Tax policy: to destroy or to create?

"The power to tax involves the power to destroy," wrote Chief Justice John Marshall in the landmark 1803 Marbury v Madison case. His opininion held that the state of Maryland could not use its tax power selectively to destroy the operation of the federally chartered Bank of the United States.

A century and a half later, Alabama tax officials tried to use their authority to destroy the civil rights movement led by Martin Luther King Jr. As a Philadelphia tax lawyer Taxgirl writes :

On February 17, 1960, a warrant was issued for the arrest of civil rights leader Dr. Martin Luther King Jr. on charges of tax evasion. He was accused of allegedly falsifying his Alabama income tax returns for the years 1956 and 1958; he was the only person ever prosecuted under the state’s income tax perjury statute. It seemed like an inevitable victory for the government.

In his autobiography, Dr. King described the trial like this:

This case was tried before an all-white Southern jury. All of the State’s witnesses were white. The judge and the prosecutor were white. The courtroom was segregated. Passions were inflamed. Feelings ran high. The press and other communications media were hostile. Defeat seemed certain, and we in the freedom struggle braced ourselves for the inevitable. There were two men among us who persevered with the conviction that it was possible, in this context, to marshal facts and law and thus win vindication. These men were our lawyers-Negro lawyers from the North: William Ming of Chicago and Hubert Delaney from New York.

And something quite remarkable happened. On May 28, 1960, only after a few hours, Dr. King was acquitted by an all white jury in Montgomery, Alabama.

Dr. King said about his trial:

I am frank to confess that on this occasion I learned that truth and conviction in the hands of a skillful advocate could make what started out as a bigoted, prejudiced jury, choose the path of justice. I cannot help but wish in my heart that the same kind of skill and devotion which Bill Ming and Hubert Delaney accorded to me could be available to thousands of civil rights workers, to thousands of ordinary Negroes, who are every day facing prejudiced courtrooms.

Having overcome that obstacle--and many others--placed in his way, Dr. King was able to continue his leadership of the civil rights movement, which ultimately gave many previously disenfranchised voters access to their voting rights.

One thing has led to another: tomorrow, our country will inaugurate its first African-American President. Other African-Americans now hold a number of high offices, including Charles Rangel, the Chairman of the powerful House Ways and Means Committee in the U.S. Congress, as well as New York Governor David Paterson, Massachusetts Governor Deval Patrick, NYS Senate Democratic Majority Leader Malcolm Smith and California State Assembly Speaker Karen Bass.

The economic challenges now facing President Obama, Ways and Means Chairman Rangel, Governors Paterson and Patrick, Senator Smith, Speaker Bass, and their colleagues of all colors and backgrounds are truly formidable.

Our political leaders are generally in agreement that carefully designed tax policy could be one powerful tool to create solutions to our economic challenges, to create renewed economic prosperity and job growth. The key is to get the details of the design right, so that tax policy can create rather than destroy.