Political influence and the ratification of the income tax amendment

Abstract

The adoption of the Sixteenth Amendment to the U.S. Constitution was perhaps the single most important event in the history of government growth in the 20th century. By vastly increasing the effective tax base available to the federal government, the Sixteenth Amendment removed the single constraint that might have prevented the enormous expansion of federal spending since 19 13. Historians have often portrayed the emergence of a federal income tax as part of the Populist/Progressive campaign to “soak the rich” as an end in itself. In a series of recent papers, Baack and Ray have proposed an alternative theory. They argue that support for the Sixteenth Amendment was a function of the extent to which organized interest groups in a state expected to benefit from the growth of federal spending that an income tax would allow. Hitherto neglected, however, has been the question of the incentives confronting political decisionmakers in their income tax votes, whether in the Congress or in state legislatures. What did individual politicians have to gain, or to lose, from the enactment of a federal income tax? Did nonideological factors play any significant role in the decision by individual politicians to support or oprose the income tax? The present paper is designed to explore the extent to which the degree of political influence available to the relevant political actors affected their decisions in relation to the federal income tax. The paper is divided into five sections. First the history of the federal income tax in the United States prior to the ratification of the Sixteenth Amendment in 1913 is reviewed. Then previous explanations given by historians for the emergence of a federal income tax are considered, including some recent alternatives presented by economists, and an alternative explanation based on the relative political influence of key decisionmakers is offered. Our empirical model of the income tax creation process is then presented, as well as an explanation of our