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My Second-Favorite Republican Innovation ...

... was the introduction of the progressive income tax. My absolute favorite Republican idea, of course, was freeing the slaves. Both were the achieved during the greatest presidency in American history. In fairness, it should be said that Abraham Lincoln didn't take a strong interest in how the federal government would raise revenue to support the Union army. ("Money!" he said. "I don't know anything about 'money'!") He just needed some, fast. Now, with every major Republican presidential candidate except Rick Santorum and John Huntsman supporting a flat tax (and even Huntsman boasting he created one as governor of Utah) the GOP is turning its back on a seldom-discussed legacy of the Great Emancipator.

We take for our text Steven Weisman's excellent 2002 history, The Great Tax Wars, a copy of which should be given to every presidential candidate. (It's where the Lincoln quote is from.) At the start of the Civil War the federal government, which wasn't very big, was funded largely by tariffs, which had the effect of an invisible sales tax and of course discouraged foreign trade. Congress considered a national property tax but concluded it would place an unfair burden on farmers while letting wealthy holders of stocks and bonds off scot-free. So Congress turned to the income tax. It wasn't an entirely novel idea. England had created one in 1799, and Pennsylvania, Virginia, Alabama, North Carolina, South Carolina, Maryland, and Florida all had them, some with graduated tax rates and some not. The first iteration was a 3 percent tax on all incomes above $800 per year. But Treasury Secretary Salmon Chase had doubts about the law's constitutionality (as, later, would the Supreme Court, necessitating passage of the 16th amendment in 1913), and anyway it couldn't be enforced because Congress didn't create a government body to collect the tax. So he ignored it. Chase borrowed money instead from the banks, then printed paper money. When these options were exhausted the banks did something one can't imagine them doing today. They told Congress to pass a tougher (i.e., enforceable) income-tax law.

Rep. Justin Morrill (R., Vt.), remembered by history as the author of the Land Grant College Act (and, to a lesser extent, as author of the Anti-Bigamy Act that sent Mitt Romney's ancestors into Mexican exile) was chairman of the taxation subcommittee of the House Ways and Means committee. (It tells you a lot about that era that the House Ways and Means committee relegated taxation to a subcommittee.) Morrill didn't like the income tax--he called it "inquisitorial"--but he believed it to be a necessary evil. The tax he proposed was designed to be proportionate to each person's ability to pay. "Ought not men," he said, "with large incomes, to pay more in proportion to what they have than those with limited means, who live by the work of their own hands, or that of their families?" Ways and Means chairman Thaddeus Stevens (R., Pa.) agreed. "It would be manifestly unjust," he said, "to allow the large money operators and wealthy merchants, whose incomes might reach hundreds of thousands of dollars [!], to escape from their due proportion of the burden." In the Senate, future Treasury secretary William Fessenden (R., Me.) shepherded the income tax through the finance committee. The result was a bill that taxed income above $600 at 3 percent and income above $10,000 at 5 percent. This time Congress created an Internal Revenue Bureau to collect the tax and established a method for employers to withhold tax.

Morrill and Stevens later changed their minds about the income tax, sounding like Rick Perry as they did. Stevens said it was "unjust" to level "a punishment of the rich man because he is rich." Morrill said it was "a confiscation of property, because one man happens to have a little more money than another." But their reason for turning against the tax was entirely political: They wanted to raise tariffs, a solution favored by east coast industrialists and opposed by farm state populists. Eventually they succeeded in raising average duties from 37 to 47 percent. The income tax, meanwhile, was modified into a 10 percent flat tax that kicked in at $10,000. When gold speculation created another revenue shortfall, Morrill recommitted himself to progressivity. "As a whole, and taking it alone, there is no tax more equal than an income tax," he said. The tax was altered yet again to 8 percent on income above $600 and 10 percent on income above $10,000. It would be altered one final time before the Civil War ended, taxing 5 percent on income above $600 and 10 percent on income above $5000. Morrill later changed his mind again and pushed for a single 5 percent rate on all incomes above $1000. That alteration was enacted in 1867. In 1870 the rate was lowered to 2.5 percent and the threshold was raised to $2000. In 1872 it was repealed altogether over the objections of Sen. John Sherman (R., Ohio), Fessenden's successor as chairman of the Senate finance committee and later Treasury secretary and author of the Sherman Anti-Trust Act. Sherman said that as the federal government was, among other things, committed to protecting private property, it was only just "to require property to contribute to their payment." But by then the Gilded Age had begun and the government was in the pocket of the robber ba--ahem, I mean job creators.

Weisman concludes that the income tax "was crucial to the prosecution and winning of the Civil War." It raised less than $3 million in its first year but by 1866 generated $73.5 million. Overall it provided, on average, 20 percent of all federal revenues collected during the war (with the remainder collected in tariffs and taxes on various businesses and commodities). In that sense, you might say that the income tax helped free the slaves. Granted, you could also say suspending habeus corpus helped free the slaves. But Republicans are already in favor of that, if their positions on Guantanamo are any guide. The progressive income tax is a much better GOP legacy whose justification has been well-articulated from the beginning.