Hostname: page-component-77c89778f8-fv566 Total loading time: 0 Render date: 2024-07-21T06:04:37.476Z Has data issue: false hasContentIssue false
  • English
  • Français

Selling Scientific Taxation: The Treasury Department's Campaign for Tax Reform in the 1920s

Published online by Cambridge University Press:  27 December 2018

M. Susan Murnane
Get access Rights & Permissions [Opens in a new window]

Abstract

The received interpretation of the Mellon tax reforms in the 1920s describes a reactionary roll-back of the first, progressive, permanent income tax system in United States history. This essay revises that interpretation in important ways.

The Treasury Department of Secretary Andrew W. Mellon proposed and passed tax reform legislation in the 1920s that radically reduced marginal tax rates on wealthy individuals from World War 1 highs. The Mellon plan was developed by attorneys from the previous Democratic administration. Working with the foremost tax professionals of the day and deeply committed to the principles of progressive income taxation, they intended the establishment of a permanent peacetime tax system for a modern industrial society. They called their taxplan scientific taxation. The Treasury Department policymakers anticipated determined opposition to their program and consciously embarked on an extensive public relations campaign to convince the general public that reducing taxes on wealthy people was good for them because it made the whole society richer and more dynamic.

This essay tells the story of how the Mellon plan took shape, and of the public relations campaign waged to secure its enactment. This essay also suggests that the Treasury Department's campaign to sell scientific tax reform to the general public generated a dialogue that facilitated popular acceptance of modern industrial capitalism.

Type
Articles
Information
Law & Social Inquiry , Volume 29 , Issue 4 , Autumn 2004 , pp. 819 - 856
Copyright
Copyright © American Bar Foundation, 2004 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Academy of Political Science. 1926. Proceedings of the Academy of Political Science in the City of New York. Vol. 11. New York: Academy.Google Scholar
Adams, Thomas S. 1921. Fundamental Problems of Federal Income Taxation. Quarterly Journal of Economics 35 (4): 527–56.Google Scholar
1923a. An Open Letter to the Chairman of the Committee on Ways and Means and to the Friends of the Progressive Income Tax in Congress. Bulletin of the National Tax Association 9 (5): 130–33.Google Scholar
1923b. Evolution vs. Revolution in Federal Tax Reform. Address as President of the National Tax Association. Sixteenth Annual Conference, held at White Sulphur Springs, W. Va., September 27.Google Scholar
1924. Secretary Mellon Pleads For Tax Laws Which Work. New York Times Book Review, May 18, 3.Google Scholar
Atwood, Albert W. 1924a. The Sin of Success. Saturday Evening Post , Aug. 2, 23.Google Scholar
1924b. The Sin of Success. Saturday Evening Post , August 9, 8.Google Scholar
1924c. What Becomes of the Rich Man'n Income Saturday Evening Post , Sept. 6, 14.Google Scholar
Babson, Roger W. 1924. Taxes are Paid by the Untaxed. Saturday Evening Post , Jan. 19, 6.Google Scholar
Blakey, Roy G. 1919. The Revenue Act of 1918. American Economic Review 9 (1): 213–43.Google Scholar
1922. The Revenue Act of 1921. American Economic Review 12 (1): 75–108.Google Scholar
1924 The Revenue Act of 1924. American Economic Review 14 (3): 475–504.Google Scholar
1926. The Revenue Act of 1926. American Economic Reuiew 16 (3): 401–25.Google Scholar
1940. The Federal Income Tax. New York: Longman'n Green.Google Scholar
Brownlee, Elliot W. 1985. Wilson and Financing the Modern State: The Revenue Act of 1916. Proceedings of the American Philosophical Society 129 (2): 173–210.Google Scholar
1990. Economists and the Formation of the Modern Tax System in the United States: The World War I Crisis. In The State and Economic Knowledge: The American and British Experience, ed. Mary Furner, O. and Barry Supple, E. Washington, D.C.: Woodrow Wilson Center Press; Cambridge: Cambridge University Press.Google Scholar
1993. Social Investigation and Political Learning in the Financing of World War I. In The State and Social Investigation in Britain and the United States, ed. James Lacey, Michael and Mary Furner, O. Washington, D.C.: Woodrow Wilson Center Press; Cambridge, U.K.: Cambridge University Press.Google Scholar
2000. Historical Perspective on U.S. Tax Policy Toward the Rich. In Does Atlas Shrug? The Economic Consequences of Taxing the Rich, ed. Slemrod, J. B. New York: Russell Sage Foundation; Cambridge, Mass.: Harvard University Press.Google Scholar
Campbell, Ballard C. 1995. The Growth of American Government, Governance from the Cleveland Era to the Present. Bloomington: Indiana University Press.Google Scholar
Campbell, Bart J. 1925. What Are the Chances of Lower Taxes Collier'r , June 12, pp. 9–10.Google Scholar
Chandler, Alfred D. 1977. The Visible Hand, The Managerial Revolution in American Business. Cambridge, Mass.: Belknap Press.Google Scholar
Finley, David E., Papers. Manuscript Division. Library of Congress. Washington, D.C.Google Scholar
Frear, James A. 1923. The Tax Program to Which the Progressive Group Is Committed. National Income Tax Magazine, May, p. 18.Google Scholar
1924 Why Congress Rejected the Mellon Tax Rate Schedule. National Income Tax Magazine, Aug., p. 229.Google Scholar
Galambos, Louis. 1975. The Public Image of Big Business in America, 1880–1940. Baltimore, Md.: Johns Hopkins University Press.Google Scholar
Green, William R. 1923. How the Ways and Means Committee Views the Tax Question. Congressional Digest, Sept., p. 339.Google Scholar
1924a. Congressman Green Replies to Dr. Adams. Bulletin of the National Tax Association 9(6):167–69.Google Scholar
1924b. Problems of National Taxation. National Income Tax Magazine , Jan.Google Scholar
Huston, James L. 1998. Securing the Fruits of Labor: The American Concept of Wealth Distribution, 1765–1900. Baton Rouge: Louisiana State University Press.Google Scholar
Jones, Carolyn C. 1996. Massbased Income Taxation: Creating a taxpaying culture, 1940–1952. In Funding the Modern American State, ed. Brownlee, W. E. Washington, D.C: Woodrow Wilson Center Press; New York: Cambridge University Press.Google Scholar
King, Ronald F. 1993. Money, Time, and Politics: Investment Tax Subsidies and American Democracy. New Haven, Conn.: Yale University Press.Google Scholar
Literary Digest. 1923. Taxwhackers Warming Up. Literary Digest, April 28, pp. 10–11.Google Scholar
1924a. Final Report on the “Digest” Tax Poll. Literary Digest , April 12, pp. 10–11.Google Scholar
1924b. First Returns in “The Digest't” 15,000,000 Poll. Literary Digest , Feb. 2, pp. 5–7.Google Scholar
1925. Tax Clubs, A New Factor in Tax Revision. Literary Digest, Nov. 21, p. 68.Google Scholar
May, George O. 1962. Memoirs and Accounting Thoughts of George, O. May, edited by Paul, Brady, His friend and partner. New York: Ronald Press.Google Scholar
McKernan, Lewis W. 1925. Taxation by Misrepresentation. Nation, Nov. 18, pp. 566–67.Google Scholar
Mellon, Andrew W. 1924a. The Business of Taxation. Forum , March, pp. 334–38.Google Scholar
1924b. Taxation: The People'e Business. New York: Macmillan.Google Scholar
Metzer, Jacob. 1985, How New Was the New Era? The Public Sector in the 1920s. Journal of Economic History 45 (1): 119–26.Google Scholar
Mills, Ogden L. 1924. Secretary Mellon'n Program. Bulletin of the National Tax Association 9(4):107–9.Google Scholar
Mott, Frank L. 1938. A History of American Magazines. Cambridge, Mass.: Harvard University Press.Google Scholar
Murray, Lawrence L. 1978. Bureaucracy and Bi-partisanship in Taxation: The Mellon Plan Revisited. Business History Review 52 (2): 200–25.Google Scholar
National Archives and Record Administration (NARA) Correspondence of the Office of the Secretary of the Treasury, 1917–32. Record Group 56. College Park, Md.Google Scholar
National Cyclopedia of American Biography 1940. Vol. 28. New York: James T. White.Google Scholar
National Cyclopedia of American Biography 1965. Vol. 48. New York: James T. White.Google Scholar
National Income Tax Magazine . 1923a. Annual Meeting of National Tax Association. National Income Tax Magazine , Sept., p. 22.Google Scholar
1923b. Secretary Mellon Reaffirms Support of Surtax Reductions. National Income Tax Magazine , May, pp. 20–21.Google Scholar
1924a. Burden of Income Taxes. National Income Tax Magazine, March, p. 86.Google Scholar
1924b. Tax Reduction Campaign. National Income Tax Magazine, April, p. 121.Google Scholar
1924c. The Tax Reduction Controversy. National Income Tax Magazine, Feb., p. 54.Google Scholar
New York Times . 1924a. La Follette Sees Bunghole Waste. New York Times, Oct. 23, p. 4.Google Scholar
1924b. La Follette Sees Freight Rise Plan. New York Times, Oct. 16, p. 7.Google Scholar
1924c. LineUp of the Parties on the Main Issues. New York Times, June 20, p. 5.Google Scholar
1925. Treasury Deprecates $500,000,000 Tax Cut. New York Times, June 7, p. 26.Google Scholar
Radner, Benjamin. 1971. Federal Taxation in the 1920s: A Re-examination. Historian 33 (3): 415–35.Google Scholar
Reams, , Bernard, D. Jr. 1979. Internal Revenue Acts of the United States 1909–1950: Legislative Histories, Laws, and Administrative Documents. 144 volumes. Buffalo: William S. Hein.Google Scholar
Roberts, George E. 1924. The Income of the People of the United States. American Review of Reviews, Feb., pp. 177–83.Google Scholar
Ross, Dorothy. 1991. The Origins of American Social Science. Cambridge, U.K.: Cambridge University Press.Google Scholar
Seligman, R. A. Edwin 1924a. Can Income Taxes Be Shifted National Income Tax Magazine, April, p. 101.Google Scholar
1924b. Federal Tax Legislation Issues. National Income Tax Magazine, June, p. 6.Google Scholar
1924c. Tax Reduction and Tax Exemption. North American Review 219 (821): 433–48.Google Scholar
Sklar, Martin J. 1987. The Corporate Reconstruction of American Capitalism, 1890–1916: The Market, the Law, and Politics. Cambridge, U.K.: Cambridge University Press.Google Scholar
Skowronek, Stephen. 1982. Building a New American State: The Expansion of National Administrative Capacities, 1877–1920. New York: Cambridge University Press.Google Scholar
Smiley, Gene, and Richard, H. Keehn. 1995. Federal Personal Income Tax Policy in the 1920s. Journal of Economic History 55 (2): 285–303.Google Scholar
Stanley, Robert. 1993. Dimensions of Law in the Sernice of Order: Origins of the Federal Income Tax, 1861–1913. New York: Oxford University Press.Google Scholar
Swaine, Robert T. 1948. The Cravath Firm Since 1906. Vol. 2 of The Cravath Firm and Its Predecessors, 1819-[1948]. New York: Priv. print. at Ad Press.Google Scholar
Trachtenberg, Alan. 1982. The Incorporation of America, Culture, and Society in the Gilded Age. New York: Hill and Wang.Google Scholar
U.S. Bureau of the Census. 1975. Historical Statistics of the United States: Colonial Times to 1970. Bicentennial, ed., pt. 1. Washington, D.C.: GPO.Google Scholar
U.S. House. 1925. Committee on Ways and Means—Elect. Revenue Revision: Hearings before the Committee on Ways and Means . 69th Cong., Oct. 19-Nov. 3. In Reams 1979, vol. 7.Google Scholar
1927. Committee on Ways and Means. Revenue Rewsion 1927–28: Hearings before the Committee on Ways and Means . Interim 69th/70th Cong., Oct. 31-Nov. 10. In Reams 1979, vol. 8.Google Scholar
U. S. Internal Revenue. 1925. Statistics of Income from Returns of Income for 1922. Washington, D.C.: GPO.Google Scholar
U. S. Senate. 1921a. Committee on Finance. Internal Revenue Bill of 1921 . 67th Cong., 1st sess., S. Rep. 275. In Reams 1979, vol. 95A.Google Scholar
1921b. Committee on Finance. Internal Revenue Bill of 1921: Minority Views . 67th Cong., 1st sess., S. Rep. 275 pt. 2. In Reams 1979, vol. 95A.Google Scholar
1921c. Committee on Finance. Internal Revenue Hearings before the Committee on Finance on H. Rep. 8245. 67th Cong., 1st sess. Confidential Print for use of Members of the Senate. In Reams 1979, vol. 95A.Google Scholar
1924. Committee on Finance. Revenue Act of 1924: Hearings on H.R., 6715. 68th Cong., 1st sess. In Reams 1979, vol. 2.Google Scholar
1929. Committee on the Judiciary. Lobby Investigation, Hearings before a Subcommittee of the Committee on the Judiciary Pursuant to S. Res. 20, pts. 2 and 3. 71st Cong., 1st sess.Google Scholar
U.S. Treasury Department. 1920. Annual Report of the Secretary of the Treasury on the Sate of the Finances for the Fiscal Year ended June 30, 1919. Washington, D.C.: GPO.Google Scholar
1921. Annual Report of the Secretary of the Treasury on the Sate of the Finances for the Fiscal Year ended June 30, 1920. Washington, D.C.: GPO.Google Scholar
1923. Annual Report of the Secretary of the Treasury on the Sate of the Finances for the Fiscal Year ended June 30, 1922. Washington, D.C.: GPO.Google Scholar
1924 Annual Report of the Secretary of the Treasury on the Sate of the Finances for the Fiscal Year ended June 30, 1923. Washington, D.C.: GPO.Google Scholar
1925. Annual Report of the Secretary of the Treasury on the Sate of the Finances for the Fiscal Year ended June 30, 1924. Washington, D.C.: GPO.Google Scholar
1927. Annual Report of the Secretary of the Treasury on the Sate of the Finances for the Fiscal Year ended June 30, 1927. Washington, D.C.: GPO.Google Scholar
Wanniski, Jude. 1989. The Way the World Works. Morristown, N.J.: Polyconomics.Google Scholar
Weisman, Steven R. 2002. The Great Tax Wars: Lincoln to Wilson the Fierce Battles over Money and Power that Transformed the Nation. New York: Simon and Schuster.Google Scholar
Welliver, Judson C. 1924. Secretary Mellon and His Tax Proposals. American Review of Reviews, Feb., pp. 167–76.Google Scholar
Wiebe, Robert H. 1967. The Search for Order, 1977–1920. New York: Hill and Wang.Google Scholar
Winston, Garrard B. 1924. Principles Involved in Income Tax Reduction. National Income Tax Magazine, March, p. 69.Google Scholar
Witte, John F. 1985. The Politics and Devehpment of the Federal Income Tax. Madison: University of Wisconsin Press.Google Scholar
Zelizer, Julian E. 1998. Taxing America: Wilbur D. Mills, Congress, and the State, 1945–1975. Cambridge, U.K.: Cambridge University Press.Google Scholar