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Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, September 28, 2007

Bank Presents War and Taxes: Is There an American Tradition of Wartime Fiscal Sacrifice? Today at Ohio State

Steven A. Bank (UCLA) presents War and Taxes: Is There an American Tradition of Wartime Fiscal Sacrifice? at Ohio State today as part of its Ohio Legal History Seminar Series.  Here is the abstract:

Over the past six years, the country has been engaged in expensive and deadly military operations in both Afghanistan and Iraq. During the same period, the Bush Administration has requested and Congress has approved a series of major tax cuts. This contrast – between an active war effort on the one hand and substantial tax cuts on the other – has no precedent in American history. Beginning with the War of 1812, every significant military conflict in our nation’s history has been supported by a range of new and higher taxes.

The historical incongruity of Congress reducing taxes while increasing spending on the war in Iraq has not gone unnoticed. Critics have wondered publicly if the country has betrayed its tradition of wartime fiscal sacrifice. As one columnist stated in a typical proclamation, “we have always accepted heavier burdens as the price those at home pay to support those under fire on the front.”

Underlying this criticism is a core truth that is hard to deny. The United States does have a strong tradition of imposing higher tax burdens during wartime and the Bush tax cuts do seem to mark an outright repudiation of that tradition.

Nevertheless, America’s history of wartime taxation is not quite the heroic tale that many Bush critics seem to imply. Although taxes have typically gone up during times of war, the common portrayal of a patriotic embrace of fiscal sacrifice during war misses much of the complexity of American history. Indeed, as a nation, our commitment to wartime fiscal sacrifice has always been uneasy – and more than a little ambiguous.

The attached paper, part of a larger book project, focuses on the politics of tax legislation in World War I. While individual income tax rates skyrocketed during the war and new taxes were levied against individuals’ estates and business’ “excess” profits, there was substantial opposition that was unrelated to protest against the war itself.

Patriotic feelings, carefully cultivated and nurtured during the Liberty Bond campaign, dissipated when taxes rose. Although proclaiming the desire to pay their fair share, opponents worked to shift the burden elsewhere. Lobbyists managed to narrow the income and excess profits tax bases. Businesses engaged in large-scale evasion of the new taxes.

It was only after President Wilson jumped into the fray, issuing his famous declaration that “politics is adjourned,” that a compromise revenue bill was even enacted in 1918. This paper hopes to shed light on this less examined history of wartime opposition to increased taxes, along with the use of arguments for “shared sacrifice” in attempting to overcome such opposition.

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