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Tuesday, January 22, 2019

The Secret History Of America’s Pro-Tax Movement

Despite conservative anti-tax rhetoric, American voters have a history of supporting higher taxes to fund government-led progress.

How do Americans really feel about taxes? Anti-tax groups and limited-government activists are quick to invoke a long American tradition of tax revolt and resistance in making the case that aversion to taxes is as American as apple pie. But this simple narrative gets the story wrong. The most recent such indication came on Election Day, when voters rejected tax limitation measures and supermajority requirements in Florida and Michigan, and Californians strongly endorsed increases in the sales tax and income taxes for high earners in order to fund public education. Though notable in a political environment dominated by anti-tax rhetoric, such support is actually not as exceptional as it seems. It’s worth remembering, now that the election is over and we turn to the looming fiscal problems that confront state and federal governments, that Americans also have a long history of embracing and defending higher taxes.

We don’t hear as much about this history, in part because it doesn’t fit the story that anti-tax groups want to tell. But this silence also stems from the fact that political fights to increase and defend higher taxes have frequently played out in the halls of state and local governments, rather than in the national spotlight.

Consider the postwar period in American history between the late 1940s and the mid-1970s. During these decades, state and local governments dramatically expanded investments in public infrastructure and services, particularly in the area of public education. Financing these investments required substantial increases in revenue, which states generated by adopting new taxes (namely, individual and corporate income taxes and the sales tax), increasing the rates or expanding the reach of existing taxes, and making other changes to improve the efficiency of revenue systems. According to the Advisory Council on Intergovernmental Relations (ACIR), a federal commission that tracked these changes, state and local revenue as a share of GDP more than doubled between 1945 and 1972, going from 4.4 percent to 10 percent.

Although a portion of revenue increases occurred naturally as inflation raised prices on taxed goods and pushed taxpayers into higher income brackets, the largest share was a consequence of specific interventions by state lawmakers. Between 1950 and 1967, the ACIR calculated that 53 percent of the increase in state tax collections resulted from political or legislative initiative rather than from automatic increases built into existing tax structures.

These actions by state policymakers were by no means uncontested. Vigorous debates took place over whether states needed new revenue and who should be required to chip in to provide it. But in state after state, tax reform aimed at modernizing revenue systems and funding new public services won out, championed by both Democratic and Republican lawmakers. To be sure, the two parties often had different ideas about what types of taxes should be adopted (Republicans tended to favor the sales tax or flat-rate income taxes while Democrats were more supportive of graduated income taxes and higher taxes on business). But policymakers in both parties recognized that their budgetary priorities depended on new sources of revenue; existing funds simply could not be stretched indefinitely in the face of growing populations and increased demands for public services. “Fiscal discipline” during this period actually meant adopting new taxes to fund the growing needs of states rather than relying on borrowing, accounting tricks, or stop-gap measures.

Crucially, voters also supported higher taxes during this period. By the late 1970s, a backlash against the property tax would be forcefully expressed through ballot initiatives that limited state taxes and expenditures. But during the 1960s and early 1970s in most states that authorized the initiative and referendum, voters repeatedly chose to retain new taxes that had been referred to the ballot by anti-tax groups, often endorsing these new taxes by large margins. For instance, in Nebraska, Maine, and Ohio, voters rejected ballot initiatives that would have overturned newly adopted income taxes, while the same result held in Massachusetts and Idaho for sales taxes.

How did policymakers build public support for higher taxes? Perhaps the most important lesson of postwar tax reform battles lies in the vocabulary that pro-tax coalitions developed to persuade citizens that higher revenues deserved their votes. In addition to warning about the fiscal chaos that would result if governments did not act quickly to reform their patchwork revenue systems, advocates argued that higher taxes would underwrite a modern, progress-oriented state. For example, in 1966, the Republican governor of Idaho called the sales tax “the coronary artery of progress” for the state, arguing that “it will take money—not mothballs—in the state treasury to build the Idaho of which we all dream.” In his opening address to the 1967 legislature, Republican governor George Romney of Michigan pressed lawmakers to adopt an income tax so that Michigan might enter “a new generation of progress.”

Ultimately, the pro-tax coalitions that formed as Republicans and Democrats, labor unions and business interests, teachers and homeowners sided with higher taxes during the 1950s and 1960s would prove unsustainable by the late 1970s. But the anti-tax politics of this later era can by no means be attributed to an innate American dislike of taxes. Indeed, popular opinion about taxation is shaped by political debates, and history demonstrates that Americans are capable of much different debates about taxes than the ones that prevail today. This more complex history of Americans’ relationship to taxes is worth investigating—rather than overlooking—as we confront contemporary fiscal challenges.

Elizabeth Pearson is a Roosevelt Institute Fellow and a PhD candidate at UC Berkeley.

Cross-posted from The Roosevelt Institute’s Next New Deal blog

The Roosevelt Institute is a non-profit organization devoted to carrying forward the legacy and values of Franklin and Eleanor Roosevelt.

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20 responses to “The Secret History Of America’s Pro-Tax Movement”

    Professor Dan Ariely and associate of Duke University
    posed to 5,000 the distribution of wealth in Sweden and America.
    Over 90 percent chose Sweden. A socialist nation with great Equality.
    The question is—with this overwhelming choice for greater equality how can America continue on the path to more Inequality? We rank 4th on Inequality in oecd nations.
    Answer is Plutocracy. The rich rule. Why allow it to continue?
    How can we get Congress and the President to change course? Take money out of our elections is one suggestion. Progressive flat tax by group. Outlaw federal employees from taking anything with a financial value. To offer is to jail.

    • commserver says:

      The cost of socialism is the cost. There are much higher taxes. The benefits aren’t necessarily better.

      There are exceptions. Finland is such a country. The thing is that Finland is a small country with a small population.

  2. bobles says:

    A corollary to this position is the fact that more jobs have been created when tax rates were higher rather than lower. Even when marginal tax rates were dramatically reduced during Ronald Reagan’s term in office from 70% to 28%, more jobs were created during Bill Clinton’s presidency when rates were raised from 31% to 39.6%. More fascinating is the fact that in 2011 the effective tax rate on the “job creator’s” $250,000 taxable income (that is the amount of tax divided by $250,000) is the lowest it’s been in more than 59 years. Tuesday’s election results in part reflected the public’s attitude about higher taxes. Get the facts, read, “IF LOW TAXES CREATE JOBS, WHERE ARE THEY?”

  3. bobles says:

    A corollary to this position is the fact that more jobs have been created when tax rates were higher rather than lower. Even when marginal tax rates were dramatically reduced during Ronald Reagan’s term in office from 70% to 28%, more jobs were created during Bill Clinton’s presidency when rates were raised from 31% to 39.6%. More fascinating is the fact that in 2011 the effective tax rate on the “job creator’s” $250,000 taxable income (that is the amount of tax divided by $250,000) is the lowest it’s been in more than 59 years. Tuesday’s election results in part reflected the public’s attitude about higher taxes. Get the facts. Read “IF LOW TAXES CREATE JOBS, WHERE ARE THEY?”

  4. I wouldn’t mind paying more in taxes if it went to programs that really helped our country, esp. the coming generations — i.e., education, health care for children, the environment, green energy, world peace, female empowerment, etc. — and I’m a retired grandma!

  5. jstsyn says:

    It is obvious that if the biggest share of Americans did not want taxes raised Robme would be in the W.H. Could it be any simpler to those of limited intelligence?

    • Inthenameofliberty says:

      JSTSYN your logic is so off base that I am ashamed of, and for, you. History has shown time and time again that a people will always choose to vote into power a government that gives them, for free, everything that they want. It is how every great nation has fallen. Over 95% of the people of Germany voted FOR Hitler. Did you know that? But I digress – I say ‘free’ with great cynicism. It is never free. That price comes from stealing the money from the citizens who work. The United States was designed as a Constitutional Republic. Our founding fathers knew that a true Democracy would never survive. And, they were correct. Because the United States is about to undergo a depression the likes of which we have we have never seen unless our two political parties [that have drug her down] figure out a way to work together. ‘Limited intelligence’, eh? Reading your statement makes it more than obvious that you have absolutely no idea what you are talking about. Obama did not get re-elected because the American populous wants higher taxes. The truth is that the majority of the people who voted for him have no idea that inflation and taxes are about to rise to heights this country has never seen in her history. I am not sure if that means they were uninformed or ignorant. They believed what they were told by the main stream media. This is not me saying this – this is being said by economic advisers who predicted the housing bubble collapse – and those people were ignored then and are being ignored now. Ignored by folks such as yourself who come up with such inaccurate conclusions as you just put forth. Obama’s own advisers have admitted that Obamacare can not currently be paid for. And now the Federal Reserve is printing billions of dollars out of thin air. This will cause inflation to come all the faster. Tell you what – since you seem to be so smug and sure of yourself with your comment – do me a BIG favor. Go spend 20 minutes watching a Youtube video before your happy little fingers do a dance on the keyboard to refute me. [yes, that is me, a person of limited intelligence, being facetious]. Go look up Tony Robbins Deficit. Watch it. Don’t be distracted – give the video your full attention. I will mark this page and I will come back tomorrow night to see what you think of the video. Since every man, woman and child in this country would have to come up with ~$51,000 to pay off our current deficit, I am wondering just where the hell you think this money is going to come from? Higher taxes won’t touch it, sir (or ma’m). Taking all the money from all the wealthy people will not touch it. Our backs are against the wall, and so many in this country have no idea what is about to happen.
      So, watch the video. Then we’ll talk. Until you do, I have nothing more to say to people such as yourself. I am sick at heart that millions didn’t realize that this election will determine the future of us. As a nation. Or her fall.
      Prove me wrong. I beg of you. Because when our nation falls off the fiscal cliff don’t you DARE go telling me that you were not warned.

      And Clarance Swinney – socialism will not work in America. People need to learn to be self sufficient and take personal responsibility for their actions and TAKE CARE OF THEMSELVES when they are able-bodied and can do so. The drag on our current welfare state is from those individuals who have learned to work the system or who have never paid into the system, dragging it down to a farce of what the program was designed to do. It was designed to take care of those who worked hard and found themselves unable to do so anymore. Those people paid their debt to society. They deserve to be helped. Billions upon billions of dollars are spent in our Emergency Rooms taking care of people who have never paid ONE DIME. I work – I’d like to keep my money, thank you. No one takes care of me but me. I’ve been working now for 27 years, paying into the system. And I damn well know that when the time comes when I need assistance, there won’t be one dime left to help me. Because people like yourself will have spent it all and redistributed it all. And that leaves me bewildered, angry and frustrated.

      Anyone remember that little document called the Constitution? Maybe you all should refresh your memories because you seem to be singularly lacking in recall.

      • TruthSayer says:

        “No one takes care of me but me. I’ve been working now for 27 years, paying into the system. And I damn well know that when the time comes when I need assistance, there won’t be one dime left to help me. Because people like yourself will have spent it all and redistributed it all. And that leaves me bewildered, angry and frustrated.”

        Aside from the overall lack of credibility of your post, I am curious as to why there will be a ‘time comes when I need assistance’ phase in your self sufficient life. Surely you will have taken personal responsibility for your actions and will be prepared to take care of yourself. And tony robbins… for real?

        • Inthenameofliberty says:

          The tone of your reply indicates that you dare not be educated about the 16 trillion dollar deficit that we now face. That is a shame. Would it kill you to watch a video about our current deficit? Lack of credibility – well, in America you are entitled to your opinion. Time for you to do your own research TruthSayer and prove me wrong. I look forward to your research and reply.

          Assistance – I am talking about my social security, sir. You know, that system that I have been paying into my whole life that will never be around for me to collect on. If I sound bitter, well sir, I am.

          • Yappy2 says:

            People have been saying Social Security won’t be around for me when I retire since I was young and I am almost 79 and recieve Social Security. I too paid into Social Security.

          • Inthenameofliberty says:

            Then you give me hope. But let’s look at the flip side. Currently, in our time, our government borrows approximately 40 Cents out of every One Dollar, every DAY, to sustain itself. So, perhaps Social Security remains solvent because we have borrowed 16 Trillion Dollars of other nations’ dollars (mainly China) and naively believe we have a financially sound Social Security Program. Yappy2 – will you please tell me – is your house still yours if you live in it but you owe 16 Trillion Dollars on it?

          • Yappy2 says:

            I sold my house about 21 years ago and bought a modest condo and I still live here and don’t owe anything. It’s worth grew to about twice as much as I paid for it but in the last five years it’s worth dropped quite a bit. I’m happy I have a place to live and hopefuly real estate will make a decent comeback. I do know that at one time lenders were always calling me on the phone to offer a loan so I could remodel, take a vacation, buy a car, or whatever. I did none of that as I thought it was bad to risk your home for some immediate gratification.

          • Inthenameofliberty says:

            That is very nice. We remortgaged our home from 17 back to a 30 year mortgage so we could survive. Different strokes, different folks.

          • Yappy2 says:

            People have to do different things for different reasons and I see nothing wrong with that. I just couldn’t see mortgaging my place of residence for some frivilious reason. I didn’t want to worry and burden my children. We are never assured that finances will turn out right for ourselves. We can only try. Good luck you you and your family.

        • Inthenameofliberty says:

          You have not replied. So let me remind you that Bill Clinton just said that the deficit is the most important concern of this country. So you won’t take the time to hear what Tony Robbins has to say ( a self-made millionaire, so he’s not a stupid man) but perhaps you can be persuaded to listen to Bill?

      • Yappy2 says:

        Then why did we not go into a great depression when Bill Clinton was in office and the tax rates were higher and we did go into a recession ( I think a depression) as a result of George Bush’s tax cuts?

  6. Trouble now is there are getting to be way too many people expecting to get government programs while the pool of those paying for it is shrinking and with less money and more bills themselves.

  7. onedonewong says:

    The author fails to understand the difference between local taxes and federal taxes. When voters are provide the opportunity to vote on raising taxes for social good IE schools, Hospitals, roads. They will more often than not agree to the new spending and taxes.
    However when taxes are raised or misspent that’s what what causes the problem. No taxpayer at the state level will vote for tax increases to fund the lavish pay and retirement benefits of state workers, no driver will agree to spending the gas tax on bike paths, mass transit and union wags that bleeds 40 cents of every dollar away from the infrastructure.
    The US taxpayers aren’t willing to pay more taxes so that people can be on unemployment for 2 years, or to double the number of people on food stamps, or allowing illegals to receive welfare food stamps, free healthcare and section 8 housing

  8. Yappy2 says:

    The investment in infrastucture and education from the 1940s through the mid 1970s allowed businesses to become very sucessful and make lots of money and now that we need to invest more in our falling apart infrastucture and demand for up to date education these same people don’t want to pay their fair share.

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