From Berlin to Baltimore: German Historicism and the American Income Tax, 1877-1913
Ajay K. Mehrotra
Indiana University Maurer School of Law
TAXATION, STATE, AND CIVIL SOCIETY IN GERMANY AND THE UNITED STATES FROM THE 18TH TO THE 20TH CENTURY, Alexander Nutzenadel and Christoph Strupp, eds., Nomos, December 2007
Indiana Legal Studies Research Paper No. 98
The late nineteenth-century notion of moving American public finance toward more direct and graduated forms of taxation was an idea that was embedded in and born out of a larger transatlantic web of intellectual exchange. At the center of this international transfer was a group of American theorists and activists who translated the ideas of their German mentors about the importance of context, institutions, and evolution into U.S. tax policy. This paper seeks to illuminate the links between turn-of-the century German social theories and the development of U.S. tax policy. More specifically, this paper explores how theories of German historicism affected the creation of the American income tax. The German emphasis on institutions, evolution, and context had a profound impact on the group of American political economists who mobilized these ideas to shape the trajectory of American tax policy. By exploring this transatlantic link, this paper clarifies the intellectual beginnings of one of the most significant shifts in American tax theory.
This paper, moreover, examines how a group of progressive political economists self-consciously applied the lessons of German historicism to the American campaigns for tax reform. These reformers knew, or soon learned, that they could not simply transplant German tax ideas or policies onto American soil. Instead, they deployed a thoroughgoing historicism in a self-reflexive and critical manner to justify the need for graduated income taxes in turn-of-the-century America. In so doing, these theorists and reformers helped inject a sense of redistributional reasoning into the prevailing American fiscal order. Though they did not go as far as some of their German mentors in advancing radically redistributive taxes, these thinkers brought a vigorous and historically informed defense of social justice and equity to an otherwise anemic American dialogue about taxation.
This paper is a chapter in a recently published collection of essays, entitled Taxation, State, and Civil Society in Germany and the United States from the 18th to the 20th Century (eds. Alexander Nutzenadel and Christoph Strupp). The essays focus on a transatlantic comparison of German and U.S. fiscal systems and national tax traditions. They were first presented at an international conference on historical tax research sponsored by the German Historical Institute in Washington, D.C.
Keywords: American history, tax policy, comparative tax history, history of economic thought
Date posted: January 10, 2008 ; Last revised: July 1, 2013