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From the Revolutionary War to the late 19th century, the federal government was financed primarily through regressive tariffs on imported goods. The exception was the income tax enacted during the national emergency of the Civil War, which was allowed to expire in 1872. The rise of an industrial economy in the post- Civil War era led to significant increases in inequality, which the tariffs exacerbated by falling primarily on the working class. ‘‘Robber barons’’ like J.P. Morgan, Andrew Carnegie, and John D. Rockefeller did not consume most of their income, and their intangible wealth avoided state-level personal property taxes as well. This led to the great tax wars that occurred from 1894 to 1913, in which the Democratic Party pushed for the reenactment of a federal income tax. After the Supreme Court struck down such a tax in 1895, the Democrats continued their pressure, which resulted in the enactment of federal corporate and estate taxes in 1909 and culminated in ratification of the 16th Amendment in 1913 and the adoption of the existing federal income tax the same year. A century later, that progress is under threat. The ‘‘Better Way’’ blueprint for radical tax reform, written by House Speaker Paul D. Ryan, R-Wis., and House Ways and Means Committee Chair Kevin Brady, R-Texas, represents a regressive retreat to the pre-1913 era because at its core is a consumption tax on corporations imposed on imports, just like the old tariffs. The blueprint tries to avoid that characterization by calling its business tax a corporate income tax. But precisely because it avoids acknowledging that it is a VAT and not an income tax, the blueprint runs into problems with both our WTO obligations and our tax treaties. Also, because it is not structured as a traditional credit-invoice VAT, the blueprint would not solve the tax avoidance problems that allegedly motivate its enactment.

Available for download on Saturday, December 12, 2026