Best Way to Revamp Income Tax Might Be a Do-Over

A 1917 World Series Program, featuring President Woodrow Wilson on the cover, sold for $4,800 at a May 2017 Heritage auction.

By Jim O’Neal

In 1912, after 16 years in the wilderness, Democrats seized control of Congress and the White House, with Woodrow Wilson as their leader. To their disappointment, the new president kept celebrations to a minimum. He delivered a brief inaugural address on March 4, 1913, canceled the inaugural ball, and reviewed the parade with stoic forbearance. This is not a day of triumph, he declared, but a day of dedication. And it was a day to muster the forces of humanity, not the forces of party.

Wilson went on to produce the greatest outpouring of social legislation Americans had ever experienced, during a brief period when the ruling class would use Hamiltonian means of a strong federal government to bring about Jeffersonian ideals of egalitarianism. His presidency would transform the American banking and currency system, create new industrial and farm policies, and expand the protection of America’s natural resources. But the first accomplishment was lowering tariffs and enacting an income tax – reforms aimed directly at middle-class pocketbooks.

Wilson and his associates sincerely believed that the federal government needed to serve as a counterweight to corporate wealth and an aggressive agent to help ordinary citizens. Wilson’s legacy is often cited as a fateful turning point when “do-gooders” harnessed the income tax to both raise revenues to grow government and to redistribute the wealth of Americans in a way they viewed as more fair. Yet at the outset, no one could foresee that war, not social justice, would start an inexorable rise in taxes that would thwart all the moral absolutism dreamed about.

Starting the day after his inauguration, Wilson called Congress into an extraordinary session for a historic assault on the tariff system by delivering his message personally in the first presidential appearance inside the Capitol since the days of President Jefferson. Although he recognized the challenge he faced due to conservative committee barons who dominated Congress, despite being Democrats, Wilson stood with his progressives and intended to use his executive power to the fullest. By September, the Senate actually passed a tariff bill that helped consumers … a historical first.

However, there was the small issue of how to plug the $100 million loss of revenue that was created. And so we now meet the federal income tax, which turned employers into tax collectors. New York’s The Sun summed up the opposition by arguing that income taxes were repugnant except in times of great national emergency and charged “it amounted to taxation of the few for the benefit of the many.” Advocates claimed it was merely a way to tap the “surplus” income of the rich – “over and above the amount necessary for good living.”

On May 8, 1913, the House approved the first income tax that would actually take effect since 1872, when Congress repealed Civil War-era taxes. But the Senate disagreed, with some senators opposing the “confiscation of property under the guise of taxation” and others saying “No honest man can make war upon great fortunes per se.” The war of words continued until a law was passed that affected fewer than 4 percent of Americans, with working-class people virtually excluded. A 1 percent rate on $20,000-$50,000 graduated up to 6 percent on $500,000 and above. There was also a 1 percent flat tax on corporations.

After two years, everyone seemed angry at Wilson for doing either too much or too little. Feeling besieged, he entertained a fantasy of putting on a beard and sneaking out of the White House prison, or putting a sign in front of his office: “Don’t shoot! He’s doing his best.” The reform agenda was mobilizing to act when…

In June, a shot rang out at Sarajevo.

World War I would eventually cost the United States $50 billion and the federal budget grew from $742 million in 1916 to nearly $14 billion in 1918. Excise taxes and tariffs had been providing 90 percent of federal revenue and this was limited. What to do?

Thus started the long story of the U.S. income tax, which at one point grew to 90 percent and has become so complex not even the IRS knows with certainty what lurks on all 50,000 pages of highly technical jargon (or even if 50,000 pages is accurate!). It grows each day … as does the debt that is back in the news.

My recommendation to President Trump is to simply start over, since every effort to reform only adds more pages and complexity. Take a blank piece of paper and write down “Need 18 to 20 percent of GDP to run federal government. Question: What is the best way to get this money and do the least damage in the process?” Answer: Find three smart people to figure it out, then just do it … fast.

Intelligent Collector blogger JIM O’NEAL is an avid collector and history buff. He is president and CEO of Frito-Lay International [retired] and earlier served as chair and CEO of PepsiCo Restaurants International [KFC Pizza Hut and Taco Bell].

Marie Antoinette Swept Away by Conditions that Rocked European Landscape

An oil on canvas of Marie Antoinette, after Elisabeth Louise Vigée-Lebrun (1755-1842), realized $10,755 at a November 2010 auction.

By Jim O’Neal

It is hard to ignore the significance of July 14, despite my previous recap of the key events that took place in Paris over 200 years ago when revolutionaries and mutinous troops stormed the Bastille, the royal fortress and prison (with only seven inmates) that symbolized the tyranny of monarchy. It was an event that degenerated into a chaotic bloodbath, but shaped modern nations by exhibiting the power inherent in the will of the common man.

However, I felt a tinge of sympathy for President Donald Trump when I saw pictures of him at dinner last week at the Eiffel Tower (at the Jules Verne restaurant). There is nothing quite so boring as a three-plus-hour dinner at a Michelin-starred French restaurant. I also presume that with President Emmanuel Macron playing host, the kitchen really exaggerated the occasion since he appears to share the classic pomp and monarchical tendencies that got his predecessors in trouble.

This especially includes the last Queen of France, Marie Antoinette, the 14-year-old Austrian princess who had the misfortune of wedding the last King of France, Louis XVI, since they both got their heads chopped off. Their marriage was intended to seal the alliance between longtime enemies Austria and France, following the end of the Seven Years’ War.

Marie Antoinette was born in 1755 in Vienna, Austria, the daughter of the Holy Roman Emperor Francis I and Maria Theresa, the powerful Habsburg Empress. The teen bride-to-be had been delivered to the French on May 7, 1770, and then escorted to the Palace of Versailles, where she met her husband-to-be, Dauphin Louis-Auguste, a 15-year-old boy with a medical condition that rendered him impotent for several years. Eventually, the couple had four children.

The king lost his head on Jan. 21, 1793. Nine months later, a Revolutionary Tribunal found the queen guilty of treason, sexual promiscuity and a phony charge of having incestuous relations with her son Louis-Charles. The trial lasted two days and the tribunal unanimously condemned her to death. On Oct. 16, 1793, the executioner entered her cell wearing a red hood; he sheared off her hair to ensure a quick, clean cut of the guillotine blade.

He then lopped off her head as a boisterous crowd watched and cheered “Vive la nation!”

The 37-year-old queen has long been wrongly charged of responding “Let them eat cake” when told of starving peasants with no bread to eat. Some credit the phrase to philosopher Jean-Jacque Rousseau. I doubt she resents this final insult, but it does represent the conditions that fueled the revolution that rocked the European landscape in general.

Intelligent Collector blogger JIM O’NEAL is an avid collector and history buff. He is president and CEO of Frito-Lay International [retired] and earlier served as chair and CEO of PepsiCo Restaurants International [KFC Pizza Hut and Taco Bell].

Julius Caesar Still Influencing Culture 2,000 Years Later

Many Romans in 44 B.C. must have been stunned to see the image of Julius Caesar stamped on newly issued silver denarii. This example sold for $57,500 at a September 2011 Heritage auction.

By Jim O’Neal

Rome, “The Eternal City,” began as a cluster of small villages on seven hills by the River Tiber and grew into a city-state. According to legend, it was first ruled by kings, who were overthrown, before becoming a republic. A new constitution allowed the election of two senators to run the state. Their terms were limited to one year, as the office of king was prohibited.

It became remarkably successful between 500 and 300 B.C., extending its power through conquest and diplomacy until it encompassed the whole of Italy. By 120 B.C., Rome dominated parts of North Africa, the Iberian Peninsula, Greece and Southern France. The conquered territories were organized into provinces ruled by short-term governors who maintained order and ensured the collection of taxes.

By the 1st century B.C., Rome was a Mediterranean superpower, yet its long tradition of collective government, in which no individual could gain much control, was challenged by the personal ambitions of a few immensely powerful military men. A series of civil wars and unrest culminated in the dictatorship of Julius Caesar, a brilliant general and statesman.

Gaius Julius Caesar was born in Rome in 100 B.C. to a family of distinguished ancestry. From an early age, he grasped that money was the key to power in a political system that had become hopelessly corrupt. He also learned that forging a network of alliances and patronage would be crucial to his success.

After serving in the war to crush the slave revolt led by Spartacus, he returned to Rome in 60 B.C. and spent vast sums of money buying influence and positions. Eventually, he teamed up with two other powerful Romans, Crassus and Pompey, to form the First Triumvirate. Then Caesar was first consul and two years later, governor of Gaul, which gave him a springboard to true military glory.

Over the next eight years, he conquered Gaul, bringing the whole of France, parts of Germany, and Belgium under his personal rule. Buoyed by his achievements, he then tried to dictate the terms for returning to Rome. Roman laws required military leaders to relinquish control of their armies before returning to Rome, a prerequisite for running for public office.

When Caesar refused, the Roman Senate declared him hostis (public enemy) and then came the unthinkable: He decided to march his army on Rome! En route, he paused at the border between the Gallic provinces and Italy proper … a small river called the Rubicon. Acutely aware that crossing that river would constitute a declaration of war, he announced “alea iacta est” (the die is cast) and led his army forward, telling them, “Even yet we may draw back, but once across that little bridge, and the whole issue is with the sword.”

“Crossing the Rubicon” is still in vogue today and represents making a difficult decision that cannot be reversed once taken.

Obviously, Caesar won the ensuing civil war, but soon a conspiracy developed with 60 senators planning to assassinate him on March 15, 44 B.C. (the infamous “Ides of March”). What is curious is that even after more than 2,000 years, we find Caesar references so often. The latest is the flap over a play in NYC’s Central Park, Julius Caesar, in which the title character bears a not-so-subtle resemblance to President Trump, with The New York Times questioning whether he can survive living in Caesar’s Palace.

Et tu, Brute?

Intelligent Collector blogger JIM O’NEAL is an avid collector and history buff. He is president and CEO of Frito-Lay International [retired] and earlier served as chair and CEO of PepsiCo Restaurants International [KFC Pizza Hut and Taco Bell].

Only Four Presidents Never Appointed a Supreme Court Justice

An 1840 silk banner depicting William Henry Harrison realized $33,460 at a May 2010 Heritage auction.

By Jim O’Neal

When Donald Trump’s appointee fills the Supreme Court vacancy created by the death of Justice Antonin Scalia, the chief executive will escape from a small group of presidents who did not appoint a single nominee confirmed by the Senate. Trump’s pick will join the other 117 justices, 17 chief justices and four women who have served on the court.

Presidents without a Supreme Court appointee:

  • William Henry Harrison (1841) – Died only 31 days after being inaugurated.
  • Zachary Taylor (1849-50) – Died 16 months after inauguration.
  • Andrew Johnson (1865-69) – Victim of a hostile Congress that blocked several nominees.
  • Jimmy Carter (1977-81) – The only president to serve a full term with no vacancies during his four years in office.

It seems clear that the Founding Fathers did not spend a lot of time considering the importance of the Supreme Court as an equal branch of government. That would come later during the tenure of Chief Justice John Marshall, who many credit with providing the balance to ensure that our fragile democracy survived.

One example is there are no legal or constitutional requirements for a federal judgeship. There does exist an unwritten prerequisite to have practiced law or to have been a member of the bar, but it is not mandatory. As a matter of historical record, no non-lawyer has ever been a member of the Supreme Court – and it is a virtual certainty that none ever will.

And, although the methodology for judicial appointments was subject to intense debate, the criteria for such appointments was apparently not a matter of significance. Those few delegates who did raise the issue of criteria did so by assuming merit over favoritism. Congress also did not foresee the role political parties would very soon come to play in the appointment and confirmation process.

Only John Adams clearly anticipated the rise of political parties but, of course, he was not a member of the Constitutional Committee. He summarized it rather well: “Partisan considerations, rather than the fitness of the nominees, will often be the controlling consideration of the Senate in passing on nominations.”

I suspect they would all be disappointed by the dramatic, partisan “gotcha” grilling that nominees face today.

Personally, I would prefer the old process the Scots used to select Supreme Court justices. The nominations came from the lawyers, who invariably selected the most successful and talented members of the legal community. This effectively eliminated their most fierce competition, which then allowed them to solicit their best customers. The court would then truly be assured of getting the best-of-the best, while the profession competed for clientele.

Intelligent Collector blogger JIM O’NEAL is an avid collector and history buff. He is president and CEO of Frito-Lay International [retired] and earlier served as chairman and CEO of PepsiCo Restaurants International [KFC Pizza Hut and Taco Bell].

Teddy Roosevelt Brought Vim, Vigor and Vitality to the White House

theodore-roosevelt-exceptionally-rare-type-of-equality-button
Teddy Roosevelt political pins often illustrated the theme of “equality,” inspired by Booker T. Washington’s visit to the White House. This rare variant sold for nearly $9,000 at a November 2009 Heritage auction.

By Jim O’Neal

During his first year as president, Teddy Roosevelt left the White House as he had found it. But when the Roosevelts and their six lively children moved in, it had become obvious that there was insufficient room for both governmental offices and a family home. This prompted a complete remodeling, the first in nearly 100 years. Leading architects designed a new West Wing of executive offices that was joined to the main building by a colonnade. The second floor of the main building had the offices replaced by private bedrooms, sitting rooms and playrooms for the presidential family.

Like John Tyler, Millard Fillmore, Andrew Johnson and Grover Cleveland, Roosevelt had not been sent by the voters to live in the White House, having moved in only after the death of an elected president. He knew he lacked the public and party power to support the new international presidency that President William McKinley developed, yet he was destined to dramatize it to the world.

Born in 1858, he is (surprisingly) the only president born in New York City. The first new president of the 20th century and the youngest man to ever hold the office, he brought a vim, vigor and vitality to the White House that swept away any lingering cobwebs of the 19th century. Later, elected in his own right, Roosevelt began to act with an even bolder style than before. In his annual message to Congress in December 1904, he announced an expansion of the concept of the Monroe Doctrine that became known as the Roosevelt Corollary.

The Russo-Japanese War had been going on for more than a year when TR began efforts in 1905 as a mediator. He succeeded in getting the two nations to sign a peace pact in Portsmouth, N.H. On Dec. 10, 1906, he became the first American to win the Nobel Peace Prize.

One of the first controversial issues had occurred during his first year in office on October 16 when he held a “family supper.” Among the invited guests was the great educator Booker T. Washington, whose biography, Up From Slavery, was being widely read. The press reaction was instantaneous; this dinner guest was the hottest news since the McKinley assassination.

“Probably The First Negro Ever Entertained at the White House” screamed the headlines of the Atlanta newspaper, and many others were also harsh in their criticism. No African-American received a special invitation to the WH for many years.

It seems exquisitely delicious and ironic that a black family has had their “family meals” in the same White House over the past 2,800-plus nights and, importantly, anyone of any race is only there by their special invitation!

Things do change.

Jim O'NielIntelligent Collector blogger JIM O’NEAL is an avid collector and history buff. He is President and CEO of Frito-Lay International [retired] and earlier served as Chairman and CEO of PepsiCo Restaurants International [KFC Pizza Hut and Taco Bell].

Today’s Political Schisms Would Not Surprise George Washington

A painting by Jeremiah Paul Jr. (d. 1820) depicting George Washington taking leave of his family as he assumes command of U.S. forces during the “quasi-war” with France in 1798, realized $47,500 at a May 2015 Heritage auction.

By Jim O’Neal

George Washington was a staunch opponent of political parties due to the corrosive effect he (strongly) believed they would have on all levels of government.

As president, Washington worked hard to maintain a non-partisan political agenda, despite significant differences that existed right in his cabinet.

His 1796 farewell address was replete with advice to the country, and by extension, to future leaders. One prominent warning was to avoid the formation of political factions that would pose a danger to the effectiveness of government (think gridlock in Washington, D.C.). A second peril was entanglements with foreign governments, since they inevitably lead to war. The examples here start with the War of 1812, two World Wars, Korea, Vietnam and end with the Russian threats to NATO, the China Sea and the remarkably complex situation in the Middle East and North Korea.

After Washington’s retirement, John Adams and Alexander Hamilton ignored his sage advice and wasted little time confronting the Democratic-Republicans, headed by Thomas Jefferson and James Madison. Adams became the first (and last) Federalist president. He was easily defeated in 1800, after one term, by Jefferson and Aaron Burr. Adams finished a dismal third and the Federalists gradually faded into irrelevance.

The Democratic-Republicans put together a nice run of three Virginia presidents – Jefferson, Madison and James Monroe – however, the party lacked a strong center and split four ways. Next was an alliance between John Quincy Adams and Henry Clay of the National Republican Party, which only won a single election in 1824 that required the House to settle. When Andrew Jackson defeated Clay in 1832, the party was absorbed into the Whigs … a diverse group of anti-Jackson politicos.

Then the Whig Party fell apart in the 1850s over the issue of the expansion of slavery in the new territories. In fact, after the 1854 election, the largest party in the House of Representatives was the Opposition Party, with 100 members, followed by 83 Democrats and 51 American Party members (the Know Nothings).

These parties never seem to last long (thankfully).

Next it was the New Republican Party’s turn (the Party of Lincoln) until another major kerfuffle occurred in 1912 when Teddy Roosevelt and President William Howard Taft managed to divide the Republican Party enough to let Democrat Woodrow Wilson win the White House … until he had a stroke and his wife took over.

A century later, we appear to be in another political schism, with a socialist, Senator Bernie Sanders, on the Democrat Party side and on the other, Donald “The Wall” Trump, who claims to have part of the Republican Party supporting him. It is not clear which part.

Only one thing seems certain. Thanks to President Washington, we were warned!

P.S. As history teaches … this too shall pass.

Jim O'NielIntelligent Collector blogger JIM O’NEAL is an avid collector and history buff. He is President and CEO of Frito-Lay International [retired] and earlier served as Chairman and CEO of PepsiCo Restaurants International [KFC Pizza Hut and Taco Bell].

Edward Bernays’ ‘Torches of Freedom’ Stunt Still Reverberates Today

Lucky Strike recruited Carole Lombard for this 1937 magazine advertisement.

By Jim O’Neal

Donald Trump continues to baffle the political pundits who sincerely believed his presidential campaign was a “stunt” that would fizzle out once the media buzz stopped. However, he is still dominating the polls and has demonstrated what a remarkable campaigner he is. With the first primary elections only a few weeks away, we will have a chance to find out if it translates into votes.

Only time will tell, but it brings back memories of Edward L. Bernays, who many believe was the father of Public Relations, Spin, PR and other euphemisms.

He was born in 1891 in Vienna. The family came to the United States in 1892. He graduated from Cornell and then started his business … Edward L. Bernays Public Relations in New York. His clients included Procter & Gamble, General Electric, General Motors, Time, CBS and NBC.

One of his most memorable campaigns was for the American Tobacco Company, the largest in the industry. In 1929, their No. 1 seller was Lucky Strike, and it was a big hit … with men.

A major issue was that most women did not smoke. One brilliant insight was that male taboos on women smoking had convinced women that smoking was unladylike.

So Eddie concocted an elaborate event that involved recruiting a bevy of beautiful women to participate in an event called “The Torches of Freedom Parade.” On Easter Sunday 1929, right on cue, a dozen of these elegant women … lit up a cigarette and marched down 5th Avenue holding “Torches of Freedom.”

The next day, virtually every newspaper in America had a picture of them with cigarettes dangling from their mouths or in their hands. After this historic event, women started lighting up more than ever before.

Bernays had created this event as “news” and then proceeded to convince industries that news, not advertising, was the best medium to carry their message to an unsuspecting public.

Eddie Bernays had a long career that included many similar strategies. He died in 1995 at age 105.

Women have not fared so well.

Lung cancer is now the leading cause of cancer death in women and surpassed breast cancer in 1987… 28 years ago. Every five minutes in the United States, a woman is diagnosed with lung cancer and 72,000 will die in 2015.

“You’ve come a long way, baby.”

Virginia Slims brand was introduced in 1968 and marketed to young, professional women.

Addendumb (not a typo):

► Chinese men now smoke more than one-third of all the world’s cigarettes.

► One-third of all young Chinese men will die from the effects of smoking (not smog)

► By 2050, 3 million of these men will die annually.

► Only 1 percent of middle-age Chinese women smoke, but there are SHARP increases in teenage girls.

“You have a long way to go, baby.”

Jim O'NielIntelligent Collector blogger JIM O’NEAL is an avid collector and history buff. He is President and CEO of Frito-Lay International [retired] and earlier served as Chairman and CEO of PepsiCo Restaurants International [KFC Pizza Hut and Taco Bell].