Hostname: page-component-848d4c4894-89wxm Total loading time: 0 Render date: 2024-07-06T18:00:50.308Z Has data issue: false hasContentIssue false
  • English
  • Français

Forging Fiscal Reform: Constitutional Change, Public Policy, and the Creation of Administrative Capacity in Wisconsin, 1880–1920

Published online by Cambridge University Press:  27 April 2009

Ajay K. Mehrotra
Ajay K. Mehrotra
Affiliation:
Indiana University, Bloomington
Get access Rights & Permissions [Opens in a new window]

Extract

At the turn of the twentieth century, Wisconsin, like many northern industrial states, faced a profound fiscal challenge. As one concerned citizen succinctly explained, “The two great administrative problems before our people at this time are, first, the control of corporate wealth, and, second, the establishment of a rational system of taxation.” The large-scale structural pressures created by the rise of corporate capitalism and the decline of an obsolete tax system forced all levels of government to reexamine the substance and administration of their fiscal policies. At the state and local level, many governments addressed the mismatch between the increasing demand for state services and the declining supply of revenue by turning to new levies and innovative forms of administration.

Type
Articles
Information
Journal of Policy History , Volume 20 , Issue 1 , January 2008 , pp. 94 - 112
Copyright
Copyright © The Pennsylvania State University, University Park, PA. 2008

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Notes

1. H. S. Wilson to Nils P. Haugen, 1 September 1910, Box 56, Nils P. Haugen Papers, The State Historical Society of Wisconsin, Madison (SHSW).

2. Biennial Report of the Secretary of State of the State of Wisconsin, 1927–1928 (Madison, 1928)Google Scholar; Historical Statistics of the United States, Earliest Times to the Present, ed. Carter, Susan B. et al. (New York, 2006)Google Scholar, table Ea132–59, table Ea247–75, table Ea489–518.

3. Skowronek, Stephen, Building a New American State: The Expansion of National Administrative Capacities, 1877–1920 (New York, 1982)Google Scholar; Yearley, Clifton K., The Money Machines: The Breakdown and Reform of Government and Party Finance in the North, 1860–1920 (Albany, N.Y., 1970)Google Scholar.

4. Brownlee, W. Elliot, Progressivism and Economic Growth: The Wisconsin Income Tax, 1911–1929 (Port Washington, N.Y., 1975)Google Scholar; Buenker, John D., The History of Wisconsin, Vol. IV, The Progressive Era, 1893–1914 (Madison, 1998)Google Scholar; Nesbit, Robert C., Wisconsin: A History (Madison, 1973)Google Scholar; Thelen, David P., The New Citizenship: Origins of Progressivism in Wisconsin, 1885–1900 (Columbia, Mo., 1972)Google Scholar.

5. Stark, John O., “The Establishment of Wisconsin's Income Tax,” Wisconsin Magazine of History (Autumn 1987): 27–45Google Scholar; Stark, , A History of the Property Tax and Property Tax Relief in Wisconsin (Madison, 1992)Google Scholar; Ranney, Joseph A., “Law and the Progressive Era, Part 2: The Transformation of Wisconsin's Tax System, 1887–1925,” Wisconsin Lawyer 67 (08 1994): 22–25, 62–63Google Scholar.

6. Higgens-Evenson, R. Rudy, The Price of Progress: Public Services, Taxation, and the American Corporate State, 1877–1929 (Baltimore, 2003)Google Scholar; Keller, Morton, Regulating a New Economy: Public Policy and Economic Change in America, 1900–1933 (Cambridge, Mass., 1990)Google Scholar; Teaford, Jon C., The Rise of the States: Evolution of American State Government (Baltimore, 2002)Google Scholar; Wallis, John Joseph, “American Government Finance in the Long Run: 1790–1990,” Journal of Economic Perspectives 14 (Winter 2000): 61–82Google Scholar; Yearley, The Money Machines. On the importance of slavery to the early development of the American property tax, see Einhorn, Robin L., American Taxation/American Slavery (Chicago, 2006)Google Scholar.

7. Friedman, Lawrence, History of American Law (New York, 1974), 497Google Scholar. See also Scheiber, Harry N., “The Road to Munn: Eminent Domain and the Concept of Public Purpose in the State Courts,” Perspectives in American History 5 (1971): 400Google Scholar; Kloppenberg, James T., Uncertain Victory: Social Democracy and Progressivism in European and American Thought, 1870–1920 (New York, 1986), 355Google Scholar.

8. Wiebe, Robert H., The Search for Order, 1877–1920 (New York, 1967)Google Scholar; Hays, Samuel P., The Response to Industrialism, 1885–1914 (Chicago, 1957)Google Scholar; Galambos, Louis, “The Emerging Organizational Synthesis in Modern American History,” Business History Review 44 (1970): 279–290Google Scholar.

9. U.S. Bureau of the Census, Report on the Manufacturers of the United States at the Tenth Census, 1880 (Washington, D.C., 1991), 189Google Scholar, table IV; Statistical Abstract of the U.S., 1921 (Washington, D.C., 1922), 253, table 161Google Scholar; Gibson, Campbell, Population of the 100 Largest Cities and Other Urban Places in the United States (Washington, D.C., 1998), 37, 41, tables 11, 19Google Scholar.

10. Wallis, “American Government Finance,” 69–71; Thelen, New Citizenship, 30–31; Brownlee, Progressivism and Economic Growth, 45.

11. Higgens-Evenson, Price of Progress, chap. 2. In real terms, Wisconsin spent approximately $1.34 per capita on common school spending in 1880 and $2.62 by 1900. Ibid., 28, table 1.

12. Transportation spending in Wisconsin, which was nearly nonexistent in 1910, had jumped to nearly 25 percent of total annual expenditures by 1920. Higgens-Evenson, Price of Progress, fig. 5, appendix.

13. Estimates suggest that by 1902 property taxes accounted for 57 percent of all state government revenues, and roughly 73 percent of all local revenues. Wallis, “American government Finance,” 70.

14. Title XIII, chap. 48, sections 1034, 1036, 1052, Supplement to the Wisconsin Statutes of 1898 (Chicago, 1906).

15. Chandler, Alfred D. Jr., The Visible Hand: The Managerial Revolution in American Business (Cambridge, Mass., 1977)Google Scholar; Roy, William G., Socializing Capital: The Rise of the Large Industrial Corporation in America (Princeton, 1997)Google Scholar.

16. Wisconsin Tax Commission, Report of the Wisconsin State Tax Commission (Madison, 1898), 109–110Google Scholar. The Wisconsin Commission also “found frequent instances of an almost open and avowed practice of favoring particular interests and industries or classes of property.” Ibid., 78.

17. Seligman, , “The General Property Tax,” Political Science Quarterly 5, no. 1 (1890): 62CrossRefGoogle Scholar.

18. von Cotzhausen, F. W., “A Graduated Income Tax,” Milwaukee Sentinel, 17 10 1904; in 1873Google Scholar, von Cotzhausen, as state senator, was one of the first government officials to call for tax reform. Philipp, Emanuel L., Political Reform in Wisconsin: A Historical Review of the Subjects of Primary Election, Taxation, and Railway Regulation (Milwaukee, 1910), 107Google Scholar.

19. Bullock, Charles J., “The State Income Tax and the Classified Property Tax,”in Proceedings of the Tenth Annual Conference under the Auspices of the National Tax Association(New Haven,1917), 369Google Scholar; Teaford, Rise of the States, 47–49.

20. Yearley, The Money Machines, xii–xv; Higgens-Evenson, Price of Progress, 13–14; Teaford, Rise of the States, 45–46.

21. Stark, History of the Property Tax, 8; Bullock, “State Income Tax and Classified Property Tax,” 375; Teaford, Rise of the States, 46.

22. Adams, T. S., “The Significance of the Wisconsin Income Tax,” Political Science Quarterly 28 (12 1913): 569–585, at 575CrossRefGoogle Scholar.

23. Fisher, Glenn, The Worst Tax? A History of the Property Tax in America (Lawrence, Kans., 1996), chap. 4Google Scholar; Einhorn, American Taxation/American Slavery, 204.

24. Radford, Gail, “From Municipal Socialism to Public Authorities: Institutional Factors in the Shaping of American Public Enterprise,” Journal of American History 90, no. 3 (2003): 863–890CrossRefGoogle Scholar.

25. Wisconsin Constitution, Section 1, Article VIII.

26. Marsh v. Supervisors 42 Wis. 502 (1877); see also Hersey v. Board of Supervisors, 37 Wis. 75 (1875); Bradley v. Lincoln County, 60 Wis. 71 (1884).

27. Thelen, New Citizenship, 204–7, 288; McCormick, Richard L., “The Party Period and Public Policy: An Exploratory Hypothesis,” Journal of American History 66 (1979): 279–298Google Scholar; McGerr, Michael, The Decline of Popular Politics: The American North, 1865–1928 (New York, 1986)Google Scholar. For an updated reassessment of the party period, see John, Richard, “Farewell to the ‘Party Period’: Political Economy in Nineteenth-Century America,” Journal of Policy History 16, no. 2 (2004): 117–125Google Scholar.

28. Philipp, Political Reform in Wisconsin, 109–11; Kennan, Kossuth Kent, “The Wisconsin Income Tax,” Quarterly Journal of Economics 26, no. 1 (11 1911): 169–178CrossRefGoogle Scholar; Wisconsin State Tax Commission, 1898 Report.

29. Haugen, Nils P., Pioneer and Political Reminiscences (Evansville, Wis., 1930)Google Scholar; Robert La Follette to Nils Haugen, 24 September 1911; Haugen to La Follette, 2 November 1911, Box 56, Haugen Papers, SHSW; Brownlee, Progressivism and Economic Growth, 49–51; Buenker, History of Wisconsin, 442–43; Brandes, Stuart D., “Nils P. Haugen and the Wisconsin Progressive Movement” (Master's thesis, University of Wisconsin, 1965)Google Scholar.

30. McCarthy, Charles, The Wisconsin Idea (New York, 1912)Google Scholar; Buenker, History of Wisconsin, 573–77.

31. Howe, Fredrick C., Wisconsin, An Experiment in Democracy (New York, 1912), 133–139Google Scholar; Philipp, Political Reform in Wisconsin.

32. Wisconsin Constitution, Section 1, Article VIII.

33. Adams, T. S., “The Wisconsin Income Tax,” American Economic Review 1 (12 1911): 906–909, at 906Google Scholar. The amendment carried every county but one, and was ratified by a vote of 85,696 to 37,729 in November 1908 (ibid.).

34. Buenker, History of Wisconsin, 488–89; Stark, Jack, The Wisconsin State Constitution: A Reference Guide (Westport, Conn., 1997), 8Google Scholar.

35. “Praise Income Tax,” Milwaukee Journal, 24 May 1911; “Income Tax Hearing,” (Milwaukee) Evening Wisconsin, 24 May 1911.

36. Wiebe, Search for Order; Eisenach, Eldon J., The Lost Promise of Progressivism (Lawrence, Kans., 1994)Google Scholar; Rodgers, Daniel T., “In Search of Progressivism,” Reviews in American History 10 (12 1982): 113–132Google Scholar.

37. In this sense, the tax experts employed by state tax commissions were similar to the “mezzo-level” actors of national executive agencies. On the importance of mezzolevel administrators, see Carpenter, Daniel P., The Forging of Bureaucratic Autonomy: Reputations, Networks, and Policy Innovations in Executive Agencies, 1862–1928 (Princeton, 2001), 18–25Google Scholar.

38. H. S. Wilson to Haugen, 24 July 1910, Box 56, Haugen Papers, SHSW.

39. Haugen to Wilson, 26 July 1910, Box 56, Haugen Papers, SHSW; “Income Tax in Place of Personal Property Tax,” Milwaukee Free Press, 26 May 1910.

40. Haugen to Wilson, 26 July 1910, SHSW; Haugen, Pioneer and Political Reminiscences, 158–59. On the transatlantic roots of American economic ideas during this period, see Rodgers, Daniel T., Atlantic Crossings: Social Politics in a Progressive Age (Cambridge, Mass., 1998), chap. 3Google Scholar.

41. Curti, Merle, The Making of an American Community: A Case Study of Democracy in a Frontier County (Stanford, 1959), 270Google Scholar.

42. Not all businesses opposed the income tax. Some saw it as an opportunity to apply the efficiency of the business corporation to state and local governance. Higgens-Evenson, Price of Progress.

43. Brownlee, Progressivism and Economic Growth, chap. 3; Buenker, History of Wisconsin, 551–54; Stark, “Establishment of Wisconsin's Income Tax.”

44. Ibid. Adams to Haugen, 24 December 1910; Adams to Haugen, 1 April 1910, Box 56, Haugen Papers, SHSW; “Genesis of Wisconsin's Income Tax: An Interview with D. O. Kinsman,” Wisconsin Magazine of History, September 1937, 4.

45. Wisconsin Session Laws (1911), Section 1087m-8(1) and (2), Chapter 658; Kennan, , “The Wisconsin Income Tax,” Quarterly Journal of Economics (1911)Google Scholar; Seligman, The Income Tax, 421; Stamp, J. C., “The Tax Experiment in Wisconsin,” Economic Journal 23, no. 89 (03 1913): 142–146Google Scholar.

46. T. S. Adams, “The Significance of the Wisconsin Income Tax,” 572; Kennan, Kossuth Kent, “The Wisconsin Income Tax,” Annals of the American Academy of Political and Social Science 58 (03 1915): 65–76Google Scholar; Lyons, Thomas E., “The Wisconsin Income Tax,“ Annals of the American Academy of Political and Social Science 58 (03 1915): 77–86Google Scholar.

47. Brownlee, Progressivism and Economic Growth, 49–50; Buenker, The History of Wisconsin, 554; Conant, James K., Wisconsin Politics and Government: America's Laboratory of Democracy (Lincoln, Neb., 2006), 298Google Scholar; Penniman, Clara, State Income Taxation (Baltimore, 1980), table I, 2–3Google Scholar;

48. State ex rel. Bolens v. Frear; Winding v. Frear. The Court consolidated these two cases as the Income Tax Cases, 148 Wis. 456 (1911). “Believes Income Tax Law Invalid,” Milwaukee Sentinel, 16 November 1911; “Income Tax Law Is Argued” Milwaukee Free Press, 21 November 1911.

49. Income Tax Cases, 504.

50. In signing the bill, Governor McGovern attached a lengthy memo that stated in part that “the plan of adjusting public burdens according to ability has been in successful operation for many years in Switzerland, Austria, France, England, Norway, Sweden, Denmark, Holland, and the German states.” “Governor Calls Income Tax Just,” Milwaukee Sentinel, 14 July 1911.

51. Income Tax Cases, 505.

52. Ibid., 511.

53. “Income Tax Law Valid, Says Court” Milwaukee Sentinel, 10 January 1912; “Hold's State's Taxation Plan Revolutionized,” Milwaukee Free Press, 10 January 1912.