FROM TAX COLLECTOR TO FISCAL PANOPTICON: A SOCIAL HISTORY OF A CENTURY OF FEDERAL INCOME TAXATION

Author: Eric A. San Juan

At the current juncture of fiscal uncertainty and pending tax reform, this Article offers an historical perspective by setting taxation in the context of demographic trends.  The Article divides the last century of Federal income taxation legislatively into four periods from enactment in 1913, to codification in 1939, recodification in 1954, and recodification with reform in 1986.  In the first quarter-century, income taxation largely applied to wealthy, white merchants, doctors, and lawyers, who dealt with their Collectors, who in turn were locally prominent political appointees.  All this changed during the second phase, when World War II transformed the income tax into a mass revenue generator, popularized by the Treasury.  Meanwhile, the patronage appointment system proved prone to corruption.  In 1952, an Internal Revenue Service (IRS) reorganization marked a shift from local Collectors to centralized tax administration.  Automation became a priority, despite a tragic failure of technology and management in 1985.  Notwithstanding reform in 1986, the tax law became more and more complex, especially due to tax expenditures that effectively charged the tax collector with socio-economic benefit administration.  That is, the IRS effectuated disbursement, through tax rebates and refundable credits.  Boasting that it had become “the world’s largest financial institution,” the IRS had the job of scanning sensitive information of hundreds of millions of persons, both those who paid tax and those who didn’t.  In the electronic age, the IRS has become a fiscal panopticon. 

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