-Caveat Lector-
an excerpt from:
The Maximum Wage
by Sam Pizzigati
The Apex Press (C) 1992
777 United Nations Plaza
New York, NY 10017
212/953-6920
ISBN 0-945257-45-7
-----
A very intersting and well researched book. I found it to be very informative.
Personally, I would like the 'Fed' gone and non-usurious notes issued by the
government. MHO
Om
K
-----
pp. 37-59
2. The Wars Against Wealth
Nobody gave Hattie Caraway much of a chance. In the 1932 Arkansas election
for United States senator, Caraway, a caretaker incumbent appointed to the
seat held by her late husband, faced six other candidates. A week before the
election, no one in Arkansas politics considered her a viable contender.(1)
But Hattie Caraway had, in her brief stint as senator, made one very astute
move. She had earned the gratitude of the junior senator from Louisiana, Huey
P. Long, by supporting his proposed Senate resolution to limit the wealth and
incomes of America's richest people.
In the closing weeks of Hattie Caraway's campaign, Long repaid the favor. He
brought his tax-the-rich and share-the-wealth message to the Depression-
ravaged farmers of Arkansas, all the time singing Hattie Caraway's praises.
"Think of it, my friends!" Long told one cheering rally. "In 1930 there were
540 men in Wall Street who made $100,000,000 more than all the wheat farmers
and all the cotton farmers and all the cane farmers of this country put
together."
"And you people," the homespun Long added, "wonder why your belly's flat up
against; your backbone!"(2)
On Election Day, Hattie Caraway pulled a political miracle. She won her
Senate bid, receiving more votes than the other six candidates combined. In
1932, such was the power and the reach of Huey P. Long.
Today, we remember Huey Long, if we remember him at all, as a rustic
eccentric, the root of a Louisiana political dynasty, a colorful political
clown who never missed a parade, a dark, evil force whose strong-arm tactics
as governor helped earned him the label as "the most dangerous man in
America."
What's been forgotten is what Huey Long had to say and the political
significance of his immense popularity. For a brief few years, Long led the
most popular campaign against rich people in American history.
Huey Long, a critical biographer noted years ago, "dared put his fingers
into the real ulcer
of social evil in American life," the inequitable distribution of wealth.(3)
And he spoke a political language Depression America could understand.
"Unless you redistribute the wealth of a country into the hands of the
people every fifty years, your country's got to go to ruination," Long warned.
"Too many men running things that think they're smarter than the Lord."(4)
Most Americans found Long's analysis of the Depression eminently sensible.
"There's too much concentration of wealth among a few people," Long noted in
one 1932 interview.(5) "Now as long as the government permits the pilin' up of
huge individual fortunes, which is expressly forbidden in Leviticus, we are
goin' to have crime and spoilin' and trouble," he added in another.(6)
In 1932, on the floor of the United States Senate, Long proposed that the
tax laws "be so revamped that no one man should be allowed to have an income
of more than one million dollars a year" and that "no one person should
inherit in a lifetime more than five million dollars withoutworking for
it."(7) "What is a man going to do with more than $1,000,000?" Long asked his
Senate colleagues.(8) "If we could distribute this surplus wealth, while
leaving these rich people all the luxuries they can possibly use, what a
different world this would be."(9)
Long's resolution received only a handful of Senate votes, but people-and
politicians-took notice. In the 1932 Presidential campaign, Franklin Roosevelt
and Herbert Hoover both echoed Long's egalitarian message.
FDR, accepting the Democratic nomination, announced that Americans "look to
us for guidance and for a more equitable opportunity to share in the
distribution of the national wealth."(10) Hoover told a campaign rally in New
York's Madison Square Garden that he longed for an America "where wealth is
not concentrated in the hands of a few, but diffused among the lives of all"
(11)
One month after FDR's election, Long reintroduced his Senate resolution.
This time, his proposal to cap wealth and income received 20 yeas.(12)
The "Long Plan" that the senator from Louisiana put before the Senate and
the American people was to go through several variations. But the basics
always remained (constant: a ceiling on the income and wealth of the very rich
that would create a floor of decency for everyone else. One early version of
the plan proposed a 1 percent tax on all individual wealth between $1 million
and $2 million, with that tax rate progressively increasing until it reached
100 percent on all fortunes over $100 million. The effect, said Long, would
limit "the size of any one man's fortune to something like $50,000,000" and
allow "millionaires to have more than they can use for any luxury they can
enjoy on earth." This same Long Plan added a $5 million lifetime limit on
inheritances and a $1 million annual income limit.(13)
Long had left the 1932 Democratic convention convinced that Franklin
Roosevelt shared his tax-the-rich commitment. But the early New Deal made no
significant moves toward redistributing the nation's wealth, and Long soon
moved to formalize his movement. Long's "Share-Our-Wealth' campaign, launched
in 1934, aimed to guarantee $5,000 to every family and free college for all
qualified young people, all financed by a capital levy on the savings of the
wealthy.(14)
"In order to cure all of our woes," Long told the nation in a February 1934
radio address, "it is necessary to scale down the big fortunes, that we may
scatter the wealth to be shared by all the people."(15)
Huey Long had big plans for his movement. "What would you say," he asked
one reporter, "if I had a majority of the voters signed up in every
Congressional district in the country only to vote for a Share-Our-Wealth
candidate?"(16)
These were not idle musings. By mid-1935, Long's Share-Our-Wealth clubs
claimed 7 million members. Even allowing for "considerable exaggeration,'
noted one critical journalist, this total "represented the largest active
political organization ever put together in this country."(17)
In all, Long claimed 27,431 Share-Our-Wealth clubs in 1935.(18) That total,
undoubtedly inflated, was real enough to frighten FDR's political strategists.
Their secret polling found that Long could pull 3 to 4 million votes if he ran
for President in 1936.(19) And the Presidency was clearly what Long was after.
In mid-1935, Long busied himself writing a novel later published as My First
Days in the White House. Those first days of the Long Administration, he left
no doubt, would be momentous. After his inauguration, Long wrote, Congress
would declare "that it was against the public policy of the United States for
any one person to possess wealth in excess of one hundred times the average
family fortune."(20)
Huey Long may have been every bit the power-hungry pol that contemporary
critics and later historians and dramatists have made him out to be. But the
share-the-wealth ethos that Huey Long professed was not some idiosyncratic
passion. The Huey Long attack on the inequities of wealth and income
distribution capped more than a half-century of American tax-the-rich tumult.
Long himself first caught public attention when, as a young attorney, he
defended a Louisiana state senator who had been caught up in that tumult. The
state lawmaker, S. J. Harper, had been indicted by a federal grand jury for
violating the Espionage Act. Harper's crime? During World War I, he had
campaigned for Congress on a platform "calling for the conscription of
wealth." Long won Harper's acquittal.(21)
The Roots of the Tax-the-Rich Tradition
Huey P. Long and S. J. Harper both hailed from Winn Parish, the hotbed of
Louisiana's Populist revolt against wealth and privilege in the 1890s. In Winn
Parish and throughout the South, the Populist crusade united poor farmers,
white and black, in electoral struggles that were eventually crushed by simple
violence and fraud. By the late 1890s, the People's Party had been beaten into
the political margins, and, in 1900, a Winn Parish man ran one of Populism's
last-gasp campaigns. This die-hard standard-bearer was, predictably, routed.
How much attention the young Huey Long paid to the campaign we don't know. But
it's likely young Huey imbibed the candidate's Populist message. The candidate
was his father.(22)
In its mid-1890s heyday, the Populist message of economic, political, and
social equality swept America's South and West. For the Populists, equity
meant that the rich had to be cut down to democratic size. Their instrument of
choice: a federal income tax.
Today, we take the existence of a federal income tax for granted. For us,
the income tax is just another tax burden that all Americans must resentfully
bear. For the Populists and like-minded reformers in the 1890s, the income tax
was something else again. The income tax was a tax on the rich, the key to
redistributing America's wealth.
Ironically, for the Civil War-era lawmakers who enacted the nation's first
federal income tax law, redistribution was never a motive. In 1861, the
Lincoln Administration needed revenue, in massive amounts, to wage the war
against secession. The traditional sources of federal revenue-"custom duties,
supplemented by the income from the sale of public lands"(23)-were quickly
seen as woefully inadequate. An income tax seemed the best alternative.
The first of the Civil War income tax levies enacted by Congress placed a 3
percent tax on incomes over $800. The 1861 measure drew little controversy. If
some Americans were going to give up their lives for the union, the least
people with income could do was pay a little tax.(24) The 1861 revenue
legislation also included America's first inheritance tax.
"Millionaires like Mr. W. B. Astor, Commodore Vanderbilt," the New York
Herald approvingly noted, "will henceforth contribute a fair proportion of
their wealth to the support of the national government."(25)
No taxes were actually collected under the 1861 measure,(26) and
collections didn't
actually begin until 1862 when new legislation established a $600 exemption
and taxed all income between $600 and $10,000 at 3 percent. Income above
$10,000 was taxed slightly higher, at 5 percent.(27)
The new commissioner of internal revenue, working "day and night in a small
room in the Treasury building with three clerks borrowed from other
departments," was soon pulling in the revenue by the bucket. One cashier with
a salary of $1,600 a year collected $37 million worth of income taxes in just
six months.(28) But the war was costing $2 million a day, and Congress soon
found itself upping the income tax ante. The tax act of 1864 set the rates at
5 percent for income between $600 and $5,000, 7.5 percent between $5,000 and
$10,000, and 10 percent over $10,000.(29) The next year, Congressman Lewis W.
Ross tried unsuccessfully to raise the top rate to 20 percent on income over
$20,000. The Ross effort failed, but the final legislation enacted in 1865,
did drop the 10 percent tax threshold down to $5,000.(30)
The war-time willingness to tax the rich ended as soon as the shooting
stopped. "As the Civil War faded into memory," historian Sidney Ratner notes,
"business interests gradually gathered strength to oppose the income and
inheritance taxes which had received such strong support from the people when
the Union was at stake."(31) The counterattack against the income tax minced
no words. Academic Goldwin Smith denounced the income tax's "socialistic
tendency." It was, he charged in 1866, "a tax imposed expressly on the rich,
and capable of indefinite expansion and class graduation." The progressive
income tax, added Rep. Justin S. Morrill "can only be defended on the same
ground the highwayman defends his acts."(32)
The income tax, to be sure, had its defenders. Rep. Austin Blair of Michigan
noted that
"every dollar which we take off this income tax, which applies to the rich men
of the country, must be laid upon the poorer men of the country." Rep.
Washington Townsend of Pennsylvania charged that the "clamor in favor of the
abolition of the income tax" had been cynically orchestrated by "men of
colossal fortunes and extraordinary incomes."(33) In the Senate, John Sherman
called the income tax "the only discrimination in our tax laws that will reach
wealthy men as against the poorer classes.(34)
Sherman and other income tax advocates were fighting a losing battle. In
1867, Congress eliminated higher tax rates for higher incomes and set a flat
income tax rate of 5 percent on all incomes over $1,000.(35) In 1868, 250,000
Americans out of a population of 39.5 million paid income tax.(36) By 1872,
the last year before the Civil War income tax died completely, only 72,949
Americans, less than one fifth of 1 percent of the nation's population, were
paying any taxes on their incomes.(37)
The 1873 repeal of the income tax gave America's most fortunate few a green
light to amass wealth totally unfettered by government limitation. And amass
wealth they did. Over the next 30 years, the "Gilded Age," fortunes soared to
heights scarcely imaginable only a few years before. The United States had
until the Civil War always boasted a relatively even distribution of income,
at least compared to aristocratic Europe. "By the early twentieth century,"
note economists Jeffrey G. Williamson and Peter H. Lindert, "wealth
concentration had become as great in the United States as in France or
Prussia."(38)
Journalists and scholars of the era tracked this growing concentration. In
1892, the New York Tribune raised eyebrows by publishing a list of America's
millionaires, all 4,047 of them. The following year, an article by a Census
Bureau official revealed that .03 percent of the nation's families-the
millionaires-owned 20 percent of the nation's wealth. The next 8.97 percent
owned another 51 percent, which meant that the nation's wealthiest 9 percent
owned 71 percent of the country's treasure.(39)
A widely discussed 1895 book, The Present Distribution of Wealth in the
United States by Charles B. Spahr, offered some additional damning numbers.
The wealthiest 200,000 families in America, those families with incomes over
the then princely sum of $5,000, received 30 percent of national income, noted
Spahr. These rich Americans paid taxes of various sorts that amounted to 1
percent of their incomes, at the same time average Americans were paying taxes
that cost them 4 percent of their incomes.(40) In the same year Spahr's book
appeared, Mrs. William Backhouse Astor, Jr., the scion of New York's greatest
fortune, dramatically underscored the human dimension of Spahr's statistics.
She built a Fifth Avenue mansion with a ballroom big enough for 1,200.(41)
Wealth's dizzying climb in the Gilded Age did not go unopposed. Between
1873 and 1879, lawmakers from the West and South introduced 14 bills to
reenact the income tax.(42) In 1880, Felix Adler, the founder of the Ethical
Culture Movement, called for "an income tax graduated up to 100 percent on all
income above that needed to supply all the comforts and refinements of
life."(43) In 1883, crusading newspaper publisher Joseph Pulitzer made the
demand for an income tax part of his New York World's 10-plank platform for
social reform.(44) In 1886, the Knights of Labor, what was then American
labor's largest national organization, announced its support for a graduated
income tax.(45) By 1890, the income tax was part and parcel of every
significant American social reform agenda.
But the graduated income tax was only the most politically plausible of a
number of ideas then circulating to limit wealth and income. In his widely
read 1879 book, Progress and Poverty, Henry George had attacked the
concentration of land ownership and proposed the abolition of all taxes,
except those upon land values. This "single tax" on land would expropriate all
rental income. George's "single tax" prescription won him enough adherents to
run a credible campaign for mayor of New York.(46) But it was another book,
Edward Bellamy's Looking Backward, that truly captured America's imagination.
Published in 1888, Bellamy's novel told the tale of a nineteenth century
Bostonian who awoke a century later to find an America that had conquered
inequality. In the new America Bellamy described, all working people earned
the same income, but worked different numbers of hours. Workers bid for jobs,
and the market set the hours of work required in each job category. If no one
bid for a particularly unappetizing job, then the hours required for that job
would be reduced until the job became appealing enough to attract bidders. In
Bellamy's utopia, workers with unappealing jobs would only have to work a few
hours a week.
Bellamy's vision of equality proved immensely popular. In the nineteenth
century, only the Bible and Ben-Hur sold more copies than Looking Backward.
"Nationalist Clubs" sprung up around the nation to popularize the Looking
Backwards credo. Reformers of every stripe found Bellamy an inspirational
force, even if they didn't totally endorse his particular utopian vision. The
Farmers' Alliance, the paper of the Southern farmers' organization that helped
found the Populist movement, offered a free copy of Looking Backward with
every year's subscription.(47)
Bellamy's inspiration and the election of Populist representatives and
senators in 1892 all helped make the income tax once again politically viable.
By 1894, Populists and Democrats had coalesced behind legislation that would
tax the incomes of the nation's richest 5 percent. Their modest proposal for a
2 percent tax on income above $4,000 struck America's wealthy as absolute
madness. "Cries of 'confiscation' were echoed throughout the land," one
historian has noted, "to which Populist orators usually replied that these
huge incomes were 'stolen' anyway."(48) The opposition to the 1844 income tax
included lawmakers who had supported the income tax 30 years earlier in the
feverish flush of Civil War. "In a republic like ours, where all men are
equal," Senator John Sherman argued, "this attempt to array the rich against
the poor or the poor against the rich is socialism, communism, devilism."(49)
Other opponents charged that the income tax would lower wages, dampen
incentive, and generate fraud and corruption.(50) The income tax, they noted,
would take from the "thrifty and enterprising' and give to the "shiftless and
sluggard.(51)
Income tax advocates shrugged off the opposition's heated rhetoric. They had
the votes. Their income tax proposal passed as an amendment to the 1894 tariff
bill, legislation they knew that President Grover Cleveland, an income tax
opponent, couldn't afford to veto. The Democratic hen, the New York Tribune
noted, had "hatched a Populist chicken at last."(52) On August 28, 1894, the
nation-for the first time since the Civil War era-had an income tax.
But not for long. Income tax opponents almost immediately began plotting a
court challenge.
They counted on the Supreme Court to "stand like a rock against a "wave of
socialist revolution."(53) They were not to be disappointed. On May 20, 1895,
less than a year after the income tax became law, a 5-4 Supreme Court majority
invalidated the entire 1894 income tax. "The wave of socialistic revolution
has gone far," applauded the New York Sun, "but it breaks at the foot of the
ultimate bulwark set up for the protection of our liberties. Five to four the
Court stands like a rock."(54) Dissenting Justice Brown felt the weight of
that rock. He hoped the decision might not "prove the first step toward the
submergence of the liberties of the people in a sordid despotism of
wealth."(55)
The Supreme Court's 1895 ruling, just as Justice Brown feared, did prove a
significant step toward a new American politics sculpted by the power of great
wealth. In 1896, the Republican Party outspent the Democratic-Populist
coalition into oblivion. The GOP expended somewhere between $3.5 and $7
million on the 1896 campaign, an unheard of sum. The funds came from the
plutocracy that so worried Justice Brown: $250,000 from Standard Oil, $250,000
from J. P. Morgan, and on and on. The Democrats spent $600,000.(56)
With the Populist-Democratic coalition in tatters, wealth had successfully
shoved the income tax off the national political stage. In 1898, no one in
Congress seriously proposed an income tax when the Spanish-American War
generated demands for new revenue sources. Instead, Congress adopted a weak
tax on inheritances, mainly because conservatives, as one historian has noted,
"felt that a concession on the inheritance tax was far less of a danger to the
wealthy classes than one on the income tax."(57) The 1898 inheritance tax
adopted by Congress applied only to those bequests over $1 million left to
distant relatives or private bodies.(58) But even this modest attempt to
limit, wealth couldn't outlast the war. In 1902, the war inheritance tax was
repealed.
-----
-cont.-
-----
Aloha, He'Ping,
Om, Shalom, Salaam.
Em Hotep, Peace Be,
Omnia Bona Bonis,
All My Relations.
Adieu, Adios, Aloha.
Amen.
Roads End
Kris
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