Just 100 years ago the nation ratified one of the most far reaching amendments to the constitution: the 16th amendment authorizing a federal income tax. Proposed by Congress in 1909, it won approval by three fourths of the states over a four year period that ended in February 1913.
In Maine, both party political platforms in 1910 gave support to the federal income tax amendment. But when legislators convened a few months later many of them initially had cold feet about voting for ratification. Setting in motion a strange set of events was a nine to one vote of the legislature’s taxation committee to withhold ratification of the federal amendment unless Maine at the same time enacted its own state income tax.
Both a large number of the majority Democrats — who then controlled both branches of Maine’s legislature — along with many of the minority Republicans — argued that only by a state income tax could Maine guarantee that the revenues raised would stay at home. House Taxation Chairman William R. Pattangall, a Waterville Democrat, charged that the western states would rob eastern states such as Maine of their tax money in order to install “irrigation schemes costing millions” and that Maine’s tax money would be sent out West to be “taken up by speculators who hardly gave us a chance to say good-bye to it.”
Another Taxation Committee member Frank Mace, a Hancock County Democrat, also spoke of how the proposed national tax would accelerate the perceived diversion of Maine resources to other states.
“By surrendering the rights to the government of the United States to take from her citizens their hard earnings and place them in the treasury of the United States, what right can we expect that our proportional part shall ever be received into the State of Maine?”
Pattangall and Mace’s fears about the drain of federal income tax dollars away from Maine have not fortunately in modern times been borne out. Over the last generation the flow of federal dollars into Maine has always exceeded the amount our taxpayers have laid out. In 2005, for example, the most recent year for which figures are available, the state received $1.41 for each $1.00 it sent out. Maine in that year, a typical one for the last generation, ranked 13th in the nation for the amount we received over the amount for which we were taxed.
Neighboring New Hampshire, by contrast, has consistently ranked near the bottom of the federal outlay list. In 2005, also a typical year for the Granite State, it ranked 47th, pulling in only 71 cents for each dollar it sent to Washington.
In any event, after an extensive debate over the wisdom of the new federal tax, the Maine House turned it down, 82 to 43. It then proceeded to vote for ratifying the federal tax on condition that a state income tax be enacted at the same time.
Surprisingly, the vote was not along either party or typical ideological lines. A number of rural Republicans voted for the tax. Some urban based Democrats voted against it. In a pattern that would repeat itself in future tax votes by the Maine legislature, those hardest hit by the property tax — such as farmers and logging contractors — voted for a state income tax on grounds that such a tax held out the promise of property tax relief. Urban professionals, for whom the prospect of paying a tax on incomes seemed a greater threat, voted against it.
The Maine House vote tying the federal income tax to enactment of a state income tax didn’t last long, however. When the Senate balked the House reluctantly then went along with ratifying the federal income tax constitutional amendment without tying it to simultaneous imposition of one at the state level. In less than two years, enough other states – three fourths of the then 48 – had ratified the amendment so that by February 1913 it became law of the land. Among it first missions was helping to finance World War I.
Inspired by the national model, many states soon followed suit with their own income tax.
The question of whether Maine should adopt an income tax would continue to be a feature of Maine legislative debates for decades to come. By 1919, two thirds of the Maine legislature, by then controlled by the GOP, went so far as to propose a state constitutional amendment then seen as necessary to enable the state to enact one. When the next year the amendment came up for voter ratification, it failed on a 65-thousand to 54-thousand vote.
GOP Gov. Frederick Payne pushed for one in 1949 but wound up settling for the state’s first sales tax two years later instead.
Our own income tax finally won approval in 1969 and it soon became a mainstay of state revenues. (It was passed by a Republican legislature and signed into law by Democratic Gov. Kenneth Curtis.) We became the 39th state to adopt such a tax.
Even without the state individual income tax — one that only seven states including New Hampshire, Texas and Florida have refrained from enacting — all states including Maine have become dependent on the revenue that federal taxes provide. Most major highways and bridges are built with an 80 percent federal match, two-thirds of Maine DHHS, and 90 percent of employees in the state Department of Labor, are funded by federal sources. To be sure, not all the federal funding is from the income tax, but as the largest source of all federal tax revenues it’s the backbone of such largesse.
What Maine and the rest of the nation did a century ago set the stage then for sweeping change in the entire underpinning of both federal and state governments. In some respects, it’s an occasion for some to deplore. In other ways, it’s a time for some to engage in exultation. Whether one mourns or celebrates it, however, this year’s federal constitutional income tax centennial is certainly something to observe.
Paul H. Mills is a Farmington attorney well known for his analyses and historical understanding of public affairs in Maine. He can be reached by e-mail: [email protected]