governor of Texas, with his presidential campaign in mind, he resisted calls to increase spending on education and turned $2 billion of budget surplus into a tax cut. This record established him as the biggest tax cutter among the Republican candidates for president. In the Republican primaries, he invoked his Texas record to outflank Christie Todd Whitman, whose record of tax cutting as governor of New Jersey was not quite as impressive, and Steve Forbes, who continued to advocate replacing the progressive income tax with the poorly understood “flat tax.”
Index
- W. Elliot Brownlee, University of California, Santa Barbara
-
- Book:
- Federal Taxation in America
- Published online:
- 05 July 2016
- Print publication:
- 18 July 2016, pp 321-332
-
- Chapter
- Export citation
8 - Fiscal Consolidation and Revival of the Old Tax Regime
- W. Elliot Brownlee, University of California, Santa Barbara
-
- Book:
- Federal Taxation in America
- Published online:
- 05 July 2016
- Print publication:
- 18 July 2016, pp 210-244
-
- Chapter
- Export citation
-
Summary
The shifts in fiscal policy during the mid-1980s suggested that the United States might have the political capacity to embrace a new tax regime. The tax increases of 1982 and 1984, the Social Security reforms of 1983, and the Tax Reform Act of 1986 (which accepted the principle that tax reductions should be offset by tax increases) all reflected the kind of political leadership and discipline that were required for fundamental fiscal reform.
Significant reform, however, stalled after the passage of the Tax Reform Act of 1986. In particular, reform along the base-broadening lines chartered by the bipartisan architects of the 1986 legislation failed to advance. The essential reason was the growing popular hostility to government. The antigovernment movement that gathered force during the late 1970s and the 1980s grew even stronger in the 1990s, enabling the Republican Party to capture both houses of Congress in 1994, the first time the party had done so since 1952. This movement, with its popular base in an increasingly alienated middle class, caused politicians to fear recommending the elimination of tax expenditures, such as the home mortgage deduction, that favored large segments of society. Instead they proposed tax cuts that favored, or seemed to favor, the middle class. And the growing fervor of the antigovernment movement gave political cover to the representatives of wealthy and corporate interests who desired further cuts in taxes on capital income. The most vigorous antigovernment activists increasingly invoked retro-liberal ideology and harkened back to Reagan's tax cut of 1981 as their model for sound fiscal policy.
The antigovernment movement, however, did not produce any tax cuts on the scale of the Economic Recovery Tax Act (ERTA) during the administrations of both George H. W. Bush and Bill Clinton. These administrations at times recommended significant tax cuts, but they were much smaller than those under ERTA, some emphasized benefits to middle-class taxpayers, and most failed to win adoption. Moreover, both the Bush and Clinton administrations succeeded in enacting increases in taxes, especially in those paid by the rich, as the central elements in their projects of deficit and debt control (often referred to today as fiscal consolidation).
6 - The Era of Easy Finance
- W. Elliot Brownlee, University of California, Santa Barbara
-
- Book:
- Federal Taxation in America
- Published online:
- 05 July 2016
- Print publication:
- 18 July 2016, pp 149-181
-
- Chapter
- Export citation
-
Summary
The tax regime created during World War II proved more resilient than the one that had emerged from the previous world war. A key reason was a prolonged postwar surge of remarkable economic prosperity rather than a severe recession like the one that took hold in 1920–1921. The prosperity following so closely on the heels of the Great Depression helped build a popular, bipartisan consensus behind the basic tax policy shifts undertaken during the Roosevelt administration.
After World War II a strong bipartisan consensus emerged behind the central purposes of the tax regime and the fiscal regime of which it was the central component. These purposes included a progressive distribution of tax burden through the income tax; management of total demand under a domesticated Keynesianism designed to avoid a recurrence of the Great Depression; funding a vigorous foreign policy (above all the prosecution of the Cold War); an expansion of various growth-oriented domestic programs within a broker-state framework; and an expansion of Social Security entitlements. The consensus remained strong until the 1970s.
Continual and significant cuts in personal and corporate income taxation reinforced political support for the regime. Until the 1970s the federal government was able to make such cuts while meeting its other fiscal goals. This was because of revenue bonuses produced by economic growth and inflation; the period between 1945 and the 1970s was “the era of easy finance.” But the tax cuts relentlessly undermined the fiscal regime, especially when joined in the 1970s by slower economic growth and faster inflation. While all income groups received some of the largesse from the cuts, the nation's poorest citizens received the smallest and the wealthiest the largest shares, partly because of the progressive structure of income taxation. Thus, the overall effect of the entire series of tax cuts was to reduce that progressivity that had been established during the New Deal and World War II. A long swing away from fiscal progressivism had begun.
Funding Leviathan
The World War II crisis had institutionalized a new tax regime. It had three elements: (1) a mass-based but progressive personal income tax for general revenues; (2) a relatively flat-rate tax on corporate income, also for general revenues; and (3) a regressive payroll tax for social insurance.
5 - Roosevelt's Regimes
- W. Elliot Brownlee, University of California, Santa Barbara
-
- Book:
- Federal Taxation in America
- Published online:
- 05 July 2016
- Print publication:
- 18 July 2016, pp 124-148
-
- Chapter
- Export citation
-
Summary
Beginning in 1935, the economic crisis of the Great Depression, together with the political creativity of President Franklin D. Roosevelt, transformed the World War I tax and fiscal regime into a distinctive new one. New Deal liberalism now incorporated tax reform. A push toward democratic statism and a more robust tax base for expanded social programs amplified the long swing toward the greater progressivity of fiscal policy.
Presidential leadership proved crucial to the reforms. Tension between the executive and the legislative branches intensified during the Great Depression, as did the demands of local interests on the federal government. Consequently, the administration of Franklin D. Roosevelt found it more difficult to influence the new tax regimes demanded by national emergencies than had the administrations of Abraham Lincoln during the Civil War and Woodrow Wilson during World War I. But Roosevelt's appeals to party loyalty worked to his advantage, and he succeeded in forging coalitions both inside and outside of the federal government. As a result, the two tax regimes produced by the New Deal and World War II bore the imprint of the executive branch more than that of Congress, and the imprint of a national interest more than that of local interests.
Subsequently the second major war in a generation would yield yet another democratic-statist fiscal regime. This war, like World War I, created opportunities for public finance reforms that had clear social intent and organizational coherence. During World War II the administration of President Franklin D. Roosevelt – motivated by a concern for social justice as well as by the threat to the nation's security – shaped the enactment of a wartime fiscal regime that appeared to have even greater potential for reform than the one created in 1935.
Resumption of Democratic Statism
In 1935, Roosevelt concluded that political and economic conditions now favored a resumption of a democratic-statist tax policy. His timing was influenced by the growing “Thunder on the Left,” particularly Huey Long's “Share Our Wealth” movement, which proposed redistributional taxation designed to remedy flaws in the nation's economic structure. Moreover, as Roosevelt had gained confidence in the prospects for economic recovery, he had become less worried about a business backlash. And Secretary of the Treasury Henry Morgenthau had finally established the infrastructure of professional expertise that Roosevelt needed within the Treasury.
Historiography and Bibliography
- W. Elliot Brownlee, University of California, Santa Barbara
-
- Book:
- Federal Taxation in America
- Published online:
- 05 July 2016
- Print publication:
- 18 July 2016, pp 295-320
-
- Chapter
- Export citation
-
Summary
Toward the end of World War I, the Austrian sociologist Rudolf Goldscheid proposed a “fiscal sociology” as a new way to study the public budget. He wanted to analyze the budget as “the skeleton of the state stripped of all misleading ideologies.” Goldscheid explained that “nowhere [is] the entirety of any given order of society and economy…reflected as clearly [as] in the public household, that the State cannot be very different from its financial system, [and] that every single private household is intimately connected with the State household.” Another Austrian scholar, the economist Joseph Schumpeter, seconded Goldscheid's proposal and stressed that the fiscal sociology should have a historical basis. In 1918, Schumpeter declared:
The spirit of a people, its cultural level, its social structure, the deeds its policy may prepare – all this and more is written in its fiscal history, stripped of all phrases. He who knows how to listen to its message here discerns the thunder of world history more clearly than anywhere else.
The severe wartime fiscal crisis and attendant debates over the meaning of the modern state within the ruins of the Austro-Hungarian Empire stimulated Goldscheid and Schumpeter to develop their interest in fiscal sociology, fiscal history, and the history of taxation.
In a similar fashion, in the United States severe fiscal crises, or perceptions of them, have stimulated bursts of scholarly interest in the history of taxation and its fiscal policy context. One such burst accompanied the fiscal tensions and conflicts that accompanied the economic downturns – that is to say, the severe recessions or depressions – that began during the 1870s and continued through the 1930s, as well as the two world wars of the twentieth century. A second burst began a generation later, during the 1970s, and continues today. It has been associated with two interrelated processes: the economic erosion of the “era of easy finance” that emerged from the New Deal and the sustained political attack on the fiscal institutions created during the national crises of the twentieth century. Both bursts sought to study tax history in order to understand contemporary policy options and to enrich knowledge of American society and government.
7 - “Reagan Revolution”
- W. Elliot Brownlee, University of California, Santa Barbara
-
- Book:
- Federal Taxation in America
- Published online:
- 05 July 2016
- Print publication:
- 18 July 2016, pp 182-209
-
- Chapter
- Export citation
-
Summary
As the efforts of President Jimmy Carter to reduce tax expenditures stalled, presidential candidate Ronald Reagan and the Republican Party seized the issue of tax reform. They fanned public hostility to anything resembling new taxes, and stimulated popular enthusiasm for tax reductions. In 1981, when Reagan became president and the Republicans took control of the Senate, they set out to adopt Reagan's campaign platform. By 1986, they had produced the most significant changes in the income-tax system since World War II, but the overall results turned out to be very different from what President Reagan and his advisers had foreseen in 1981.
The Revolutionary Moment Won and Lost
When Ronald Reagan ran for the presidency in 1980, the heart of his tax platform was a populist call for across-the-board major tax cuts. Those cuts, along with indexing of the income tax for inflation, promised significant economic relief to middle- and working-class Americans. Reagan emphasized, in particular, that the deep cuts would directly offset the harsh impact of inflation on standards of living for all income-tax payers. Like Franklin D. Roosevelt in 1935, Reagan sought to use tax issues to build a new political coalition of workers and consumers.
During his campaign, however, Reagan never entertained any intention of pushing beyond rate cutting or indexing to reform the federal tax system in a fundamental way. A nonstarter was base-broadening reform, which he aggressively criticized. As early as 1975, he had expressed his skepticism about the concept of tax expenditures. In July 1979, he said that the term “tax expenditures” was “the new name government has for the share of our earnings it allows us to keep. You and I,” he said, “call them deductions.” “All told,” he concluded, “our rich…Uncle Sam has an eye on about $170 billion that we think is ours.” He was focused on the political fact that President Carter and other liberals supported “tax expenditure” reform because they were interested in closing tax loopholes for the rich in order to make the income tax more progressive and increase its revenue capacity.
Reagan's vague position on tax expenditures opened the way for corporate lobbyists to shape the agenda of his presidential campaign and to make his tax program more similar to those the Republicans had championed during the 1920s.
3 - The Civil War Regime
- W. Elliot Brownlee, University of California, Santa Barbara
-
- Book:
- Federal Taxation in America
- Published online:
- 05 July 2016
- Print publication:
- 18 July 2016, pp 58-92
-
- Chapter
- Export citation
-
Summary
In the turbulent effort to restore the Union and ultimately eradicate slavery, the political leaders of the executive and legislative branches of the federal government struggled to establish coherent tax policies. As would be the case in the major wars of the twentieth century, crisis conditions strengthened the power of these leaders, and the tax systems that they implemented further enhanced their influence. Political leaders mobilized party government and administrative techniques, including professional expertise, to expand the capacity and productivity of the federal tax system. To be sure, there was always tension between executive and legislative leaders over tax policy, and both the president and Congress had to address the demands of local interests. But during the Civil War and the wars that followed in the twentieth century, the common partisan loyalties and shared social values of the nation's political leaders largely overcame the pressures that tended to fragment American government.
By 1861 the modern fiscal state as it had developed in the United States rested on three legs: buoyant demand for imported goods that kept revenues from low tariffs strong; a rich domain of public lands held in trust by the federal government for the American people; and a vibrant partnership among federal, state, and local governments. The prospect of war, and the war itself, threatened all three legs. First, the war disrupted international trade and threatened the national unity that had played a crucial role in generating tax revenues and, even more important, in making the nation powerful within the Atlantic trading world. Second, the breakup of the Union put at risk the ownership and management of the nation's rich landed domain. Third, the pro-slavery and states-right goals of the Confederacy, along with the threats to the public lands, clouded the future of state and federal fiscal relations. It was in the context of these threats that the Union government constructed a new tax regime.
The new regime employed all the taxes that Alexander Hamilton had contemplated and added others that the framers of the Constitution had not visualized. As republican leaders forged the modern American nation-state during the war, they greatly enhanced the scale and scope of public finance. In the postwar era, the core of their wartime system of finance became an expression of national strength and power.
4 - The World War I Regime
- W. Elliot Brownlee, University of California, Santa Barbara
-
- Book:
- Federal Taxation in America
- Published online:
- 05 July 2016
- Print publication:
- 18 July 2016, pp 93-123
-
- Chapter
- Export citation
-
Summary
As World War I began, the nation was poised for a decisive swing away from the Civil War tax regime. Democratic pressures had mounted for the federal government to shift its tax system to conform to the criterion of “ability to pay” and, in the process, to address the growing inequality in the distribution of income and wealth. Meanwhile, mature industrialization, which included the proliferation of modern corporations and sophisticated financial intermediaries, had fostered much of the organizational capability necessary for implementing a direct tax on the incomes of corporations and wealthy individuals. Even so, the federal government would have been slow to adopt income taxation without the play of historical contingency. Without the intervention of the United States in World War I and the management of that intervention by the leaders of the Democratic Party, the development of federal taxation would have proceeded far more incrementally. It almost certainly would have relied much more heavily on the taxation of consumption.
The World War I crisis, as well the next wartime crisis less than a generation later, forced political leaders to reexamine all of the nation's financial options. In so doing, leaders faced issues that went far beyond the financial problem of meeting war demands to increase government spending. Each crisis involved the meaning or survival of the nation and stimulated debate over national values. Each crisis intensified ideological and distributional divisions within American society. Because wars required the sacrifice of lives as well as treasure, each was a powerful stimulant of social division. The resulting political conflicts often centered on issues of taxation; tax politics was always an important vehicle for the expression of both national values and the underlying social and ideological conflicts that the emergencies only intensified.
Within the conflicted politics of World War I, the leaders of the federal government worked to persuade Americans to accept new taxes. During the war the architects of national mobilization made taxation part of larger strategies of persuading Americans to accept sacrifice. New tax programs were designed both to implement sacrifice and to convince the mass of taxpayers that their sacrifices were fair. The progressive impulses of the general public were so strong that the framers of tax policy launched major initiatives – most notably the rigorous taxation of corporate excess profits – that were designed to democratize production and finance.
10 - Fiscal Paralysis
- W. Elliot Brownlee, University of California, Santa Barbara
-
- Book:
- Federal Taxation in America
- Published online:
- 05 July 2016
- Print publication:
- 18 July 2016, pp 273-290
-
- Chapter
- Export citation
-
Summary
The elements of the World War II tax regime that survived into the retro-liberal regime weakened even further during the administration of Barack Obama (2009–present). President Obama and the Congress introduced some new progressive features to the tax code but made permanent the primary regressive cuts of the Bush administration, reinforcing the Bush transition to retro-liberalism in fiscal policy. In addition, the continuing wartime spending unaccompanied by tax increases created additional pressure on discretionary domestic spending. The Obama administration proposed augmenting spending on education, infrastructure investments, and environmental protection, but faced determined and effective hostility from the forces of retro-liberalism. As economic inequality grew it seemed to foster further economic inequality through the increased political power of organized retro-liberalism.
The “Great Recession” and Fiscal Gridlock
During the transition from his 2008 electoral victory to his inauguration, President-elect Barack Obama and his administrative team made their highest priority the drafting of a fiscal stimulus package that would supplement Bush's Economic Stimulus Act of 2008. The transition team's strong presumption was that the Federal Reserve had nearly exhausted its ability to halt and reverse the continuing collapse of consumer demand, incomes, and employment.
In his 2008 campaign Obama had already made it clear that tax cuts would play a major role in his stimulus efforts. It turned out that on this point both Obama and John McCain, his Republican rival, agreed. McCain actually proposed even larger tax cuts than did Obama. The nonpartisan Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, forecast a revenue loss from McCain's cuts of $1.5 trillion over a four-year term vs. a $1.0 trillion loss for Obama's. McCain did not say whether or not he thought his cuts would increase deficits more than would Obama's cuts. Both candidates promised benefits for middle-class taxpayers, but their campaigns revealed differences in the forms their tax cuts might take.
McCain's tax program emphasized extending the Bush income tax cuts of 2001 and 2003, reducing corporate income taxes, and accelerating business write-offs for new equipment. Obama, however, favored extending the Bush tax cuts only for taxpayers who made less than $250,000 a year and raising taxes on the dividends and capital gains earned by affluent families.
Dedication
- W. Elliot Brownlee, University of California, Santa Barbara
-
- Book:
- Federal Taxation in America
- Published online:
- 05 July 2016
- Print publication:
- 18 July 2016, pp v-vi
-
- Chapter
- Export citation
Preface
- W. Elliot Brownlee, University of California, Santa Barbara
-
- Book:
- Federal Taxation in America
- Published online:
- 05 July 2016
- Print publication:
- 18 July 2016, pp ix-xii
-
- Chapter
- Export citation
-
Summary
“In this world nothing can be said to be certain, except death and taxes,” wrote Benjamin Franklin in 1789. I certainly agree with him regarding what my father soothingly referred to as “eventualities.” But Franklin's proverb breaks down as a way of understanding tax planning, the making of tax policy, and tax history. Well-trained tax attorneys can help some clients avoid paying any taxes on the wealth they accumulate in their lifetimes and then pass on that wealth tax free to the next generation. Skillful politicians and lobbyists can bring about huge shifts of income and wealth through changes in the tax system that produce winners and losers. And, while great national crises almost invariably produce seismic transitions in tax systems, the transitions often occur in ways that are very hard to predict. In two editions of Federal Taxation in America: A Short History, I tracked those transitions in the history of the United States and concluded that the history of taxation in the United States ought to be understood not as a process of incremental change but as a series of distinct tax regimes, each one driven by a national crisis.
Since the late 1970s, the possibility of radical reform of the federal tax system, one that would produce a new tax regime, has been a matter of intense debate. And that debate has, in fact, prompted important changes in the tax system. Of primary importance were the reforms of tax and fiscal practice undertaken during the presidency of George W. Bush and confirmed during that of Barack Obama. These reforms brought about the most significant changes in federal taxation since World War II. The reforms, I believe, have launched a new tax and fiscal regime that, for reasons discussed in this book, should be described as “retro-liberal.”
The transition to the retro-liberal regime did not take place overnight. It had roots in hostility to progressive taxation and ambitious government that dated back to World War I and even earlier. The swing toward the new regime began during the late 1970s, producing first the success of California's Proposition 13 in 1978 and President Ronald Reagan's Economic Recovery Tax Act of 1981.
Contents
- W. Elliot Brownlee, University of California, Santa Barbara
-
- Book:
- Federal Taxation in America
- Published online:
- 05 July 2016
- Print publication:
- 18 July 2016, pp vii-vii
-
- Chapter
- Export citation
1 - Anglo-American Regimes
- W. Elliot Brownlee, University of California, Santa Barbara
-
- Book:
- Federal Taxation in America
- Published online:
- 05 July 2016
- Print publication:
- 18 July 2016, pp 1-30
-
- Chapter
- Export citation
-
Summary
When the thirteen states that had won independence from Great Britain adopted the Constitution of the United States in 1788, they created a federation and a federal government with the power to tax its citizens. A federation and federal taxation were new to America. However, beginning in the early seventeenth century, the thirteen colonies had already experienced taxation by a higher level government – the large and sometimes seemingly remote imperial government of England and Britain (after England's union with Scotland in 1707).
The tax regimes that developed in British North America before the American Revolution were integral components of the world's first modern fiscal state, one that had emerged following the crisis of the English Civil Wars in 1642. In both metropolitan England and the colonies, the Crown and Parliament had expanded taxation on domestic consumption and international trade, collected the taxes indirectly (meaning through third parties), established those taxes as the primary source of revenue, and leveraged their new tax revenues to expand long-term borrowing. From the revenue raised from external taxation of its colonies, England funded most of the routine costs of administering colonial governments. However, these revenues were inadequate to support British military forces in North American during wartime, so the British government often taxed and borrowed within the British Isles for that purpose.
Until 1763, British taxation of the colonies was largely external, applied to trade between the colonies and the rest of the world and trade among the colonies themselves. As such, this tax system served both as a source of revenue for Britain and a component of a complex system of British trade regulation – the system that came to be known as mercantilism. On the whole, before 1763 this external taxation was relatively light in its extent and effects and well tolerated by the colonists. Meanwhile, the British government left its American colonies relatively free to develop systems of both domestic self-governance and autonomy in funding a variety of public services. In 1763, however, to pay for the costs of fighting a major war and administering an expanded North American empire, Britain ramped up its tax effort in the colonies. In effect, it created a new tax regime for the colonies – one that was more ambitious, internal, and centralized.
Frontmatter
- W. Elliot Brownlee, University of California, Santa Barbara
-
- Book:
- Federal Taxation in America
- Published online:
- 05 July 2016
- Print publication:
- 18 July 2016, pp i-iv
-
- Chapter
- Export citation
2 - Creating a Modern Fiscal State
- W. Elliot Brownlee, University of California, Santa Barbara
-
- Book:
- Federal Taxation in America
- Published online:
- 05 July 2016
- Print publication:
- 18 July 2016, pp 31-57
-
- Chapter
- Export citation
-
Summary
The ratification of the U.S. Constitution in 1788 created the basic structure of federal taxation. The new Constitution established powers and requirements that have had an enduring influence on all the nation's tax regimes. The Constitution gave the new federal government clear and broad powers to impose “indirect” taxes – taxes on commerce that consumers would pay only indirectly, through intermediaries – as well as the power to borrow and the exclusive power to create money. But the Constitution restricted the ability to levy “direct” taxes – taxes levied directly on individuals. This restriction had a major impact on the form of all federal tax regimes and on the division of tax effort between the federal government and the governments of states and localities.
The framers of the Constitution provided only the skeleton of a state. It was up to the leaders of the new republic to develop the central instruments of government, including government finance. Beginning in the 1790s these leaders experimented with many of the taxes allowed by the Constitution, but they made extensive use only of taxes on imports. They discovered that import duties met most of their needs for tax revenues while minimizing political discord. As in Britain, low customs duties formed the core of the nation's financial system, funding important national projects directly and also paying the interest required to carry national debt. The tax regime lasted until the Civil War, surviving longer than any other except the one created during World War II.
The new American government had two other key elements, both of which had deep roots and remain significant even today. Their combined effect has been to reduce the need for taxation by the federal government, and this effect was never greater than in the nineteenth century.
One element was heavy taxation by sub-national (state and local) governments. Its importance had much to do with the history of the movement toward American political independence. Before the Revolution, the American colonies had used their discretionary fiscal space within the British Empire to expand their taxation of property and internal trade; the New England and Middle Atlantic colonies had employed these taxes not only to contribute to waging colonial wars but also to fund various public services.
Appendix
- W. Elliot Brownlee, University of California, Santa Barbara
-
- Book:
- Federal Taxation in America
- Published online:
- 05 July 2016
- Print publication:
- 18 July 2016, pp 291-294
-
- Chapter
- Export citation
Figures
- W. Elliot Brownlee, University of California, Santa Barbara
-
- Book:
- Federal Taxation in America
- Published online:
- 05 July 2016
- Print publication:
- 18 July 2016, pp viii-viii
-
- Chapter
- Export citation
Acknowledgments
- W. Elliot Brownlee, University of California, Santa Barbara
-
- Book:
- Federal Taxation in America
- Published online:
- 05 July 2016
- Print publication:
- 18 July 2016, pp xiii-xiv
-
- Chapter
- Export citation