Randolph Evernghim Paul, a tax attorney in the beginning of the 20th century, was known as one of the “architects of the modern tax system.” A common name among tax lawyers, Paul would change the landscape of taxation with his extensive knowledge and experienced gained within the far reaches of tax law. Living and dying within the intricacies of tax law, Randolph Paul—a tax lawyer, a prominent tax law professor, and an advisor to President Roosevelt—was undeniably influential in the birth of the tax system American citizens are familiar with today.
Paul began his distinguished career in a rather inconspicuous way—as the switchboard operator at a New York law firm. Although he had already graduated from law school, Paul demonstrated a work ethic that would carry him through the years and into prominence in the eyes of tax lawyers. There are not many tax lawyers today who would accept such a lowly position, but this did not faze a man who would become esteemed by those very tax lawyers in the years to come. After working at the switchboard for five years, Paul accepted a position with a tax law specialist, one of New York’s tax lawyers by the name of George E. Holmes. It was there that the young attorney found a passion for tax law, and for the next two decades, he dedicated himself to learning all he could about taxation. It would only be a few years before he joined the ranks of noted tax lawyers.
After working in conjunction with Holmes as tax lawyers, Paul decided to open a tax law practice of his own, Lynn, Paul & Havens. After working with other tax lawyers of his choosing in private practice, Mr. Paul joined the firm Lord, Day, & Lord. Before his time in public service for the Roosevelt administration, Paul served unofficially as an advisory to the Treasury in the last years of the 1930’s. He was offered an official position as the assistant secretary for tax policy, but he declined the appointment, stating that he would rather remain among privately practicing tax lawyers.
His perspective changed though, along with that of the nation as a whole, that fateful day of the attack on Pearl Harbor. As Americans looked for ways to assist in the war effort, Paul decided to do his part, accepting a job as special assistant to the U.S. Secretary of the Treasury at the time, Henry Morgenthau. A few months later, Paul accepted the appointment of general counsel for the Treasury; his experience working closely with tax lawyers would profit him greatly in a time of great economic change.
During World War II, after having worked with tax lawyers in private practice, Mr. Paul served at this post, Treasury general counsel. It is during this time that Mr. Paul transformed the income tax from a tax that would reach only the poor to a tax that included middle class Americans. Throughout his tenure in the Roosevelt administration, Paul was undeniably one of the most influential proponents of Keynesian economics. He argued without hesitation that taxes could be and should be used as a regulatory tool for the United States economy.
In the midst of the war, the Treasury scrambled to find additional revenue to pay for the war efforts. For Paul, with his extensive taxation background among tax lawyers, part of the solution lay in the income tax. From his perspective, a broader tax would bring increased revenues in the most equitable manner, asking the nation as a whole to pay for the war efforts. While he was a proponent of a far-reaching income tax, Paul was an opponent of a nationwide sales tax. He was firm in his belief that such a tax would be “unjust, unwise, and unworkable.” It was the regressive nature of the tax that he feared, remarking to lawmakers that the tax burden would fall most heavily on the poor.
There were many who disagreed with his perspective sales tax. Many business owners, lawmakers, and even other tax lawyers saw a sales tax as a way to raise revenue in large amounts, and very quickly. Paul was quick to point out that such a tax had its disadvantages, as it would negate any revenue gains with exemptions that such a tax would necessitate. The key, Paul would consistently remark, was in raising individual and corporate income tax. Any naysayers regarding this opinion would have to infiltrate the circles of tax lawyers who understood what an impact the influx of tax revenue would mean to the government.
In 1942, on the advice of Paul and other income tax proponents, President Roosevelt asked Congress for a dramatically expanded income tax, which would make the tax reach millions of more Americans in the middle class. This expansion of the income tax also saw the birth of another taxation tool: withholding. From that time, withholding became a part of the system; wages and salaries became subject to this aspect of the system that Paul saw as an enforcement necessity.
When it came to the war, the economic effect that Paul and other tax lawyers feared the most was inflation. He saw it as inevitability, with the majority of production efforts being focused on producing the weapons and other necessities to sustain a war of that scale. The income, which he predicted would swell during the time of war, would demand goods that would be low in supply as consumer good production decreased.
Paul was not the only one within the presidential administration that worried about inflation. Other policymakers put wage and price controls into place, but Paul believed that, once again, taxes were the best way to combat this economic disarray. In his own words, Paul said that “Price ceilings and wage controls, by themselves, will check but not halt, the upward course of prices.”
In addition to working with tax lawyers and advising the Roosevelt administration on tax matters, Paul also served as the director of the New York Federal Reserve Bank. He worked closely with Beardsley Ruml, though they disagreed on a number of taxation aspects. Ruml was a leading figure when it came to the debate regarding the new withholding aspect to taxation and the way that tax collection was being conducted. He proposed that the government forgive a year’s worth of tax payments in an effort to ease taxpayers into the pay-as-you-go taxation. Paul, always the advocate of equality among tax lawyers in the reaches of taxation, opposed the idea as a way to give wealthy taxpayers a break.
When he left service in the Roosevelt administration, Paul returned to private practice, organizing Paul, Weiss, Rifkin, Wharton & Garrison. The firm, which employed enough tax lawyers to have its own tax section, served high profile clients like Henry Ford, Standard Oil, and General Motors.
Randolph Paul died as he lived, within the reaches of tax law. While he was testifying in front of a congressional committee, as he outlined his complaints about President Eisenhower’s tax policy, suddenly slumped over in his chair. He was pronounced shortly afterward. People reached across the aisle to eulogize Paul. His influence shaped the landscape of taxation law for tax lawyers, policymakers, and taxpayers for decades to come.
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