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The year 1974 was an eventful one in U.S. history. For the first time, a president resigned under threat of impeachment. Watergate and the Vietnam War shook Americans’ faith in their government. The economy was reeling from the first oil embargo, and the United States’ prospects seemed bleak. In that context, Professor William Andrews of Harvard Law School published an article that would revolutionize tax scholarship. Against the backdrop of widespread dissatisfaction with the government in general and the income tax in particular, Andrews suggested replacing the income tax with a consumption tax. That suggestion was ironic for anyone familiar with the history of the U.S. income tax. Before the 16th Amendment was adopted in 1913, the federal government relied almost exclusively on consumption taxes. Two previous attempts to collect taxes on income ended in repeal, in 1872, and judicial overturning, in 1895. The adoption of the 16th Amendment was intended to tax those in the upper-income brackets, who were able to escape personal property taxes because their property was intangible and who did not bear much of the burden of the consumption taxes because they did not consume most of their income.


Reprinted with the permission of Tax Analysts.

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