| The helplessness of American state governments in the face of an expanding national economy is a common theme in the historical and legal literature on the early twentieth century---namely, that the rise of the American national economy sounded the death knell for the economic power of the states. The changing relationship of the state to the corporation was a telling example. Just as multinational corporations are said to undermine the power of nation-states today, so multistate corporations were alleged to be the agents of the decay of the power of American states. In brief, state competition for corporate business led to the liberation of corporations from state control---a phenomenon known as "racing to the bottom"---even though state governments remained the de facto creators of corporations through the chartering power. State boundary lines became anachronisms, relics of an era when business operations rarely extended beyond a state's boundaries, increasingly invisible in an economy of increasingly national scale and scope.;My dissertation investigates a counter-example to this conventional narrative: State governments' expansion and diversification of their powers of taxation. During an era in which the states were apparently receding in importance, yielding power and authority to the national government, American taxation underwent a renaissance in which the states were among the main architects. During a time when states allegedly were becoming mere appendices to the federal system, these same states were revamping their tax machinery in order to ensure a steady stream of revenue for their operations and development. Thus, instead of succumbing to de facto unitary government, state governments were, in effect, reinventing federalism---an economy of increasingly national scope and scale created, ironically enough, a fiscal system in which old divisions of authority reasserted themselves. The history of taxation in the early twentieth century is the beginning of the history of modern fiscal federalism in the United States. |
