100 YEARS OF THE 1040

April 15, 2013

April 15th wouldn't be such a horrid day were it not for Progressives!

You read that right! 1913 was the year the Federal Reserve was born, States' Rights were watered down with the direct election of Senators and the passing of the 16th Amendment!

Ah yes, the 16th Amendment - The so-called Progressive Income Tax Amendment. The Progressive Income Tax turns 100 and today is the 100th observance of the 1040. Its permanent establishment was set forth in two historic moments: 1) the 16th Amendment was ratified February 3, 1913; and 2) its signing into law by the progressive’s progressive, President Woodrow Wilson, October 3, 1913.. It was a major political victory for Wilson and fellow progressives then and still today. By my math, that ought to mean a long, sustained party by today’s progressives, a period of extended thanksgiving.

I have written previously about this Amendment and its consequences, but on this "tax" day I felt compelled to deal with it, especially since this will be the first year in which half of Americans will pay no taxes whatsoever.

Maybe it’s a measure of progressives’ refusal to look back, to always move “forward” (a often used term Joseph Stalin was fond of using). Otherwise, they should be celebrating right now. In fact, President Obama and fellow modern progressives/liberals should be ecstatic all this year, rejoicing over the centenary of something so fundamental to their ideology, to their core goals of government, to their sense of economic and social justice—to what Obama once called “redistributive change.”

And what is this celebratory thing to the progressive mind?

President Obama once charged that “tax cuts for the wealthy” are the Republicans’ “Holy Grail.” Tax cuts form “their central economic doctrine.” Well, the federal income tax is the Democrats’ Holy Grail. For progressives/liberals, it forms their central economic doctrine.

As merely one illustration among many I could give, former DNC head Howard Dean and MSNBC host Lawrence O’Donnell were recently inveighing against Republican tax cuts. Dean extolled “what an increase in the top tax rate actually does.” He insisted: “that’s what governments do—is redistribute. The argument is not whether they should redistribute or not, the question is how much we should redistribute…. The purpose of government is to make sure that capitalism works for everybody …. It’s government’s job to redistribute.”

What Dean said is, in a few lines, a cornerstone of the modern progressive manifesto. For Dean and President Obama and allies, a federal income tax based on graduated or progressive rates embodies and enables government’s primary “job” and “purpose.” They embrace a progressive tax for the chief intention of wealth redistribution, which, in turn, allows for income leveling, income “equality,” and for government to do the myriad things that progressives ever-increasingly want government to do.

And so, in 1913, progressives struck gold. The notion of taxing income wasn’t entirely new. Such taxes existed before, albeit temporarily, at very small levels, and for national emergencies like war. The idea of a permanent tax for permanent income redistribution broke new ground. The only debate was the exact percentage of the tax. In no time, progressives learned they could never get enough.

Permit me to delve a little into the historical results of the Income Tax during the last 100 years.

In 1913, when the progressive income tax began (and the first 1040 form, with instructions, was only four pages long), the top rate was a mere 7 percent, applied only to the fabulously wealthy (incomes above $500,000). By the time Woodrow Wilson left office in 1921, the great progressive had hiked the upper rate to 73 percent. World War I (for America, 1917-18) had given Wilson a short-term justification, but so did Wilson’s passion for a robust “administrative state.”

Disagreeing with Wilson were the Republication administrations of Warren Harding and Calvin Coolidge, his immediate successors. Along with their Treasury secretary, Andrew Mellon, they reduced the upper rate, eventually bringing it down to 25 percent by 1925. In response, the total revenue to the federal Treasury increased significantly, from $700 million to $1 billion, and the budget was repeatedly in surplus.

Unfortunately, the rate began increasing under Herbert Hoover, who jacked the top rate to 63 percent. It soon skyrocketed to 94 percent under another legendary progressive, FDR, who, amazingly, once considered a top rate of 99.5 percent on income above $100,000 (yes, you read that right).

Appalled by this was an actor named Ronald Reagan, himself a progressive Democrat—though not much longer. Reagan often noted that Karl Marx, in his “Communist Manifesto” (1848), demanded a permanent “heavy progressive or graduated income tax.” Indeed, it’s point 2 in Marx’s 10-point program, second only to his call for “abolition of property.”

The upper tax rate wasn’t reduced substantially until 1965, when it came down to 70 percent. Alas, President Ronald Reagan took it down to 28 percent. And despite claims to the contrary, federal revenues under Reagan increased (as they did in the 1920s), rising from $600 billion to nearly $1 trillion. (The Reagan deficits were caused by excessive spending and decreased revenue from the 1981-3 recession.)