he first Federal income tax was adopted in 1861 to finance the Civil War, but it was allowed to lapse after the war. In 1913, the Sixteenth Amendment to the Constitution was ratified, permitting the Federal government to levy an income tax without giving all of it to the states. The Federal income tax enacted in 1913 included corporate and individual income taxes.
Federal taxes were expanded greatly during World War I. In 1921, wealthy industrialist and then Treasury Secretary Andrew Mellon engineered a series of significant income tax cuts under three presidents. Mellon argued that tax cuts would spur growth. The last such cut in 1928 was followed by the Great Depression in 1929. Taxes were raised again in the latter part of the Depression, and during World War II. Income tax rates were reduced significantly during the Johnson, Nixon, and Reagan Presidencies. President Clinton raised marginal tax rates on the wealthy in 1993 and eliminated the deficit. George W. Bush scaled back tax rates across the board, resulting in large and sustained budget deficits.
Cry Wolf Quotes
An excess profits tax is not in keeping with our competitive enterprise system. It suggests that government can decide how much profits should be, which profits are excessive, and which are not excessive. If this is possible with the energy producing segment of the economy, then is it not possible with other segments of the economy? Where do we stop? What will be the shortages next year and the next, and which businesses will be subjected to government regulation and control of their profits?
This country was built by men who used American ingenuity and know-how to meet the shortages and the needs of the people through the profit motive. It would be unwise to set a precedent of government control of profits when conditions of shortage arise. We believe this would not be in the best interests of the public and a free economy.
Experience with a wartime excess profits tax indicates that it tends to encourage needless and wasteful expenditures. With government bearing 80 to 90 per cent of the cost of business operations, there is little incentive for a corporation to increase the efficiency of its organization.
Such a tax inevitably discourages capital investment that is so important for the development of new energy resources. There is a definite psychological effect on investors who know that any success will be subject to a tax that could consume almost the entire profit.
Related Laws and Rules
Conservative Commentator Examines the History of Right-Wing Tax Cut Hypocrisy
Hard right-wingers fear-monger in the face of tax increases of both Republican and Democratic administations.
Tax Cuts on the Rich Don't Spur Economic Growth
The Center for American Progress takes apart supply side myths.
The Tax Policy Center is an invaluable resource for researching tax policy. It is a non-partisan organization, founded by alumni of the Clinton, Reagan, and Bush (the first), administrations.
The Center on Budget and Policy Priorities (CBPP) is a think tank focused on tax and fiscal policy. They provide in-depth analysis of state issues.
Citizens for Tax Justice is an organization that represents low and middle income citizens in the tax debates on Capitol Hill.