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Abraham Lincoln supported a wealth tax. Here’s why.

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Contrary to the Biden administration’s proposed “billionaire minimum income tax,” Sen claims. Joe Manchin III (DW.Va.), “You can not tax anything that is not earned. Earned income is what we are based on.” Proponents of a wealth tax often mention its successful implementation in Europe’s social democracies – which only reinforces the feeling that a wealth tax would be an un-American resort to European socialism.

But this was not always the case in America. In President Abraham Lincoln’s generation, wealth taxes were the most important way to prevent the return of the aristocracy. In other words, wealth taxes were hardly a foreign import – they were the very fulfillment of the American Revolution.

Issues of taxation were central to the grassroots uprising that triggered the American Revolution. During the Crisis of the Stamp Act, for example, artisans and working-class revolutionaries targeted the ornaments of wealth, such as carriages and fancy houses. These working people resented the British-imposed aristocracy that used regressive taxation to rule over their wealth and status over the working people of America.

While elite revolutionaries sometimes sought to curb the egalitarian tendencies of the revolution, they also sought to prevent the return of the aristocracy by making taxes progressive. Alexander Hamilton argued that the federal government should seek “to impose the principal burdens on the wealthy.” These were, he said, “easy and straightforward principles.” “Equality” for Hamilton meant a progressive treasure, not a flat one. His political rival Thomas Jefferson agreed.

But enslaved people were assets, so as historian Robin Einhorn shows, Jefferson and other slaves preferred a customs duty on imports rather than a wealth tax. South of Ohio, southern slaves refused to pay taxes to fund public schools or railroads that would benefit anyone other than the ruling slave elite. Even before the Civil War in Jefferson’s Virginia, the western counties of the state itched to secede from the state – in part to break away from what they saw as a regressive, aristocratic, un-American, slave tax regime. A senator like Manchin from West Virginia should have this story in his bones. West Virginia did not have public schools until it achieved statehood in 1863, when its first constitution mandated a wealth tax.

Before the Civil War, wealth taxes were imposed at the state level and only in the north, where schools, roads, canals and even railways were financed by loans with the support of the public power to tax. Beginning as part of the Northwest Territory, Illinois had always had a wealth tax, and over the decades, various efforts were made to reach intangible assets such as stocks or bonds.

The Illinois Revenue Act of 1839, which Lincoln as House Minority Leader helped shepherd through the state legislature, required, for example, residents to state the true value of their shares and pay a tax on it. Lincoln believed the action was “right” because it did not raise taxes on “the many poor,” but on “the few rich.” The personal property types taxed by the tax law included items that only the wealthy would probably own: “slaves and servants of color, clocks, watches, carts, carriages, wagons, actually lent money, stock in trade and all other descriptions of personal assets, of the stock of registered companies. ” (Yes, there were “indentured servants” in Illinois held back from slavery before 1818, who had actually become the grandfather of slavery, and this property would now be taxed.)

Directly contrary to Manchin’s claim that Americans have no history of taxing “unearned income,” the Lincoln Revenue Act prevented wealthy people from hiding their assets by buying a bond or otherwise borrowing money. Since these assets were “invisible” to the appraiser knocking on the door, he could demand an oath from the wealthy taxpayers that they had faithfully stated all their taxable assets, including any “unrealized” capital gains.

In other words, appraisers were not required to list all the assets belonging to a given taxpayer. The evaluator who knocked on the door only had to list (and ultimately tax) the kind of property on a list that was skewed toward assets owned by the wealthy. He downgraded (and taxed) only an “estimate” of the value of all other personal property.

Land, however, was by far the most valuable asset in the state, and the Income Act also targeted the wealthy here. The new law abandoned an outdated land classification scheme. Some wealthy landowners faced a 24-fold increase in taxes – and some of Lincoln’s friends were among the most complaining. Land Baron and future Lincoln campaign leader David Davis mumbled that Illinois was becoming a “Sucker State” while Iowa looked attractive.

But Lincoln did not finish taxing the wealthy. In 1841 he proposed a minimum value of four dollars per. hectares on uncultivated land previously valued at only one dollar. He had to settle for three dollars. Speculators had bought up land cheaply because they had access to cash. By arbitrarily valuing these lands at three times the market value, Lincoln not only taxed unrealized capital gains, he further sought to prevent the gains completely by forcing the land barons who held land from actual settlers to sell it at depressive prices. Shouldn’t this have violated the constitutional mandate of a “proportional” property tax as required by the Illinois (and ultimately West Virginia) constitution? No. Deviations from strict proportionality were fine if they served a “Republican,” that is, an equal interest.

Why were these wealth taxes so important to Lincoln? He believed that Americans should be “self-made” and that a Republican government existed to provide opportunities for everyone, not just children with wealthy parents, who could buy a farm for them. Lincoln reminded critics of his new tax law that only truly popular representation would prevent the rise of an aristocracy.

Lincoln’s class policy, which was deeply rooted in the American Revolution, cannot be denied. The purpose of popular representation was to ensure that the wealthy did not jump out of paying taxes and instead imposed on working people – as the British aristocracy around the world had done. As the popular refrain from the American Revolution put it: “Taxation without representation is the tyrant. “

It is not just that progressive wealth taxation is not prohibited by the American Republican tradition. More precisely, it would be a betrayal of the fundamental principles of the United States does not to tax wealth progressively, including “unrealized” capital gains. To suggest otherwise would be, well, un-American. Or as Lincoln said, it would be “wrong in itself.”

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