BAILEY’S EFFORTS failed. For one reason, there was another proposal before the Senate, a graduated tax, which was supported by the progressive Republicans. Then, too, Taft’s reluctance to support either bill cost the income tax votes. Finally, Sen. Aldrich, as adept _ at managing the Senate as ever was Lyndon Johnson, was just the man to take advantage of disunity. Taft, however, retrieved the situation by persuading Aldrich, Payne, and Speaker Joe Cannon to accept a compromise consisting of modified tariff schedules, a corporation tax, and a resolution submitting to the states a constitutional amendment explicitly empowering Congress to levy an income tax. They accepted because they felt that the corporation tax would take some of the steam out of the income tax drive, and that the amendment would not be ratified, killing the income tax for all time. The state’s congressional representation all voted for the resolution with the exception of two who were not there. Of those voting, two others spoke in debate besides Bailey, both representatives. The two made it quite clear that they did not view the tax as dangerous to liberty or property. Said an earlier Martin Dies who was representing the Beaumont district, “It is a damnable system which taxes want and exempts wealth; which takes toll from the clothes on a poor man’s back and leaves untouched the rich man’s bank. Mr. Speaker, I have advocated the income tax in season and out of season since I reached manhood’s estate. . . . I proclaimed its fairness amid the jibes and jeers of men who taunted me with being a socialist and anarchist.” “Why an income tax has not been adopted long ago as a permanent feature of our system of national taxation cannot be satisfactorily explained unless it be admitted that wealth, instead of the people, has been in control of the government. I can conceive of no tax based upon sounder principle or which would operate with greater uniformity, equality, or justice than an income tax.” So spoke William B. Smith of Colorado, Texas. On July 5, 1909, Congress submitted the amendment. In its favorable report on the amendment, a committee of the Texas House of Representatives expressed views similar to those of Dies and Smith. On Aug. 15, 1910, the Texas legislature ratified the amendment with only two dissenting votes. AT THE TIME most of the advanced nations levied income taxes, as did five of the states of the Union. And though the Supreme Court, in a controversial split decision, had declared the 1894 income tax unconstitutional, the Civil War income tax had been unanimously upheld. The tax had been used by the Confederacy, also, and by several states before the Civil War. There was also used in New England a 4 -The Texas Observer faculty tax which had the characteristics of an income tax. The inspiration for these early income taxes had been not Karl Marx, but rather William Pitt the Younger, who had introduced the first modern income tax in 1799 in Great Britain. By the end of the Napoleonic Wars, Britain had perfected the tax administratively. Even. Pitt was not the originator of the tax. It had made its appearance in some form and for varying durations in the Roman Empire, in some of the Italian citystates in the early Middle Ages, and in Spain during the reign of Charles III. Most of these early taxes were fairly primitive in their concepts and failed because of poor administration. Austin The business community’s next major legislative offensive in Texas will probably be a drive for legislative permission to the cities for them to levy sales taxes. Lately the whiffs of this have merged into a light blow ; by 1965 they’ll be a norther. The first hints came from the Texas Research League, the private Austin research agency financed by businessmen. The league sought repeal of the state property tax last session of the legislature. This was thwarted. In the process it became clear that one cause of much hostility toward the property tax is the fact that business pays most of it. A Texas Research League report divulges that local and state property taxes in Texas produce nearly five times as much revenue as the state sales tax and notes that since the homestead exemption was passed in 1933, the state property tax has been largely a tax on business. Rep. Jack Woods, Waco, introduced legislation that would give the cities authority to levy sales taxes. It did not pass. It would have let cities add a city sales tax on top of the present two percent sales tax and lower property taxes accordingly, or finance new city activities out of the local sales tax. Gov. Connally, addressing the American Municipal Congress in Houston in August, sounded the theme that local government needs to find the means to perform its functions for itself. “We will solve this problem in Texas,” he said. He did not say what kinds of city taxes he supports or opposes. Lately the Texas Municipal League, which bills itself as “An Association of Cities for Municipal Progress,” has been an assiduous cultivator of public opinion on behalf of city sales taxesthough the Thus, Texas, in ratifying the income tax, was doing nothing really new, radical, or alien. The Sixteenth Amendment merely signified that the American economy had become capitalist, that is, that its wealth was measured in money and not in land. SOURCES American Taxation, by Sidney Ratner; Encyclopedia of the Social Sciences, in the article, “Income Tax”; Encyclopedia Britannica; Cambridge Modern History, Vol. VI, The Eighteenth Century; on Senator Joseph Bailey, The Last Democrat, by Sam Acheson; on congressional speeches and action, Congressional Record, first session, 61st congress, Pp. 1351, 1743, and appendix, p. 75; on legislative action, Texas Senate Journal, 31st legislature, third called session, p. 173, and Texas House Journal, same date, pp. 64-69. The newspaper references are given in the article itself. message. is couched in jaw-breakers. Oct. 4, the municipal league’s executive director, Steve Matthews, said in Uvalde that Texas cities rely “far more heavily on revenues from the property tax than has been found desirable or feasible for nearly all other states” and left an implication that cities should turn to what he called “non-property taxes per capita.” Subsequently he said, “The league feels the best way to approach a city sales tax is with a legislative act authorizing the cities to levy it.” The controversy found a local focus in Austin. Mayor Lester Palmer said a local sales tax might be a good idea. For the Travis County Democratic Women’s Cornmittee, Mrs. W. R. Dunkelberg protested against this to the council. Palmer said the council wouldn’t act without “many public hearings.” The Texas Municipal League has just delivered to Texas newspapers a series of five canned articles on “local fiscal policy.” In the fifth one, on the-last page of it, in the last of five points, the kicker is delivered: Texas’ five largest cities get nearly 90 percent of their local revenues through property taxes, compared to a national average of the 50 largest cities of 70 percent. A cover letter for this package of five articles says the municipal league supplies “objective, factual information and ‘references” on the subject. The last sentence of the last of the five articles reads: “Students of municipal finance generally agree that Texas citieslike state government itself in recent yearswill need broader tax bases if cities are to support themselves.” Needless to specify, the broader tax base the state government got for itself in recent years was the two percent sales tax. Pressures Are Gathering For the City Sales Tax 1
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