Published by EH.NET (May 2009)

Steven A. Bank, Kirk J. Stark, and Joseph J. Thorndike, War and Taxes. Washington, DC: Urban Institute Press, 2008. xix + 224 pp. $26.50 (paperback), ISBN: 978-0-87766-740-7.

Reviewed for EH.NET by W. Elliot Brownlee, Department of History, University of California, Santa Barbara.

In early March, 2003, Secretary of the Treasury John W. Snow explained to the House Ways and Means Committee how a Bush administration proposal for a round of massive tax cuts would be consistent with fighting a war in Iraq. Snow declared that ?The cost of the war will be small,? and went on: ?We can afford the war, and we?ll put it behind us.? In reporting in the New York Times on this testimony and the Bush administration?s ?determination to cut taxes even while waging war in Iraq,? the late David E. Rosenbaum observed that ?President Bush is bucking history.? Rosenbaum explained: ?With the exception of the war against Mexico in the 1840s, taxes have been increased for every war the United States has fought.?[1] War and Taxes responds to propositions that Bush (and the Congress) were ?bucking history? by attempting to write ?a thorough and balanced account of the politics of U.S. tax policy during wartime.? The authors ? Steven A. Bank and Kirk J. Stark, who are professors of law at the University of California, Los Angeles, and Joseph J. Thorndike, who is director of the Tax History Project at Tax Analysts and scholar in residence at the University of Virginia ? explain that ?our chief objective has been to put the tax cuts enacted during the war in Iraq in historical perspective? (p. 174).

In the introduction and conclusion, which set forth the book?s key interpretations, the authors assert that in one sense the Bush administration was, indeed, bucking history. The contrast ?between an active war effort on one hand and substantial tax cuts on the other … has no precedent in American history,? they write (p. xii). Further, it is ?an inescapable fact,? the authors declare in their introduction, that ?the United States has a strong tradition of wartime fiscal sacrifice, and the Bush tax cuts mark an abrupt departure from that tradition? (p. xiii). However, the authors seek to diminish the extent and significance of this departure. Most important, they discount the historic force of the tradition of fiscal sacrifice: ?Our commitment to wartime fiscal sacrifice has always been uneasy ? and more than a little ambiguous? (p. xiii). While they find evidence for a ?strong? tradition of fiscal sacrifice that appears ?in the extraordinary tax changes wrought by World War II and, to a lesser (through still significant) extent, during World War I and the Korean War, … in many of the wars we examined the tradition is better described as one of reluctance, resistance, and opposition? (p. 167). Thus, the authors suggest, the politics of wartime taxation during the Iraq war have not been fundamentally different from the politics of ?many? wars. Sacrifice has been debated, but three factors, the authors assert, have worked against any form of increased financial sacrifice and in favor of tax cuts. These crucial elements of contingency have been: (1) relief from the kind of fear of inflation that helped drive tax increases in earlier wars; (2) ?increased partisan polarization and the corresponding marginalization of deficit concerns? (p. 172); and (3) the end of the military draft in 1972, which means that ?arguments for the ?conscription of wealth? simply no longer have the same moral force that they once did? (p. 173).

The authors? crucial chapter on ?9/11 and the War in Iraq? follows five chapters which provide discrete narratives of tax politics during the American Revolution and the War of 1812; the Civil War; World War I; World War II; and Korea and Vietnam. The book gives only cursory treatment to the Mexican War, the Spanish-American War, and the Gulf War, and does not discuss the Indian wars or the Cold War. In the narratives, the authors focus on the provisions of wartime tax laws and the legislative process, paying special attention to ?the influence of arguments concerning ?shared sacrifice? in shaping wartime tax policy? and the role of ?wartime opposition to increased taxes? (pp. xiii-xiv). In doing so, they stay close to the surface of politics. For example, they ?offer no single definition or methodological answer to the question of what constitutes a tax cut.? They explain: ?We have … let our subjects define the terms. If political leaders in a particular era called something a tax cut, then so do we? (p. xvii). They also do not develop their own definitions of ?shared sacrifice?: ?Although we use the term throughout the book, we have deliberately avoided assigning it any particular definition, choosing the let historical actors speak for themselves when invoking ? or refusing to invoke ? principles of shared sacrifice? (p. xviii). The resulting narratives, each one self-contained, are exceptionally informative yet compact. Indeed, there is no more thorough and efficient survey of, and introduction to, wartime tax politics in the United States than this collection of essays. In addition, the essays, particularly those on World War II, Korea, and Vietnam, make lively reading, providing the human depth and drama often missing from tax history.

The authors are successful in indentifying the diverse ways in which politicians have invoked ?shared sacrifice,? but I believe they overemphasize the force of ?sacrifice? arguments on behalf of higher levels of aggregate taxation, and neglect the influence of ?sacrifice? arguments for more progressive taxation. It was the especially powerful role of the arguments for progressive taxation that distinguished the mobilizations for World Wars I and II, and profoundly shaped, in path-dependent fashion, subsequent federal taxation. At the same time, the authors have some difficulty placing the ?sacrifice? arguments in historical context because they rarely engage the social, economic, institutional, and intellectual forces that shaped wartime tax regimes. The influence of important factors such as political learning from earlier wars, growing administrative capacity, and changing economic structure, for example, are largely unexamined in the book.

Even without systematic analysis of the political economy of war, the authors have successfully identified, I believe, most of the key elements that explain (thus far) the departure of public finance during the war in Iraq. However, they do not have the space to discuss these factors in depth and leave unexplored at least one critical element: the power of the continuing ?Reagan revolution.? During the Iraq war, George W. Bush and the Republican leadership in Congress were able to implement a fiscal strategy based on their reading of the historic legacy of wartime finance. They were determined to break out of a historic process (unexamined in this book): the upward ratcheting of taxing capacity, domestic spending, and tax progressivity associated with the financing of the world wars of the twentieth century. They did not want the Iraq war to disrupt their effort to increase the downward fiscal pressure on entitlements and other domestic spending, and to shift the base of taxation toward regressive consumption taxation. Their strategic effort required muting or countering traditional calls for ?shared sacrifice? via taxation. The outcome of the 2008 elections, however, may well have marked a defeat for the strategy and signaled a future revival of the two-pronged tradition of ?shared-sacrifice? in public finance during national crises.

Note: 1. Snow quoted in David E. Rosenbaum, ?Threats and Responses: Washington Talk; Tax Cuts and War Have Seldom Mixed,? New York Times, March 9, 2003.

Professor Brownlee is the author of ?Wilson?s Reform of Economic Structure: Progressive Liberalism and the Corporation,? in John Milton Cooper, ed., Reconsidering Woodrow Wilson: Progressivism, Internationalism, War, and Peace (Washington, DC: Woodrow Wilson Center Press and Johns Hopkins University Press, 2008), 57-89; and ?The Shoup Mission to Japan: Two Political Economies Intersect,? in Isaac W. Martin et al., The New Fiscal Sociology: Taxation in Comparative and Historical Perspective (Cambridge: Cambridge University Press, 2009), 237-55.