Review of the Book:

American Taxation: Its History
as a Social Force in Democracy

by Sidney Ratner

Harry Gunnison Brown

[Reprinted from the American Economic Review,
Vol. 32, No. 3, Part 1 (September, 1942), pp. 602-604.
Mr. Ratner's book was published in New York by Norton]

There seems to be, as a general rule, an opposition between scholarly writing, and the more popular writing of the professional journalist. The one, aiming at exactitude, full of qualifications (lest perchance a review by another scholar note the absence of reference to some exceptional case or to some occasional modifying circumstance!) and documented with numerous footnotes, is often drudgery to read. The other, though it may hold the reader's attention, is likely not to be documented at all and is sometimes inaccurate, almost necessarily incomplete (because of lack of space, if for no other reason), and probably more often misleading than the work of the trained scholar. But Mr. Ratner's study is at the same time scholarly and interesting. The author has a happy faculty of selection of dramatic incidents and striking quotations without neglect of what is truly significant.

Although Mr. Ratner's book is, as its subtitle indicates, a history of American taxation, it is by no means confined to the facts and figures on taxation. On the contrary, it is shot through with references to conflicting interests, opinions, and sentiments and with considerable description and comment on the influence of pressure groups. There is comment, too, on the inconsistencies between or among various pronouncements of the Supreme Court on the income tax and related topics and comment on the pre-membership background and point of view of one and another member of the court.

The author has taken pains to make mention of the writings and pronouncements of many economists whose views are given in the text or whose contributions to the literature of taxation are cited in footnotes. Especial mention has been made of the economists on the matter of financing war. Referring to the problem of financing World War I, the author says:

Such noted economists as Professors 0. M. W. Sprague of Harvard, Irving Fisher of Yale, and E. Dana Durand of Minnesota urged Congress to finance the war, enormously costly though it was, mainly, if not entirely, from taxes collected during its progress. Their argument was that government reliance on loans would lead to an inflation of credit, a general and rapid rise in prices, an increase in the money costs of the war, a reduction in the real income of the masses, extraordinary profits for a few, and consequent social discontent. To avert these evils and the danger of revolutionary class antagonism, they advocated that the conscription of men should logically and equitably be accompanied by something in the nature of the conscription of current income above that of the pre-war income and that portion of it not needed for absolutely necessary consumption. They favored high progressive income taxes, practically confiscatory of incomes above $100,000. Similar views were given wide currency through the American Committee on War Finance, headed by Amos Pinchot, in its "pay-as-you-go" war campaign. This program was criticized by Professors E. R. A. Seligman and R. M. Haig of Columbia, C. J. Bullock of Harvard, and others as being too extreme, but they agreed that a long-time policy of increasingly heavy taxation, coupled judiciously with loans, was desirable. A large number of distinguished economists in sympathy with the heavy taxation program sent a memorial to Congress setting forth its advantages as against the bad effects of relying too strongly upon bond issues.

And in his final chapter, "America Faces the Second World War," mention is made of the proposals for war financing of J. M. Keynes, Gerhard Colm, Alvin H. Hansen, and others.

Attention is devoted throughout, and at length, to the influence on federal taxation and other financial measures, not only of our various wars, but also of the rise and fall of political parties and coalitions and of the dominating administrative and legislative leaders of each period. Typical chapter headings are "Jacksonian Democracy and Manifest Destiny," "The Populist Revolt," "The Tariff, and the Income Tax," "Pressure Politics and Tax Issues," "Theodore Roosevelt and the Progressive Movement," "Republican Insurgency and Taxation," and "Wilsonian Liberalism and Tax Reform."

Very little attention is given to taxation policy and practice in the separate states. The author has confined his discussion almost altogether to federal taxation. The faults of the general property tax (unless there is implied criticism of this or some other tax or taxes in his sympathetic comments on Henry George), the growing reliance on sales taxes by a large number of our state governments, the increasing use of gasoline taxes, and other matters concerning the financial and tax policies of the separate states, are ignored. This is perhaps as it should be, for the addition of such material with anything like the fullness of presentation given the history of federal taxation would require at least one other equally large volume. A carping critic might indeed contend that the title leads one to expect a broader treatment in this regard, but, after all, a title should be brief and intriguing. It is not essential that it be fully descriptive.

Certain trends in federal taxation are especially emphasized. As the author himself states in his Preface, his presentation "centers on those movements which brought into existence the federal income, inheritance, estate, gift and excess profits taxes," and he has given quite a bit of attention to "their chief rival, the protective tariff."

Mr. Ratner does not try to conceal either his dislike for the tariff or his satisfaction at the trend toward the adoption and extension of the other types of taxation just mentioned. Probably his book is all the more interesting on this account. The coldly dispassionate balancing of one argument against another with no effort to evaluate them and with the studied attempt to appear always "meticulously objective" is perhaps not likely to appeal to a majority of readers. But possibly if the author had included in his study the trend of state taxation in the last decade or two toward very great reliance on sales taxes and toward increasing barriers to interstate trade, which are the kinds of thing he clearly does not like when practiced by the federal government, the tone of his book would have been a few shades less optimistic!

Although, as this reviewer has already noted, the points of view of various professional economists-and others-on the objectives of taxation and how these objectives may be best realized are given some attention, the author gives no extended theoretical argument for or against any of them. No doubt a very few careful and patient readers, unfamiliar with theoretical analyses of the shifting, ultimate incidence and various repressive or other effects of different types of taxes and tax systems, would be aided in their interpretation of the significance of the historical facts, were such analyses included. But books of too great size are forbidding. So, to many readers, is such theoretical analysis. Certainly, an author is entitled to choose his own limits of subject matter, on the basis of his own especial interests and the nature of his own researches.

Mr. Ratner's book is obviously, as his publishers say it is, the result of years of scholarly research. It contains a wealth of historical information. Its numerous footnote references and its extensive bibliography should be greatly helpful to anyone who may wish to pursue the investigation on any particular point or points still further, and it is easy to read.