Joseph J. Thorndike is a contributing editor for Tax Notes.
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When Barack Obama delivers his inaugural address next week, how much are we likely to hear about taxes? If history is any guide, not much. Tax professionals may find it hard to believe, but when new presidents reach for stirring rhetoric, they don't start talking tax.
Democratic presidents have been particularly averse to inaugural tax talk. For a party reputed to love taxes, they clearly don't like to talk about them. Even the greatest tax-and-spender of all time, Franklin D. Roosevelt, proved unwilling to discuss the subject -- only once did he even mention the "T" word in three trips to the Capitol steps. (FDR's fourth inauguration, in 1945, took place at the White House, with festivities canceled because of the war; and no, he didn't talk about taxes then, either.)
Still, the history of inaugural tax talk is worth a quick review, if only to confirm the popularity of a well-trod rhetorical trope: Taxation as an intolerable, anti-American burden.
For the sake of brevity and relevance, let's confine this survey to the modern tax era, starting in 1897 when federal taxes -- and income levies in particular -- were a hot topic of national debate. In his first inaugural address, President William McKinley managed to bury the notion of a permanent federal income tax and confirm his preference for a protective tariff.
"It is the settled policy of the Government, pursued from the beginning and practiced by all parties and Administrations, to raise the bulk of our revenue from taxes upon foreign productions entering the United States for sale and consumption, and avoiding, for the most part, every form of direct taxation, except in time of war," McKinley declared. "The country is clearly opposed to any needless additions to the subject of internal taxation, and is committed by its latest popular utterance to the system of tariff taxation."
McKinley was simply confirming the Republican Party's long-standing support for steep protective tariffs, ostensibly designed to protect the interests of both capital and labor. And while he never mentioned the income tax by name, he was clearly serving notice that no such levy would win his approval, despite its growing popularity among workers, farmers, and Democrats (not to mention a few progressive Republicans).
The next year, McKinley would be forced to accept a variety of new internal taxes to help finance the Spanish-American War. But even under the pressure of war, he and his fellow Republican leaders remained staunchly opposed to the income tax.
When McKinley delivered his second inaugural address in 1901, he mentioned taxes only once, taking credit for their reduction the previous year.
In his 1905 inaugural address, Theodore Roosevelt never mentioned taxes at all. The omission was striking, given Roosevelt's support for progressive tax reform, including a permanent federal estate tax. Instead, it fell to Roosevelt's handpicked successor, William Howard Taft, to make the Republican case for progressive reform.
Taking office in 1909, Taft faced the prospect of a $100 million deficit. Like every major political figure of his era, he considered such a shortfall intolerable. "It is imperative that such a deficit shall not continue," he said. Lawmakers must revise the tariff to produce additional revenue. And if that proved impossible, then they should devise new taxes to cover the shortfall. "Among these I recommend a graduated inheritance tax as correct in principle and as certain and easy of collection," he added.
It would take the better part of a decade, but Congress would eventually take his advice.
Woodrow Wilson presided over the introduction of the modern income tax in 1913, but his inaugural rhetoric made scant mention of tax issues. In 1913 he noted in passing the unfairness of a heavy protective tariff, which Democrats resented for the burden it placed on consumers. But he offered no alternatives. In 1917, having orchestrated a monumental increase in federal taxes during World War I, Wilson avoided the topic entirely.
Once again it fell to a Republican to talk about tax. In his 1921 inaugural address, Warren G. Harding almost rose to the level of eloquence while outlining his plans to reduce high wartime taxes and scale back federal spending:
We can reduce the abnormal expenditures, and we will. We can strike at war taxation, and we must. We must face the grim necessity, with full knowledge that the task is to be solved, and we must proceed with a full realization that no statute enacted by man can repeal the inexorable laws of nature. Our most dangerous tendency is to expect too much of government, and at the same time do for it too little. We contemplate the immediate task of putting our public household in order. We need a rigid and yet sane economy, combined with fiscal justice, and it must be attended by individual prudence and thrift, which are so essential to this trying hour and reassuring for the future.
Harding began the postwar rollback in federal tax burdens -- a project that many Democrats also supported (although more than a few hoped to retain heavy taxes on business profits).
But when it came to Republican tax rhetoric, Harding was quickly eclipsed by his successor, Calvin Coolidge. Taking office after Harding died from a heart attack in 1923, Coolidge quickly established himself as an ardent tax cutter. Indeed, he spoke more -- and more passionately -- about taxes than any president before or since. "The collection of any taxes which are not absolutely required, which do not beyond reasonable doubt contribute to the public welfare, is only a species of legalized larceny," he famously declared in 1925. "Under this republic the rewards of industry belong to those who earn them. The only constitutional tax is the tax which ministers to public necessity. The property of the country belongs to the people of the country. Their title is absolute. "
Coolidge insisted that cuts be aimed at the rich, as well as the poor and middle class. He rejected the moral legitimacy of a steeply progressive rate structure, like the one established during World War I:
I am opposed to extremely high rates, because they produce little or no revenue, because they are bad for the country, and, finally, because they are wrong. We cannot finance the country, we cannot improve social conditions, through any system of injustice, even if we attempt to inflict it upon the rich. Those who suffer the most harm will be the poor. This country believes in prosperity. It is absurd to suppose that it is envious of those who are already prosperous. The wise and correct course to follow in taxation and all other economic legislation is not to destroy those who have already secured success, but to create conditions under which everyone will have a better chance to be successful. The verdict of the country has been given on this question. That verdict stands. We shall do well to heed it.
As president, Coolidge made good on his rhetoric. Tax rates declined dramatically during his term and a half in office.
The Great Silence
Herbert Hoover didn't mention taxes in his sole inaugural address, delivered in 1929. Franklin Roosevelt made a passing reference to them in 1933, taking a swipe at Hoover for the 1932 tax increase. But in his next three inaugural addresses, FDR never again let the word pass his lips -- a striking silence for a chief executive who made progressive tax reform a centerpiece of his economic program in the 1930s and who presided over the creation of the modern tax regime during World War II.
Later presidents followed FDR's lead: Taxes disappeared entirely from inaugural addresses for more than half a century. Practitioners of the modern rhetorical presidency, Democrat and Republican alike, apparently decided that taxes were not the stuff of stirring speeches. Even presidents who would go on to champion important tax reforms, like Kennedy in 1961, chose to avoid the subject.
The Great Communicator
So who would revive the tradition of inaugural tax talk? Ronald Reagan, of course, the most ardent tax cutter to occupy the Oval Office since Coolidge. (Not surprisingly, Reagan famously chose Coolidge's portrait for a prominent place in the Cabinet Room.)
Taking office in the midst of economic turmoil, Reagan pointed to taxes as a key culprit in the nation's decline. "Idle industries have cast workers into unemployment, human misery, and personal indignity," he declared in 1981. "Those who do work are denied a fair return for their labor by a tax system which penalizes successful achievement and keeps us from maintaining full productivity."
Like Coolidge, Reagan could wax eloquent on taxation, imbuing this, the driest of political topics, with at least a modicum of excitement -- or indignation:
In the days ahead I will propose removing the roadblocks that have slowed our economy and reduced productivity. Steps will be taken aimed at restoring the balance between the various levels of government. Progress may be slow, measured in inches and feet, not miles, but we will progress. It is time to reawaken this industrial giant, to get government back within its means, and to lighten our punitive tax burden. And these will be our first priorities, and on these principles there will be no compromise.
In his second inaugural address, Reagan had even more to say about taxes. He took more than a few moments to glory in the tax cuts of his first term. "By 1980 we knew it was time to renew our faith, to strive with all our strength toward the ultimate in individual freedom, consistent with an orderly society," he recalled. "We believed then and now: There are no limits to growth and human progress when men and women are free to follow their dreams. And we were right to believe that. Tax rates have been reduced, inflation cut dramatically, and more people are employed than ever before in our history."
But more important, Reagan went on to call for further tax reform, invoking the need for simplification. He also called for a balanced budget amendment to halt the growth of government. "We must take further steps to permanently control government's power to tax and spend," he said. "We must act now to protect future generations from government's desire to spend its citizens' money and tax them into servitude when the bills come due."
Servitude! Silent Cal would have been proud.
After Reagan, presidents resumed their rhetorical tax avoidance. George H. W. Bush and Bill Clinton studiously sidestepped the topic, while George W. Bush mentioned it only in passing during his 2001 address. Clearly, taxes have remained unwelcome terrain for presidents intent on inspirational speechifying.
So what can we take home from all of this? Two things, I think.
First, the disappearance of inaugural tax talk after World War II reflects the bipartisan fiscal consensus that marked this era. Until 1940 or so, taxes were a centerpiece of political contest, giving Democrats and Republicans something important to argue about. But after the war, tax policy ceased to provide an organizing principle for interparty rivalry. To be sure, partisan sniping continued. But both parties embraced the broad outlines of the wartime tax regime and accepted its permanence.
Second, when it comes to tax, indignation is the only acceptable rhetorical mode. Even Democrats -- ostensible champions of shared sacrifice, the common good, and communal enterprise -- have been reluctant to make an affirmative case for taxation, at least from the inaugural stand. That's why even Roosevelt chose to avoid tax rhetoric during his inaugurations.
When it comes to taxes, if you don't have anything mean to say, then don't say anything at all.