Wednesday, January 15, 2003

"It is class warfare, and they've declared it."


Tax Debate Inevitably Becomes an Argument About Class
"I understand the politics of economic stimulus. Some would like to turn this into class warfare. That's not how I think."

So said President Bush last week as he prepared to unveil his $674 billion, 10-year economic package, which his critics say favors the rich.

"It is class warfare, and they've declared it," Representative Charles B. Rangel of New York, the senior Democrat on the House Ways and Means Committee, said a few days later.

As far back as the Civil War, when the first income tax was enacted, The New York Herald hailed it for forcing W. B. Astor, Commodore Vanderbilt and other millionaires to "contribute a fair proportion of their wealth to the support of the national government."

While Representative Thaddeus Stevens, the authoritarian Republican chairman of the House Ways and Means Committee, agreed that the tax was necessary, he deplored the "vicious" and "unjust" idea that the tax system should punish "the rich man because he is rich."

But the flagrantly inequitable accumulations of wealth that characterized the Robber Baron era in the late 19th century were precisely what worried Theodore Roosevelt, who considered them a virtual incitement to class warfare.

"I do not like the social conditions," he told William Howard Taft, his secretary of war, in 1906. Roosevelt worried that "the dull, purblind folly of the very rich men" was breeding "a very unhealthy condition of excitement and irritation in the popular mind." His solution to these class resentments was to placate them. At the end of his term, he proposed an income tax, arguing that the very rich had "a peculiar obligation to the state" that should be fulfilled by higher taxes.

When the income tax became permanent in 1913, after a constitutional amendment, Senator Henry Cabot Lodge, the Massachusetts Republican, proclaimed that it represented "the pillage of a class," by which he meant his class — the very rich.

BUT the concern about singling out the rich is almost always trumped in times of real war. During the Civil War, the income tax was propelled because so many Americans were growing rich off the war. At a time when a man could pay $300 to escape the draft, Treasury Secretary Salmon P. Chase bought his daughter a $3,000 shawl for her wedding. It was not lost on the public that this was the price of 10 lives.

During World War I, Woodrow Wilson told Congress that people were willing to "bear any burden and undergo any sacrifice," including taxes. "We need not be afraid to tax them, if we lay taxes justly," he said.

That was also the philosophy of Franklin D. Roosevelt during World War II. Indeed, the Treasury Department commissioned Irving Berlin to write a song called "I Paid My Income Tax Today":

I never felt so proud before
To be right there with the millions more
Who paid their income tax today.

The patriotic spirit that surrounded taxpaying, especially when it was the rich who paid rates as high as 90 percent, continued into the cold war. President Eisenhower resisted cutting taxes because of the need to support the military and social programs.

Then in the 1960's, a new factor entered into the discussions: the Keynesian view that taxes affect the economy. John F. Kennedy advocated tax cuts to jolt the nation out of its recession. In 1980, President Reagan embraced tax cuts as a cure for recession, inflation and loss of confidence.

Charges that the Reagan cuts catered to the rich were at the center of debate in 1981. But after 1982, when the recession lifted, the tax cuts were credited with rescuing the economy. Today it is an article of faith among conservatives that the Reagan cuts ushered in two decades of prosperity.

Dissenters note, however, that the Bush tax increase of 1991 and the Clinton tax increase of 1993 — both of which raised taxes on the very wealthy and were labeled by their critics the greatest tax increases in history — were followed by job growth in the 1990's even greater than that of the 1980's.

If history is any guide, the coming debate over Mr. Bush's new plan, and the class resentments it may stir, will reprise the arguments of the past 150 years. But these arguments are certain to be intensified because of two questions: What effect will it have on the economy? What sacrifice will people expect from the richest taxpayers if young Americans start fighting in Iraq?
Tax Debate Inevitably Becomes an Argument About Class

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