THE tax structure in the United States has undergone quite revolutionary changes during the last quarter of a century. Until 1914 tax revenue was derived almost wholly from property taxes and from customs duties and excises.
The burden of taxes was, accordingly, distributed with little relation to ability to pay. Customs and excises constituted in 1902 nearly one half of total tax receipts of all governments in the United States, and nearly 40 per cent in 1913. In so far as such taxes affect the prices of commodities of general consumption, the tax burden represents a diminishing percentage of income the farther one moves into the upper- income ranges. And even property taxes--and this applies particularly to rented residences--are, in large part, shifted by property owners to the general public. Thus, a tax structure based upon property and consumption taxes is likely to be heavily regressive and burdensome upon the low-income groups of the community.
The federal income tax was introduced in 1914. During the war surtax rates on upper-bracket incomes were sharply raised, and this helped to diminish the regressive character of the general tax structure. But indirect taxes weighing largely on consumption continued to be levied, and, moreover, the rates on the moderately well-to-do and lower rich class were comparatively low. Accordingly, the tax structure as a whole