http://www.nytimes.com/2003/03/09/politics/09TALK.html
Tax Cuts and War Have Seldom Mixed By DAVID E. ROSENBAUM WASHINGTON, March 8 In his determination to cut taxes even while waging war in Iraq, President Bush is bucking history. With the exception of the war against Mexico in the 1840's, taxes have been increased for every war the United States has fought, ever since most colonies increased property taxes to raise money to fight the British in the American Revolution. Some of the most fundamental changes in American tax policy have occurred in wartime. The first discussion of an inheritance tax occurred in the War of 1812, and such a tax was enacted in the Civil War. The first national income tax was imposed, on the wealthiest 10 percent or so of Union households, during the Civil War. The income tax was expanded in World War II, so that for the first time most citizens became taxpayers, as they are today. In the current situation, the Bush administration argues that a war against Iraq is bound to be short and relatively inexpensive, so there is no risk in cutting taxes. "The cost of the war will be small," Treasury Secretary John W. Snow told the House Ways and Means Committee this week. "We can afford the war, and we'll put it behind us." W. Elliot Brownlee, a tax historian at the University of California at Santa Barbara, chuckled when he was told of Mr. Snow's remark. "That's what might have been said at the outset of almost any of the significant wars," Mr. Brownlee said. For instance, after the attack on Fort Sumter started the Civil War, most experts predicted that the war would last a few months at the most, and President Abraham Lincoln's Treasury secretary, Salmon P. Chase, estimated that the war would cost $320 million. In fact, the war lasted four bloody years and cost $5 billion, more than 15 times Chase's forecast. In the early days of the military buildup in Vietnam, Presidents John F. Kennedy and Lyndon B. Johnson also thought they could safely cut taxes and meet military expenditures. Business taxes were cut in 1962, and income taxes were cut across the board in 1964. But as the United States' commitment in Vietnam grew, budgetary strains mounted. In in his State of the Union Message in 1967, Johnson asked Congress for a tax increase to keep the budget deficit "within prudent limits and to give our country and our fighting men the help they need in this hour of trial." Congress balked for a time. But in 1968, a 10 percent surcharge was imposed on individual and corporate income taxes. Under President Richard M. Nixon, taxes were raised again in 1969. The history of wartime taxes in this country can be found in Professor Brownlee's book "Federal Taxation in America: A Short History" (Woodrow Wilson Center Press and Cambridge University Press, 1996); in "The Great Tax Wars," by Steven R. Weisman (Simon & Schuster, 2002); and in a 2002 Library of Congress report, "Financing Issues and Economic Effects of Past American Wars," by Marc Labonte. To help pay for the War of 1812, Congress enacted excise taxes, sales taxes and a requirement that states raise property taxes and forward the money to the federal government. In the Civil War, in addition to imposing the first inheritance and income taxes, the government raised business taxes and taxes on spirits and tobacco and imposed higher tariffs. The principles of tax withholding, mortgage deductions and the rich paying at a higher rate than the poor were more or less established then. And some of the tax complications that exist today, like the distinctions between gross and net income, between earned and unearned income and between regular income and capital gains, first appeared during the Civil War. To help pay for the Spanish-American War, excise and inheritance taxes and tariffs were raised. In World War I, the personal income tax and taxes on corporate profits were increased significantly. The first permanent estate tax was enacted, and taxes were imposed on the production of munitions. Federal spending during World War II rose to 43.6 percent of the national economy in 1943, from 9.8 percent in 1940. In addition to expanding the income tax so that it became a broad tax on most households, the government increased the corporate tax and excise taxes, created a 5 percent "victory tax" to be repaid in a tax credit after the war, and raised to 90 percent what was called an excess profits tax on companies. In the Korean War, income tax rates were raised to the levels of World War II, and a new excess profits tax was enacted. The 10 percent surcharge on personal and corporate income taxes imposed during the Vietnam war resulted in a budget surplus in 1969, the last until 1998. Taxes were not increased during the Persian Gulf war in 1991, but that was the year the tax increases of 1990 first took effect. In many cases, most notably the Civil War and World War I, Mr. Brownlee said, a motive for raising taxes in wartime was to "respond to some sense of shared sacrifice" and head off criticism that poor soldiers were fighting a rich man's war. In that respect, too, President Bush is breaking from the past, holding that the best way to improve the economy for everyone is to cut the taxes of the most affluent. "In this time of high-tech warfare and a volunteer Army," Mr. Brownlee said, "there is no longer the concern with equalizing sacrifice." -- -Time flies like the wind. Fruit flies like a banana. Stranger things have - -happened but none stranger than this. Does your driver's license say Organ -Donor?Black holes are where God divided by zero. Listen to me! We are all- -individuals! 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