The received interpretation of the Mellon tax reforms in the 1920s describes a reactionary roll-back of the first, progressive, permanent income tax system in United States history. This essay revises that interpretation in important ways.
The Treasury Department of Secretary Andrew W. Mellon proposed and passed tax reform legislation in the 1920s that radically reduced marginal tax rates on wealthy individuals from World War 1 highs. The Mellon plan was developed by attorneys from the previous Democratic administration. Working with the foremost tax professionals of the day and deeply committed to the principles of progressive income taxation, they intended the establishment of a permanent peacetime tax system for a modern industrial society. They called their taxplan scientific taxation. The Treasury Department policymakers anticipated determined opposition to their program and consciously embarked on an extensive public relations campaign to convince the general public that reducing taxes on wealthy people was good for them because it made the whole society richer and more dynamic.
This essay tells the story of how the Mellon plan took shape, and of the public relations campaign waged to secure its enactment. This essay also suggests that the Treasury Department's campaign to sell scientific tax reform to the general public generated a dialogue that facilitated popular acceptance of modern industrial capitalism.