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Mozumi, Seiichiro. “Tax Expenditures and the Tax Reform Act of 1969 in the UnitedStates.” Social Science History 46.1 (2022): 93–118. doi:10.1017/ssh.2021.41.

➨ 32 ᅇ⛒⛯㈨ᩱ㤋㈹ᛂເㄽᩥせ᪨ㄽᩥࢱ࢖ࢺࣝ㸸Tax Expenditures and the Tax Reform Act of 1969 in the United Statesᶓ὾ᅜ❧኱Ꮫ኱Ꮫ㝔ᅜ㝿♫఍⛉Ꮫ◊✲㝔෸ᩍᤵ ⱱఫ ᨻ୍㑻ࠕ⛒⛯ᨭฟࠖ࡜ࡣࠊ⣡⛯⪅ࡢ⛒⛯㈇ᢸࢆ㍍ῶࡍࡿ⛒⛯ඃ㐝ᥐ⨨ࢆࠕ⛒⛯㈇ᢸ㍍ῶࢆ㏻ࡌࡓ⣡⛯⪅࡟ᑐࡍࡿ⤥௜ࠖ࡜ᤊ࠼ࡿᴫᛕ࡛࠶ࡿࠋᮏᛂເㄽᩥࡀศᯒᑐ㇟࡜ࡍࡿ࢔࣓ࣜ࢝ྜ⾗ᅜࡢ㐃㑥㈈ᨻࡣࠊ
ࡇࡢ⛒⛯ᨭฟ࡟⤥௜ࢆ౫Ꮡࡋ࡚ࡁࡓ࡜࠸࠺Ṕྐⓗ≉㉁ࢆᣢࡘ࡜ከࡃࡢඛ⾜◊✲࡛ᣦ᦬ࡉࢀ࡚ࡁࡓࠋ
ࡋ࠿ࡋ㏆ᖺࠊ࠸ࡃࡘ࠿ࡢ◊✲࡛ࡣࠊ኱㒊ศࡢ࢔࣓ࣜ࢝ᅜෆࡢ⣡⛯⪅ࡀࠊ⛒⛯ᨭฟࢆᨻᗓ࠿ࡽࡢ⤥௜࡜ឤࡌ࡚࠾ࡽࡎࠊࡴࡋࢁࠊᐩ⿱ᒙ࡬ࡢ⛒⛯㈇ᢸ㍍ῶࡢ೫ࡾࠊ㐃㑥ᨻᗓࡢ⛯཰ㄪ㐩⬟ຊࡢᙅయ໬࡜㈈ᨻᨭฟࢆ㏻ࡌࡓ⤥௜ࡢᅔ㞴ࠊ⣡⛯⪅ࡢᨻᗓ࡟ᑐࡍࡿಙ㢗ࡢ႙ኻࠊ♫఍⤫ྜࢆ⾜࠺ᅜᐙ㈈ᨻࡢᶵ⬟୙඲ࢆᘬࡁ㉳ࡇࡋ࡚ࡁࡓ࡜ホ౯ࡉࢀ࡚ࡁࡓࠋࡑࡋ࡚ࠊ௨ୖࡢၥ㢟ࡀࠊ1970 ᖺ௦༙ࡤ௨㝆ࠊ⣡⛯⪅ࡀ㐃㑥⛯ไࡸ⮬ࡽࡢ⛯㈇ᢸ࡟཯Ⓨࡋࠊῶ⛯ࢆせồࡍࡿ➼ࡢ⾜Ⅽࢆ⾜࠺ࠕ⣡⛯⪅ࡢ཯஘ࠖࢆ㢖Ⓨࡉࡏࠊᨻᗓ࡟ࡼࡿㄢ⛯࡜ྛಶேࡢ⛯㈇ᢸ࡟ᑐࡍࡿࠕ⣡⛯⪅ࡢྠពࠖࡢㄪ㐩ࢆᅔ㞴࡟ࡋ࡚ࡁࡓࡇ࡜ࡀᣦ᦬ࡉࢀ
࡚ࡁࡓࠋ௨ୖࡢ⫼ᬒࡢୗࠊᮏᛂເㄽᩥ࡛ࡣࠊ➨஧ḟୡ⏺኱ᡓᚋ࠿ࡽ 1969 ᖺࡲ࡛࡟↔Ⅼࢆᙜ࡚ࠊࡇࡢ᫬ᮇ
ࡢ㐃㑥⛯ไᨵṇࡢヨࡳ࡜ࡑࡢ⤖ᯝࡀࠊࡑࡢᚋࡢ㐃㑥⛯ไࡢᙧᡂ࡜ࡑࢀ࡟ᑐࡍࡿ⣡⛯⪅ࡢホ౯ࠊ⣡⛯⪅ࡢ཯஘ࡢⓎ⏕ࠊ࢔࣓ࣜ࢝㈈ᨻࡢ⛒⛯ᨭฟ࡬ࡢṔྐⓗ౫Ꮡࠊ㈈※ㄪ㐩࡜ࠕ⣡⛯⪅ࡢྠពࠖࡢㄪ㐩ࡢᅔ㞴࡟⧅ࡀࡗࡓṔྐⓗせᅉࢆၥ࠺ࡓࡵ࡟ࠊ1969 ᖺ࢔࣓ࣜ࢝㐃㑥⛯ไᨵṇ㸦௨ୗࠊ69 ᖺᨵṇ㸧࡟⮳ࡿࡲ࡛ࡢᨻ⟇Ỵᐃ㐣⛬࡜ࡑࡢ⤖ᯝࡢṔྐศᯒࠊཬࡧホ౯ࢆ⾜࡞ࡗࡓࠋ69 ᖺᨵṇࢆᢅ࠺ඛ⾜◊✲࡛ࡣࠊձୖ࡛㏙࡭ࡓ࢔࣓ࣜ࢝㐃㑥⛯ไࡢᢪ࠼ࡿㄢ㢟࡟ᑐࡋ࡚ࠊᨻ἞ⓗ࡞ᅔ㞴ࢆ஌ࡾ㉺࠼ࠊỈᖹⓗ࣭ᆶ┤ⓗබᖹᛶࢆഛ࠼ࡓ㐃㑥ᡤᚓ⛯ไࢆᵓ⠏ࡍࡿࡇ࡜࡟ᡂຌࡋࡓ⛯ไᨵṇࡢ୍ࡘ࡜࠸࠺ホ౯࡜ࠊղ࣋ࢺࢼ࣒ᡓத୰࡟ࡶ࠿࠿ࢃࡽࡎᐇ᪋ࡉࢀࡓ኱つᶍῶ⛯࡜࠸࠺ࠊ୺࡟஧ࡘࡢ
どⅬ࠿ࡽホ౯ࡀ⾜ࢃࢀ࡚ࡁࡓࠋࡲࡓࠊୖグձ࡟ヱᙜࡍࡿඛᨷ◊✲࡛ࡣࠊ࢔࣓ࣜ࢝㐃㑥㈈ົ┬ࠊࠕࢩࣕ࢘ࣉ౑⠇ᅋࠖࡢ࣓ࣥࣂ࣮ࡔࡗࡓ S㸬ࢧ࣮ࣜࠊ㐃㑥㆟఍ୗ㝔㆟ဨ W㸬࣑ࣝࢬࡽࡢᙺ๭ࡀࡑࡢᐇ⌧࡟Ỵᐃⓗࡔࡗࡓࡇ࡜ࠊ㆟఍Ẹ୺ඪဨࡀᙼࡽࢆᨭ࠼ࡓ୍᪉ࠊࢪࣙࣥࢯࣥ኱⤫㡿ࡀໟᣓⓗ⛯ไᨵṇ࡟ᾘᴟⓗࡔࡗࡓࡇ࡜ࡀᣦ᦬ࡉࢀ࡚ࡁࡓࠋ
ࡇࢀ࡟ᑐࡋ࡚ᮏᛂເㄽᩥ࡛ࡣࠊඛ⾜◊✲࡛ࡣ᫂ࡽ࠿࡟ࡉࢀ࡞࠿ࡗࡓ௨ୗࡢ஧Ⅼࢆ᫂ࡽ࠿࡟ࡋࡓࠋ
➨୍ࡢⅬࡣࠊඛ⾜◊✲ࡀᣦ᦬ࡍࡿࡼ࠺࡟ࠊ69 ᖺᨵṇࡀ㒊ศⓗ࡟Ỉᖹⓗ࣭ᆶ┤ⓗබᖹᛶࢆ㧗ࡵࠊప୰ᡤᚓᒙῶ⛯ࢆࡶࡓࡽࡋࡓ୍᪉ࠊࡇࡢ⛯ไᨵṇࡀ▷ᮇⓗ࡟ࡣቑ⛯࡜ࡋ࡚ᡂ❧ࡋࡓࡇ࡜࡛࠶ࡿࠋ➨஧ࡢ
Ⅼࡣࠊ69 ᖺᨵṇࡀࠊྛᨻ⟇୺యࡢồࡵࡿ⛯ไᨵṇീࡢᑐ❧࡜ᨻ἞ⓗጇ༠ࡢᮎ࡟ᐇ⌧ࡋࡓࡑࡢṔྐⓗᩥ⬦࡛࠶ࡿࠋᮏ✏࡛ࡣࠊձࢧ࣮ࣜࡽࡢᣢࡘ࠸ࢃࡺࡿࠕໟᣓⓗᡤᚓᴫᛕࠖࡀẸ୺ඪ㆟ဨ࡟ᾐ㏱ࡋࠊ㐪ࡗࡓᙧ࡛฼⏝ࡉࢀࡿ୍᪉ࠊቑ⛯࡟ࡼࡿ࢖ࣥࣇࣞᢚไࢆ㔜どࡍࡿࠕࢣ࢖ࣥࢪ࢔ࣥࠖࡢぢ᪉ࡀຊࢆᣢࡗ

࡚࠸ࡓࡇ࡜ࠊղࡇࡢ஧ࡘࡢぢ᪉ࡀΰࡊࡿᙧ࡛ᥦ᱌ࡉࢀࠊᐇ⌧ࡋࡓࡢࡀ 69 ᖺᨵṇࡔࡗࡓࡇ࡜ࠊճࡋ࠿
ࡋ 69 ᖺᨵṇࡀྵࢇ࡛࠸ࡓ⮫᫬ࡢᡤᚓ⛯⋡ᘬࡁୖࡆࡢ⥅⥆ࡸಶูᾘ㈝⛯⋡ᘬࡁୗࡆࡢᘏᮇࡀࠊ⛒⛯ඃ㐝ᥐ⨨࡟ࡼࡗ࡚୙බᖹ࡞ྲྀࡾᢅ࠸ࢆཷࡅࠊ⣼㐍⛯⋡࡜࢖ࣥࣇ࣮ࣞࢩࣙࣥ࡟ࡼࡗ࡚⛯㈇ᢸࡀቑ࠼ࡘࡘ
࠶ࡗࡓປാ⪅㝵⣭ࡸ୰㛫ᒙࡢࠊ㐃㑥⛯ไ࡜୙බṇ࡟ᑐࡍࡿ཯ឤࢆᙉࡵࡓࡇ࡜ࠊմࡑࡢࡇ࡜ࡀࠊ1970ᖺ௦௨㝆ࡢ㐃㑥㆟఍࡜ᨻᶒ࡟ࠊ⣡⛯⪅ࡢᛣࡾ࡜୙‶ࢆᢚ࠼ࡿᡭẁ࡜ࡋ࡚⛒⛯ᨭฟࢆᥦ౪ࡍࡿ㑅ᢥࢆࡉࡏࡿṔྐⓗせᅉ࡜࡞ࡾࠊᅜᐙ࡜㈈ᨻ࡟ᑐࡍࡿ⣡⛯⪅ࡢྠពࡸಙ㢗ࢆ᥀ࡾᔂࡋࠊ㈈※ㄪ㐩࡜බᖹᛶࡢᨵၿࢆྍ⬟࡜ࡍࡿ⛯ไᨵṇࡢᐇ⌧ࡢྍ⬟ᛶࢆῶࡌ࡚ࡁࡓࡇ࡜ࢆ᫂ࡽ࠿࡟ࡋࡓࠋ

RESEARCH ARTICLE

Tax Expenditures and the Tax Reform Act of1969 in the United States
Seiichiro Mozumi(Received 7 August 2020; revised 18 December 2020; accepted 4 February 2021; first published online
11 January 2022)

Abstract
In the United States, tax favoritism—an approach that has weakened the extractive capacity of the federal government by providing tax loopholes and preferences for taxpayers—
has remained since the 1930s. It has consumed the amount of tax revenue the government
can spend and therefore weakened the possibility of the redistribution of fiscal resources. It
has also made the federal tax system complicated and inequitable, resulting in undermining taxpayer consent. Therefore, since the 1930s, a tax reform to create a simple, fair, andequitable federal income tax system with the capacity to raise revenue has been long overdue. Many scholars have evaluated the Tax Reform Act of 1969 (TRA69), which Richard
M. Nixon signed into law on December 30, 1969, as one of the most successful steps toward
accomplishing this goal. This article demonstrates that TRA69 left tax favoritism in the
United States. Furthermore, it points out that TRA69 turned taxpayers against the ideaof federal taxation, a shift in public perception that greatly impacted tax reform in the years
to follow.
Keywords: Sociology of Public Finance; U.S. Federal Taxation; Tax Expenditures; Tax Favoritism; Taxpayer
Consent

Introduction
On December 30, 1969, Richard M. Nixon signed the Tax Reform Act of 1969
(TRA69) into law. TRA69 coupled tax-relief measures for almost all income classes
with several major structural reforms that broadened the tax base by restricting andeliminating tax preferences and loopholes for high-income taxpayers and businesses. It also included a temporary income tax surcharge for the first six monthsof 1970 (Congressional Quarterly 1970: 589). When he signed TRA69, Nixon
emphasized that most of his proposals had been adopted, which would make thefederal income tax system simpler, fairer, and more equitable, while reducing thetax burden of most taxpayers and encouraging investments in the long term. In
the face of expanding budget deficits and rising prices, however, the tax reform fell
© The Author(s), 2022. Published by Cambridge University Press on behalf of the Social Science History Association. Thisis an Open Access article, distributed under the terms of the Creative Commons Attribution-NonCommercialNoDerivatives licence (https://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-commercial re-use,
distribution, and reproduction in any medium, provided the original work is unaltered and is properly cited. The written
permission of Cambridge University Press must be obtained for commercial re-use or in order to create a derivative work.

  Yokohama National University, Yokohama, Japan
Email: mozumi-seiichiro-jc@ynu.ac.jp  Social Science History (2022), 46, 93–118
doi:10.1017/ssh.2021.41

Social Science History

As to the “mass-based wartime taxation,” see Jones (1989).

1  approximately $3 billion short of his original proposal. “The effect on the budget
and on the cost of living [that TRA69 would provide] is bad,” Nixon stated. He
worried that the tax reform might impose a ceiling on “[g]overnment revenues
in future years, limiting our ability to meet tomorrow’s pressing needs.”
Meanwhile, he emphasized that “[t]he tax reforms, on the whole, are good : : : itis a necessary beginning in the process of making our tax system fair to the taxpayer”(Nixon 1969b).
TRA69 resulted from the efforts of the Department of Treasury and tax experts toaccomplish a long-overdue goal of creating a simple, fair, and equitable federal
income tax system with the capacity to raise revenue. Since World War II, the federal tax system had heavily relied on high-rate progressive income taxation, theso-called punitive mass-based wartime taxation that had included most middle-classwages and salaries.1 The tax system also paved the way for a proliferation of tax
loopholes and preferences—popularly known as “tax expenditures”—that favoredrecipients of unearned income and higher income classes. This “tax favoritism”
undermined statutory tax rates, eroded the breadth of the tax base, and madethe federal income tax system complicated and inequitable among income types
and classes (Brownlee 2016). In the 1960s, the US Treasury and tax experts
attempted to reform the “mass-based wartime taxation” and tax favoritism by lowering the rates of individual and corporate income taxes to reduce the tax burden oflow- and middle-income classes while reducing and eliminating unfair tax loopholes
and preferences. Their goal was a one-package tax reform that combined basebroadening reforms with a rate structure reform based on the concept of “comprehensive income”: “[T]he money value of the net accretion to one’s economic power
between two points of time” (Haig 1921: 7–27). The Treasury and tax experts agreed
that tax reform based on the concept (hereinafter, comprehensive income tax reform)
would make the federal income tax system fairer, simpler, and more equitable bothhorizontally (the same tax liability for any taxpayer with the same level of income) andvertically (the appropriate sharing of tax burdens among different levels of income),with sufficient ability to raise revenue. Their efforts to accomplish this goal were once
defeated by two tax cuts of John F. Kennedy, in 1962 and 1964 (Mozumi 2016, 2018a).
Still, the Treasury continued its research during Lyndon B. Johnson’s presidency,
which eventually led to Nixon’s enactment of TRA69.
Many scholars discussing TRA69 have evaluated that it succeeded in overcoming
the political difficulties, shifting the tax burden from lower and middle-income classes, and enhancing the equity of the federal tax system horizontally and vertically.
They have also argued that TRA69 elevated the popularity of loophole-closing tax
reforms, inspiring liberal activists and think tanks to pressurize Congress into enacting further tax reforms (Bartlett 2012; Ippolito 2012, 2015; Michelmore 2012;
Steuerle 2008; Thom 2017; Witte 1985; Zelizer 1998). However, several studies havedemonstrated that TRA69 primarily provided opportunities to decorate a tax-cut
Christmas tree, or a wartime tax cut championed by liberal Democrats inCongress (Bank et al. 2008; Brownlee 2016; Witte 1985). Most of the scholars agree
that the Treasury and its staff, led by a tax law scholar, Stanley S. Surrey, andRepresentative Wilbur D. Mills, a southern Democrat from Arkansas who led  

94

95

Tax Reform Efforts of Surrey and Mills until 1961
The effort to achieve a comprehensive tax reform in the 1960s was a continuation ofan even earlier effort of the Treasury and Congress from the 1930s. A tax law
scholar, Stanley S. Surrey, had significantly contributed to the tax reform development as early as the 1930s, continuing into the 1960s. After graduating from
Columbia University Law School in 1932, Surrey joined the administration ofFranklin Roosevelt and subsequently the Treasury’s Tax Legislative Counsel the following year. After becoming a law professor in 1947 at the University of California,
Berkeley, he joined the American Tax Mission to Japan under the chairmanship ofCarl Shoup of Columbia University, the “Shoup Mission.” It aimed to reform theJapanese tax system based on the “comprehensive income” concept to make it more
equitable and efficient (Brownlee et al. 2013). After the Shoup Mission, Surrey
became a law professor at Harvard Law School in 1951, and convened numerous
conferences for economists and tax lawyers to discuss the federal tax system(Surrey 1956 HLSL/HSC/SSSP). In the late 1950s, he advised the CWM on tax
reform proposals (Surrey to Mills 1958 HLSL/HSC/SSSP). Throughout these activities, he emphasized that tax reform based on the concept of comprehensive income
should promote fairness, simplicity, and horizontal and vertical equity. He believedthat the federal tax system should allow for more equity in the tax burden, according
to the type and level of income horizontally, and should smooth the rate structure
without sacrificing vertical equity and tax revenues.
While Surrey made significant efforts to accomplish a comprehensive income
tax reform, congressmen and congressional staff also focused on constructing an  the House Committee on Ways and Means (CWM), played a crucial role in draftingand passing TRA69. They have also demonstrated that while congressional
Democrats supported their efforts, Johnson was unlikely to propose the tax reform,
particularly the cuts in tax preferences for the oil and gas industry, the main industryof his home state, Texas, because he obtained support from them.
This article demonstrates two main points neglected by previous studies about
TRA69. First, although TRA69 partially succeeded in horizontally and verticallyenhancing tax equity while reducing the tax burden of low- and middle-income classes, it did so through a short-term tax increase. Second, the result of TRA69 was provided by the conflict among various perspectives of the tax reform proponents—theTreasury, Mills, and congressional Democrats. Although TRA69 implemented many
tax-relief measures for low- and middle-income classes, its tax-increase elements
fueled the anger of the working- and middle-class taxpayers, who had already sufferedinequitably from progressive rate structure and increasing tax burdens in the face of
inflationary pressure, against federal taxation and intensified their sense of injustice.
Notably, it led both Congress and administrations after the 1970s to introduce more
tax preferences for the angry and dissatisfied taxpayers. TRA69 was a “missed opportunity” in terms of beginning the process of improving the fairness of the federal tax
system and alleviating tax favoritism after the 1970s. The remaining tax favoritism has
undermined taxpayer consent to and confidence in the American fiscal state. It also
diminished the possibility of further tax reforms to finance the federal government
and enhance the equity of federal tax system both horizontally and vertically.

  Tax Expenditures and the Tax Reform Act of 1969 in the United States

Social Science History“Looking at tax effects.” Business Week, May 21, 1955. For more details about Mills’s background, see
Goss (2012) and Zelizer (1998).
3
See also “Tax Policies for Economic Growth,” December 17, 1959, File Folder #56: Suggestions for TAX
REFORM Submitted to Treasury for Comment, 1959, Box 68, NACP/OTPSF.
2  equal, fair, and simple federal income tax system. Among them, Wilbur D. Mills(Democrat—Arkansas), a very senior and politically talented Representative, significantly contributed to this discussion. In 1938, Mills successfully ran for Congress,
becoming a member of the CWM in 1942. After he began chairing the Tax Policy
Subcommittee of the Joint Committee on the Economic Report (JCER) and the Joint
Committee on Internal Revenue Taxation of the CWM in 1954, he gained the confidence of both parties concerning federal tax policy, as he was one of the few congressmen that did not rely on professional advice to understand tax proposals.
During the administrations of Harry Truman and Dwight Eisenhower, however,federal tax reforms until 1954 increased loopholes that should have been abolishedwhile leaving a steep progressive rate structure (Brownlee 1996; McClenahan andBecker 2011). Then, in the mid-1950s, Mills began leading the effort to accomplish
comprehensive income tax reform by cooperating with many well-trained tax scholars, including Surrey.2 Based on his experience with the JCER and the CWM, Mills
learned that broadening the income tax base, according to the rule of “ability topay,” by simultaneously cutting tax preferences and eliminating advantages thatthe average taxpayers did not enjoy, tax rates could be reduced and the tax burden
could be distributed more fairly without losing revenue, increasing public debt,
aggravating inflation, and reducing government expenditures (Cassels 1956).
After Mills assumed the chairmanship of the CWM in 1958, he appointed economic
experts, political parties, business leaders, and Treasury staff, including Surrey, who
was a keynoter to attend a series of hearings, from November 16 to December 18,
1959, where they discussed specific tax-reform proposals and promoted the necessity of tax reforms to the public.
At the panel, Surrey explained that preferential treatment for certain types ofincome created an unduly narrow tax base and allowed taxpayers, particularly higher
income taxpayers, to avoid paying their fair share. He also pointed out that the narrowed tax base provided excessively high marginal rates for raising revenue, low effective rates, and a severely discriminatory tax burden across various types of income
imposed on some taxpayers, especially those in the middle-income bracket. Basedon the concept of comprehensive income, Surrey argued that lowering and smoothing
the tax rate structure and eliminating unjustifiable tax preferences for the upperbracket would reduce the tax burden of lower and middle-income classes, improving
comprehensively fairness, simplicity, and the horizontal and vertical equity of the tax
system without revenue losses (Surrey 1959 HLSL/HSC/SSSP). After the hearings, theCWM concluded that Surrey’s idea would be the foundation of tax reforms foradministrations in the 1960s (CWM 1959). The Treasury and the CWM concurredthat the tax reform plan would be essential to tax fairness and promoting desirable
economic or social objectives (Scribner, Jr. to Mills 1959 NACP/OTPSF).3
During the 1960 presidential campaign, Democrats and their presidential candidate, John F. Kennedy, added a tax reform plan into their agenda based on Surrey’s
tax idea and the CWM’s 1959 conclusion (Kennedy 1960a, 1960b, 1960c). The

  

96

97

The CEA and the Defeat of Comprehensive Tax Reform, 1961–1964
During the Kennedy presidency, the Council of Economic Advisers (CEA) in the
White House was influential in federal tax policy decision making. Kennedy’s
CEA members—Chairman Walter Heller, James Tobin, and Kermit Gordon—
considered tax ideas other than those of Surrey and Mills.6 To them, the mostimportant economic problem was the gap between actual output and a “fullemployment output,” the output assumed when an economy is at full employment.
At the beginning of the 1960s, they estimated that the federal tax system could increase
revenue by $7–8 billion annually under normal economic conditions. In a slack economy, however, a “fiscal drag,” as Heller called it, would frustrate any change of
4

The Task Force consisted of Mortimer Caplin (a tax law professor at the University of Virginia School of
Law), Richard Musgrave (a public finance scholar at Harvard University), Norman Ture (a member of the
Joint Economic Committee), Cary Brown (Professor of Economics at Harvard University), and Adrian
DeWind, a New York attorney who specialized in tax matters and had previously served as the ChiefCounsel on the House Ways and Means Subcommittee on Internal Revenue Administration in 1951–52.
Caplin would serve the Internal Revenue Service as Commissioner from February 7, 1961 to July 10, 1964.
5
See also “A Summary of the Views of Tax Consultants Eckstein, Goode, Pechman, and Shoup on the Tax
Reform Issues Discussed at the Treasury Department on June 10, 1961,” October 26, 1961, File No. 208–3A:
Consultants Prof. Seymour Harris, 1961–62, Box 59, HLSL/HSC/SSSP.
6
As to their background, see Kilborn (1987), Tobin’s curriculum vitae (cowls.econ.yale.edu/faculty/vita/
cv_tobin.pdf), and “Kermit Gordon Personal Papers,” John F. Kennedy Presidential Library and Museum(www.jfklibrary.org/Asset-Viewer/Archives/KGPP.aspx?f=1). Gardner Ackley and John Lewis replaced
Tobin and Gordon later, respectively.

  Democratic circle had issued statements arguing that a Democratic victory would
bring American taxpayers an overhaul of the federal income tax law. They madeaverage taxpayers believe that Kennedy would realize a tax plan to comprehensively
reform the federal income tax (Sullivan to Kennedy 1960 NA/JCIRT). After
Kennedy won the presidential election, he appointed Surrey as the chairman of
his Pre-presidential Taxation Task Force, which worked to devise this tax reform
plan.4 On the last day of 1960, the Task Force finally recommended a tax reform
combining base-broadening reforms with rate reductions based on the “ability topay” and the concept of comprehensive income. They expected that it would
win taxpayers’ acceptance by emphasizing its broader and more uniform tax base,appropriate rate structure, enhanced horizontal and vertical equity, and the reduced
tax rates that entailed no revenue losses. The Task Force emphasized that associating tax base reform with rate reductions as “a single comprehensive [income tax
reform] program : : : significantly differentiates this approach from the usual ‘loophole-closing’ campaign” that ideologically contended that the wealthy had unfairly
obtained income so that tax reform should reduce or eliminate the tax preferencesthat benefitted them (Taxation Task Force 1960 JSKL/JFKPPP). After Surrey
became Assistant Secretary of the Treasury for Tax Policy, the Treasury, led by
Surrey and the Office of Tax Analysis (OTA) of the Treasury, drafted a coherent,
revenue-neutral tax reform package aligned with the Task Force’s recommendation(Surrey 1961 JFKL/WWHPP). In 1961, the idea of the CWM and the Treasury stillprevailed in the Kennedy administration (Okun to Solow and Pechman 1961 HLSL/
HSC/SSSP; Solow to Heller, Gordon, and Tobin 1961 HLSL/HSC/SSSP).5  Tax Expenditures and the Tax Reform Act of 1969 in the United States

Social Science History

The Treasury Devises the Concept of “Tax Expenditure”
When it turned out that the Treasury would likely be defeated in 1964, they began
another attempt to reverse the gradual erosion of the tax base created through theinclusion of social preferences and privileges for certain groups of taxpayers. On
March 2, 1964, Henry H. Fowler, the Under Secretary of the Treasury, declared thatthe federal tax system should raise necessary revenues at the lowest possible tax rates
while eradicating a number of long-standing flaws related to equity and simplification.7 He emphasized that it would be a commendable switch from the old pattern of
opening new “loopholes” with the inevitable result of increasing upward pressure on
existing rates or passing up opportunities to reduce the rate scales (Treasury
Department 1964 NACP/OTPSF). Fowler largely entrusted Surrey with accomplishing the long-desired tax reform within the Treasury alongside the new OTA director, Gerald M. Brannon.8
Surrey and Brannon first elaborated a fundamental concept to judge whether acertain tax preference followed the Treasury’s policy to criticize the idea that it often
7

Fowler became the Secretary of the Treasury on April 1, 1965.
As to Brannon’s background, see “Gerald M. Brannon.” Washington Post, March 5, 2015.

8  economic expansion. In response, the CEA used the concept of a “full-employment
budget surplus,” the difference between the balance of the actual budget and thefull-employment budget, to suggest that the “fiscal drag” should be offset by “fiscal
dividends” through tax cuts or increased government expenditures, even in the faceof the actual budget deficit (Heller 1967: 60).
Based on the concept of the “full-employment budget,” the CEA of Kennedy
interfered with the efforts of the Treasury, Surrey, and Mills. From 1961 to 1962,
to relieve the fear of a recession by offsetting the fiscal drag, the CEA recommended
that Kennedy should propose the tax reform program the Treasury had drafted in1961 as a net tax cut by dividing it into two parts: the permanent rate cuts and simple tax-cutting measures would take effect first; then, a year later, controversial basebroadening reform measures should take effect (Heller to Kennedy 1962 JFKL/
WWHPP). Although the Treasury and Mills did not favor this approach, they
accepted it after negotiations (Wallace 1962 JFKL/RDTMPO). When Kennedy sent
Congress his tax reform program in 1963, it was a huge tax cut according to the
CEA’s recommendation (Kennedy 1963). However, when Kennedy’s successor,
Lyndon B. Johnson, finally signed the tax reform program into law on February
26, 1964, the tax reform bill consequently included huge rate cuts in individualand corporate income taxes but almost no reform measures. It was, in general, little
more than a huge tax cut just as the CEA wanted, becoming known as the“Kennedy–Johnson tax cut” of 1964. It embedded within the idea of fiscal policy,
which Herbert Stein had once called “domesticated Keynesianism,” that taxing andspending were tools for controlling macroeconomic conditions rather than meeting
public demand (Mozumi 2018a; Stein 1969). The new legislation did not strengthen
the horizontal and vertical equity of the federal tax system, which foiled the ambitions of the Treasury. The original impetus for comprehensive income tax reform
had once vanished.

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99

Tax Reform Versus Tax Increase, 1966–1967
While researching possible tax reform program, the Treasury worked on two waysof proposing countercyclical tax increase owing to the Vietnam War and inflationary pressure in late 1965. With a temporary across-the-board increase in tax rates,
the Johnson administration sought to fulfill its international commitments, fightinflation, and maintain essential social programs. The administration’s views werebased on the arguments of Johnson’s CEA members—Chairman Gardner Ackley,
Otto Eckstein, and Arthur M. Okun—that such a temporary tax increase was necessary in the face of inflation and the full-employment budget deficit (Surrey toFowler 1966 LBJL/PHF).9 They focused on the possibility of a temporary surtax
on individual and corporate income taxes of approximately $4–5 billion (Heller
1967; Martin 1991; Stein 1969). Democrats contended, however, that Americans
had already faced high state and local taxes, which had sharply increased the prices
of essential items and caused hardships for the poor and middle-income taxpayers.
Some of them also viewed any tax increase as a way to fund and accelerate the9Eckstein was replaced by James Duesenberry, a Harvard University economist, in 1967. In 1968, Okun
succeeded Ackley as the chairman of the CEA. Meanwhile, Merton Peck joined the CEA.

  created loopholes that could be used to attack social and economic problems effectively (Brannon 1964 NACP/OTPSF). Surrey, Brannon, and the OTA understoodthat tax preferences based on this idea, such as education and medical care, were
unfairly and inefficiently providing large amounts of tax relief to higher income taxpayers rather than individuals and families who did not have enough income to takeadvantage of them. They also viewed that they had drained vital tax revenue(Stockfisch to Lamont 1964 NACP/OTPSF). Therefore, they regarded any tax preferences designed to further a specific, desirable social goal as the equivalent to“monies spent” to assess and judge whether it would enable the federal government
to achieve its policy goals more efficiently, directly, and fairly, as compared to government direct expenditure programs.
Surrey and his colleagues in the Treasury believed that this primitive concept of“tax expenditures” would help the Johnson administration avoid wasting tax revenue
that could instead be used to directly finance the expansion of the social programs—
poverty, pollution, manpower training, health, and research and development
programs—they had planned for those most in need as part of the “Great Society
programs” (Treasury Department 1965a NACP/OTPSF). Thus, Surrey prioritized
the tax policy goal of Johnson’s Treasury as eliminating poverty and improving
the equity—both horizontally and vertically—and simplicity of the federal tax system
by reducing the differences among the types of tax treatment through restricting or
eliminating tax preferences and loopholes, particularly those benefitting the wealthy,
and lowering the tax burden in ways of giving the most benefit to the poor (Treasury
Department 1965b NACP/OTPSF). Although Surrey set the goal of tax reform basedon the concept of tax expenditures by assuming the concept of comprehensive income
with no significant revenue gains or losses in as fair and simple way as possible, it
notably also aligned with the ideals of Johnson’s Great Society programs that sought
to benefit the most vulnerable populations in the United States.

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Social Science History

10

As to the surtax proposal of Johnson, see Johnson (1967).
“Tax policy for national goals.” February 17, 1967, Folder: Domestic Taxes: Tax Reform, 1967—
Problems and Program, Box 112, LBJL/PHF.
12“$40 billion in loopholes.” Colorado Post, July 18, 1967.
11  escalation of the Vietnam War. Then, they argued that Johnson should propose
measures to close tax loopholes that had majorly benefitted high-income brackets
and corporations as a desirable tax increase measure (Ottinger to Johnson 1966
NACP/OTPSF; Ottinger to Mills 1966 NACP/OTPSF).
Surrey, the Treasury staff, and Mills had varying opinions of how to treat closingloophole reforms. Surrey and the Treasury staff separated any tax increase arguments from the Treasury’s tax reform program and ruled out the proposal ofloophole-closing measures as temporary countercyclical tax increases. They wereconcerned that the tax increase suggested by Democrats would have highly uncertain economic effects, particularly in the short run, and provoke controversy thatwould considerably delay legislation (Surrey to Ottinger 1966 NACP/OTPSF).
Even after Johnson proposed the temporary surtax on individual and corporate
income tax on January 10, 1967, they believed that the tax reform recommendation
should be postponed until the two tax-writing committees, the CWM and the Senate
Finance Committee (SFC), finished discussing the surtax proposal (Surrey 1967
LBJL/PHF).10 While Mills pointedly opposed Johnson’s temporary surtax proposal
and demanded cuts in government expenditures as a prerequisite, he publicly promoted the importance of the tax reform that Surrey and the Treasury aimed toaccomplish. Although Mills did not clarify which tax equity—horizontal, vertical,
or both—he emphasized, he declared that all CWM members had agreed that theTreasury’s tax reform would enable the federal tax system not only to raise the necessary government revenues in a simpler, fairer, and more equitable manner but also
to provide economic stability and growth to the private economy. In addition, Mills
recommended that the Treasury should avoid delaying the recommendation of the
tax reform bill for a discussion of the surtax proposal in Congress.11
The Mills’s promotion of the Treasury’s tax reform coincided with the argumentsof many Democrats about tax reform. In early 1967, extracting the closing-loopholeaspect from the Treasury’s tax reform plan, they intensified their arguments for the
proposal of mere closing-loophole measures to enhance the equity and fairness ofthe federal income tax system while financing the Vietnam War. They repeatedlyemphasized that old and newly discovered tax loopholes had catalyzed the growing
imbalance between the rich who were aided by trust companies and lawyers with
intimate knowledge of the tax system intricacies, and the poor who had no such
help. Congressional Democrats also predicted that people would be increasingly
aware of the tax bite and the inequities that had been built into the topsy-turvy
tax structure as the cost of the Vietnam War escalated and the prices increased(Childs 1967).
As the Democrats’ arguments spread nationwide, newspapers began criticizing“ideas for more tax loopholes” as dangerous to the national budget and equivalent
to providing “new loopholes in a tax law already as full of holes as a Swiss cheese.”12
Many of them described how Johnson’s request for the surtax would affect low- andmiddle-income groups the hardest. The expansion of social expenditures by  

100

101

13

Through the oil depletion allowance, oil producers were permitted to reduce their annual taxable
income by an amount equal to either 27.5 percent of the gross income from oil sales or half the net income.
See, e.g., Burke (1967).
14“Plug loopholes to avert tax rise.” Washington Post, Times Herald, August 11, 1967.
15
See also “Address by Senator Robert F. Kennedy, Civil Service Employees Association, Commodore
Hotel, 9:00 p.m., September 7, 1967,” September 8, 1967, Folder: Domestic Taxes: Tax Reform, 1967—
Problems and Program, Box 112, LBJL/PHF.
16“Many in Congress prefer tax reform to Johnson’s proposal for increase.” New York Times, September
12, 1967.

  1967—particularly of the number of families receiving the Aid to Families with
Dependent Children—had rapidly increased costs to taxpayers and received
increasingly critical public attention as a crisis of “confidence—of fear and alarm
among taxpayers, of mounting frustration, ill-feeling and disorder in smolderingurban ghettoes, of widening disillusion among men of goodwill” (CWM 1967:
96). This intensified the whites’ hostility toward the nonwhites. Many conservative
whites in the suburbs or the South commonly perceived they had unfairly paid moretaxes than the nonwhites for a welfare system that catered to the nonwhites (Kruse
2005: 125–30). In this situation, the newspapers revived the idea that Johnson andCongress should force the wealthy and industries such as the oil and gas industry,
which paid a lower effective tax rate on their income and profits than most industries,
to pay more taxes and reduce the tax burden of others.13 They spread the view thatloophole-closing measures would overhaul the distribution of tax burdens and plugloopholes while simply raising additional tax revenues for the Vietnam War rather
than a temporary surtax that would raise larger revenues from less-privileged taxpayers. Furthermore, they also made the average taxpayers believe that such reform
measures would make other taxpayers carry their share of the tax load fairly.14
The arguments of congressional Democrats and newspapers provoked taxpayers
to argue for closing-loophole tax reforms as a means to prevent tax avoidance,
restrict inflationary pressure, and finance social programs as well as the Vietnam
War instead of Johnson’s surtax proposal. As constituents, they encouraged many
Democrats, including Representative Wright Patman (Democrat—Texas) and
Senator Robert Kennedy (Democrat—New York), to strongly support what theycalled “closing tax loopholes” as an alternative to the surtax proposal (Patman toJohnson 1967 LBJL/PHF).15 As a CWM member, Democratic Representative
James Burke (Democrat—Massachusetts) told The New York Times that many congressional Democrats were urging the Johnson administration to accomplish
loophole-closing tax reforms in accordance with their constituents’ demands:“Why tax me more when you let some of the rich fat cats off scot free?”16
Surrey and his colleagues had emphasized tax reform that would enhance both vertical and horizontal equity of the federal tax system. They devised the primitive concept of tax expenditures to accomplish this goal. Although Mills also argued for tax
reform to enhance “tax equity” from viewpoints of the “ability to pay,” it was ambiguous which tax equity Mills intended to emphasize. As a result, the Mills’s argument
induced the movements of the public and congressional Democrats that required
loophole-closing reforms. They understood “loophole-closing” tax reforms—which
Surrey had distinguished from his ideal comprehensive tax reform since 1960—as ameasure to raise revenue while enhancing the equity and fairness of the federal tax

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Social Science History

system. The term “tax reform” popularly came to signify loophole-closing measuresthat would enhance vertical equity while raising revenue by forcing the rich and tax
dodgers to pay their fair share rather than what Surrey and the Treasury had craftedand desired from their defeat in 1964.

“Tax expenditures.” Washington Post, Times Herald, November 29, 1967.
Many studies have examined the legislative process of RECA as a representative tax policy of theJohnson administration that was used to finance the Vietnam War and Great Society programs(Anderson and Hazleton 1986; Bank et al. 2008; Ippolito 2012; Martin 1991; Stein 1996; Zelizer 1998).
1718  

Revenue and Expenditure Control Act of 1968 and the Tax Reform
Proposal of 1969
Despite growing support for the loophole-closing reforms, the situation remained
fluid until the end of 1968. During the autumn of 1967, Surrey and his colleagues
within the Treasury continued inquiring about the effects, efficiency, and legitimacyof each tax preference, while the CWM committed to the administration’s surtax
proposal. Shifting his perspective, Mills asked Surrey and the Treasury to postpone
sending the tax reform program to Congress until 1968 because he did not want tobecome involved in any further tax matters in 1967 (Surrey to Fowler 1967 LBJL/
PHF). By the end of 1967, the concept of tax expenditures had gradually become
more popular among the public as revenues that were lost by virtue of the tax preferences Congress had granted to certain groups of taxpayers, or “government
expenditures through the tax system.”17 Even businesses, the largest beneficiaryof tax preferences and the most significant advocate of expenditure cuts, consideredthat a tax reform based on the concept of tax expenditures would rank as the single
most important tax idea of 1968 (Metz 1968). In January 1968, thirty-one
Democrats stated that they would not vote for the surtax bill unless it was accompanied by a tax reform bill (Bowman to Surrey 1968 LBJL/PHF). In the hearings
before the CWM, several Democratic CWM members inquired Fowler that theJohnson administration should recommend the loophole-closing reforms as measures not only to improve vertical equity of the tax system but also to substituteJohnson’s surtax proposal. Fowler nonetheless expressed the Treasury’s unchanged
attitude from 1966: the tax reform they had planned was to enhance tax equity bothhorizontally and vertically by diminishing inequality in the existing tax law andlightening the burden of the most vulnerable taxpayers (CWM 1968: 125–26).
Furthermore, he repeatedly emphasized that the Treasury had been preparing “verysubstantial tax-reform proposals” to reform the federal tax system that he believed
was “far from being equitable today” (Dietsch 1968).
When the surtax proposal was finally legislated as part of the Revenue andExpenditure Control Act of 1968 (RECA) on June 28, 1968, it included a 10 percent
surcharge on individual and corporate income taxes that would initially expire afterJune 30, 1969, and a ceiling on federal spending in 1969 of $180.1 billion to combat
inflationary pressures. RECA also ordered the administration to submit the tax
reform proposal that the Treasury had sent Johnson by the end of 1968.18 It helped
mollify a persistent bloc of Congressmen who called on Johnson to recommend tax
reform along with or instead of a temporary tax increase. Mills stated that the tax

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103

“Washington outlook.” Business Week, July 6, 1968, 36.
As to Kennedy’s background, see Hershey Jr. (1996).
21
In the hearing, Barr identified the middle class as those with incomes from $7,000 to $20,000.
22
See, e.g., “Treasury secretary warns of taxpayers’ revolt: Barr tells Congress it should revise laws givingedge to high-income persons.” New York Times, January 18, 1969, 15.
23“House committee begins major tax reform hearings.” Congressional Quarterly Weekly Report,
February 28, 1969, 313.
19
20  reform would be the CWM’s top priority in 1969.19 Given the expenditure cuts of
RECA, the Johnson administration had few options other than defending theirsocial programs targeted to the poor. Due to these fiscal conditions, RECA’s tax
increases might add to the tax burden of the middle class and induce taxpayer’s
revolt, making it more difficult to generate revenues for meritorious social programs(Brown 1999: 257–62). During the presidential campaign in 1968, Richard M.
Nixon employed a strategy of color-blind populism that celebrated the hardworking
and middle-class taxpayers to evade the call for forceful government action toaddress segregation and racial inequality. Nixon expected that his strategy would
resonate with white middle-class voters in the metropolitan South and nationwide(Nixon 1968). Nevertheless, in 1968 Johnson did not submit to Congress the tax
reform proposals composed by the Treasury over the previous five years. On
December 31, he announced that he would pass this responsibility onto the
Nixon administration and Congress (Johnson 1968).
Shortly before Nixon took office, the impetus for tax reform peaked. The interim
Secretary of the Treasury, Joseph Barr, had worked out an arrangement whereby the
CWM and the SFC would request proposals from the Nixon administration. Barrwas under substantial pressure from Congress to provide the data on how many therich had avoided their fair share. Then, Barr called Mills to argue that he did notwant to turn down the requests from Congress before he left the Treasury. Mills
then convened a meeting of the Joint Committee on Internal Revenue Taxation.
The new Secretary-designate of the Treasury for Nixon, David M. Kennedy, accompanied Barr to the meeting.20 In the meeting, Barr, Kennedy, and Mills reached anagreement that the CWM would transmit a request to Kennedy for the informationof tax reform recommendation and publish it as a CWM report. More importantly,
appearing before the Joint Economic Committee of Congress on January 17, 1969,
Barr warned Congress of an emerging “taxpayer’s revolt” of middle-class citizens
spurred by increasing awareness of existing tax inequity and a tax system thatallowed high-income taxpayers to pay little or no federal income taxes throughtax loopholes while middle-income taxpayers bore the brunt of taxation.21 To exemplify, he cited 155 “extreme cases” in which individuals with adjusted gross income
in excess of $200,000 paid no federal income tax (JEC 1969: 4–7). The next day, Barr
captured media headlines, and his warning made tax reform a major issue.22 Barr’s
statement matched the criticism swelling among the public about the inequality of
the federal income tax system and temporary surtax. Consequently, Nixon’s
Treasury forwarded the recommendations of tax reform, Tax Reform Studies andProposals, to the two congressional tax-writing committees on February 5, 1969.23
The Tax Reform Studies and Proposals compiled the results of the Treasury’s
research and studies that Surrey and Brannon had directed from 1965 based on
the concept of tax expenditures. The Treasury’s recommendations first intended  Tax Expenditures and the Tax Reform Act of 1969 in the United States

Social Science History

24

The middle-income classes in 1969 ranged from $7,074.75–18,866. I calculated it based on US Census
Bureau, “Historical income tables: Households, table H-9,” August 29, 2019, www.census.gov/data/tables/
time-series/demo/income-poverty/historical-income-households.html.
25“Orphaned tax reforms.” New York Times, February 5, 1969, 44.
26“Presidential report: News conference.” Congressional Quarterly Weekly Report, February 14, 1969,
266. As to Byrnes’s background, see Pearson (1985).
27“House committee begins major tax reform hearings.” Congressional Quarterly Weekly Report,
February 28, 1969.
28
As to Walker’s background, see Barnes (2015) and Roberts (2015).

  to significantly reduce the tax burden on lower and middle-income taxpayers, particularly those below the poverty line.24 To this end, the Treasury recommended
several tax-relief measures, including an increase in minimum and ordinary standard deductions, personal exemptions, a “maximum income tax” to limit income
tax payments to no more than 50 percent of a taxpayer’s earned income, andthe expansion of moving expenses for employees. These recommendations also
included many base-broadening measures to impose a fair tax burden on higher
income classes who paid little or no income taxes, such as a “minimum incometax” that would place a 50 percent ceiling on an individual’s total income that could
be excluded from tax payment, the allocation of itemized deductions between taxable income and nontaxable income, the correction of farm loss deduction abuses,
and the reduction of capital loss deduction from 100 percent to 50 percent.
Furthermore, the Tax Reform Studies and Proposals recommended measures toreform corporate income tax preferences, such as the treatment of mineral production payments, tax-exempt foundations, and multiple trusts. The Treasury’s
recommendations would provide $420 million cuts in individual income tax and$155 million increases in corporate income tax, which would amount to a $265 million tax reduction overall. The individual income tax reform would lower the tax
burden of low-income taxpayers and most in the middle-income taxpayers while
increasing the tax burden of some middle-income taxpayers and higher income taxpayers (table 1). The reform plan aimed to alleviate the hardship of the poor andmiddle-class taxpayers while comprehensively enhancing the horizontal and verticalequity of the federal tax system (CWM and SFC 1969).
The public report of the Treasury’s recommendations shifted the conversation
about tax reform to “both the White House and Capitol Hill must understand thata failure to enact reforms will increase the resistance to needed revenue measuresand make more tax-cheaters out of otherwise honest Americans.”25 In the first tendays of February 1969, the Treasury received more letters on the subject of tax
reform than in all of 1968. Having a meeting with a ranking member of the
CWM, John Byrnes (Republican—Wisconsin), and Mills, Nixon went over his
tax reform recommendation and the timetable of when it should reach
Congress.26 On February 18, the CWM held hearings that Mills said “would be
the most extensive hearings on tax reform in at least a decade.”27 After the hearings,
Mills suggested to the Nixon administration that coupling the repeal of the 7 percent
investment tax credit with the extension of surtax would gain more than a hundred
votes from Democrats. In a meeting on April 16, the new Under Secretary of theTreasury, Charls E. Walker, advocated the Mills’s recommendation.28 He argued
that social priority was not for stimulating investment spending but for helping  

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Table 1. The effect of the tax liability changes of TRA69
Adjusted Gross Income

TRA69 (%)

0–3,000

–35.8

–69.8

3,000–5,000

–15.6

–33.2

5,000–7,000

–7.2

–19.9

7,000–10,000

–3.1

–15.8

10,000–15,000

–2.5

–12.6

15,000–20,000

1.0

–8.6

20,000–50,000

3.9

–5.1

50,000–100,000

6.1

–1.9

100,000–500,000

8.6

7.2

500,000–1,000,000

17.5

1,000,000 and over

22.4

Total

–0.7

–10.6

Source: JCIRT 1970: 14; SFC 1969: 34.
Note: The number of TRA69 excludes the effect of the extension of the surtax and the repeal of excise tax increases.

cities, the disadvantaged, and the poor. He pointed out that the repeal of the investment tax credit would raise about $3 billion for these purposes as well as for dampening the investment boom fueling inflation. This would reduce the burden on
low- and middle-income taxpayers, and fund Nixon’s important programs suchas revenue sharing with state and local governments. Furthermore, Walker expectedthat the repeal might be the clincher in achieving the extension of the surtax that
RECA had included (Walker to Nixon 1969 RMNL/WHCF/SF/FI). Following themeetings and the hearings, Nixon finally recommended a comprehensive tax reformbill to Congress on April 21, 1969.
Nixon’s tax reform proposal combined the recommendations of the Tax Reform
Studies and Proposals to bring equity to the federal tax system with antiinflation
fiscal policy based on the idea of domesticated Keynesianism. To scale down a number of tax preferences enjoyed by the wealthy, Nixon’s proposal included the 50 percent “minimum income tax” for citizens with substantial incomes on the use of tax
preferences, the allocation of itemized deductions between taxable income and nontaxable income, the reduction and elimination of deductions for stock dividends,
mineral transactions, farm losses, mutual saving banks, private foundations, charitable contributions, and tax-exempt organizations. Nixon also recommended therepeal of the 7 percent investment tax credit that would be effective retroactively
from April 18, 1969. Nixon planned to use the revenue gained by these measures
to provide tax-cutting measures for low- and middle-income taxpayers, including a“low-income allowance” that would remove low-income families from federal tax
rolls, and the increase in standard deduction. In addition, Nixon recommended
the extension of the full surcharge at 10 percent until January 1, 1970, with a  Treasury Recommendation in 1969 (%)

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Social Science History

reduction to 5 percent on January 1, 1971. Nixon addressed that the proposed tax
reform would bring equity to the federal tax system and “serve the nation as awhole” with no substantial revenue gains or losses, reduce the burden of taxpayers
who felt they were paying more than their fair share, and repeal “the tax of inflation”
by the surtax with cuts in federal direct expenditures (Nixon 1969a). While theextension of the surtax would offset the revenue cuts of the Treasury’s recommendation, it would kill the tax-cutting effect for all taxpayers across the board.

“Committee roundup: Tax reform.” Congressional Quarterly Weekly Report, May 2, 1969, 627.
“Toward true tax reform.” Wall Street Journal, May 12, 1969; “Around the Capitol: Mills’ tax plans.”
Congressional Quarterly Weekly Report, May 9, 1969, 676.
31
“Surtax in danger.” New York Times, June 27, 1969, 36.
32“Congress weighs series of proposals for tax reform.” Congressional Quarterly Weekly Report, July 25,
1969, 1340–41.
2930  TRA69: A Short-Term Tax Increase
In the CWM, Mills led the effort to modify Nixon’s tax reform proposal. He recommended that it include more base-broadening reforms such as a reduction in thecurrent 27.5 percent oil depletion allowance.29 He also promoted a trade-off for
reducing tax preferences and slashing government expenditures to compensate
for the revenue loss through substantial rate cuts.30 During the CWM hearings,
the resentment of American taxpayers against the “notorious loopholes” permitting“the wealthy to avoid taxes altogether or to pay far less than is warranted by theirincomes” became known as a new political fact.31 At the CWM hearings, labororganizations such as the United Auto Workers, the American Federation ofLabor, and the Congress of Industrial Organizations, generally supported theTreasury’s proposals. They expected that the reform measures would raise revenues
that would enable the administration to grant tax relief to low- and middle-income
classes. Conversely, many business organizations such as the US Chamber ofCommerce, the National Association of Manufacturers, the National Associationof Real Estate Boards, the New York Stock Exchange, the US Savings and Loan
League, and the American Automobile Association opposed most major
Treasury proposals such as reforms of the oil and gas depletion allowance, capitalgains, accelerated depreciation on real estate, interest on state and municipal bonds,
and capital gains taxation.32
Mills and the CWM admitted the labor organizations’ arguments but did notreflect the opposition from businesses to the CWM bill reported on August 2.
The bill added to Nixon’s recommendation cuts in individual income tax rates fromthe current range (14–70 percent) to 5–50 percent for almost all taxpayers (effective
1971 and 1972), the low-income allowance, and the increase in standard deduction.
The CWM bill also provided larger tax-relief measures than Nixon’s proposals,
including simpler income-averaging provisions, moving expense deductions, andthe “maximum income tax” the Treasury had recommended. The CWM bill eliminated and restricted many tax expenditures by the alternative maximum tax rate
and other tax preferences on capital gains and losses, the repeal of the investment
tax credit, the 50 percent “minimum income tax,” the restrictions of preferential  

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“House votes overwhelmingly for landmark tax reform.” Congressional Quarterly Weekly Report,
August 8, 1969, 1424–31.
34
As to Cohen’s background, see Saxon (2006).
35“In committee: Finance Committee weakens House-passed tax reforms.” Congressional Quarterly
Weekly Report, October 17, 1969, 1986.
33

  treatments of stock dividends and interests, foundations, and the oil and gas depletion allowances. Furthermore, the bill extended the tax surcharge from January 1 toJune 30, 1970, while Congress legislated the other half of the surtax extension from
July 1, 1969 to the end of the year as H.R. 9951. The revenue effect of the CWM bill
was almost neutral. The CWM emphasized that it would virtually restrict individuals from significantly escaping their tax payments while devoting all the revenue
gains provided by the base-broadening measures to remove the general hardships oflow- and middle-income taxpayers.
In the House Rules Committee (HRC), the CWM bill was challenged by House
Democrats who required more tax-cutting measures for low- and middle-income
taxpayers. During the HRC session, House Democrats criticized that the CWM billgave more tax-relief benefits to low-income classes than to other taxpayers. The
House Democratic Study Group argued that the bill left out middle-income taxpayers with annual income between $7,500 and $13,000. Mills then immediately
called the CWM into another session to reach a compromise by adding tax-relief
measures to the revenue-neutral CWM bill. The amendment added $2.4 billion tax
reductions for almost all individuals with taxable income less than $100,000, wheremiddle-income wage earners who received few tax breaks from the original CWM
bill had belonged. Consequently, the amendment provided $9.3 billion annually intax reductions and $6.9 billion in base-broadening reforms. The legislation would
lose more revenue than it would produce, thereby threatening to increase deficits. In
response to the concern, Mills justified the result by drawing on the logic of the 1964
tax cut that economic improvements derived from the bill would generate higher
revenue in the long run, while warning of a “complete breakdown in taxpayer
morale” and the federal tax system “based on ability to pay” if the tax reform
was not enacted (Shanahan 1969). Finally, Mills compromised with House
Democrats by increasing tax-cutting measures. On August 7, the House passed
its tax reform bill as a tax cut almost along with the CWM amendment.33
However, the new Assistant Secretary of the Treasury for Tax Policy, Edwin S.
Cohen, stated publicly that the House-passed bill did not sufficiently succeed inclosing loopholes for the rich.34 The Nixon administration feared that the
Cohen’s statement might further anger the average taxpayers so that it expected
the Senate would restore closing-loophole measures to the bill (Dent to Nixon
1969 RMNL/WHCF/SF/FI).
The Senate nevertheless responded to the administration’s fear by weakening theclosing-loophole reform aspects of the House-passed bill. At the SFC hearings, businessmen opposed the repeal of the investment tax credit. They feared that it would
force them to file amended tax returns at considerable expense if it were not voted
until 1970. The SFC bill eliminated the repeal of investment tax credits from theHouse-passed bill.35 It also removed or reduced the loophole-closing provisionsof the House-passed bill, including the “maximum income tax,” the elimination  Tax Expenditures and the Tax Reform Act of 1969 in the United States

Social Science History“In committee: Tax-relief bill with some reform provisions reported.” Congressional Quarterly Weekly
Report, November 7, 1969.
37“On the floor: Senate ignores veto threat, votes 69–22 for tax.” Congressional Quarterly Weekly Report,
December 12, 1969.
38“How Mills ran the tax makers’ marathon.” Business Week, December 27, 1969, 70–71.
36  and limitation of preferential treatment for capital gains, the “minimum incometax,” the allocation of deductions between taxable and nontaxable income, therestrictions of tax preferences for private foundations, dividends, and interests,
and the oil and gas depletion allowance. The SFC chose to compensate for revenue
loss by shrinking loophole-closing reforms by adopting a higher-rate schedule thanthe House-passed bill (13–65 percent) for single persons.36 On the Senate floor, further amendments were added to the SFC bill, such as the increase in Social Security
benefits and personal exemption from $600 to $800 for each taxpayer and theirdependents, and a host of new, widened, or reopened tax loopholes. Fifty-one
Democrats—all but two who voted against the bill—supported the bill while
Republicans were split, with 18 in favor and 20 against. The Senate bill passed
on November 2 was essentially a huge tax cut shared by nearly all taxpayers thatcombined $3.32 billion loophole-closing provisions with $9.134 billion tax-relief
measures in addition to Social Security increase.37
Although Nixon considered a veto against the reform bills of the two tax-writing
committees because they took the form of tax cuts in the face of inflation, he and his
staff compromised and accepted the bills. The former vice president for Johnson,
Hubert Humphrey, warned that the perception that the government had singled
out their schools and neighborhoods for racial integration while their hard-earned
tax payments subsidized the lifestyles of the rich, and the poor had spread among
blue-collar white families (Lassiter 2006: 302–03). On December 19, House-Senate
conferees convened to resolve the House and Senate differences. Mills directed it.
The conferees knew that not only would they have to dovetail the provisions of tax
reform proposals into legislation that would satisfy the growing public demand for“meaningful reform” but also measure their final tax-reform bill by Mills’s standards. In response, the White House staff recommended to Nixon that a “veto would
risk alienating such potent groups as the aged as well as a fair portion of the ‘greatsilent majority.’ A preferable course would be for the President to sign the bill, but toexpress his great disappointment with it” (Rose to Flanigan 1969 RMNL/WHCF/SF/
FI). The new director of the Bureau of Budget, Robert Mayo, the new chairman of
the CEA, Paul McCracken, and Kennedy also told Nixon that a veto “might impair
your relations with Congress” and the public might interpret it “as denying taxpayers, especially low-income taxpayer : : : while protecting upper-income taxpayers against the loss of their loopholes” (Kennedy, Mayo, and McCracken to
Nixon 1969 RMNL/WHCF/SF/FI). Consequently, both houses of Congress passed
the House-Senate conference bill on December 22, and on December 30, 1969,
Nixon finally signed it into law as TRA69.38
TRA69 succeeded in massively overhauling the tax base worth $3.32 billion in thelong run. On the one hand, it coupled base-broadening reforms such as the reduction of the 27.5 percent gas and oil depletion allowance to 22 percent, a 10 percent
minimum income tax on most kinds of tax preference income exceeding $30,000, a  

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“Congressionally initiated tax reform bill enacted.” Congressional Quarterly Almanac, 91st Cong. 1st
Sess. 1969, 589–90, 632–35.
39  $50,000 ceiling on the amount of individual capital gains eligible for the alternative
capital gains tax rate of 25 percent while raising capital gains taxes from 25 to 30
percent for corporations and 35 percent for individuals above $50,000, and a 4 percent audit tax on the investment income of private foundations. TRA69 also
repealed the 7 percent investment tax credit. When fully effective, these measureswould provide $6.6 billion revenue increase in a year while closing tax loopholes forhigh-income classes over $200,000 and businesses. On the other hand, TRA69 also
contained $9.1 billion of income tax relief, including personal exemption increase
from $600 to $750 between July 1, 1970 and 1972, the low-income allowance
designed to remove 5.5 million low-income taxpayers from the tax toll, the increasein the maximum standard deduction from 10 percent of income with a $1,000 ceiling to 15 percent with a $2,000 ceiling to be fully effective in 1973, cuts in tax rates
for single persons effective in 1971, and the 50 percent maximum income tax rate on
earned income. TRA69 provided tax reductions for almost all income classes, except
the income class over $100,000. The benefits of tax reductions were more incidental
to low- and middle-income classes than high-income classes. In the meantime,
TRA69 enhanced the equity of the federal tax system vertically and somewhat horizontally for middle- and high-income classes (table 1). Subsequently, Nixon andCongress evaluated TRA69 as the most comprehensive reform of the nation’s
tax statutes in history.39
No matter how largely Nixon and Congress applauded TRA69 as successful, theyneglected the fact that the Treasury had recommended more base-broadening provisions than it provided. Both Representatives and Senators—particularly, House
Democrats and SFC members—presented tax reforms as involving tax-relief measures that would benefit the public, especially low-income and middle-class taxpayers. Although Mills had emphasized the principle of the “ability to pay” andrestored several reform measures in the House-Senate conference, he also believedin the importance of rate cuts in and relief measures for individual income tax to“sell” the tax reform to taxpayers in the House as it would reduce the burden ofalmost all taxpayers. The tax reductions of TRA69 were significantly larger than
the revenues raised by the base-broadening reforms because they lowered the tax
burden of higher-income taxpayers while reducing the proposed base-broadening
measures such as the 50 percent minimum income tax proposal to the 10 percent
version. By sacrificing tax revenue in the long term and some of the base-broadening
measures that the Treasury had recommended, Congress legislated TRA69 as thelargest tax cut since 1964 (tables 1 and 2).
Although TRA69 was achieved as a long-term tax cut, in the short term, it wasenacted as another wartime tax increase because of the extension of the surtax at a
5 percent rate for the first half of 1970, the postponement of scheduled reductions inexcise taxes on telephone services and new automobile purchase exchange services,and the gap of the effective dates between tax-relief and tax-increase measures. The
act made most revenue-raising measures effective earlier than tax-relief measures(table 2). Although TRA69 reduced the surtax rate from 10 to 5 percent in 1970,
the extension would continually impose an additional tax burden on all taxpayers  Tax Expenditures and the Tax Reform Act of 1969 in the United States

Social Science History

Table 2. Revenue effects of TRA69—calendar year 1970–1974 and long run (in millions of dollars)
1971

1972

1973

1974

Long Run

Base-broadening reforms

1,150

1,430

1,660

1,905

2,195

3,320

Repeal of investment credit

2,500

2,990

2,990

3,040

3,090

3,300

Income tax relief measures–1,441 –4,927 –7,269 –9,134 –9,134–9,134

Balance between reforms and relief measures

2,209–507 –2,619 –4,189 –3,849–2,514

Extension of surtax and excises

4,270

800

Total

6,479

293 –1,819 –3,789 –3,849

800

400
–2,514

Source: SFC 1969: 33.

who had already suffered from the 10 percent surcharge of RECA. Furthermore, forwithholding tax purposes, the surcharge was taken into account at a 5 percent rate withrespect to wages and salaries paid during the period. As a result, TRA69 would increase
federal tax revenue by $6.5 billion in 1970, and $0.3 billion in 1971. In the short term,
TRA69, combined with H.R. 9951, coercively imposed additional tax burdens on all
taxpayers, particularly middle-class taxpayers who contended with the inequality offederal taxation and the tax avoidance of the wealthy (JCIRT 1970: 186–87).

Concluding Remarks: The Aftermath of TRA69
Soon after Nixon signed TRA69 into law, his administration attempted to sell it as ameasure that provided tax reductions for low- and middle-income taxpayers while
enhancing tax equity and raising revenue to offset revenue loss and counteract inflation to some extent through base-broadening measures. Nixon’s staff such as theStaff Assistant to the President, Noble M. Melencamp, and Press Secretary to the
President, Ronald L. Ziegler, appealed to taxpayers that more than $9 billion intax relief, when fully effective, would be heavily concentrated in the low- andmiddle-income brackets, while base-broadening reform measures would impose
a fairer share of the burden on many high-income persons who had paid little orno tax in the past. Nixon’s staff also emphasized that TRA69 would benefit most taxpayers and have a major impact in making the tax laws fairer. In addition, they
appealed that they planned to continue working on tax reform and therefore needed“the support of concerned citizens in making this a better place to live and work”(Ziegler to Fink 1970 RMNL/WHCF/SF/FI; Melencamp to Maciejewski 1970
RMNL/WHCF/SF/FI). In response to their attitude, congressional Democrats recommended that Nixon consider the possibility of more tax-reform proposals to “complete the job of loophole-plugging” (Reuss to Nixon 1970 RMNL/WHCF/SF/FI).
Middle- and working-class taxpayers did not uniformly agree with these appeals(Linn, Jr. to Nixon 1970). Rather, some of them regarded TRA69 as a complicatedtax reform that exploited and misused their money for politicians and aimed tomake it obscure. For instance, Clyde W. Rupert, from Dwight, Illinois, criticized
Nixon for failing in increasing personal exemption and making it fully effective
on January 1, 1970 as he had proposed. Although TRA69 included several  1970  

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“13 Democrats urge Nixon to seek tax cut.” New York Times, July 13, 1971, 37.
“Nixon tax plan enacted after major partisan clash.” Congressional Quarterly Almanac, 93rd Cong. 1st
Sess. 1971, 430–31.
42“Value-added tax opposed in a poll.” New York Times, August 27, 1972, 20.
4041  base-broadening measures, Rupert argued that Nixon “signed this bill for the rich”
while increasing his salary and that of Congressmen, effectively “stealing moneyfrom the poor working people [who would now] starve in this country” (Rupert
to Ziegler 1970 RMNL/WHCF/SF/FI). In a letter to the Nixon administration,
John G. Rauch, a tax attorney, argued that TRA69 had attained “a degree of complexity which can only be described as obscene,” forcing taxpayers to comply with
its provisions because it was too complicated to understand (Rauch to Kissinger
1970 RMNL/WHCF/SF/FI). Expressing their dissatisfaction with TRA69, many
middle- and working-class taxpayers, who called themselves “the undersigned petitioners, U.S. citizens and taxpayers,” sent letters in their joint name to request Nixon
to carry out another reform of the federal public finance system. They expressed how
deeply they were “distressed at the disproportionate share of our taxes which go
directly to military and defense-related expenditures while we see our cities deteriorate, our education system inadequately funded, more and more of us on the rolls of
the unemployed and millions of our own people without shelter and starving.” They
also complained that they were nevertheless paying their “taxes under duress” of thefederal tax system that overtaxed “citizens to the point of discouragement or outright
rebellion.” Then, they strongly urged Nixon to consider a complete, immediate reordering of national priorities, warning that they would protest his administration if
he failed (13 Taxpayers to Nixon and Congress of United States of America 1970
RMNL/WHCF/SF/FI; 22 Taxpayers to Nixon 1970 RMNL/WHCF/SF/FI).
These pressures led both Republicans and Democrats to demand more tax cuts
from the Nixon administration for the dissatisfied taxpayers. In July 1971, 13
Democratic Senators asked Nixon to consider moving up the “income tax cuts presently scheduled for 1972 and 1973 [by TRA69] : : : to this year.”40 Nixon agreed tothis requirement. On December 9, 1971, he signed the Revenue Act of 1971, anothertax reduction, into law. The 1971 act accelerated the increases in minimum standard
deduction, personal exemption, and standard deduction that had been scheduled totake effect in 1972 and 1973. However, half the tax reductions provided by the 1971
act benefitted businesses because of the reintroduction of the investment tax
credit.41
It seems that the pressure from middle- and working-class taxpayers also dissipated the possibility that the Nixon administration would introduce a value-addedtax (VAT) at the federal level. The Nixon administration considered the VAT as a
candidate to partially substitute for local property taxes used to fund public schools.
The necessity of balancing the 1971 fiscal budget was another important reason why
Nixon asked the Treasury Department to craft a comprehensive proposal of the
VAT. However, a 1972 survey by George Gallup reported that among 1,614 adults,
51 percent opposed a national sales tax, 34 percent approved it, and 15 percent had
no opinion.42 Democrats, who opposed the VAT for its regressivity, attempted toforce Nixon to reveal a VAT reform agenda to gain a political advantage in the 1973
election. Although this strategy failed to prevent Nixon’s return to office, in  Tax Expenditures and the Tax Reform Act of 1969 in the United States

Social Science History“Paper says president opposes value-added tax as a danger.” New York Times, November 20, 1972, 25.
As to more details about the attempt of the VAT reform by the Nixon administration, see James (2015:
345–46), Kato (2003: 125–26), and Matusow (1998: 52–55). In terms of revenue collection, VATs represent
the predominant part of a nation’s fiscal revenue among member countries of the Organization for
Economic Cooperation and Development (OECD) that have adopted them. Many existing studies havepointed out that welfare states that have introduced VATs succeeded in providing tolerant direct social
programs and overcoming the backlash against welfare states, even during the so–called neoliberal era,unlike the United States that has largely depended on progressive income taxation. As the most prominent
exception among OECD countries, only the United States has not yet adopted it. See, e.g., Lindert (2004),
Prasad and Deng (2009), Steinmo (1993), and Wilensky (2002).
45
As to Reagan’s three tax reforms, see, e.g., Brownlee (2016) and Steuerle (2008).
43
44  November 1972, his administration resultantly dismissed the VAT reform because
they feared that it “would raise too much revenue too fast” and would lead to a riseof federal spending and the growth of government.43 Unlike West European countries such as France and Germany, or Scandinavian countries, this choice resulted inruling out a measure that would have potentially financed social programs to support the poor and middle-class taxpayers.44
The results of TRA69 and Nixon’s subsequent tax policies seemingly left fewer
choices for most of his successors but to provide tax cuts and tax expenditures tobenefit the public and gain political support from the middle class. While theeconomy faltered in the mid-1970s, the large, unlegislated tax increases for mostindividual taxpayers—the “bracket creep”—pushed not only the wealthy andmiddle-income class but also many lower income individuals into higher tax brackets even though their income had not increased. The growing tax burden madeAmerican citizens hostile toward federal taxing and spending (Michelmore 2012:
1–3, 70–71, 93). The administrations of Gerald Ford and Jimmy Carter in the late1970s expanded the role of tax expenditures as a critical avenue to benefit workingand middle-class families (Biven 2003; Mozumi 2018b; Witte 1985: 179–98). By thelate 1970s, however, a wave of taxpayer revolts had spread across the country in adifferent way than Barr had anticipated: taxpayers demanded tax cuts and maintenance of tax privileges they had received, while arguing for cuts in social expenditures. This movement led to one of largest tax cuts in US history, the Economic
Recovery Tax Act of 1981 (Martin 2008). Later, Ronald Reagan’s tax reforms in
1982, 1984, and 1986 rolled back the expansion of tax expenditures and enhanced
horizontal equity by broadening the tax base.45 However, Bill Clinton’s Taxpayer
Relief Act of 1997 and George W. Bush’s tax cuts in 2001 and 2003 mainly benefitted the wealthy by cutting taxes on capital gains, estates, and gifts. These tax cuts
negated the effects of the tax reforms of 1982, 1984, and 1986 (Brownlee 2016:
210–16; Steuerle 2008: 161–98).
Although the use of tax expenditures has expanded since the 1970s (Howard
1997; McCabe 2018; Pierson 2001), it has also narrowed the tax base, consumed
considerable federal tax revenue available for government expenditures, complicated the federal tax system, benefitted the wealthy rather than low- and middleincome classes, and hidden from the public eye the federal approach to provide
benefits for them (Faricy 2015; Mettler 2011). The complexity of the federal tax system and the regressive distributing effect of tax expenditures have made low- andmiddle-income taxpayers believe that those with superior knowledge of navigating  

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Acknowledgments. I presented the preliminary version of this article at a session of the annual meeting ofSocial Science History Association on November 21, 2019. I am grateful for the comments made by Molly C.
Michelmore as the chair. I would also like to thank the anonymous reviewers of Social Science History.

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John F. Kennedy Library
The Papers of John F. Kennedy, Pre-Presidential Papers (JFKL/JFKPPP)
Taxation Task Force (1960) “Tax policy for 1961.” December 31, Box 1072, File: Taxation Task Force
Report.
Record of Department of Treasury Microfilm Print Outs (JFKL/RDTMPO)
Wallace, Robert A. (1962) “Possible compromise on tax package.” November 19, Roll 40, Folder 2 of 2, File:
Asst. Secy. of Treasury (Rebert A. Wallace), Troika, September–December 1962.
Walter W. Heller Personal Papers (JFKL/WWHPP)
Heller, Walter W. to John F. Kennedy (1962) “Where we stand on budget and tax policy decisions.” June 9,
Box 22, File: Tax Cut 6/62–7/62.
Okun, Arthur to Robert Solow and Joseph Pechman (1961) “Tax meeting of November 24.” November 25,
Box 22, File: Tax Cut 4/61–11/61.
Solow, Robert to Walter W. Heller, Kermit Gordon, and James Tobin (1961) “Tax reform in 1962.” April 24,
Box 22, File: Tax Cut 4/61–11/61.
Surrey, Stanley S. (1961) “Preliminary statement of tax reform program for 1962.” April 22, Box 22, File: Tax
Cut 4/61–11/61.
Lyndon B. Johnson Library, Papers of Henry Fowler (LBJL/PHF)
Bowman, Joseph M. to Stanley S. Surrey (1968) “Tax reform and tax surcharge.” January 19, Folder:
Domestic Taxes: Tax Reform—Problems and Program—1968, Box 111.
Patman, Wright to Lyndon B. Johnson (1967) September 6, Folder: Domestic Taxes: Tax Reform,
1967—Problems and Program, Box 112.

46

Modern scholars of tax history share the view that consent, trust, and legitimacy are crucial to the history of taxation (Buggeln et al. 2017; Daunton 2001; Huerlimann et al. 2018).

  tax loopholes—particularly the wealthy—have avoided their fair share while leading
the middle- and high-income classes to believe that the poor and low-income classes
have received benefits from the federal tax system and social programs withoutworking and paying taxes (Williamson 2017). The invisibility of tax expenditures
has induced the “government–citizen disconnect”—Americans do not recognize
the expanding role of the federal government through tax expenditures, resulting
in their assessment that the government does not work for them (Mettler 2018).
As a result, TRA69 left “tax favoritism,” which has historically redistributed fiscal
resources regressively while exhausting the tax revenues available for government
spending. Thereby, it weakened taxpayer consent to and confidence in the legitimacy of federal taxation as a collective fiscal bargain in which taxpayers surrendertheir financial resources when they believe that taxation fairly reflects the cost of
public goods and treats all taxpayers equally (Levi 1988; Martin et al. 2009;
Steinmo 2018). The undermined taxpayer consent has resulted in the weak extractive capacity and welfare provisions of the American fiscal state.46

  Tax Expenditures and the Tax Reform Act of 1969 in the United States

Social Science History

Surrey, Stanley S. (1967) “Tax reform.” January 31, 1967, Folder: Domestic Taxes: Tax Reform,
1967—Problems and Program, Box 112.
Surrey, Stanley S. to Fowler, Henry H. (1966) “Current tax matters.” January 14, Folder: Domestic Taxes:
Tax Reform, 1967—Problems and Program, Box 112.
Surrey, Stanley S. to Fowler, Henry H. (1967) “Possible tax reform conversation with Mr. Mills.” October 10,
Folder: Domestic Taxes: Tax Reform, 1967—Problems and Program, Box 112.
National Archives, RG 128, Record of Joint Committee of Internal Revenue Taxation (NA/JCIRT)
Sullivan, John M. to John F. Kennedy (1960) November 8, Folder: Tax Revision, 1960, Box 661.

Richard M. Nixon Library, White House Central Files, Subject Files, Finance (RMNL/WHCF/SF/FI)
13 Taxpayers to Richard M. Nixon and Congress of United States of America (1970) April 20, Folder: GEN
FI 11 Taxation [11 of 20, January 1970], Box 62.
22 Taxpayers in Rio, Illinois to Richard M. Nixon (1970) March 30, Folder: GEN FI 11 Taxation [11 of 20,
January 1970], Box 62.
Dent, Harry S. to Richard M. Nixon (1969) August 18, Folder: EX FI 11 Taxation [3 of 18, August–
September 1969], Box 58.
Kennedy, David, Robert P. Mayo, and Paul McCracken to Richard M. Nixon (1969) December 19, Folder:
EX FI 11 Taxation [5 of 18, December 1969], Box 58.
Linn, Jr., Stahle to Richard M. Nixon (1970) January 8, Folder: GEN FI 11 Taxation [11 of 20, January 1970],
Box 62.
Melencamp, Noble M. to Joseph Maciejewski (1970) January 9, Folder: GEN FI 11 Taxation [11 of 20,
January 1970], Box 62.
Rauch, John G. to Henry A. Kissinger (1970) January 16, Folder: GEN FI 11 Taxation [11 of 20, January1970], Box 62.
Reuss, Henry S. to Richard M. Nixon (1970) January 12, Folder: GEN FI 11 Taxation [11 of 20, January1970], Box 62.
Rose, Jonathan to Peter Flanigan (1969) “Possible veto of the tax bill.” December 19, Folder: EX FI 11
Taxation [5 of 18, December 1969], Box 58.
Rupert, Clyde W. to Ronald L. Ziegler (1970) January 14, Folder: GEN FI 11 Taxation [11 of 20, January1970], Box 62.
Walker, Charls E. to Richard M. Nixon (1969) “Elimination of the investment credit.” April 16, Folder: EX
FI 11 Taxation [1 of 18, January–June 1969], Box 57.
Ziegler, Ronald L. to William G. Fink (1970) January 10, Folder: GEN FI 11 Taxation [11 of 20, January1970], Box 62.

  National Archives College Park, RG 56, Office of Tax Policy Subject Files (NACP/OTPSF)
Brannon, Gerald M. (1964) “Statement of treasury policy on tax credits,” March 30, Box 69, Folder #96: Tax
Policy (1964–1965).
Ottinger, Richard L. to Lyndon B. Johnson (1966) June 9, Folder: Tax Reform: 1966–68 Replies to Reform
Proposals Submitted by Congressmen, 1966–1969, Box 68.
Ottinger, Richard L. to Wilbur D. Mills (1966) June 9, Folder: Tax Reform: 1966–68 Replies to Reform
Proposals Submitted by Congressmen, 1966–1969, Box 68.
Scribner, Jr., Fred C. to Mills, Wilbur D. (1959) December 18, Box 68, File Folder #55: Tax Legislative
Programs for 1959–1960, Mills Subcommittee, 1959–1962.
Stockfisch, Jacob A. to Donald I. Lamont (1964) “Answers to questions regarding tax policy” October 2, Box
69, Folder #96: Tax Policy, 1964–1965.
Surrey, Stanley S. to Richard L. Ottinger (1966) June 20, Folder: Tax Reform: 1966–68 Replies to Reform
Proposals Submitted by Congressmen, 1966–1969, Box 68,.
Treasury Department (1964) “A turning point in tax policy.” March 3, Box 69, Folder #96: Tax Policy,
1964–1965.
Treasury Department (1965a) “The function of tax policy.” March 7, Box 69, Folder #96: Tax Policy,
1964–1965.
Treasury Department (1965b) “The role of tax policy in the Great Society.” October 5, Box 69, Folder #96:
Tax Policy, 1964–1965.

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114

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Harvard Law School Library, Historical Special Collection, Stanley S. Surrey Papers (SSSP)
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Social Science History

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Seiichiro Mozumi is associate professor of economics at Yokohama National University, Japan. He specializes in public finance, sociology of public finance, and the history of US public finance. He has published inseveral leading journals, including “The Kennedy–Johnson tax cut of 1964, the defeat of Keynes, and comprehensive tax reform in the United States.” Journal of Policy History 30 (1): 21–61 (2018). He has recently
launched an international collaboration project on the histories of value-added tax.

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118  Cite this article: Mozumi, Seiichiro (2022) “Tax Expenditures and the Tax Reform Act of 1969 in the UnitedStates,” Social Science History 46:93–118. doi:10.1017/ssh.2021.41