Abstract: Corporate Capitalism and the Changing Constitution: The Legal Foundations of the Modern American Fiscal State

Ajay Mehrotra


This paper explores how the turn-of-the-century consolidation of corporate capitalism helped build the legal foundations of the modern American fiscal state. In contrast to the standard accounts of the rise of direct and progressive taxation, which focus almost exclusively on political institutions and actors, this paper analyzes how the great merger movement and the rise of Big Business shaped the development of a nascent conceptual revolution in American public finance. It did so in at least two ways. First, tax reformers capitalized on the social anxieties that accompanied the rise of Big Business to help create the constitutional foundations for a graduated income tax as well the first permanent, peacetime income tax laws. Second, and perhaps more important, the advent of managerial corporate capitalism provided the organizational basis, or what public finance scholars refer to as the "tax handles," for the future growth of the income tax regime. In this paper I chronicle how these two factors contributed to building the foundations of the emerging modern American fiscal state.