# Tax Revolts in American History **URL:** **By** David T. Beito **Published:** March 1, 1987 --- “During the Whiskey Rebellion Hamilton proclaimed, “Whenever the government appears in arms, it ought to appear like a Hercules, and inspire respect by the display of Strength.”” The United States owes its birth to a tax revolt. Even so, the history of taxpayer protests has been virtually ignored by historians. Remarkably, few studies deal with the politics of taxation — much less tax revolt — after the post-Revolutionary era. The comparison with labor history is especially revealing. Newsletters of myriad unions, sometimes very obscure, have been preserved with diligence. Secondary literature, manuscript collections, and oral interviews abound for the interested researcher. Labor union officials can draw on a rich folklore and tradition, which historians have documented, fortified, and expanded. The organizers of today’s taxpayer protests know next to nothing about their precursors in the eighteenth, nineteenth, and twentieth centuries. By contrast, one would have to search long to find a major union leader who has never heard of Samuel Gompers or the sit-down strikes of the 1930s. The lack of historical writing in this area does not stem from a paucity of potential source material. Preliminary work in the field of taxpayer history points to a treasure trove of unexploited opportunities. Dall W. Forsythe’s _Taxation and Political Change in the Young Nation_, 1781-1833 (1977) remains the best overview of federal tax protest in the early national period. Forsythe traced the machinations of nationalists like Alexander Hamilton, secretary of the Treasury under George Washington. Hamilton believed that a national debt was a “blessing” because it instilled an “habitual sense of obligation” of the people toward the new central government. To finance the debt created by his policies, Hamilton shepherded into law an excise tax on whiskey.1 This particular tax sparked the Whiskey Rebellion, the first political crisis in the postindependence period. Rebellion against the tax ranged far and wide but proved strongest in the rural areas of western Pennsylvania. Angry farmers tarred and feathered tax-collectors and erected liberty poles — ‘the traditional American call for revolution. In the main, however, resistance took the form of nonviolent refusal to pay. The federal government initiated most of the violence. President Washington ordered the states to raise an army of 13,000 to suppress the rebellion. Hamilton, the _de facto_ commander of the forces, proclaimed in Wagnerian terms: “Whenever the government appears in arms, it ought to appear like a Hercules, and inspire respect by the display of Strength. The consideration of expense is of no moment compared with the advantages of energy.” Rent by internal factionalism and overwhelmed by the superior force of federal troops, the rebellion collapsed. The troops obliterated the organized resistance by arresting the ringleaders of the rebellion.² > During the Whiskey Rebellion Hamilton proclaimed, “Whenever the government appears in arms, it ought to appear like a Hercules, and inspire respect by the display of Strength.” The historiographical literature has, on the whole, pictured the whiskey rebels in a highly negative light. Writers on the subject have fostered the stereotype of these resisters as cranky malcontents addicted to hard liquor. Actually, western farmers depended on whiskey for a variety of basic needs. They gave it a prominent place as both a medicinal drug and as a unit of currency. Forsythe employed a provocative theoretical schema in his historical account. He underscored the violence inherent in taxation; in fact, he dubbed the whiskey levy an “initiative in extraction.” As Forsythe put it, “\[e\]xtraction” is an ugly but necessary term that neatly summarizes the complex strategies governments adopt to assure themselves adequate flows of revenues. Once so stated, it seems quite obvious that rulers cannot develop a central state apparatus without some degree of capacity to extract revenues from the subject population of a nation.“³ Historians have only begun to unearth information revealing an extensive pattern of tax protest in the nineteenth century. Until recently, most work dealing with government financing during this period centered around the perennial debates over the tariff. The limited scope of historical study had unduly shifted attention from the main arena of tax resistance in the nineteenth century — the states and localities. Unfortunately, chroniclers and interpreters of local history have been equally culpable of skirting around taxation issues. Until the 1950s, historians took their cues from the Charles Beard school of economic determinism. In the 1960s and 1970s, Paul Kleppner and Lee Benson, the so-called ethnoculturalists, shifted the center of debate toward the role of religious affiliation and ethnic background. Although the ethnoculturalists have added a new dimension to our understanding of American history, their work has not remedied the neglect of tax revolt. Neither economic class nor ethnic and religious categories apply well to the most debated, and frequently most explosive, issues at the local level: where and how government levied and distributed tax money. John C. Calhoun, an antebellum U.S. Senator and political philosopher, pointed the way to a theory of tax revolt. Calhoun asserted in his _Disquisition on Government_ that the State, by its fiscal action, created two classes in society: “the net-taxpayers” who “bear exclusively the burden of supporting the government” and the “net tax-consumers” who are the “recipients of their proceeds through disbursements and who are, in fact, supported by the government.” Accordingly, “the effect of this \[government taxation policy\] is to place them in antagonistic relations . . . every increase is to enrich and strengthen the one and weaken the other.”⁴ In recent years a small but growing contingent of historians have turned their attention to the history of tax protests in the nineteenth century. Two books stand out in this still sparse field, the _Secrets of the Tax Revolt_ by James Ring Adams (1984) and _The Money Machines: The Breakdown and Reform in Governmental and Party Finance in the North, 1860-1920_ by Clifton Yearly (1970). Yearly wrote from the perspective of a professional historian; Adams is a journalist with the _Wall Street Journal_. Although neither evoked Calhoun, both in their own way buttressed the empirical weight of his taxpayer/ tax-consumer dichotomy. Adams’s insights about the political struggles over proposals for tax subsidies for canal building are a welcome contrast to the many historians who depict the proponents of tax-financed canal projects as vaguely visionary statesmen who realized the need for government to promote industrialization. Looking more closely at the historical record, Adams found that backers of tax-funded schemes, like the Erie Canal, usually seemed more motivated by parochial concerns than by a disinterested long-term strategy of economic development. Opponents of these projects, on the other hand, often proved prophetic in their warnings about the dangers of government’s subsidizing one form of transportation at the expense of another. Unlike Adams, Yearly did not focus on tax resistance _per se_. Instead, he explored at length the uneasy and complex relationship between big-city political machines and middle-class taxpayers. In most urban areas during the nineteenth century, owners of real estate — usually a minority of the citizens — paid virtually all the local taxes. These taxpayers resented having to pay for the spending programs voted in by the majority of nontaxpayers. According to Yearly, political machines depended on nontaxpaying voters for their base of support. Nontaxpayers not only included the poor but also the wealthy owners of untaxed personal property. As Yearly put it, owners of real estate had become convinced that “they were financing both the revels of the new wealth and bread and circuses of the new democracy.”⁵ The relationship between municipal annexation and taxpayers’ resistance stands out as another prime research opportunity for historians. Annexation describes the standard municipal predilection to expand territorially into the municipal outskirts. Municipal annexation frequently took place against the expressed wishes of the inhabitants in the territory to be annexed. The annexation wave hit its peak in the late nineteenth and early twentieth centuries. Historian Kenneth Jackson has accurately dubbed this practice “urban imperialism.”6 Unfortunately, Jackson, like many other urban historians, underrates the crucial common denominator of annexation campaigns: the search for an expanded tax base. As downtown areas decayed, city politicians turned to annexation as a means to extract tax money from more prosperous taxpayers. That the annexation movement finally stalled by the 1920s and 1930s was due in no small part to taxpayers’ resistance. As taxpayers in outlying areas increased in number and improved their economic status, they were in a better position to blunt the territorial designs of municipal neighbors. The annexation movement was closely connected to the demise of the special assessment. Until at least the turn of the century, Americans had generally adhered to the policy that the cost of road building, repairs, and many other city services should be paid for by the individuals directly affected and not by the taxpayers as a whole. Invariably, these costs were met by user-based special assessments. In most localities, a special assessment could not even be levied without the consent of three-fourths of the parties directly concerned. The substitution of general-tax financing for the special assessment made urban annexation campaigns much easier to wage. In most respects, however, the period between 1900 and 1929 represented a lull in tax resistance. Taxation, though always an important issue at the local level, did not bite hard enough to incite substantive tax rebellions of either a legal or illegal nature. Tax strikes do not seem to have been contemplated, much less practiced, and legal limits on property taxation — which had been all the rage in the late nineteenth century — did not enjoy a renaissance. The 1929 crash introduced many Americans, who had previously taken matters of public finance for granted, to the painful realities of an unprecedented tax burden. Real-estate values plummeted while assessments and tax rates stayed high. Taxes as a percentage of national income nearly doubled from 11.61 percent in 1929 to 21.5 in 1932. In my dissertation, “_Striking Against the State: Taxpayer Revolts During the American Great Depression, 1930-1935_,” (University of Wisconsin — Madison, 1986) I explored how this rising tax load sparked one of the least studied tax protest movements in American history. Between 1932 and 1934, seven states put into place overall limitations on the general property tax; six through popular referenda and initiative, and one by a vote of the state legislature. Several dozen limitations won enactment at the local level. In addition, every state and hundreds of counties witnessed the formation of taxpayer and economy leagues. Measured by the yardstick of numbers of organizations, three thousand by one reliable estimate, the tax revolt of the 1970s looks puny by comparison. By far the largest, and most publicized, tax strike took place in Chicago. The group that led the strike, the Association of Real Estate Taxpayers (ARET), boasted thirty thousand members. Essentially, ARET, founded in 1930, operated as a cooperative legal service. Each member paid the association one percent of his tax bills plus a legal fee of $10 ($5 for taxes under $200). In return, ARET hired lawyers to challenge the constitutionality of high real-estate tax assessments. Pending a decision by the U.S. Supreme Court, ARET’s leaders recommended that members not pay any taxes. Predictably, ARET’s actions outraged local politicians. Mayor Anton Cermak, the founder of the Democratic political machine later controlled by Richard Daley, tried to paint ARET’s executive board as a “board of racketeers.” Cermak and other local politicians repeatedly portrayed the strikers as “anarchists” and “public enemies.” Irvin A. Wilson, the president of the Chicago Principals Club, called the strike the “most dangerous form of terrorism and public disorder.” Noting that Chicago’s tax delinquency had reached 40 percent of levies, he charged “\[f\]orty percent citizenship is no less dangerous and perilous to the government of America today than it was in the days of Benedict Arnold.” Politicians, bureaucrats, and municipal creditors branded the strike as a conspiracy of wealthy “speculators.” Using assessment records and the city directory, I discovered the inaccuracy of this characterization. Strikers were more likely to be skilled blue-collar workers and small proprietors. The foes of the strike, on the other hand, fit well ARET’s characterization of a “tax spender” class. > The 1929 crash introduced many Americans, who had previously taken matters of public finance for granted, to the painful realities of an unprecedented tax burden. The strikers downplayed concrete political proposals of any kind and staked their hopes on court litigation. Nevertheless, their campaign had genuine antistatist overtones. The president of ARET called for slashing the city government’s budget by one-third. John J. Mangan, a member of ARET’s Board of Advisors, supported a reduction of 60 percent. Mangan regarded the strike as the best way to force politicians to “relinquish the powers they have built up through governmental machinery and the allotment of jobs . . . which have no natural part of government. The only time the politician understands the people mean business is when the money is shut off. So shut the money off!” For a while, the strikers enjoyed enormous success with their legal strategy. A Cook County judge invalidated all property taxes for a period of months. The city government went to a hand-to-mouth existence, depending on loans from local banks and “tax anticipation warrants” payable in future levies. The consumers of local taxes formed campaigns to break the strike. The teachers’ unions and the leading bankers in the city cooperated to promote laws to prohibit tax strikes and abolish the elective assessor, and supported criminal prosecution of the strikers. The banks,depended on restored tax levies to insure repayment of their loans to the city government. To suppress the strike, the city council passed a remarkably anticivil-libertarian law that approved cutting off water to strikers and denying them all access to “public property,” including roads, sidewalks, switchtracks; in other words, the right to do any business at all. The mayor even wrote a letter to the Federal Radio Commission (the predecessor of the FCC) urging that strikers be forced off the radio for “obstructing” government. Buffeted by political coercion and torn by internal factionalism, the strike collapsed in 1933. Many leaders of ARET saw their property fall under government management through a “tax receivership” law enacted by the Illinois state legislature at the behest of the city government. From the beginning, ARET’s leaders made critical strategic errors. They miscalculated by gambling everything on court litigation. In a fight like this, the checks and balances of government could be shunted aside. As tax-consumers, politicians and judges alike shared a common interest in destroying, not in protecting, ARET. As Hayden Bell, Cook County’s States Attorney, put it, “Such citizens \[tax strikers\] stand willfully opposed to government. They would not have much legal standing in court.” ARET particularly erred in not formulating a fallback strategy. Consequently, when litigation failed, it had no other recourse. The strikers lacked a well-articulated program. ARET called for reducing government’s size, but avoided specifics. Considering the radical implications of its tax reduction program, such a strategy had obvious shortcomings. Had ARET been more forthright, it may have stood a better chance of winning more support from elements friendly to tax reduction in the business community and the press. ARET’s biggest blind spot was its inability to frame a convincing defense of nonpayment. For a while, it could take refuge in trumpeting the questionable legal basis of tax levies. When the courts ruled against this premise, strikers were left without an alternative justification of nonpayment. Adverse rulings left them at a still greater loss to answer the allegation that the tax strike led to anarchy. Tax protesters elsewhere in the country generally resorted to less radical strategies, like tax limitation. Nevertheless, the contours of the debate paralleled the confrontation in Chicago. Wherever proposed, tax-reduction and -limitation initiatives ran into predictable opposition from state employees, municipal reformers, and others who depended directly or indirectly on tax money. Teachers associations and municipal leagues formed the core of unsuccessful campaigns against property-tax referenda in Michigan, Ohio, Indiana, and Washington. In nearly every case, resisters advanced a theory of class very much in the Calhounian mould of taxpayers vs. tax-consumers. Harley Lutz, a leading public-finance economist and enemy of tax revolts, seemed taken aback by the degree to which resisters played up the class theme. He singled out their penchant “of speaking and perhaps thinking, of the taxpayers as one group, and of those responsible for public policy as another quite different group.” The federal government mobilized against local tax delinquency and resistance. It loaned money to homeowners through the Home Owners’ Loan Corporation, thus co-opting many potential recruits to the tax-protest movement. The Public Works Administration (PWA) denied subsidies to several local and state governments because they had enacted tax-limitation laws. Throughout the country municipal bondholders, politicians, teachers, and other tax-consumers formed “pay your taxes” campaigns to stimulate taxpaying. These efforts emulated the propaganda techniques of the World War I liberty-bond campaigns. By 1935, the tax revolt was in serious decline. Tax strikes almost disappeared and tax limitations lost increasingly at the polls. More than any other factor, resistance collapsed due to its own internal weaknesses. Like their colleagues in Chicago, tax-resisters avoided specifics about spending reductions and contented themselves with issuing vague calls against government “extravagance.” The antistatist aspects of the revolt, though quite genuine, never had time to jell into a well-thought-out ideological program. Even so, the tax-rebels of the 1930s are proof of a deeply held and durable American popular suspicion of paternalistic bureaucracy and the expansionist state. Antistatism survived, indeed thrived, during the worst years of economic decline in the country’s history. Few fields other than taxpayers’ history have such potential to shake up American historiography. The interested researcher has almost limitless opportunities to do publishable work on the general subject of taxation history — not to mention taxpayer revolts. Classical liberal historians are in a particularly advantageous position to offer new insights into this long-neglected field. They can lay the necessary groundwork to make taxpayers’ history into a pathbreaking subdiscipline in American history. ## Notes ¹Dall W. Forsythe, _Taxation and Political Change in the Young Nation_ (New York: Columbia University Press, 1977\), p. 22. ²Forsythe, p. 48. ³Forsythe, p. 1. ⁴John C. Calhoun, _A Disquisition on Government and Sélections from the Discourse_ (Indianapolis: Bobbs-Merrill, 1953), p. 17. ⁵Clifton Yearly, _The Money Machines: The Breakdown and Reform of Governmental and Party Finance in the North, 1860-1920_ (Albany: State University of New York Press, 1970), p. 250. ⁶Kenneth T. Jackson, _Crabgrass Frontier: The Suburbanization of the United States_ (New York: Oxford University Press, 1985), p. 145. _David Beito is a Postdoctoral Fellow of the Institute for Humane Studies at George Mason University._