Taft’s Anti-Plutocracy Conservatism
How the lesser known conservative trust-buster handled wealth concentration.
The last Democratic presidential primary saw more than the ordinary focus on disparities of wealth and income, alleged by some of the candidates to endanger democracy. The remedies floated for this condition included wealth taxes endorsed by Senators Elizabeth Warren and Bernie Sanders, as well as reversal of the Citizens United decision that allowed indirect political contributions by corporations.
Demands like those of Sanders and Warren are partisan and futile. Wealth taxation cannot be imposed without both a constitutional amendment and a uniform national property assessment system. Mobility of intangible personal property will foster massive evasion. The states have abandoned efforts to impose personal property taxes on intangibles, and such taxes have been a fertile source of corruption in foreign countries.
Sanders and Warren were right, however, when they argued that there must be separation between political and economic power, and there is fear of creation of a permanent rentier class. The ruins of the English monasteries remind us of the rage that can ensue when wealth is too highly concentrated, even in benign objects. It is therefore profitable to consider the reaction of President William Howard Taft to wealth concentration. Taft, largely because of his great bulk, is regarded as the very image of a plutocrat. In fact, he was anything but. His responses to the excesses of his time are worth consideration today.
Taft was violently opposed to government ownership, for three reasons: lack of efficiency, acquisition costs, and excessive power in the federal executive. “Socialism looks to a dead level of life, to an absence of all motives for material progress, to a stagnation in everything; it requires an official tyranny to carry out its system.” Property was “the mainspring of action that has led men to labor, to save, to invent, to increase the production of all human comforts and reduce their cost.” “To compel equality not only of opportunity but of condition and of property” would produce the “least labor, least effort, and least self-sacrifice.” He was to reiterate that “the motive of gain is the only one which will be constant to induce industry, saving, invention and organization. . . Governments are not adapted to do business as are individuals prompted by their gain in economy and efficiency and should not be so burdened.”
But President Taft also believed that “efforts to divide fortunes and to reduce the motive for accumulating them are proper and statesmanlike. It is not safe for the body politic that the power arising from the management of enormous or swollen fortunes should be continued from generation to generation in the hands of a few.” Thus, he wrote that a “federal graduated inheritance tax” would be “a useful means,” one “correct in principle and certain and easy of collection.”
In breaking up large fortunes Taft sought dispersion rather than confiscation, “the gradual effect of a long course of legislation and not…measures having an immediate and radical effect.” The only later use of a federal inheritance rather than estate tax was brief, during the Second New Deal before World War II, though a similar result could be achieved today by exempting small bequests from estates in calculating the federal estate tax. In an era of smaller families, forced heirship, now abandoned in many European countries, no longer operates to dramatically disperse wealth.
Inheritance taxation, Taft believed, “shall enable the State to share largely in the proceeds of such large accumulations of wealth that could hardly have been brought about save through its protection and its aid.” Taft acknowledged that “no State, however bitter against its own rich men, would wish to deprive itself of their residence and of their tax producing quality.” He also urged that the rule against perpetuities be made “much more drastic”; by contrast, some states, notably South Dakota, recently have eliminated it completely for certain trusts, without protest from the Sanders and Warren and their ilk, who have been seriously asleep at the switch, for modification of perpetuities requires federal action.
While President Theodore Roosevelt had initiated and mobilized public support for a trust-busting campaign, it flowered under Taft. The benefits deriving from the breakup of the oil and tobacco trusts and the prevention of a railroad trust are still with us. Roosevelt in his seven years in office instituted 44 antitrust cases; Taft in four years brought 22 civil cases and 45 indictments.
Taft repudiated Roosevelt’s effort to distinguish between “good” and “bad” trusts. His concern about trusts rested on concern for political democracy, not consumer welfare. Taft’s ultimate breach with Theodore Roosevelt was prompted in no small measure by Roosevelt’s famous Osawatomie speech, with its promise of heavy handed and highly discretionary regulation of prices in the meat, oil, coal, and railroad industries. Roosevelt’s approach to antitrust was both less radical and more discretionary than Taft’s. He believed the government should attack “not the mere fact of combination but the evils and wrongdoing which frequently accompany combination.”
Taft’s Supreme Court decisions as chief justice gave further force to the antitrust laws. He held that discovery of corporate documents was not self-incrimination within the meaning of the Fifth Amendment, a decision indispensable to effectiveness of the law. In 1895 he had despairingly observed that: “The nature of corporate wrong is almost wholly beyond the reach of courts especially those of the United States. The corporate miners and sappers of public virtue do not work in the open, but under cover.”
He joined a dissenting opinion that would have upheld the Federal Trade Commission’s authority to order the divestiture of stock, holding that section 7 of the Clayton Act applied to acts before the institution of suit. He joined the foundational case declaring horizontal price fixing to be a per se violation of the antitrust laws. He denied the right of a company to challenge an FTC investigation before the bringing of an enforcement action.
In late 1911, he called on Congress to “describe and denounce methods of competition which are unfair…underselling at a price unprofitable. . . the making of exclusive contracts with customers under which they are required to give up association with other manufacturers.”
In justifying the antitrust campaign, Taft declared:
Did it not stop for all time the then powerful movement toward the control of all the railroads of the country in a single hand? [Antitrust] must be enforced unless we are to banish individualism from all business and reduce it to one common system of regulation or control of prices like that which now prevails with respect to public utilities.
It was Taft’s antitrust militancy that led the left-wing historian Gabriel Kolko to observe: “only William Howard Taft tampered slightly with the orderly synthesis of big business needs and national reform that characterized the unity of politics and economics that some call ‘progressivism’ but which, more precisely, should be termed ‘political capitalism.’”
In his book Liberty under Law, Taft declared of the situation at the turn of the century: “the politics of the country bid fair to pass into corporate control. Presidential campaigns were largely conducted on contributions from great corporations.” Taft supported prohibition of corporate contributions and would not have rejoiced in Citizens United, nor in the Supreme Court’s invalidation of limits on candidates’ contributions that has given us Trump, Steyer, and Bloomberg.
At a time when Pollock v. Farmers’ Loan barred a federal income tax, Taft was not opposed to an income tax but thought that it should come about by constitutional amendment. He considered it to be “undoubtedly a power the National Government ought to have. It might be indispensable to the nation’s life in great crises.” But he was prescient in noting that an income tax “puts a premium on perjury,” while noting that other governments “impose the tax where possible on the source of income in the hands of those who are not ultimately to pay it,” anticipating by 30 years the plan for tax withholding devised by Beardsley Ruml during the Second World War, which has not yet been extended to interest, dividends, and rents.
Taft also introduced the corporate income tax, which he described as an excise tax on the privilege of using the corporate form, “a long step toward that supervisory control of corporations which may prevent a further abuse of power.” He argued that the “publicity feature of the law makes the law of special value. For it is not going to be a great revenue-raising measure.” He also sought to curb corporate abuses by having the government accumulate and publish corporate tax returns and favored requiring larger corporations to be federally incorporated and restricted from mergers and stock watering: “a means of changing the character, organization and extent of their business into one within the limits of law securing compliance with the antitrust statute.”
Taft sought a reduced tariff and obtained one. He also favored institutionalized sharing, on what is now the German and French models, of income and sales taxes: “The tax system could be greatly improved if there were a coordinated system agreed to by the federal government and the states. The state is not equipped to collect income taxes or intangible taxes adequately. It might well be agreed that a proportion be turned over to the states.”
Taft’s son Robert followed in the big man’s footsteps. In 1943, Robert Taft was an advocate of drastically increased taxation during wartime: “I am all in favour of taxing the rich up to the limit,” he said. I believe that those with incomes in the past of $100,000 or more must look forward to living on not more than half the amount they have formerly enjoyed.” He also saw inheritance taxes as fulfilling their purpose. “The policies of inheritance taxation are rapidly cutting down on large fortunes and I think that in America there is plenty of evidence that the old maxim still prevails ‘from shirtsleeves to shirtsleeves in three generations.’”
What Robert Taft and his father would have thought about “carried equity” and the massive commissions paid to hedge fund managers by state and local pension funds can well be imagined. “There were too many people rich beyond their deserts,” he wrote. “I thoroughly approve of the New Deal measures to prevent fraud and sharp practices through the sale of securities which was one of the principal methods of acquiring undeserved wealth.”
It would be an understatement to say that Taft conservatism bears little resemblance to that now current.
George Liebmann is the author of numerous works on law and history, most recently Vox Clamantis In Deserto: An Iconoclast Looks At Four Failed Administrations (Amazon 2021) and America’s Political Inventors: The Lost Art of Legislation (Bloomsbury 2019).