EXCERPT - Mr. Taxpayer versus Mr. Tax Spender": Taxpayers' Associations, Pocketbook Politics, and the Law during the Great Depression
Written by LINDA UPHAM-BORNSTEIN
The Specter of Tax Strikes "Shutting Off the Money"
The nation’s largest and longest tax strike in the 1930s, centered in Chicago, was hardly inevitable. In May 1930, a handful of affluent real estate owners organized the Association of Real Estate Taxpayers of Illinois (ARET) to contest recent large property tax hikes. The spike in taxes was the result of the Cook County Board of Review’s adoption and the county’s approval of a plan requiring taxpayers to pay their 1928, 1929, and 1930 real estate taxes, collection of which had been stayed since May 1928 pending completion of a countywide property reassessment, within the next sixteen months. The steep tax increase hit most property owners in Cook County very hard, and many joined ARET. Its members, who hailed mainly from the middle class, numbered around eight thousand in October 1931, and by June 1932, exceeded twenty thousand. Until January 1931, ARET challenged the new assessments and the manner in which the county taxed property through various political channels. When these proved unavailing, ARET and taxpayers affiliated with it began instituting lawsuits to contest the assessments.[i]
Tax resistance metastasized into a tax strike when, in February 1931, ARET began encouraging its members not to pay their property taxes until the courts had rendered final decisions in the lawsuits disputing the taxes. Many property owners, already hard-pressed to pay their taxes, embraced ARET’s suggestion, and the tax strike spread quickly. In May 1931, Chicago’s treasurer announced that the city had collected just 55 percent of property taxes, the lowest proportion ever, as of the May 15 penalty deadline. Public officials, bankers, Chicago’s major newspapers, and others condemned the tax strike in the strongest terms, denouncing strikers as unpatriotic at best and treasonous at worst, and characterizing the strike as a step on the road to anarchy. Harsh criticisms did not, however, deter Chicago’s tax strikers, for whom the traditional political processes had been ineffectual and who, in their view, had embarked on a tax strike only as a last resort. John J. Mangan, one of ARET’s leaders, expressed the overarching rationale for the strike when, in March 1932, he declared that the “only time the politician understands the people mean business is when the money is shut off. So shut the money off!”[ii]
When organized taxpayers launched a tax strike in Cook County in 1931, they were taking their cue from labor unions in the United States, which had frequently employed the strike as a tactic in industrial relations during the previous century. Organized labor’s experiences in the late nineteenth century had demonstrated the relative inefficacy of legislative and political strategies in promoting workers’ interests and had convinced most trade unions to adopt a strategy of voluntarism, which focused on collective action, including work stoppages, in the private sphere. These same dynamics were at play in the genesis and execution of tax strikes in Chicago and elsewhere in the 1930s. Depression-era tax strikers drew on and adapted the voluntarist tradition in the United States and organized labor’s own adaptation of that tradition. Moreover, both striking workers and striking taxpayers came to understand the limitations that the American legal order imposed on strikers.
The tax strike was a radical gambit. Even so, in the early 1930s taxpayers considered tax strikes, threatened them, and acted on the threat if other avenues of tax relief had been foreclosed. By 1933 tax strikes were common enough for newspapers to report that “organized tax strikes are spreading” and that “‘tax strikes’ in many parts of the country are indicative of the way the wind is blowing.” The Des Moines Tribune noted that “evidence has accumulated that sentiment for this sort of protest has grown in many sections of the country.” For a few years, tax strikes were a very real possibility.[iii]
Tax strikes ranged from brief, isolated episodes to extensive and extended ones. The following incident described in the National Municipal Review is typical of spontaneous, short-lived efforts of tax strikers:
The primitive urge of the tax striker has not yet been completely dissipated, if the recent disturbance in Pottsville, Pa., is any indication. Upwards of a thousand taxpayers… stormed the Schuylkill County courthouse, dragged out two of the county commissioners, and read the riot act on tax reduction. Unequal assessments were the cause. The county commissioners promised to hear a taxpayers’ grievance committee, and the strikers were appeased.[iv]
At the other end of the continuum was the Chicago tax strike, which extended from 1931 to 1933 and was, according to David Beito, “the largest tax strike in the country if not in American history.” The strike was organized by the ARET. A large majority of its thirty thousand members in late 1932 hailed from “relatively modest backgrounds” and were small shopkeepers and other small business owners, skilled blue-collar workers, and persons employed in clerical and sales occupations. At the height of the strike in 1932, a majority of real property taxes in Chicago were unpaid, and the city narrowly averted bankruptcy.[v]
The tide turned quickly against ARET in July 1932, as a result of several developments. First, the Illinois Supreme Court reversed a lower court ruling that struck down the 1928 and 1929 assessments, which meant that the local authorities could again proceed with tax sales of properties for delinquent taxes. In addition, the city of Chicago received a massive infusion of revenue when the Reconstruction Finance Corporation loaned the state of Illinois a total of $14 million. Early 1933 marked the beginning of ARET’s demise, when disagreements among its leaders escalated and the organization dissolved into two warring factions, one of which obtained an injunction prohibiting the other from accessing ARET’s funds or holding membership meetings. By late 1933, ARET was in receivership.[vi]
Although there were no other Depression-era tax strikes of the magnitude of the Chicago strike, they were seriously considered in many cities and implemented on occasion. Leaders of the Taxpayers’ Advisory Council in Milwaukee suggested a tax strike in 1932 but backed off after voters approved a tax limitation measure in the November election. That same year in New York City, the West Side Taxpayers’ Association passed a resolution encouraging taxpayers to withhold their taxes, and the Greater Brooklyn Property Owners Association actually initiated a tax strike campaign. The momentum for a tax strike in Brooklyn dissipated, however, as a result of stiff opposition from another taxpayers’ organization, the New York Real Estate Board, dissension among the tax strike advocates, and the adoption by Mayor James Walker of a more conciliatory approach on taxation matters.[vii] In Atlanta the taxpayers’ plight was sufficiently desperate that journalist Hal Steed believed that “[a]n insurrection is brewing” and “that a tax strike was by no means improbable.” The moderate wing of the Taxpayers’ League of Atlanta and Fulton County succeeded in defusing the situation with a plea for moderation, agreeing that the public officials who were responsible for high taxes and high government debt “should be starved out. But if you try to starve them by refusing to pay your taxes, you will also starve innocent and deserving persons. You will starve policemen, firemen and teachers who are serving us, and, for the most part, had nothing to do with our plight.”[viii] Most organized taxpayer activity did not target core government functions or essential levels of government services, but was aimed at spending that was wasteful or unnecessary, such as that occasioned by redundancy in government services, inefficiency in government operations, and nonessential programs. In contrast, tax strikes, like tax limits, were blunt instruments of tax resistance that dried up municipal revenue streams and forced indiscriminate budget cuts.
The longer the Chicago tax strike dragged on, the more credible and frequent threats of tax strikes became in other communities. One account of tax resistance in Des Moines reported that “speedy enactment of substantial economy measures is intended to head off a large-scale tax strike.” At a taxpayers’ meeting in Johnstown, Pennsylvania, the crowd of one thousand cheered the head of the local “tax reduction committee” as he called for hefty decreases in the tax rate and spending and then vowed that “the taxpayers will go on strike if the demands are not granted.” In Wilkinsburg, a Pittsburg suburb, representatives of the local taxpayers’ association warned councilmen “that a taxpayers’ strike is a certainty unless additional heavy slashes’ were made to the 1933 budget.” Taxpayers’ groups in Bergenfield, New Jersey threatened a tax strike to obtain budget cuts. Nearly 10,000 farmers gathered at the Indiana statehouse and promised a “general tax strike…unless the present property tax is abolished” and a sales tax enacted. Oregon taxpayers declared that a tax strike was imminent absent immediate property tax relief, and state legislator Frank Lonergan convinced his fellow legislators to enact a sales tax so as to reduce property taxes by arguing that “[a] tax strike is near in this state and I am not an alarmist.” Taxpayers’ leagues played the strike threat card with some success in 1933.[ix]
When circumstances warranted, organized taxpayers also played the strike card. The taxpayers’ league in Hamilton County, Tennessee launched a tax strike that eventually placed the country’s “finances…in a terrible condition” and necessitated a reduction in the length of the public school term. Taxpayers in the Wallowa Valley Improvement District in Oregon engaged in “a tax strike for some time” to protest high taxes resulting from the district’s excessive debt. In Brisbane, California a “large percentage of property owners…refused to pay utility district tax levies.” Members of the Sevier County Taxpayers’ League in Utah embarked on a “general tax strike,” resolving that “we deem it necessary and do jointly and severally refuse to pay any more property taxes until a new and more just tax law is passed.” Business taxpayers in one sector of the Pennsylvania economy put their own unique spin on the tax strike tactic. When, in late 1933, the commonwealth undertook to levy a tax on all alcoholic beverages exported after the imminent repeal of Prohibition, the operators of all major distilleries closed their facilities and threatened to relocate to other states. Newspapers called the protest a “modern whisky tax strike” reminiscent of the Whiskey Rebellion in the 1790s.[x]
The specter of tax strikes continued to loom over local governments through 1933. At a conference of the American Bankers Association in January speakers warned that “taxpayers’ strikes may result from failure to reduce the cost of government and taxation.”[xi] On January 19, 1933, the North Bergen (New Jersey) Taxpayers’ and Civic Association threatened a taxpayers’ strike unless $180,000 was slashed from the 1933 city budget, and the Association declared a property owners tax strike to take effect on February 24, 1933. [xii]
At the annual meeting of the New Jersey Taxpayers’ Association in June 1933, there were calls for a tax strike unless the state legislature acceded to the Association’s demands for reductions in the state budget, but the measure “failed after a sharp debate.” The Association’s president warned that “[t]his is a very controversial question containing a considerable amount of dynamite…. I feel it would be a great mistake to adopt so radical a measure.” A director of the Association warned that “[w]hen respected citizens countenance a tax strike they are undermining the essential services of government…. [F]or this organization to resolve we will stop paying taxes is too radical.”[xiii] These comments belie the stereotype of the taxpayers’ organization as a conservative, anti-government entity. They do not reflect a libertarian mindset but a measured and responsible view of the taxpayers’ relationship to government and of their responsibility to pay for essential government services. They also acknowledge the taxpayer’s duty to pay taxes, the obligation side of the citizenship coin. Most state taxpayers’ associations espoused similar values and adopted a similarly cautious approach to the subject of tax strikes.
Taxpayers articulated various rationales for participating in tax strikes. The most common was that a tax strike was a final expedient to which taxpayers turned only “after exhausting all peaceful means” of seeking tax relief. Taxpayers espousing this view had concluded that a “tax strike is the only way to bring those in authority to a realization of the fact that the cost of government must be brought down to a level which reduced incomes can support.” John Darr, an opinion columnist in Pennsylvania, agreed that the “tax strike seems to be the only alternative left to the taxpayers” because “every legitimate means of protest in the hands of citizens have been exhausted and have availed no particle of relief from” excessive real estate taxes. John Mangan, one of the architects of the Chicago tax strike, contended that the strike had advanced the causes of good government and tax relief in that “this movement has brought about the appointment of a Governor’s Committee to study tax relief, a “special session of the state legislature” to consider taxation reform, and “the focusing of public attention on this, the most important political and governmental issue of the present day.” Tax strikers consistently characterized the tax strike as a legitimate tool of tax resistance that good citizens could employ when all else failed.[xiv]
Not surprisingly, both the act and the threat of a tax strike elicited strong opposition on a number of fronts. Such radical action was antithetical to the conservative mindset of business leaders. Businessmen, bankers, municipal bond dealers, and investors in municipal bonds found the notion of tax strikes unsettling and feared that they would cause irrevocable damage to the municipal credit market.[xv]
To the public officials who depended on regular and predictable sources of tax revenues, tax strikes were anathema. Daniel Hoan, the Socialist mayor of Milwaukee and a proponent of big government, considered such organized tax resistance a threat to the Republic itself. In the “Mr. Taxpayer versus Mr. Taxspender” radio play sponsored by the National Municipal League, Hoan and Luther Gulick, the director of Columbia University’s Institute of Public Administration, engaged in a spirited discussion about the “problem of high taxes and tax reduction.” Hoan strongly defended the need for active government intervention in the devastated Depression-era economy. “Much as we dislike to pay our tax bills,” Hoan declared,
[t]he fact is that government … has stood like the Rock of Gibraltar during this frightful depression to save us the agonies of complete chaos.… If then, it is true that to have progress we must have efficient public service, it behooves every good citizen to take part in civic and governmental affairs and improve that government and when the time comes to pay the bill, to do so with a sense of civic duty.[xvi]
Tax strikes were a threat to the operation and the very legitimacy of government. Consequently, government officials opposed them vigorously and often reminded taxpayers that a principal obligation of citizenship was paying taxes.
Political scientists and other good government experts and reformers also decried tax strikes. Luther Gulick played the role of the taxpayer in the simulated radio debate with Hoan but nevertheless regarded tax strikers as a threat to the body politic, questioning the loyalty and patriotism of the tax slacker, “who can, but doesn’t pay his taxes cheerfully and promptly [and] is just a plain traitor to his city and town.” He quantified the fiscal impact of tax strikes as compared to constructive economy efforts, asserting “that a tax strike costs twenty cents on the dollar on taxes, as over against the normal and legitimate methods open to the citizen of expressing his demands for tax reduction.”[xvii] Public administration professionals frequently emphasized the dire practical consequences and radical nature of tax strikes, and they encouraged taxpayers to engage in more moderate and, in the professionals’ view, more effective efforts to reduce their taxes.
The threat posed by tax strikes and tax delinquencies was of sufficient concern to good government experts that in September 1933, the National Municipal League launched “a nation-wide ‘Pay Your Taxes’ campaign to educate the average citizen throughout the country to the importance of paying his taxes in this critical period if municipal credit is to be preserved and essential local government services continued.”[xviii] The campaign was essentially an intensive, large-scale public relations campaign designed to make “the taxpayer understand his responsibility for the tone of government” and his civic duty to pay for government.[xix] The movement gained momentum quickly and produced results in short order.[xx] In August 1934, the National Municipal Review declared that the “results secured by the campaign during the past year,” including the reduction of delinquencies and restoration of municipal credit, “had been highly successful,” and it vowed to continue the campaign.[xxi]
By late 1934 tax strikes had waned for a number of reasons. First, and perhaps most important, the tax strike was an extreme measure with destructive potential that most Americans were not prepared to embrace. Moreover, actual tax strikes had not proven all that effective and often resulted in considerable public backlash. The New Deal’s Home Owners’ Loan Corporation (HOLC) loan program, which required borrowers to use a portion of the loan proceeds to pay their delinquent real estate taxes, reduced support for tax strikes among the many homeowners who participated in the program after the HOLC opened for business in June 1933. Finally, the National Municipal League’s Pay Your Taxes Campaign succeeded to a large extent in diverting the energies of tax resisters into more constructive and more cooperative channels for advancing their agendas. By September 1934, the National Municipal Review was reporting that tax protesters throughout the nation “seem definitely to have lost their old tax strike enthusiasm.”[xxii]
When confronted with painful contractions in the economy and their incomes, taxpayers in the early 1930s drew on the experiences of organized labor with work stoppages to experiment with tax stoppages. Strikes represented an urgent, direct and confrontational assertion of rights: for workers, the rights to have a greater say in the terms and conditions of their employment and to enhance their status and power vis-à-vis their employers; for taxpayers, the rights to have a greater say in the reach, structure, and priorities of local government, in how much tax they paid, and in how their tax dollars were spent. Both organized labor and organized taxpayers engaged in strikes to defend, construct, and expand their rights and to achieve their goals.
Some of the tax strikes or threats thereof during the Great Depression were more successful than others, but the degree to which they were or were not effective in particular circumstances does not determine their importance. On this issue, labor historian Herbert G. Gutman’s observation about striking railway workers in Pennsylvania in the early 1870s applies with equal force to the striking taxpayers in the 1930s: “the significance of the strikes lay not in their success or failure but rather in the readiness of the strikers to express their grievances in a dramatic, direct and frequently telling manner.” [xxiii] Tax strikes elicited prompt and strong opposition from powerful stakeholders and from the general public, and in most cases, taxpayers were ready to employ the most militant tactic available to them only when they were utterly frustrated with state and local legislative, political, and administrative remedies. Tax strikes were often symptomatic of a breakdown in the political processes that normally provided a viable forum for dialogue, compromise, and accommodation among conflicting interests.
Though not political activities as such, tax strikes nevertheless had political overtones. Tax strikes manifested a voluntarist, antistatist current in American political culture that remained potent and served as a counterpoint to New Deal statism. As historian F. Alan Coombs has argued, even the economic catastrophe of the Great Depression “could hardly eliminate” among some “the old Jeffersonian feeling that government was best which governs least.” In pursuing their legislative strategies, which comprised the lion’s share of organized taxpayer activities in this period, taxpayers’ organizations endeavored to work with state and local governments to achieve tax relief and economy and efficiency in government. Tax strikes, in contrast, were fundamentally assaults on the state. Milwaukee Mayor Daniel Hoan, admittedly no fan of taxpayers’ leagues, argued that such efforts to starve the public sector were “misguided and destructive,” undermined “faith in government,” and seriously threatened the ability of municipalities to provide basic, essential services. Tax strikes represented organized taxpayers’ most radical turn towards voluntarism.[xxiv]
Linda Upham-Bornstein is Senior Teaching Lecturer in History at Plymouth State University. Mr. Taxpayer is available from Temple University Press at www.temple.edu
ENDNOTES -
[i] David T. Beito, Taxpayers in Revolt: Tax Resistance During the Great Depression (Chapel Hill: University of North Carolina Press, 1989), 40-44, 51-71, 81-86.
[ii] Ibid, 59-69, 72-75; Chicago Herald and Examiner, February 4, 1931, 4; Ibid, February 14, 1931, 21; Chicago Evening Post, May 18,1931,1; Ibid, May 28, 1932, 8; Chicago Daily News, May 13, 1932, 20; Chicago Tribune, March 14, 1932, 18; and John J. Mangan, Letter, Chicago Real Estate Magazine, 8, March 12, 1932, 21; all quoted or cited in Beito, Taxpayers in Revolt; The Champaign and Urbana Citizens, Champaign, Illinois, June 24, 1932, 4, 8.
[iii] Altoona Tribune, Altoona, Pennsylvania, February 3, 1933, 4: The Paducah Sun-Democrat, Paducah, Kentucky, April 6, 1933, 4; Des Moines Tribune, Des Moines, Iowa, March 16, 1933, 5.
[iv] Wade S. Smith, “Taxation and Government,” National Municipal Review (hereinafter NMR), 23, no. 5 (May 1934), 285.
[v] Beito, Taxpayers in Revolt, 80- 86, 100.
[vi] Beito, Taxpayers in Revolt, 72-79, 88-95.
[vii] Beito, Taxpayers in Revolt, 22-23, 28-32.
[viii] Hal Steed, “Adventures of a Tax Leaguer,” Saturday Evening Post, 206, no. 20 (November 11, 1933).
[ix] Des Moines Tribune, March 16, 1933, 5; Lancaster New Era, Lancaster, Pennsylvania, January 9, 1933, 3; The Morning Call, Allentown, Pennsylvania, January 9, 1933, 7; Pittsburg Post-Gazette, January 10, 1933, 11; The Record, Hackensack, New Jersey, February 22, 1933, 13; The Grand Island Herald, Grand Island, Nebraska, February 24, 1933, 1; Oregon Tay Payer, Albany, Oregon, May 1, 1933, 8; Statesman Journal, Salem, Oregon, March 3, 1933, 1.
[x] The Chattanooga News, Chattanooga, Tennessee, April 5, 1933, 5; La Grande Observer, La Grande, Oregon, July 14, 1933, 1; The Times, San Mateo, California, January 4, 1933, 4; The Salt Lake Tribune, Salt Lake City, Utah, October 16, 1933, 6; The Salina Sun, Salina, Utah, October 20, 1933, 1; The Ephraim Enterprise, Ephraim, Utah, December 3, 1933, 1; The Indiana Gazette, Indiana, Pennsylvania, November 27, 1933, 2; Evening Report, Lebanon, Pennsylvania, November 27, 1933, 7.
[xi] NYT, January 27, 1933, 7.
[xii] NYT, January 19, 1933, 36; February 2, 1933, 2; NYT, February 24, 1933, 18. There is no indication in the New York Times or other contemporary sources as to how long the strike lasted or what was its end result.
[xiii] NYT, June 10, 1933, 25.
[xiv] Oregon Tax Payer, May 1, 1933, 8; The Champaign and Urbana Citizen, June 24, 1932, 4; The Ligonier Echo, Ligonier, Pennsylvania, May 10, 1933, 2.
[xv] Melvin A. Traylor, “What Can Be Done About Taxes” (University of North Carolina at Chapel Hill, North Carolina Collection, 1932), 13-14; NYT, October 11, 1933, 37.
[xvi] “Mr. Taxpayer versus Mr. Taxspender,” NMR, 22, no. 8 (August 1933), 359, 364.
[xvii] “Mr. Taxpayer versus Mr. Taxspender,” 364.
[xviii] NMR, 22, no. 9 (September 1933), 406.
[xix] “Editorial Comment,” NMR, 22, no. 10 (October 1933), 490.
[xx] Smith, “Taxation and Government,” NMR, 23, no. 2 (February 1934), 129-130.
[xxi] Ibid., 23, no. 8 (August 1934), 446-447. See Beito, Taxpayers in Revolt, 101-139, for an extended discussion of the National Pay Your Taxes Campaign.
[xxii] William E. Leuchtenberg, Franklin D. Roosevelt and the New Deal ((New York: Harper Collins, 2009), 53, 193; Anthony J. Badger, The New Deal: The Depression Years, 1933-1940 (Chicago: Ivan R. Dee, 1989), 239; Beito, Taxpayers in Revolt, 144-145; Daniel W. Hoan, City Government: The Record of the Milwaukee Experiment (New York: Harcourt, Brace, 1936) 172-173; Smith, “Taxation and Government,” NMR, 23, no. 9 (September 1934), 485.
[xxiii] Herbert G. Gutman, Work, Culture and Society in Industrializing America (New York: Vintage Books, 1977), 295-296.
[xxiv] Beito, Taxpayers in Revolt, xi-xiv, 19-20, 160-164; F. Alan Coombs, “The Impact of the New Deal on Wyoming Politics,” in The New Deal: The State and Local Levels, edited by John Braeman, Robert H. Bremner, and David Brody (Columbus: Ohio State University Press, 1975), 234; Daniel W. Hoan, City Government, 19-20, 158-159.
