Hans F. Sennholz, “Tax and Tax” (1968)

Hans F. Sennholz’s “Tax and Tax” responds to Treasury Secretary Henry Fowler’s September 1968 tax-reform proposals. Sennholz first summarizes Fowler’s agenda—exempt the poor, tax high incomes sheltered by preferences, reconsider estate and gift taxes, and curb tourists’ foreign spending in connection with “special drawing rights”—then recasts it as a program of redistribution and compulsion. The essay’s thesis is that tax reform presented as compassion for the poor would damage the capital formation, federal balance, property rights, and freedom of movement on which general prosperity depends.

“the immediate task is to provide for continuity of proven policies.”

This Fowler phrase lets Sennholz identify “reform” with Great Society continuity. He treats the program as more than lame-duck politics because it expresses the ambitions of American “Liberals” and pressure groups. The pivotal sentence turns taxation from revenue device into engine of social transformation:

Taxing Peter to pay Paul has become a respectable way of life with countless pressure groups and their vociferous spokesmen in Congress.

Sennholz’s main conceptual move is to redefine “the rich.” Against Fowler’s picture of affluent taxpayers who use preferences to avoid contribution, he presents them as businessmen and investors whose saving sustains jobs and wages. Thus taxing high incomes is not merely redistribution from private luxury to public need; it is a levy on the productive fund that makes work available to the poor.

After all, taxes imposed on the rich are taxes on economic production, like the corporate income tax and many other business taxes.

The intended paradox is central: policies justified by concern for the poor “would only aggravate the plight of the poor.” Capital consumed by taxation cannot build “factories and stores, shops and other business establishments.” Sennholz therefore makes investment, not transfer, the condition of rising wages and improved living standards.

His next target is Fowler’s proposal to tax interest on state and municipal securities. Sennholz defends the exemption as an inherited constitutional device preventing fiscal interference between federal and state governments. Under modern federal predominance, he argues, its political meaning has reversed:

in our age of federal preponderance it is working in defense of the states.

What looks like a loophole is, for Sennholz, a shield for local borrowing. If municipal interest is taxed, states and towns either lose access to loan capital or must pay interest high enough to compensate investors after federal taxes. His “Slippery Rock sewer bond” example translates constitutional federalism into ordinary public works: the burden would return to area taxpayers through higher costs for schools, roads, law enforcement, and utilities.

Estate and gift taxes receive the same analysis. Large estates are treated not as hoards but as business capital, and Fowler’s desired “searching review” becomes a threat to private production. Sennholz stresses that confiscation is already severe:

The federal government already expropriates seventy-seven percent of all estates in excess of $10 million

To raise that burden, he says, is either demagoguery or socialism, because it transfers control over productive assets from owners to the state. This is why the article repeatedly treats tax rates as institutional facts, not only fiscal measures: they decide whether private capital can continue to organize production.

The final section turns from property to movement. Fowler’s proposed curb on tourist spending abroad is described as a confiscatory tax that would function like a travel restraint for most citizens and require border searches to enforce it. A financial measure becomes, in Sennholz’s language, a police measure.

It is a manifestation of tyranny.

The essay’s moral frame is supplied by its appeal to Marshall’s warning:

“The power to tax is the power to destroy.”

Sennholz’s relevance lies in the clarity with which he joins economic, constitutional, and civil-libertarian objections to progressive taxation. His closing diagnosis of the Great Society as one that “preaches envy and covetousness” reveals the article’s deepest claim: redistribution is not only inefficient but corrupting, because it makes political conflict over others’ property a governing principle.