"A Bridge Too Far” may prove the best title for President Barack Obama’s photo-op stop at a dilapidated river bridge linking Kentucky and Ohio, respective home states of Republican congressional leaders Mitch McConnell and John Boehner. Both have disdained current White House budget and tax proposals as dead on arrival.
The current rancorous Washington debate has distinctive contemporary elements but is also congruent with history. Americans collectively address income tax shifts approximately every quarter-century.
In 1913, the 16th Amendment to the Constitution made the income tax a permanent component of the U.S. revenue system. There was a federal income tax during the Civil War, but only temporarily and limited in time to that national emergency.
The principal incentives for introducing the constitutional amendment were not states’ secession and civil war, but rather economic crisis and expanding federal government policy responsibilities. The financial panic of 1907 and resulting recession brought the nation’s commercial system to the brink of total collapse.
Under this economic pressure, President Theodore Roosevelt turned to New York mega-banker J.P. Morgan, who controlled enormous financial assets and influenced other banks. Gigantic Morgan money and clout worked like magic, this crisis was resolved, and finance capitalism was preserved for the moment. However, the danger of relying essentially on one enormously powerful man to underwrite the stability of America’s economy was self-evident.
Meanwhile, the role of the federal government was expanding greatly. Anti-monopoly regulations, worker and child protection, wilderness maintenance and other reform legislation were hallmarks of the TR administration.
The next wave of change began during the Great Depression. Franklin D. Roosevelt captured the White House in 1932 running as a conventional, rather vaguely defined Democrat. However, FDR’s New Deal over time drastically increased taxes on the highest income sectors of the population, while instituting additional taxes to pay for the new Social Security and unemployment insurance programs. Early in World War II, top individual income tax rates rose above 80 percent. The Korean War brought further increases.
In the early 1960s, President John F. Kennedy delivered a steady stream of reform bills to Congress, including posthumous passage of significant tax reductions. The top individual income tax rate, which was over 90 percent for those earning over $400,000, was cut to about 70 percent.
President Ronald Reagan’s achievements regarding income and other taxes are especially significant. An initial tax cut was followed by Treasury Secretary James Baker’s initiatives further to reduce and simplify taxes, which by 1986 brought rates down to 28 percent. Republican Reagan also worked effectively with Democrats, notably House Speaker Tip O’Neill and Senator Pat Moynihan, to head off a looming Social Security shortfall.
While Reagan achieved broad tax cuts early in his White House tenure, he also raised taxes in more specific terms several times, describing these moves as “closing loopholes,’’ a current Obama administration theme.
These earlier presidents could be pugnacious partisans in mobilizing support. However, they also understood the value of pragmatic compromise, unlike current leaders.
Arthur I. Cyr is Clausen Distinguished Professor at Carthage College in Kenosha, Wis.