Researcher Talk: Tax and Spend: The Welfare State, Tax Politics…

Researcher Talk: Tax and Spend: The Welfare State, Tax Politics…


Richard McCulley: Thank you for attending
today’s Researcher Talk. I am Richard McCulley, Historian, at the Center
for Legislative Archives, the sponsor of this series. We have had a very full program this year
showcasing some of the significant research that has been done and is being done in Senate
and House records. Today’s talks is the eight this calendar year
and we have one more in November when we will hear from Charles Stewart, Political Science
Professor at MIT, who will talk about his book co-authored with Wendy Schiller, Electing
the Senate: Indirect Democracy before the Seventeenth Amendment published by Princeton
University Press. I have been looking forward to hosting today’s
guest, Molly Michelmore, since I first saw her in action at last year’s Policy History
Conference chairing a panel that included Ajay Mehrotra, who we heard from at a Researcher
Talk last December and that also included Carl-Henry Geswind, a tax historian who is
in the audience today and who we will hear from next year. Molly is an Associate Professor of History
at Washington and Lee University and received her Ph.D. from the University of Michigan. She is the author of the highly-regarded Tax
and Spend: The Welfare State, Tax Politics and the Limits of American Liberalism. She primarily discuss that book and research
that went into that book. She will also say something about her current
book project which builds on Tax and Spend and which is tentatively titled As a Taxpayer
and a Citizen: Rights, Obligations and Democracy in Modern America. We will have some time for Q & A after Molly’s
presentation. If you have a question, first raise your hand so that we can pass the microphone
to you. Thank you for attending and thank you too Molly. Thank you for joining us today, Molly.
Michelmore: Thank you very much, Richard, for inviting me down today. And thank all
of you for taking time out of your busy day to come for this noontime talk about tax history.
It’s sort a heavy lift, so I appreciate you coming to hear me talk. I also want to thank
the National Archives and all of the archivists who make it possible for historians to do
what we do. So much of the historian’s job is to look beneath the surface and to use
unpublished records in the Archives to put together stories about the past.
It’s sort of weird coming down here because I made basically the same trip every day for
about two years while I was doing research in the Reading Room upstairs. So it’s a little
surreal not to come back as a 25-year old graduate student but as a luckily employed
professor of history and to make that trip again in a different sense. Feels amazing
but also a little weird. I want to sketch out the political history
of the federal income tax as well as talk about my book and the ways that the National
Archives helped me put together the story that I tell in the book about the relations
between taxes and spending policy, mostly in the post-New Deal period -1936 to about
1986. That is basically the scope of the book. I would also like to offer some thoughts about
why and how taxes have moved to the center of American politics and American political
thought for the last forty years. I explore what role tax and spending policies played
in sustaining the Liberal Order of the post-World War II period, and then animating a conservative
challenge to that consensus over the last four decades.
First, a little bit about myself. My interest in taxes grew out of my interest in the welfare
state. I actually began my career in graduate school as a historian of the welfare state.
I had written my thesis at Amherst College on mothers’ pensions of the Progressive Era
which provided the basis for Aid to Families with Dependent Children. This was one of the
first welfare programs and eventually operated in 1935 as part of the Social Security Act.
But even as an undergraduate, it seemed that historians were inattentive to how you pay
for this stuff. There wasn’t enough attention or thought given to taxes in talking about
the welfare state. After college, I came down to Washington, D.C. and worked on the Hill
for two years as a staff assistant on the Senate side, then as an LC and an LA on the
House side. I also had some work on the Ways and Means Committee. So I had some first-hand
experience working with the kinds of issues that I would later deal with in my own scholarship.
So I was able to translate some of this experience. And I wasn’t this number one LA on the staff,
so I dealt with a lot of things others didn’t want to deal with and that was the stuff I
got to do. But I did manage to translate some of that experience to – familiarity with the
legislative process – into my graduate work. Over the course of my six years at Michigan,
three of which I spend here in Washington doing research at the National Archives here
as well as out at College Park, I began to understand that I was primarily an historian
of the taxing state rather than the U.S. welfare state, although the two remain intimately
connected. And it is this connection that I explore in my book. Over that same period,
it was gratifying to see that other recognized the importance of taxes and tax politics as
a field of historical inquiry. Because for one reason or another, historians have tended
to leave taxes alone. They might be afraid of numbers. Generalists try to outsource taxes
and tax history to economists, to lawyers, and sometimes to political scientists. But
in the last 10 years there has been this blossoming of historical interest in taxes. Carl-Henry
[Geschwen] in the audience is one of the leaders in that field and Ajay [Merhotra] who was
here last year has done a great deal to bring taxes to the forefront of historical study.
Tax and Spend relies heavily on archival research, particularly research done here at the National
Archives, as well as in the Johnson and Reagan presidential libraries and in what was then
the Nixon Presidential Materials Project. I was lucky enough to be here while Nixon’s
stuff was still here so I did not have to go out to Yorba Linda. Of the records in this
building, those of the Senate Finance and Ways and Means Committee were particularly
important. I also looked at the records of the Joint Committee on Taxation as well as
those of the Joint Economic Committee. These records were helpful in putting together the
history of the income tax between 1945 and 1958, a period in which taxes did not always
play a particularly visible role in national politics. These records also helped me put
together a portrait of the tax and welfare experts who designed and implemented tax and
welfare policy in the two-and-a-half decades after World War II. Congressional sources
were particularly important in two chapters of the book that deal with tax and welfare
policies in the 1960s. These chapters depended heavily on sources here, particularly staff
memoranda of the Finance and Ways and Means Committee. I also became intimately acquainted
with two men. Senator Russell Long who was chairman of the Senate Finance Committee and
– Richard, did you want to – Senator Long was the chairman of the Finance Committee,
he was particularly active on welfare issues. He was a known opponent of Aid to Families
with Dependent Children – As well as Wilbur Mills, the longtime chairman of the Ways and
Means Committee and really the sort of emperor of all tax policy in the 1950s and 1960s.
Technology, my friends as well as my enemy – One of the main claims that I make in the
book, and I can probably do this old school without any kind of tech support, although
– I don’t know if I can make it without my power point. Is it down there? There you go.
I don’t know if any of you remember this, but when you were in elementary school and
the teachers could never get the video to play. And you were always like, “Channel three!
It’s on channel three!” And it was like, these are the stupidest people in the world. It’s
like when you get to be a teacher, you suddenly lose your ability to use technology. Even
if you do it every day. So thank you very much. I hope we don’t have this particular
issue again. Here is Russell Long talking to Johnson and
possibly getting the “Johnson treatment.” And here is Wilbur Mills, also talking to
Johnson and probably also getting the famous Johnson treatment.
One of the main points I make in Tax and Spend is that while taxes periodically played an
important role in American politics, it is not until the 1970s that they emerge as a
major and perennial political issue. It is often assumed that Americans have always hated
taxes and that American history can be imagined as a 200 year revolt against taxes, through
most of the 20th century income taxes were, if not exactly popular, a relatively accepted
part of the social compact. Although conservative politicians and various interest groups experimented
with tax politics in the years after World War II, it was not until the economic collapse
of the 1970s that taxes became a political issue forceful enough to transform American
politics. Political competition over taxes grew even more heated after 1980 as persistent
budget deficits and mount debt required that all tax cuts or spending increases be paid
for. I will take a very brief tour through the
history of the federal income tax and offer a few thoughts on how and way taxes have no
become a central feature of American politics. The United States experimented with a variety
of tax systems in his 200 plus years. Throughout the 18th and 19th centuries finances depended
on tariff revenue. The Constitution allowed the federal government to lay and collect
taxes on duties, imposts, and excises in order to provide for the defense and the general
welfare of the United States. At the same time, section 9 of Article I limited the national
government -‘ the census. This limitation on the federal government’s taxing powers
reflected the framers’ fear of centralized power. Equally important, however, as historian
Robin Einhorn has shown, these constitutional checks on the government’s powers derived
from the slaves states concern to protect that peculiar institution. Slaveholders who
held key political positions in the Early Republic feared that the non-slaveholding
majority would one day use the federal government’s taxing power to abolish slavery by making
it prohibitively expense. As Patrick Henry told his fellow Virginians in 1788, as Virginia
was considering whether or not to ratify the Constitution, stated that a federal government
with the power to tax might someday impose a federal slave tax hefty enough “to compel
the southern states to liberate their slaves.” Between 1789 and 1862, American finance depended
almost exclusively on tariff at the national level and property taxes at the state and
local level. The American Civil War, however, was too expensive to pay for through these
kinds of duties. To pay for the war, the Union imposed the nation’s first income tax, which
taxed incomes over $800 at a flat rate of 10 percent. This tax eventually affected 10
percent of northern households. The income tax in the 19th century was short-lived. In
the decade after the war, Congress allowed the income tax to expire. The tariff again
becomes the basis of national finance after the war. By the 1880s, however, a series of
economic crisis post-Reconstruction return of the Democrats as a power in national politics
weakened support for tariff-based finance. There developed a popular movement for a progressive
income tax. The progressive income tax was first introduced by the Populist or Peoples
party platform, represented by the people shown in that picture. And that Populist party
platform introduced in 1892 included a plank endorsing a graduated income tax “to restore
the government of the Republic to the hands of the plain people to which class it originated.”
Democrats soon co-opted parts of the Populist agenda, including the progressive income tax.
In 1894, Congress approved a 2 percent income tax on income over $4,000. The income tax
lasted only one year. In 1895, the Supreme Court found that tax to be unconstitutional
in a controversial 5 to 4 ruling in Pollock v Farms Loan and Trust. Despite the court’s
ruling, the progressive income tax remained popular because it addressed rising concerns
about the unequal concentration of economic and political power in the hands of a very
small elite. Party politics followed popular support. By 1908, both the GOP and the Democratic
party supported some kind of a national income tax. In 1909, Congress approved a constitutional
amendment giving Congress the power to lay and collect taxes on incomes without regard
to the census to get around the constitutional prohibition on direct taxation. The Sixteenth
Amendment was passed by the states and took effect on February 25, 1913. The first tax
enacted under the Sixteenth Amendment are the Underwood-Simmons Tariff Act. It was relatively
modest imposing a tax of 1 percent on personal and corporate income. Only about 2 percent
of Americans were subject to even this very minimal tax. The tax burden did go up in response
to World War I, however, the World War I system only affected about 15 percent of American
families. And that system did not survive the end of World War I because during the
1920s Secretary of the Treasury Andrew Mellon got Congress to roll back the war taxes. Even
the Great Depression didn’t bring the income tax to a majority of people. Although Franklin
Roosevelt adopted a populist rhetoric to justify increasing income taxes on the very wealthy
to target what he called undesirable concentrations of great wealth, New Deal tax policy continued
to rely quite heavily both on regressive consumption taxes and the new payroll taxes enacted by
the Social Security Act of 1935. Excise taxes on liquor, which had the benefit of already
being on the books, but having been in abeyance because of Prohibition, became effective again
in 1933 and generated huge amounts of revenue for the federal government. In 1936, for example,
federal liquor taxes raised more than $1.5 billion. In that same year, the federal income
tax raised $1.4 billion. The federal income tax did not move to the
center of national politics until the Second World War. Planning for war tax began as early
as 1939, but of course Pearl Harbor dramatically increased pressure for new revenue. Instead
of excess profits or a new general sales tax, Congress and the administration agreed to
keep the income tax at the center of American finance. The new law lowered the personal
exemption level and so transformed the income tax from a class tax, which had been paid
by a very small minority or very wealthy tax payers, to a mass tax that affected the middle
and even working classes. Between 1939 and 1945, the number of individual tax payers
grew from 3.9 million to 42.6 million. Over that same period, income tax collections grew
from $2.2 billion to $35.1 billion. The 1942 law thus transformed millions of Americans,
almost overnight into tax payers. To sell this tax system, the federal government
explicitly turned tax paying to wartime patriotism. The campaign to convince Americans to pay
their taxes to defeat the Axis Powers enlisted the help of pop cultural luminaries such as
Irving Berlin which wrote this song, “I paid my income tax today” which every time I play
in my class I have it stuck in my head for the rest of the day. Irving Berlin, Danny
Kaye, Roy Rogers, and even Donald Duck who stared in two short films produced by Walt
Disney – and in these films Donald Duck pays his taxes. They are really very interesting.
You can find them on YouTube fairly easily. They answer a lot of questions that you might
have about Donald Duck. For example, he is an actor. A lot of people didn’t know that.
It doesn’t explain why he doesn’t wear pants. But it does explain what his job is and what
his relation is to Huey, Dewey, and Lewy. He does claim his dependent on his tax form,
although I believe that they are just his nephews. But these films and the public campaign
in general extoll the virtues of the tax paying citizen. They were remarkably successful in
selling this new income tax system. Public opinion polls indicated that Americans thought
that their taxes were fair and that their tax dollars were helpful with the war effort.
At this time, unlike after World War I, the wartime tax survived the end of the war. Taxes
of course were not universally popular. In the late 1940s, the GOP did try to use taxes
to attack Congress and the White House. Party leaders hoped that these tax policies would
appeal to the emerging middle class and to “those men who own things are aspire to own
things.” They resented to pay for New Deal and Fair Deal programs that they felt they
didn’t directly benefit from. Despite GOP claims that their demands reflecting the feelings
of middle class tax payers, most of the pressure for tax relief did not come from ordinary
voters but came from organized business groups that mobilized quickly after the war to roll
back what they viewed as onerous and unfair excess profits and corporate taxes. The role
of business in organizing these efforts was particularly clearly, but they ultimately
failed, especially in the effort to amend the Constitution to cap the top rate at 25
percent. Although supporters of the tax limitation amendment claimed that theirs was a spontaneous,
voluntary, and unprompted grassroots movement, the campaign was paid for by some of the nation’s
largest corporations, including the Mellon interests, the Duponts, Republic Steel, Standard
Oil, and Texas oil interests. This tax limitation campaign failed but not before it introduced
significant changes in the ways that people thought about and talked about taxes and their
relations to citizenship. It was during this campaign that the business lobby succeeded
in redefining American citizens at “tax payers,” a practice that politicians have followed
ever since. And you can see this in the way that liberal politicians talk about the War
on Poverty in the 1960s. This is a campaign to transform “tax eaters” into “tax payers.”
And that is not the kind of language that you see much before this period. The leaders
may have failed in their attempt to amend the Constitution, much as historians have
pointed out, but they pioneered much of the anti-tax rhetoric that came to dominant American
politics at the dawn of the 21st century. It is important to know, however, that this
rhetoric did not totally resonate with the public. Voters would respond to tax cuts if
you asked them, but they didn’t generally demand it. Indeed, for much of the early post-war
period, voters seemed to have little interest in tax cuts. Indeed, one of the largest post-war
tax cuts was the Kennedy-Johnson tax cut in 1964 was basically an inside-the-Beltway production.
A lot of the motivations was the Kennedy administration’s concern that the economy had under-performed
in the 1950s. Kennedy and his advisors worked with a bunch of tax experts and arranged around
Mills in the Ways and Means Committee. They hoped to use corporate and individual tax
cuts to expand “America’s productive capacity at a rate that shows the world the vigor and
the vitality if a free economy.” I am tempted to do a Kennedy accent when I read to word
“vigor” but I will try not to. Public interest in the tax cut was lukewarm at best. The Kennedy
administration had to actually go out and gin up public support for this across-the-board
tax cut. According to the New York Times, few tax papers “were eagerly awaiting more
money in their pocket.” The Wall Street Journal lamented that the tax cut fever that they
hoped for had failed to materialize. According to one Kennedy administration insider, the
White House hadn’t done more to convince people that tax cut is personally helpful and good
for the country. The creation of two groups, the Business Committee for Tax Reduction and
Citizens for Tax Reduction and Revision, did little to convince the public of the need
for prompt congressional action on the tax cut proposal.
So the big question is: What changes? Particularly between 1964 and 1969 when taxpayers inundated
the White House and Congress with demands for tax reduction? According to one observer,
“Why would students protest against the Vietnam War?” How did tax politics move to the center
of the national agenda? How did an issue that had once been in the orbit of a relatively
small, insular group become the stuff of a national campaign?
First, the post-World War II boom ended. By 968, inflation was rising, productivity flagging,
wages stagnating, and unemployment was ticking upward. All of these trends would worsen over
the next decade and a half. These economic changes, particularly inflation and the rise
in the cost of living, sensitized taxpayers to the size of their tax bills. In the late
1960s and early 1970s, disgruntled taxpayers across the country founded new organizations
to protect their rights and their interests. These grassroots taxpayer organizations were
clearly inspired by the movement cultures of the 1960s. Indeed, as I will show in a
moment, many of the taxpayer organizations were actually inspired by veterans of the
civil rights and welfare rights organizations of the 1960s. Congressional reform also had
an important role to play. For years, negotiations on taxes had been done in private. Ways and
Means deliberations were closed to the public, tax bills were brought to the floor of the
House only under a closed rule which didn’t permit any amendments. The tax committee control
of the agenda had augmented a small group of experts and shielded tax policy from the
public. Julian Zelizer’s book, Taxing America, does a great job talking about how tax policy
was done in this period of American history, particularly the role of Wilbur Mills and
the Ways and Means Committee in building the American state in the peculiar way that it
happened. Congressional reforms designed to increase transparency and accountability,
in combination with Wilbur Mill’s very public fall from grace, opened the door for increased
public participation in tax policy and politics. Perhaps most important for the politicization
of tax policy was the collapse of the Democratic coalition. Hubert Humphrey’s defeat in 1968
was widely interpreted as a defeat for New Deal liberalism and politicians on the left
and right began to construct a politically viable alternative to the New Deal order.
While Democrats searcher for ways to reinvent the party for a coherent, post-Great Society
agenda, GOP leaders sought out ways to consolidate and build on the party’s success with the
white middle and working classes of what Richard Nixon famously called the “Silent Majority.”
Tax politics held out hope for both the left and the right. And you can see from this chart,
tax policies became increasingly important to both party’s platforms between 1960 and
1980. As you can see here, going from 6 mentions in 1960 to 144 mentions in 1980. For Democrats,
liberals, and progressives, policies offered a way to appeal to white working classes without
abandoning new social policies at the federal level. Tax politics made progressive hope
that they could foment a populist revolt against those “people, classes, and institutions which
possess an illegitimate amount of wealth and power.” The first inkling of a national, as
opposed to a state or local, revolt against taxes came in 1969 when officials in the outgoing
Johnson administration published a list of some 200 “tax millionaires” who used loop
holes in the tax code to reduce or even eliminate their federal tax bills. A Treasury report
help mobilize citizens already sensitive to tax concerns by pointing to the 10 percent
surcharge to help by for the war in Vietnam. Frustrated taxpayers flooded Congress and
the White House with letters demanding that tax privileges to the rich be eliminated and
ordinary taxpayers’ burdens reduced. This campaign proved remarkably effective. By the
end of 1969, Congress approved a significant tax reform package despite Nixon’s repeated
veto threats. This victory provided Democratic liberals with an unexpected victory in an
otherwise grim political season. Looking into the future, Democratic strategists hoped “tax
fairness” might provide the party a way to win back the loyalty of the white middle and
working classes. Democrats hailed the bill as “a triumph for middle America” and helping
men and women trying to build a home and rearing children who for too long had been taking
it on the chin. The passage of this 1969 bill to not dampen
taxpayer anger. Quite the contrary. The year-long campaign for tax reform enlarged the scope
of the grassroots taxpayers’ reform movement by bringing attention to new organizations
the issue of fairness in the tax code. These initial groups had usually focused on local
taxes, usually property taxes. But after 1969, there was new attention to the federal tax
code. Tax groups continued to attract new members in the early 1970s. According to some
reports, by 1971 some two million taxpayers had joined some 2,300 local tax organizations.
These tax protesters defied easy political categorization. Some seemed to embody the
popular image of the white backlash – white, conservative homeowners who blamed liberal
policies for their tax bills. But others defied this backlash stereotype. In Arkansas, California,
and Massachusetts, welfare rights and civil rights organizations used their expertise
to mobilize low-income tax payers and to direct public attention to corporate and wealthy
tax avoidance. This agenda became even more central to Democratic reconstruction in the
wake of George McGovern’s defeat in the election of 1972. In January 1972,
Senator Fred Harris, an Oklahoma liberal, announced plans to lead a taxpayer revolt
aimed at reforming America’s tax laws and getting the rich off of welfare. The group,
called New Populist Action, planned a National Tax Action Day on April16, 1973 the filing
deadline for federal taxes. The group’s public presentation, as you can see here, deliberately
avoided most of the era references to cultural politics in favor of an economic populism
arrayed against the tax privileges of the rich. The group took out this National Tax
Action Day full-page ad in the New York Times. It featured a white, middle-aged woman named
Karen Miller who worked outside the home, not out of any conviction, but because of
her family’s struggle to pay the bills. Harris was not the only liberal to try to
breathe life into progressive politics through the tax issue. In 1973, noted welfare reform
leader, George Wiley, formed a new organization known at the Movement for New Economic Justice.
He insisted that Progressives “must use the tax code as a grassroots organizing tool,
as well as a means to bring together the Silent Majority and the poor and minorities around
basic economic security issues.” Inequality in the tax code, Willey insisted, brought
together people of all interests and backgrounds. A movement that aimed to challenge and remove
these inequalities would bring together the elderly, black Vietnam veterans, hospital
workers, women, tenants, farm workers, blacks, welfare recipients, mine workers, and white
ethnics. Progressive tax reformers often invoked common conservative critiques of welfare to
delegitimize subsidies for corporations and the wealthy. Here is a flyer distributed by
the Movement for Economic Justice which I found in the records of the Wisconsin Historical
Society. They’ve got a great collection on social justice movements. This image mobilizes
the image of the “welfare queen” including the fancy car, the fancy clothing, etc. but
it turns that image around. While these organizations concentrated on the grassroots, the national
office prepared press releases, flyers, as well as other organizational tools that could
be used to address local needs. They also worked on ways to help local tax groups help
their constituents directly by setting up these tax clinics. And the idea behind these
tax clinics was to offer taxpayers real help as a way of getting them interested in and
invested in tax reform. The Movement for Economic Justice helped local organizations set up
at least 125 free tax clinics. And these tax clinics not only helped people to prepare
their income tax returns, but also aimed to demonstrate how individuals’ problems were
symptomatic of an unjust system. So here is a real good example of that political axiom
of the 1970s: “The personal is political.” The group also worked closely with local and
state organizations to plan what they called “Tax Happenings” directed against corporations
that avoided taxes and to provide local groups information about injustices in current taxes,
how to start free tax clinics and how to get involved in legislative battles for tax reform.
The Movement for Economic Justice and others including Ralph Nader’s reform group devoted
much of their time to setting up trained, local teams to mobilize quickly and efficiently
to put maximum pressure on key senators of congressman. Despite the high hopes and initial
successes, however, progressive efforts to channel taxpayers’ anger proved futile. The
continued deterioration of the national economy made it difficult, if not impossible, to use
taxes to underwrite a new progressive majority. Inflation had pushed many lower and middle
class taxpayers into higher marginal tax brackets, a process called bracket creep. This turned
calls for tax reform into calls for tax reduction. Moreover, as it turns out, tax reform was
a double-edged sword. Tax reformers were eager to point out loopholes that benefited the
wealthy and corporations, but they were less eager to point out so-called loopholes that
provided material assistance to members of the Silent Majority: tax breaks for home ownership,
tax breaks for employer-provided health care, tax breaks for starting a business, even a
tax breaks in some cases for getting married. These had become an essential feature of the
tax code by the end of the 1960s. In fact, the tax code had long done more than provide
the federal government with revenue. It was an active force in promoting or discouraging
certain behaviors by using tax credit or special rates, formally known as tax expenditures
to express their functional equivalence to direct expenditures. These features of the
tax code were essential components of Americans’ economic security, particularly for members
of the middle class. And although many middle and working class Americans benefited from
these provisions, few saw themselves as beneficiaries of such largesse. This was not an accident.
Policymakers often preferred these tax expenditures to direct expenditures, not only because they
are easier to get passed – you just had to get them through the Ways and Means and Senate
Finance Committees. But also because they fit more easily into American policymakers’
longstanding preference for privileging the market and minimizing direct government spending.
The result of this slight-of-hand was that the beneficiaries were far more likely to
see themselves as victims of the tax code rather than beneficiaries of the tax and spend
liberal state. Politicians were so successful in building what one political scientist has
called the “hidden welfare state” that most beneficiaries do not even know that it exists.
In the end, it was the Right that won the tax revolt. Responding to the reintroduction
of tax politics in the 1972 Democratic primary, GOP political strategists developed a persuasive
political story that blamed rising tax burdens almost exclusively on irresponsible and wasteful
Democratic spending. By the end of the 1970s, conservatives had successfully appropriated
liberal attacks on the tax code and turned them against the national state itself. And
here we have just a couple of examples from the Archives. This might be of interest to
you Carl-Henry [Geswind] insofar as it is notes from a meeting with President Nixon
– John Erlichman took copious notes in all of the meetings that were held in the White
House. Here they are talking about the VAT [Value Added Tax], and essentially taking
the VAT off the table because they don’t want to be seen as advocating any kind of a tax
increase. Pat Buchanan, not surprisingly, was particularly forward in advocating the
politicization of tax politics in the 1970s and particularly in developing a political
rhetoric that pitted taxpayers against those “tax eaters” meaning welfare recipients who
by the 1970s had become a rather despised and racialized group. So the politics of taxes
in the early 1970s take on a racial dynamic that is reinforced in this kind of a discourse.
This putative competition between taxpayers and tax eaters has animated conservative politics
for decades and it even spawned a novelty board game. And here is sort of an aside,
a good example of the sort of serendipity of historical research. I did not go looking
for this game. I did not know that this game existed. But the year that I was hired another
member of my department, a noted pack rat named Jefferson Davis Futch III which gives
you a little bit of a sense of how old he is, was retiring. And he had had generations
of students give him things. And this was one of the things that one of his students
had given him as sort of a parting gift in 1980. He found this game as he was cleaning
out his office and he gave it to me. Introduced in 1980, “Why Makes a Living When You Can
Play this Great Welfare Game?” translated the rage, alienation, and frustration of the
Silent Majority into a board game. Modeled after Monopoly, the rules of the game are
pretty simple. Players role a set of dice and move along one of two tracks: the “Able
Bodied Welfare Recipients” on the one hand and the “Working Person’s Rut” on the other.
Reflecting the game’s creator’s belief that the federal government exploited hard-working
taxpayers like himself, the rules made it almost impossible for a working person to
win. You probably can’t see what all of these squares say, but they are basically what you
would imagine a game like this would say. So the able bodied welfare recipient promenade,
you can go to the race track, you can go to the prostitute, you can have illegitimate
children. There is a “Have Illegitimate Children” square where you can get money every time
you have illegitimate children. Equally important is the kind of zero-sum-gain relations between
taxpayers and tax eaters. Not only did taxpayers and welfare recipients travel along different
paths, its rule made clear that workers’ tax burdens were caused by the bad behavior both
welfare recipients and their government enablers. Any time a player on the Welfare Promenade
landed on the Have an illegitimate Child square, each player in the Working Persons route had
to pay that player $50 out of their own pocket. And at the end, if you are on the Working
Person route and you end up with money, it’s then taxed away at about 40 percent. So it
is basically impossible to win if you get on the Working Person’s route. Here are some
examples of the sort of things that might come up during the course of your play in
the welfare game. “You are up for a high-paying promotion but a government affirmative action
rules require that a disadvantaged minority homosexual female be promoted over you. Lose
$500.” “Welfare Benefit: Congratulations! You are
a very young grandparent. Your illegitimate child, now has an illegitimate child of her
own. Collect $100 benefit at the first of the month.” So these are not extreme examples
of the kinds of situations that you come across when you get to play the Welfare Game.
And what is sort of interesting is that, I don’t think this game was an outlier. It captured
and represented a kind of conventional wisdom about the relations between taxes, welfare,
and the liberal state. The tax revolt by the 1980s had turned decisively to the Right.
And that is kind of where Tax and Spend ends. It ends with the Reagan Revolution. It ends
with Ronald Reagan – election in 1980. It talks a little about tax reform in 1986, but
not that much. Then I talk a little bit about the stalemate in contemporary politics over
tax policy. And my next project grows out of parts of
Tax and Spend to address questions that come up but that I could not answer within the
scope of the book. And it also come up in part – and I owe my experience on the Hill,
the title of my book owes to experience on the Hill.. Because every time anyone, I was
a low-level staffer so I answered a lot of letters and I answered a lot of calls. And
every time anyone called for anything – It didn’t matter what it was. They could be a
sort of right-wing guy calling about border security or a group of progressive nuns wanting
us to close the School of the Americas. They would always preface their demands with “As
a taxpayer and a citizen” I demand that you -. And it seemed to me that was an interesting
way to phrase your claims on the state, phrasing your relationship to the state. So what is
about politics, the American experience that makes that taxpayer identify so salient? And
is this something that is unique to the United States, unique to the last four decades? Where
does this come from? So that is what I am looking at in my next book. Which I have tentatively
titled As a Taxpayer and a Citizen. Toni Morrison has recently argue that this kind of taxpayer
citizenship is a cramped one because it requires you to buy in, to have some skin in the game
in some ways. She was quoted in a recent interview in which she was lamenting the transformation
of citizenship into an identity solely associated with taxpayer citizenship. And I think that
there is something to be said for this. But my research agenda looks at the ways that
taxpayer identify has been used to push back against a cramped definition of citizenship.
Look at the way some marginalized groups are able to claim a taxpayer identify in order
to push open the boundaries of American citizenship. So this book will focus on how various groups
including women, African Americans, property owners, pacifists, anti-war activities, immigrants,
the poor, gay men and women have used both their political and legal identifies to affect
policy changes to expand existing definitions of citizenship. Although the defense of taxpayers’
rights is almost always in contemporary America associated with the political Right, historically
political progressives have been able to mobilize this kind of language. Like Tax and Spend,
As a Taxpayer and a Citizen sees politics as the key to understanding 20th century American
history. But where my first book focused largely on elite policymakers and agenda setters in
the post-New Deal period, this new project will include grassroots mobilization as well
as national lawmakers. It will look at political as well as legal defenses of taxpayers’ rights
and hopefully span the entire 20th century. The first piece of this project that I have
been working on is currently under review at the Journal of Women’s History is on the
politics of the so-called marriage tax penalty which becomes a big political issue in the
1970s. And looks at how gender, family, and taxes combine to play a critical role in the
realignment of American politics in the 1970s. I would be happy to answer any questions about
that in the Q & A, but I see we are coming up on about ten minutes to 1:00. I will stop
there and will thank you very much for your attention and for coming out for this. Again,
if you have any questions – My husband had this made for me for Christmas two years ago.
It’s very difficult apparently knuckle busters anywhere. As it turns out, they are illegal,
so he had to have these mylar ones made in Hong Kong. So you can get anything you want,
as long as you’re willing to wait. Again, thank you coming out. I would love to take
any questions that you have and I appreciate your attention.
It would also be great to know who everybody is so that I can know who I am talking to.
Question: That was a fantastic talk thank you so much. My name is Kate and I am an historian
with the Senate Historical Office. I have a couple of questions for you. That statistic
you gave about World War II that dramatically increases. What is the percentage there? You
have a number like 42 million taxpayers. What is the percentage of the, I don’t know, American
working – Michelmore: I am thinking – and Car-Henry
[Geshwin] you may have better numbers on this, but I want to say that about 60 percent of
Americans owed some kind of federal tax in 1945 and about 75 percent had to file. So
the connection between the individual and the state becomes all the more closer, because,
even if you didn’t have to pay anything, you still have to go through the motions of filling
out this form. So in terms of defining, or redefining the relations between the state
and the citizen, this is a critical moment in that redefinition. Here people are literally
filling out this form and sending it to the government. They are seeing themselves as
taxpayers for the first time. And the argument a lot of tax scholars make is that an income
tax feels like a tax in ways consumption taxes don’t always feel like. They increase tax
consciousness. So a lot of people – there was a poll taken in 1939, even though a lot
of people were paying taxes on liquor, they didn’t think of themselves as taxpayers. But
after 1945, they do more often, think of themselves as taxpayers.
Kate: One more, quick one. This image of the “welfare queen – I love this image, let’s
redefine this woman, a person who is wealthy benefitting from these types of breaks. The
gender component of this is interesting. I mean – a woman. Why is it always a woman?
Is that anything that you unpack in this book or plan to look at further.
Michelmore: Yes. Yes, it is one of the things. I don’t deal with gender a lot in the book,
but obviously the politics of welfare are a deeply gendered politics. And the politics
of taxation too are gendered although in a different way. Taxpayers have often been sort
of a male prerogative. But clearly what they are doing here is translating this gendered
image of a “welfare queen” when it is assumed that women have been naturally dependent.
What was interesting about the image of the “welfare queen” was that she was unnaturally
dependent. She wasn’t dependent on the right thing. You’re supposed to be dependent on
your husband. You’re supposed to be dependent on your father. You’re not supposed to be
dependent on the government. So what you have here is the transformation of meaning of that
dependency that is deeply raced and deeply misogynist. And here you have this group that
is coming out of the civil right background, a background that is attentive to the needs
of women, then mobilizing that image against white women. So it is an interesting image.
You’re right. There is a lot there to unpack. Kris Wilhelm: I am Kris Wilhelm and I remember
you when you were a researcher, so welcome back. We have a number of researcher who contact
us who – They request documents that will prove that where ever they live – in Idaho,
is not part of the United States of America. But I think that is less that they don’t want
to pay the tax but that they hate the government and are trying to show that they are not subject
to the government’s authority. Is this something fairly new or has it always been part of tax
protesting? Michelmore: It’s always been part of tax protesting.
Robin Einhorn’s book, American Taxation, American Slavery, argues that this comes out of the
Early Republic. In particular, it comes out of slaveholders fears of the non-slaveholding
majority taxing the peculiar institution out of existence. They managed to wrap this agenda
“to protect slavery” wrap this up in the language of freedom. This is something that is honed
and perfected in the earliest years of the Republic. If you look at other examples of
tax protest Romain Huret has a wonderful book, American Tax Resisters that traces the course
of tax resistance over the course of the 18th and 19th century, they use the same kind of
language. So Idaho is not part of the United States?
Amanda Moniz: Hello, I am Amanda Moniz from the National History Center of the American
Historical Association. You said that during World War Ii with the 1942 income tax law,
income tax went from being a class phenomenon to a mass phenomenon. Similarly, during World
War I, philanthrophy went from being an elite phenomenon to a mass phenomenon, at least
that is the argument some historians make about World War I philanthrophy. And a lot
of that was wrapped up with the war effort. So I was curious if you have any sense that
there is any connection between philanthrophy having helped turn ordinary Americans into
people who were helping to fund – intentionally helping to fund government priorities. Is
there any connection between the philanthropic experience and the tax question?
Michelmore: I don’t know. That is a really good question but it is not something that
I have thought about – I have not read about in the literature. The World War Ii and the
mass tax situation – but that is an interesting question and an interesting way of thinking
about it, this notion that there is a, not fiscal citizenship so much, but a social responsibility
that has an economic component to it that precedes World War II. No, I don’t know anything
about it, but it is a good question. Good to see you.
Amanda Monize: Good to see you too. Michelmore: Amanda and I went to graduate
school together. David Lintzer: I am David Lintzer with the
Joint Committee on Taxation. I was wondering if any of your work to date or any of your
work on your new project will have a comparative element. I work on international taxation.
I take it from your book that progressive taxation dies by the 1980s. If we come forward
to today. We look in Europe and see much more of a civil society movement than about taxation.
We read stories here about the big multi-national companies not paying much taxation. And a
lot of people get upset about that but it doesn’t seem to be as big a grassroots phenomenon
as it is in Europe. I am wondering if you have looked at historical comparisons.
Michelmore: I think in terms of making this argument about the relation of taxation and
citizenship being something that is uniquely American, one needs to make those sorts of
international comparisons. I do a little of that on this piece on the marriage tax policy
just using the research of others comparing the ways that the United States taxes married
couples as the appropriate tax unit and the way in which other OECD countries do. I think
there has been a turn in international taxation against family taxation and towards individual
taxation, in part to encourage women to go back into the work force. And that is different
than in the United States. But I think looking at the international component would be helpful:
Is this the way people think about this or is it something that is peculiarly American,
perhaps unique to the post-1970s period, the post-1950s period. I am not far enough in
to figure out where that comes from. McCulley: I believe we have time for about
one more question and Carl-Henry has raised his hand and he is just the man to Segway
into this topic. Carl-Henry Geswind: Carl-Henry Geswind, independent
scholar. I am wondering in terms of what might have happened in the 1960s, another thing
that might happened was that the Eisenhower Republicans in the 1950s said you cannot cut
taxes because that will increase the deficit. By the 1980s, what is different in the United
States from any place else in the world is the Lauffer Curve and Americans believing
that cutting taxes will actually lead to a balanced budget. But I am wondering, it’s
Johnson who really pushed that. Michelmore: Well, Kennedy too. I mean the
rationale the 1963-1964 tax cut was that we need to cut these taxes in order to grow the
economy. They make this explicit argument that cutting taxes now will actually increase
federal revenues. It is not exactly supply side because these are demand side cuts. They
are cuts geared towards the middle and working classes. Now there is a huge investment credit
tax cut that comes in 1962 that is sort of the predecessor of this major income tax reduction.
Oh yes. They are using that argument if you look at 1978-1979 Jack Kemp is pushing the
Kemp-Roth which is a 30-30-30 tax cut, a massive supply side tax cut, he calls it a continuation
of the “Kennedy tax cut” – he never calls it the Johnson tax cut because he doesn’t
want to get associated with the Johnson administration. But he calls it the Kennedy tax cut. I am
just doing what the other Jack K. did and we’re just bringing this up into the 1970s.
But I think you are right. “Fiscal conservative” comes to mean something very different by
the end of the 1970s compared to what it meant in the 1950s. If you look at the debates over
the 1964 cuts, it’s the Republicans who are saying: “No, no, no! You can’t do this because
we can’t afford it.” We would love to cut taxes but look at all the stuff you want us
to pay for. We can’t cut taxes now, but with the introduction of the Lauffer Curve and
the collapse of the Keynesian consensus and with the introduction of Supply Side economics,
politicians found a way around that potential rhetorical obstacle. And I do talk about that
in the book. McCulley: And the book is here. We have a
few copies. Dennis Braden who is the book acquisition person in the Archives Gift Shop
was not able to be here today but he got them directly at a discounted rate and then he
made another discount, so this is a highly discounted book, but an extraordinarily eye-opening
book. You really should read the book. Molly goes deeply into the anamoly about how American
hate taxes but they love all the things taxes give them… for all the reasons that you
lay out in the book. It was a wonderful presentation. Michelmore: Oh thank you.

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