[Steve Bank, guest-blogging, June 4, 2008 at 11:49am] Trackbacks
Is Rangel’s Call for a Draft Tax-Driven?

House Ways and Means Chairmen Charlie Rangel has been one of the few politicians to dare call for reinstituting the draft during the current Iraq conflict. A veteran of the Korean War, Rangel has long advocated the draft as a way to supplement the troops in Iraq and elsewhere and to spread the sacrifice more equally. He also has said that it would have kept us out of the war in the first place. Nevertheless, a draft – and in particular a controversial draft – arguably would also serve another purpose: It would help advance Rangel’s tax policies.

One of the recurring themes in the wars discussed in our book, War and Taxes, is the influence of conscription on the rhetoric and reality of wartime taxation. A draft is itself an implicit in-kind tax, but it also serves as a form of moral impetus for the explicit adoption of more direct forms of taxation. During the Civil War, a steeply progressive (for the time) income tax was enacted by the Union close on the heels of the New York City draft riots of 1863 – perhaps the worst riots in American history to that point. Given the ability of the wealthy to avoid service by finding a substitute or paying a $300 commutation fee, the popular perception, as one newspaper declared, was that “the rich are exempt!” Politicians like Representative J.B. Grinnell called for high income tax rates so “that large class whose great care is to safely compound their hundreds of thousands should feel that there is a war and a demand which they have not yet felt on their purses and on their patriotism.”

The link between conscription and targeted income taxes on the rich has been even more explicit in the twentieth century. While the Revenue Act of 1917 was being crafted in World War I, Congress authorized a draft and began registration and conscription in the early summer. This was frequently invoked by proponents of higher income taxes during debates over the Revenue Act. Representative James Collier declared “We are going to conscript the dollars necessary to carry on this war. I believe when we send our young men to the front to bear the brunt of battle those who are beyond fighting age and who will not fall within the selective draft should make no complaints when they are called upon to defray the expenses of the war.” During the Korean War, Truman’s Treasury chief, James Snyder, made a similar statement when he testified before the Senate Finance Committee: “You passed a bill up here to draft boys of 18, to send them to war. I think it is just as important we draft some of the profits to help pay for the expenditures.”

Even though Rangel’s call for a draft seems unlikely to succeed (public opinion is firmly against) – we may be inching toward a de facto draft that already could be influencing tax policy. Recent reports indicate that Army “stop-loss” orders have increased dramatically during the past year. These are involuntary extensions of a soldier’s term of enlistment, often considered a backdoor draft among people who initially volunteered to serve (even though they may have legally agreed to such extensions, under a specified set of circumstances, as part of their terms of enlistment). Over the last five years, 58,300 soldiers have been forced to remain in the service beyond their enlistment term. The practice is apparently unpopular enough that it led to the making of a recent movie, called “Stop-Loss.”

This backdoor draft and the multiple tours of duty for reserves and national guardsmen may have helped to influence the recent House vote to fund veterans’ education benefits through a surtax on incomes in excess of $500,000. Representative Louise Slaughter said "We owe it to them. . . More than 40,000 of them are coming back with life-altering wounds. I don't see how we can do too much for them." The surtax has been dubbed a “Patriot Tax” in language reminiscent of the rhetoric used to sell the “Liberty Bonds” in World War I and the “Victory Tax” in World War II. While the surtax did not survive in the Senate version of the bill, it would not be surprising to see this rhetoric used to push further tax measures if stop-loss orders and other similar actions increase.