1. "The nobles were subject in principle to the vingtièmes and the capitation (pooltax), from which the clergy were exempt. The peasants alone paid the taille." The vingtième was "A tax of a twentieth, levied, in theory, on the whole income, but in practice only on certain kinds of income" while "the taille, one of the principal sources of the national revenue, was originally levied for military purposes; hence the nobility, whose profession was that of arms, was exempt, as well as the clergy." Mathiez, p. 20. Mathiez is a French historian of high repute.
2. Louis Eisenstein, The Ideologies of Taxation, The Ronald Press Company, N.Y., 1961, p. 11. This valuable and probing book, a logical analysis of the unconsciously comic but seriously intended rationalizations and excuses for American taxation by a keenly perceptive Washington, D.C., tax lawyer, should be read as an extension in depth of this chapter. Our main sources are the tax laws, the annual Statistics of Income published by the Internal Revenue Service, the mordant Eisenstein study, Randolph E. Paul's Taxation in the United States, Little, Brown and Company, Boston, 1954, and Philip M. Stern's The Great Treasury Raid, Random House, N.Y.), 1964, a briskly readable popular treatment mainly of the data unfolded by Eisenstein but without Eisenstein's delineation of the ideological subterfuges. Paul was special tax consultant to the president and the Treasury Department from 1937 to 1941, special assistant and tax adviser to the secretary of the treasury in 1941 and 1942, and general counsel of the Treasury and acting secretary of the Treasury in charge of Foreign Funds Control from 1942 to 1944. Stern was deputy assistant secretary of state in the Kennedy Administration and is a former Harvard and Rockefeller Fellow who became legislative assistant to Senators Henry M. Jackson and Paul H. Douglas. All these books contain extensive bibliographies, Paul's mainly along historical lines. Paul acknowledges his indebtedness to a seminal paper by Eisenstein in 58 Harvard Law Review 477 (1945).
3. Ideology helps obscure from the initiators themselves the injustice involved. As Eisenstein remarks (pp. 11-12), under a putative democracy, "Reasons have to be given for the burdens that are variously proposed or approved. In time the contending reasons are skillfully elaborated into systems of belief or ideologies which are designed to induce the required acquiescence. Of course, if an ideology is to be effective, it must convey a vital sense of some immutable principle that rises majestically above partisan preferences. Except in dire circumstances, civilized men are not easily convinced by mere appeals to self-interest. What they are asked to believe must be identified with imposing concepts that transcend their pecuniary prejudices." Three ideologies he regards as primary are then considered as seemingly high-minded interpretations of the tax laws: the ideologies of ability to pay, of barriers and deterrents to general economic well-being and of equity. But as he also points out (p. 15) the ideologist is "nicely flexible" from time to time in which ideology he subscribes to. He speaks as a believer through principle when he speaks for the bar as a whole but he becomes a believer from "direct interest or compensation" when he speaks for a client. "Since he is then stimulated by monetary rewards, he is a believer through compensation as well as conviction." But, as a taxpayer himself, the ideologist may also be a believer through self-interest. "One of the major achievements of the [American Bar] Association is that it enables tax lawyers to serve in several capacities without fear of embarrassment." Whatever ideology is espoused from time to time one may always be sure it is believed in the deepest sincerity, the paving material for the well-known road to Hades. Clients, too, are equally sincere. The reader should never forget that we are concerned at all times in this study with people who are always thoroughly and unshakably sincere, true believers in what they do.
4. Eisenstein, p. 181.
6. Ibid., p. 127.
7. Mathiez, p. 21.
8. Eisenstein, pp. 55-56. As the scholarly and deeply learned sources I cite draw their data from the period of the pre-1964 tax rates it is necessary to notice that those rates have been revised. Instead of rates ranging from 20 per cent to 91 per cent, the formal rates were reduced to 16-77 per cent in 1964 and to 14-70 per cent in 1965. But early in 1966 it was proposed that the new rates be raised by one or the other percentage in order to pay for President Johnson's personally initiated pubpolic large-scale intrusion in the Vietnam religious and civil war. A rise of 7 per cent proposed, by Johnson would restore 16 per cent of the reduction. Corporation rates were reduced from 52 to 50 per cent in 1964 and to 48 per cent in 1965. Income from foreign operations pays much less and huge special credits are allowed for new investments. As there is constant tinkering with the tax structure, usually to the disadvantage of the lower brackets, it is only the continuing pattern that is of interest. Readers who wish to apply current rates to cases cited need simply ascertain their difference, as I have done in some cases, whatever they may be after the latest go-round in Congress. It would, in any case, be impossible to give rates that will be precise throughout the life of a book, although one may be sure the essential tax structure and relative differences will be unchanged at least until Birnam Wood starts moving toward Washington.
9. Although Mr. Stern's book, The Great Treasury Raid, is recommended to readers who wish to be led in easy style into many incredible but true details, an objection must be registered against its catchy title, which is not a little misleading. There has been no raid on the United States Treasury, direct or indirect. Each year the government sets the total of money it wants for operations and dispensations and it always gets what it sets out to obtain. What aspect of raid there is is directed by the big property holders and their tax lawyers and lobbyists, with the connivance of pubpols, against the powerless average man, often a very unmoneyed man and usually job-dependent, moderately circumstanced and thoroughly gullible. Whatever the major financial beneficiaries of the system are able to avoid paying--and protests by any of them against the process are yet to be heard--is necessarily pushed over on the shoulders of the powerless who, as Mr. Eisenstein observes, are patriotic and uncomplaining.
10. Statistical Abstract, 1964, p. 412.
11. Ibid., p. 387.
12. Wall Street Journal, May 5, 1958, p. 1. There is a good editorial in this issue on the tax structure as an economic impediment.
13. Quoted by Eisenstein, p. 107.
14. Lewis H. Kimmel, Taxes and Economic Incentives, Brookings Institution, Washington, D.C., 1950, p. 182.
15. Fortune, July, 1965, p. 155. Observations in the text are confined to very large corporations. If one takes the range of corporations, especially the 7,129 with more than 100 employees each, one finds as of 1961 some truly astonishing rates of return. St. Paul Ammonia apparently led with 286.7 per cent, Southern Nitrogen had 102.4 per cent, Gillette 40.1 per cent, Alberto-Culver 39.6 per cent, American Photocopy 33.2 per cent and Avon Products 32.6 per cent. Source: 12,000 Leading U.S. Corporations.
16. The National Industrial Conference Board, The Economic Almanac, 1964, reports a series of many leading industries from 1925 through 1960 at pp. 274 and 276.
17. Adolph A. Berle, Jr., Power Without Property, 1959, pp. 32-47.
18. Stern, p. 199.
19. "War and the Clergy," New York Times, February 15, 1966; 2:3-4.
20. Guenter Lewy, The Catholic Church and Nazi Germany, McGraw-Hill Publishing Company, N.Y., 1964, passim.
21. Stern, pp. 62-63.
22. Stern in The Great Treasury Raid deals with various on-the-record cases of income splitting by means of family partnerships, multiple trust funds and multiple corporations at pp. 71-80.
23. Statistical Abstract, 1964, Table 465, p. 342.
24. "In making their judgments the committee members evaluate test scores, academic record, qualities of leadership, extracurricular activities, and other pertinent information submitted by the student and his school." Student Information Bulletin, National Merit Scholarship Qualifying Test, Spring 1966, Science Research Associates, Inc., Chicago, 1966. Better put, above, it might be and a variety of irrelevant information...."
25. The Handbook of Basic Economic Statistics, February, 1966, Economic Statistics Bureau, Washington, D.C., pp. 230-31.
27. Eisenstein, p. 53.
28. Stern, pp. 198-99.
29. Stern, p. 191.
30. Statistical Abstract, 1964, p. 405. Additional bonds are partially tax exempt.
31. See Eisenstein for opinions pro and con, pp. 69-75.
32. Stern, p. 112. Various similar cases of the expense of luxurious living being deducted before taxes, thus reducing the tax bill, are cited in ASF, passim.
35. Ibid., pp. 113-14.
36. Cited by Stern, p. 113.
38. Ibid., p. 124.
39. All these cases are reported by Stern, pp. 181-83.
40. Stern gives the pros and cons of these arguments, pp. 183-90.
41. Ibid., p. 184
42. Edwin Sutherland, "Crime of Corporations," The Sutherland Papers, p. 89.
43. Eisenstein, p. 127.
44. Stern, pp. 18-19. But in this exposition generally I am following Eisenstein, pp. 124-25.
45. Eisenstein, p. 124.
47. Ibid., p. 125.
48. Stern, pp. 143-60.
49. Ibid., p. 143.
50. Ibid., p. 148.
51. Ibid., p. 88.
52. Statistical Abstract, 1964, p. 400.
53. Stern, pp. 144-45.
54. Ibid., p. 45.
55. These specially tailored tax laws, obtained through influence in Congress, are rather thoroughly discussed by Stern, pp. 44-61. Some of the cases are quite amusing.
56. Ibid., p. 254.
57. Anderson, pp. 223-33. Anderson reports many cases and much harrowing detail.
58. William Surface, Inside Internal Revenue, Coward-McCann, Inc., N.Y., 1967, pp. 76-77.
59. New York Times, July 13, 1967; 26:1.
60. Stern, pp. 15-16.
61. Statistical Abstract, 1964, p. 397.
62. Ibid., p. 395.
63. Mr. Stern in his final chapter presents a plan for reforming and simplifying the income tax in the spirit of the Sixteenth Amendment, taxing income "from whatever source derived," uniformly and at rates only half as high as the pre-1963 rates. Under this plan all receipts with purchasing power constitute income. Congress would then set deductions for self and each dependent. There would also be deducted all costs in obtaining the income. From the result in each case would be computed the tax at rates of 11 to 50 per cent. But this is the last we may expect to hear of this or any other plan of reform; for what it does is to put all income and costs on an absolutely equal footing. There would be no partial or total exemptions, no special deductions and no special dispensations such as have been insidiously worked into the law in secret sessions of the congressional tax committees. The reason the country will not get such a reform--at least not by act of Congress--is that the privileged beneficiaries of the present tax structure--and its victims as well--do not want it. They will fight it. And those few who would favor such a reform do not have the power to defeat them, are political nullities.