Abraham Lincoln supported a wealth tax. Here’s why.

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In opposition to the Biden administration’s proposed “Billionaire Minimum Income Tax,” Sen. Joe Manchin III (DW.Va.) argues, “You can’t tax something that’s not earned. Earned income is what we’re based on.” Supporters of a wealth tax frequently cite its successful implementation in Europe’s social democracies — which only reinforces the sense that a wealth tax would be an un-American resort to European socialism.

But this wasn’t always the case in America. In President Abraham Lincoln’s generation, wealth taxes were the principal way to forestall the return of aristocracy. In other words, wealth taxes were hardly a foreign import — they were the very fulfillment of the American Revolution.

Issues surrounding taxation were central to the grass-roots revolt that precipitated the American Revolution. During the Stamp Act crisis, for instance, artisan and working-class revolutionaries targeted the trappings of wealth, such as chariots and fancy houses. These working people resented the British-imposed aristocracy that used regressive taxation to lord their wealth and status over the working people of America.

While elite revolutionaries sometimes sought to contain the egalitarian tendencies of the revolution, they, too, sought to forestall the return of aristocracy by making taxes progressive. Alexander Hamilton argued that the federal government should seek “to lay the principal burdens on the wealthy.” These were, he said, “easy and equal principles.” “Equality,” for Hamilton, meant a progressive tax, not a flat one. His political rival Thomas Jefferson agreed.

But enslaved people were assets, so as historian Robin Einhorn shows, Jefferson and other enslavers preferred a tariff on imports instead of a wealth tax. South of the Ohio, Southern enslavers refused to pay taxes to fund public schools or railroads that would benefit anyone other than the ruling enslaver elite. Even before the Civil War in Jefferson’s Virginia, the state’s western counties itched to secede from the state — in part to break from what they viewed as a regressive, aristocratic, un-American, enslaver tax regime. A senator like Manchin from West Virginia should have this history in his bones. West Virginia did not have public schools until it achieved statehood in 1863, when its first Constitution mandated a wealth tax.

Before the Civil War, wealth taxes were imposed at the state level and only in the North, where schools, roads, canals and even railroads were funded by borrowing backed by the public power to tax. Beginning as part of the Northwest Territory, Illinois had always had a wealth tax, and, over the decades, various efforts were made to reach intangible assets like stocks or bonds.

The Illinois Revenue Act of 1839 that Lincoln as House minority leader helped shepherd through the state legislature, for example, required residents to list the true value of their stock and pay a tax on it. Lincoln thought the act was “right” because it did not increase the tax on “the many poor” but on “the wealthy few.” The personal-property types taxed by the Revenue Act included items that only the wealthy were likely to own: “slaves, and servants of color, clocks, watches, carriages, wagons, carts, money actually loaned, stock in trade and all other description of personal property, of the stock of incorporated companies.” (Yes, there were “indentured servants” in Illinois held over from slavery before 1818 who had been effectively grandfathered into slavery, and this property would now be taxed.)

Directly counter to Manchin’s contention that Americans do not have a history of taxing “unearned income,” Lincoln’s Revenue Act prevented the wealthy from hiding their assets by purchasing a bond or otherwise loaning money. Since these assets were “invisible” to the assessor who knocked on the door, he could require an oath from the wealthy taxpayers stating that they had faithfully declared all their taxable assets, including any “unrealized” capital gains.

In other words, assessors were not required to list all of the property of a given taxpayer. The assessor who knocked on the door was to list (and, ultimately, tax) only the kinds of property on a list that was skewed toward assets owned by the wealthy. It took down (and taxed) only an “estimate” of the value of all other personal property.

Land was by far the most valuable asset in the state, however, and the Revenue Act targeted the wealthy here, too. The new law abandoned an outmoded land classification scheme. Some wealthy land-holders faced a 24-fold increase in taxes — and some of Lincoln’s friends were among the chief complainers. Land baron and future Lincoln campaign manager David Davis muttered that Illinois was becoming a “Sucker State,” while Iowa was looking attractive.

But Lincoln was not finished taxing the wealthy. In 1841, he proposed a four-dollar-per-acre minimum land value on unimproved lands previously valued at only one dollar. He had to settle for three dollars. Speculators had bought up land cheaply because they had access to cash. Arbitrarily valuing these lands at three times the market value, Lincoln not only taxed unrealized capital gains, he further sought to forestall the gains entirely by forcing the land barons who kept land from actual settlers to sell it at depression prices. Shouldn’t this have violated the constitutional mandate of a “proportional” property tax as required by the Illinois (and eventually the West Virginia) Constitution? no. Variations from strict proportionality were fine if they served a “republican,” which is to say, an egalitarian, interest.

Why were these wealth taxes so important to Lincoln? He thought that Americans were supposed to be “self-made,” and a republican government existed to provide opportunities to everyone, not just to children with wealthy parents who might buy them a farm. Lincoln reminded critics of his new tax law that only truly popular representation would prevent the rise of an aristocracy.

Lincoln’s class politics, which were deeply rooted in the American Revolution, cannot be dismissed. The purpose of popular representation was to ensure the wealthy did not skip out on paying taxes and impose the burden instead on working people — as the British aristocracy around the world had done. As the popular refrain from the American Revolution put it: “Taxation without representation is tyranny.”

It is not merely that progressive wealth taxation is not prohibited by the American republican tradition. More accurately, it would be a betrayal of America’s founding principles not to tax wealth progressively, including “unrealized” capital gains. To suggest otherwise would be, well, un-American. Or as Lincoln said, it would be “wrong within itself.”

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