Creating the modern American fiscal state: The political economy of United States tax policy, 1880--1930

At the turn of the twentieth century, the U.S. system of public finance underwent a dramatic transformation. The late nineteenth century structure of indirect national taxes, associated mainly with the tariff and regressive excise taxes on alcohol and tobacco, was eclipsed in the early decades of the twentieth century by a national income tax that soon accounted for more than half of all federal tax revenues. A similar, albeit much less pronounced, shift occurred at the state-level where the income tax soon came to challenge the dominant reliance on property taxes. This study investigates the multitude of forces that affected, and were affected by, this dramatic shift in U.S. fiscal policy-making. More specifically, this dissertation explores the questions of how and why the modern income tax emerged when it did, and what role tax policy played in the development of the American state, and in the changing status of American state-society relations.; This dissertation takes an interdisciplinary approach to studying how one set of economic and social policies was shaped by, and in turn influenced, a group of academics, professional policy makers and social and political interest groups. I argue that, with the emergence of the income tax as the dominant form of government revenue, a new fiscal polity emerged in the early twentieth century, and that this new polity had three critical components. First, the structural transformation towards the direct taxation of income was guided by a paradigm shift in the legal and economic theories that undergirded tax policy. Second, this new fiscal state was supported by an enhanced administrative capacity---at both the national and state-level---that was created by a group of political and policy entrepreneurs. And finally, this new fiscal polity was a product of "democratic pluralism"---that is, a broad cross-section of the American population and not any one social or class group predominated in implementing tax reform policies. By examining the ideas and actions of political economists, lawyers, state administrators and social reformers, I demonstrate that a number of varied individuals and social networks were able to apply differing amounts of political pressure to the levers of American democracy in the process of creating the modern American fiscal state.; Ultimately, however, this study is not just about the ideas, institutions, and social groups that influenced, and were influenced by, tax policies. It is rather an attempt at a historically based fiscal sociology of the American state. Therefore, this project like any study of a country's fiscal history is about a much larger story. It is a tale about American democracy, about the winners and losers of a process seeking to change the structures of wealth and opportunity in the United States.