Indiana Law Journal

Document Type


Publication Date

Fall 2000

Publication Citation

95 Indiana Law Journal 1233 (2020)


The killing of the income tax has not been open and notorious: such is not the style of contemporary politics. As with other markers of progressive social policy—the promises of universal health care, Obamacare, come to mind6—the income tax is dying a death by stealth, albeit stealth played out in plain view. The plot lines of the tragedy are apparent. The individual “income” tax has been split in two. One tax, for the masses, is a simple, increasingly formless wage tax. This wage/income tax adds higher brackets onto the payroll tax, the model toward which the wage/income tax aims, to form a single “universal wage tax” providing the vast bulk of the government’s revenue. A second tax, which I shall call the “ur-income tax,” persists only for the wealthiest top 1%–5% of the population. This tax, the relics of a true income tax, still nominally taxes wealth—that is, income from capital—in addition to wages, as an “income” tax must in order to be an income tax. But this taxation of wealth as opposed to wages is so porous that it is largely symbolic. Structural features of the tax—loopholes—allow the wealthy to avoid its sting. Congress and the executive branch continue to add rules and regulations to help the wealthy avoid tax.

Indeed, a cynic might suggest that the ur-income tax, the original and future tax that applies to America’s wealthiest, persists only to feed the Wall Street financiers who help their clients avoid paying it and the politicians and lobbyists who benefit whenever tax reform specifically for the wealthy is on the legislative table. For the rest of us, the income tax has died, and we are paying a painful price for its killing. The fate of the income tax correlates closely with an economic-class structure in America that many have begun to notice. For the very top, the 0.1% or so, tax is essentially voluntary due to basic tax planning available for those living off capital alone. For the next tier, what Matthew Stewart has taken to calling the new American aristocracy, the ur-income tax continues to apply, as these citizens have a mix of capital and labor with which to play tax-planning games. For the bottom 90%–95% of the economic scale, however, the income tax is dead, replaced by the formidable and inescapable universal wage tax. This is the tale told in the pages ahead.