David T. Beito - Taxpayers in Revolt: Tax Resistance During the Great Depression

TAXPAYERS IN REVOLT

Taxpayers in Revolt

Tax Resistance during the Great Depression

David T. Beito

The University of North Carolina Press

Chapel Hill and London

1989 The University of North Carolina Press

All rights reserved

Manufactured in the United States of America

The paper in this book meets the guidelines for permanence and durability of the Committee on Production Guidelines for Book Longevity of the Council on Library Resources.

93 92 91 90 89 5 4 3 2 1

Library of Congress Cataloging-in-Publication Data

Beito, David T.

Taxpayers in revolt: tax resistance during the Great Depression / by David T. Beito.

p. cm.

Bibliography: p.

Includes index.

ISBN 0-8078-1836-4 (alk. paper)

1. Tax collectionUnited StatesHistory, 2. Taxpayer complianceUnited StatesHistory. 3. Depressions1929United States. I. Title. II. Title: Tax resistance during the Great Depression.

To my parents, Rangvald and Doris Beito, with admiration and affection

It is impossible to thank adequately all of the individuals who helped me in preparing this book. At the onset, I would like to express my debt to Allan G. Bogue. His insightful comments and suggestions have greatly enhanced this book on both a stylistic and a conceptual level. Stanley K. Schultz also deserves special praise. He never hesitated to take time out of his busy schedule to offer suggestions and encouragement. James L. Baughman brought home the necessity of putting this work into an historiographical context.

Had it not been for the help of Walter E. Grinder and Leonard P. Liggio, of the Institute for Humane Studies at George Mason University, Fairfax, Virginia, this book might not have been completed. Walter proved instrumental in introducing the manuscript to Paul Betz of the University of North Carolina Press. The Institute awarded me a postdoctoral fellowship to continue my research and rewrite my dissertation for publication. The enthusiastic support and comments offered by Ralph Raico and Lawrence H. White, also active with the Institute, helped get my work started on the right foot.

Through the recommendation of Lester Hunt, of the University of Wisconsin, I was awarded a fellowship at the Center for Study of Public Choice at George Mason University, While at the Center, I received much helpful advice from Charles Rowley, Robert Tollison, Jennifer Roback, and Viktor Vanberg.

The many other individuals who provided assistance include Tom G. Palmer, Tatia Payne, Ralph Kloske, Lee Cronk, Deborah K. Hunt, Anne M. Hudson, Thomas McCormick, Christine and John Blundell, Mary S. Lyman, W. Elliot Brownlee, Eric Lampard, Steven Vaughn, Beverly Morrison, Earl Mulderink, Emilio Pacheco, Sheldon L. Richman, R. Dale Grinder, David Boonin, Jeremy Shearmur, Sharon Kern, Andrea Salsberg, Margo Reeves, Todd J. Olson, and Keith Shimko. Judy Cochran, in the Department of History of the University of Wisconsin, Madison, rendered invaluable and patient aid in arranging for my defense. Most of all, I want to thank my parents Rangvald and Doris Beito. Without their constant and heartening encouragement, this book would not have been possible.

Two historians who stand out in this still-sparse field are James Ring Adams and Clifton Yearley. Adams pointed to the role of the radical Jacksonian Locofoco Democrats in promoting tax-resistance initiatives, such as voters approval of bond issues and constitutional limitations on state debt. He expanded on work by historians, such as Lee Benson, who have highlighted the extreme antistate doctrine of the Locofocos. William Leggett, the chief intellectual spokesman of the Locofocos, advocated the strict laissez-faire doctrine that government possesses no delegated right to tamper with individual industry a single hairs-breadth beyond what is essential to protect the rights of person and property.

Unlike Adams, Yearley did not focus on taxpayers revolts per se. Instead he explored at length the uneasy and complex relationship between big-city political machines and middle-class taxpayers during the Gilded Age. In most urban areas during the nineteenth century, real estate ownersusually a minority of the citizenspaid most local taxes. Many taxpayers resented having to pay for the spending programs voted in by the nontaxpaying majority. According

On the whole, the period between 1900 and 1929 brought a lull in tax resistance. Taxation, though always an important issue, did not bite hard enough to provoke substantive rebellions of either a legal or an illegal nature. Tax strikes do not seem to have been contemplated, much less practiced, and legal limits on local property taxationall the rage in the late nineteenth centurydid not enjoy a renaissance.

The Crash of 1929, and the economic collapse that followed in its wake, sparked a revival of taxpayers revolts throughout the country. Between 1932 and 1934, seven states put into place overall limitations on the general property tax (meaning both real and personal property); six through popular initiative and one by a vote of the state legislature. Several dozen similar limitations won enactment at the local level. In addition, every state and hundreds of counties witnessed the formation of taxpayers and economy leagues. Measured in numbers of organizations, the tax revolt of the 1970s and 1980s looks puny by comparison.

The tax strike was the most serious weapon of resistance. Although taken seriously, and threatened often, an organized tax strike rarely took hold. One place where it did was Chicago. From 1930 to 1933, Chicago was the scene of one of the largest illegal tax boycotts in American history. At its pinnacle, the organization that led the strike, the Association of Real Estate Taxpayers (ARET), had a paid membership of 30,000 and a budget of $600,000.

The tax rebels of the early 1930s, both in Chicago and elsewhere, wanted to put constraints on government via tax and spending reduction. They combined these ideas with a general (though usually inchoate) distrust of politicians, bureaucrats, and municipal bond holders. Many resisters advanced a kind of class theory under which receivers of government funds were characterized as a tax spender (or tax eater) class. Support for economy in government and tax slashes did not go into hibernation after 1929; in fact, if the statements of prominent civic, political, and business leaders are taken at face value, these beliefs enjoyed a resurgence lasting well into 1933.