WEBVTT NOTE Thank Goodness for FDR's Tax Cut 1 00:00:00.000 --> 00:00:08.000 My topic today is a little curious. It's called, Thank Goodness for FDR's Tax Cut. 2 00:00:08.000 --> 00:00:18.000 That's a little bit more than curious, because FDR never actually had a tax cut. 3 00:00:18.000 --> 00:00:26.000 So this is going to take some explaining to do, but eventually I'll get around to it. 4 00:00:26.000 --> 00:00:31.440 to it. And actually, I do have a couple of journal articles that if you're really interested 5 00:00:31.440 --> 00:00:37.560 more in the topic, from the Journal of Libertarian Studies, which really go into this issue that 6 00:00:37.560 --> 00:00:44.320 I'll be dealing with here today, in much greater depth. Now, one of the reasons we're all here, 7 00:00:44.320 --> 00:00:51.320 of course, is that the constant harp from state, county, local and federal officials 8 00:00:51.320 --> 00:01:21.320 and federal officials for more taxes, they need more revenues, the federal government needs more revenues for these problems and more revenues for social security, more revenues to fight this war, that war and the next war, and of course the same thing at the state level, we don't have enough money for education and welfare and blah blah blah blah blah, and at the local level you hear the same thing, every year, every cycle, local, county, town officials are calling for some form of revenue 9 00:01:21.320 --> 00:01:27.160 New Enhancement, so that they get to spend more of your money. 10 00:01:27.160 --> 00:01:35.880 Well the body of my talk is going to be really a look at two American tax revolts. 11 00:01:35.880 --> 00:01:40.720 When Americans said enough is enough, we've been overtaxed and we're going to do something 12 00:01:40.720 --> 00:01:46.080 about it, we're going to take this into our own hands. 13 00:01:46.080 --> 00:01:54.340 But first I want to take a minute and look specifically at the trouble with taxation. 14 00:01:54.340 --> 00:01:56.380 Why is taxation trouble? 15 00:01:56.380 --> 00:02:02.820 These public officials and special interest groups don't view taxation as trouble. 16 00:02:02.820 --> 00:02:10.260 They view it as the solution to all of at least their problems. 17 00:02:10.260 --> 00:02:11.620 They view it as a great thing. 18 00:02:11.620 --> 00:02:18.500 If we can just transfer resources to the public sector, we can make society much better off. 19 00:02:18.500 --> 00:02:23.220 And from the Austrian point of view, that's just simply not correct. 20 00:02:23.220 --> 00:02:27.740 There is real trouble with taxation. 21 00:02:27.740 --> 00:02:34.260 Really with all taxation, it's just the more taxes there are, the more trouble there is 22 00:02:34.260 --> 00:02:41.100 in society, and I think this is, of course, one of the great lessons of Charles Adams. 23 00:02:41.100 --> 00:02:48.420 The first point that we want to make is that taxation is theft. Now, a lot of people like 24 00:02:48.420 --> 00:02:54.700 to cover that over. A lot of people like to excuse the fact that taxation is theft. A 25 00:02:54.700 --> 00:03:00.100 lot of people think it's okay if they get a piece of the pie or if they get a vote in 26 00:03:00.100 --> 00:03:06.860 the matter. And that's all. You can think whatever you want. But you cannot erase or 27 00:03:06.860 --> 00:03:10.620 or resolve the problem that all taxation is theft. 28 00:03:10.620 --> 00:03:14.060 It involves a coercive activity 29 00:03:14.060 --> 00:03:17.220 where one person's resources are being taken 30 00:03:17.220 --> 00:03:20.780 and given to someone or some other group 31 00:03:20.780 --> 00:03:23.140 to use for their own purposes. 32 00:03:23.140 --> 00:03:26.020 Whether or not that purpose is good or not 33 00:03:26.020 --> 00:03:27.420 is another matter. 34 00:03:27.420 --> 00:03:29.700 And the fact that, as suggested last night 35 00:03:29.700 --> 00:03:34.420 by Thomas DiLorenzo, that 45% of all the dollars 36 00:03:34.420 --> 00:03:42.420 In our country, go through this process of taxation and redistribution is a problem. 37 00:03:42.420 --> 00:03:57.420 The fact that our society has become 45% coercive is a real problem for what is otherwise supposed to be a free society. 38 00:03:57.420 --> 00:04:03.420 I was in a government bureaucracy this week and I overheard the bureaucrats who were supposed to be helping me, 39 00:04:03.420 --> 00:04:06.660 I'm going to talk about the IRS and the IRS and the IRS. 40 00:04:06.660 --> 00:04:10.060 The IRS was one of the first people to have come to help me. 41 00:04:10.060 --> 00:04:14.420 They were really interested in helping me, but were really more interested in what they 42 00:04:14.420 --> 00:04:17.060 were doing on their personal lives. 43 00:04:17.060 --> 00:04:22.460 One of them said something to the effect that the IRS is going to help you out. 44 00:04:22.460 --> 00:04:24.700 And that really caught my attention. 45 00:04:24.700 --> 00:04:30.600 And it must've been some boondoggle for state employees, I'm sure. 46 00:04:30.600 --> 00:04:37.600 And I turned to him and I nodded yes. That's exactly what they do. They help you out of your money. 47 00:04:37.600 --> 00:04:43.600 And there's an underlying systemic problem with that sort of society. 48 00:04:43.600 --> 00:04:56.600 The second point that I like to raise with regard to taxation is what I call Thornton's Law. 49 00:04:56.600 --> 00:05:03.920 And this is an economic law which says that taxation discourages the production of everything 50 00:05:03.920 --> 00:05:06.320 that they are placed on. 51 00:05:06.320 --> 00:05:09.280 So if you tax labor, you get less work. 52 00:05:09.280 --> 00:05:13.060 If you tax savings, you get less wealth creation. 53 00:05:13.060 --> 00:05:18.520 If you tax investment, you get less capital investment, and so on. 54 00:05:18.520 --> 00:05:24.880 So that the more taxes we have, the less real goods and services, the less food, clothing, 55 00:05:24.880 --> 00:05:54.880 Walter, transportation, medical care, we have, okay, and I was describing this in my Principles of Economics class, and I said that this is a law of economics, and the first thing they wanted to know is what's it called, because in my Principles of Economics class, I talk about economics as the law of economics, the law of supply, the law of demand, Say's law, and so on. 56 00:05:54.880 --> 00:06:02.520 and I also have a lot of test questions on anything that's a law. They have to 57 00:06:02.520 --> 00:06:08.480 know what it's called, how it works, why it always works, and so on. And so they 58 00:06:08.480 --> 00:06:12.280 immediately raised their hand and said, well, what's this law called? And so I 59 00:06:12.280 --> 00:06:19.720 said, at that point, I said, it's called Thornton's Law. And I have homesteaded 60 00:06:19.720 --> 00:06:28.680 this and have not been challenged for over five years so it's permanently mine and I think it's 61 00:06:28.680 --> 00:06:37.360 important to become famous one of these days but it is important I mean if you realize the fact 62 00:06:37.360 --> 00:06:43.920 that it's not just taking one of your dollars and giving it to the government no there's an incentive 63 00:06:43.920 --> 00:06:51.440 have effect there, so that it's not just a transfer, but there's fewer resources in society. 64 00:06:51.440 --> 00:06:56.360 It's like if the government needs a car, the government takes two cars, cuts them in half, 65 00:06:56.360 --> 00:06:59.840 puts them one together and throws the other half away. 66 00:06:59.840 --> 00:07:08.320 We're losing resources in this process. 67 00:07:08.320 --> 00:07:17.000 Waste and Distortion. 68 00:07:17.000 --> 00:07:22.080 Waste and distortion, you all know about the time and trouble involved in doing your taxes, 69 00:07:22.080 --> 00:07:32.640 the distortion of our choices regarding housing, regarding borrowing and savings, inheritance, 70 00:07:32.640 --> 00:07:38.120 shipping jobs overseas now, there's really no end to the type of distortions in our decisions 71 00:07:38.120 --> 00:07:44.200 and the simple fact that we're not free to make the types of decisions that we'd like 72 00:07:44.200 --> 00:07:49.720 to about where we live, how we live, how many children we have and so on. 73 00:07:49.720 --> 00:07:54.160 It's ridiculous for the government to be involved in that kind of thing. 74 00:07:54.160 --> 00:08:04.920 And taxation is really a major fulcrum on which our decisions are biased and altered. 75 00:08:04.920 --> 00:08:14.380 And then we also have to raise the point, is it worth it? 76 00:08:14.380 --> 00:08:18.040 What is it that the government does that's so essential? 77 00:08:18.040 --> 00:08:22.700 What is it some people consider government indispensable, but what exactly is it that 78 00:08:22.700 --> 00:08:29.580 it does so well or would not be done by the private sector in the absence of government? 79 00:08:29.580 --> 00:08:35.640 Public education was considered indispensable and now it's completely falling apart. 80 00:08:35.640 --> 00:08:42.400 Education and literacy in the United States is both falling as a result of widespread public 81 00:08:42.400 --> 00:08:45.080 education. 82 00:08:45.080 --> 00:08:53.200 National defense, the United States spends gazillions of dollars and the simple fact 83 00:08:53.200 --> 00:09:03.200 The fact is that this country really doesn't face any real military invasion type threat that requires a half a trillion dollars of expenditures. 84 00:09:03.200 --> 00:09:08.200 Regulations were just exposed and this really comes about every week. 85 00:09:08.200 --> 00:09:14.200 We don't really, I'm just going with the sort of the thing of the week. 86 00:09:14.200 --> 00:09:21.560 The FDA, we find out that they've been protecting drug companies who are basically, they're 87 00:09:21.560 --> 00:09:28.880 giving the good housekeeping seal of approval on drugs, where the cost and dangers and risks 88 00:09:28.880 --> 00:09:34.460 are greater than the benefits, and the FDA has basically been keeping that from us and 89 00:09:34.460 --> 00:09:36.360 covering it up. 90 00:09:36.360 --> 00:09:43.820 And now we're told by experts and even the president that Social Security is in serious 91 00:09:43.820 --> 00:09:45.820 of Bankrupting the Country. 92 00:09:45.820 --> 00:09:49.820 So something that was supposed to provide for our social security now. 93 00:09:49.820 --> 00:09:57.820 Most experts agree we face a bankrupting of our nation out about 20 years. 94 00:09:57.820 --> 00:10:06.820 So the conclusion here that we basically come to is that taxes make us poor over time. 95 00:10:06.820 --> 00:10:14.180 Okay, and all that this clamor for more taxes and new taxes is really a clamor for more 96 00:10:14.180 --> 00:10:18.940 poverty and more problems and that's the way it should be viewed. 97 00:10:18.940 --> 00:10:27.500 And whereas taxes make us poor, tax cuts, tax cuts actually leads to prosperity. 98 00:10:27.500 --> 00:10:34.300 Tax cuts or eliminating types of taxes leads to higher standards of living. 99 00:10:34.300 --> 00:10:39.820 When this all gets to the matter of the thesis of Charles Adams, who has brought so much 100 00:10:39.820 --> 00:10:47.040 attention and evidence to these points, is that taxes have an important impact on the 101 00:10:47.040 --> 00:10:50.120 course of our civilization. 102 00:10:50.120 --> 00:10:56.620 In the last lecture, for example, about Thomas D. Lorenzo, Lincoln and the tariff war and 103 00:10:56.620 --> 00:11:03.520 the civil war, and then ultimately what happened to this country as a result of the civil war 104 00:11:03.520 --> 00:11:07.580 is a prominent example there. 105 00:11:07.580 --> 00:11:16.120 But Charles Adams also tells us that tax rebellions or tax revolts are really one of the keys 106 00:11:16.120 --> 00:11:20.600 to American civilization and American freedom. 107 00:11:20.600 --> 00:11:27.320 This country was born of a tax revolt and it has continued with a series of tax revolts 108 00:11:27.320 --> 00:11:34.320 and yet history has basically, those aspects of tax revolts have been erased from the history books 109 00:11:34.320 --> 00:11:42.320 and it's all been rewritten so that the American Revolution wasn't really about taxes, it was about democracy 110 00:11:42.320 --> 00:11:47.320 and the Civil War wasn't about tariffs, it was about slavery 111 00:11:47.320 --> 00:11:55.320 and all of these other tax revolts were just silly nonsensical, you know, people getting out of control, drinking too much and fighting 112 00:11:55.320 --> 00:12:01.320 No. Charles Adams shows that they were real, that they were important, that they were effective. 113 00:12:01.320 --> 00:12:07.320 And that's what I'm going to talk about today, a tale of two American tax revolts. 114 00:12:07.320 --> 00:12:11.320 The first one is centered right here. 115 00:12:11.320 --> 00:12:23.320 In Charlottesville, Virginia is really what I consider the epicenter of one of the most important tax revolts in our history. 116 00:12:23.320 --> 00:12:29.480 but again one that was covered up. This is one that was mentioned by DeLorenzo. 117 00:12:29.480 --> 00:12:37.720 It's called the Whiskey Revolt of the 1790s. Now I know the standard story has 118 00:12:37.720 --> 00:12:43.360 it that the Whiskey Revolt occurred in four Western counties in Western 119 00:12:43.360 --> 00:12:49.800 Pennsylvania on a given month in a given year, but that's actually not the case. 120 00:12:49.800 --> 00:12:57.800 The whiskey revolt revolution was actually in a number of states including 121 00:12:57.800 --> 00:13:03.200 Western New York, Western Pennsylvania, Virginia and West Virginia, what is now 122 00:13:03.200 --> 00:13:10.160 West Virginia, Kentucky, Tennessee, North Carolina, North Georgia, and North South 123 00:13:10.160 --> 00:13:17.920 Carolina. So it was widespread throughout the entire backwoods country of America. 124 00:13:17.920 --> 00:13:25.920 It was in opposition to the excise tax on alcohol imposed by the federal government. 125 00:13:25.920 --> 00:13:34.980 It had a very big impact, but it was almost entirely one of a nonviolent nature. 126 00:13:34.980 --> 00:13:43.380 Tax revolts are very often of a nonviolent nature of one of civil disobedience. 127 00:13:43.380 --> 00:13:48.260 It's just that in most of these places, the public officials went along with the revolt. 128 00:13:48.260 --> 00:13:52.500 They didn't even try to collect the taxes. 129 00:13:52.500 --> 00:13:58.500 So the official story has this rebellion occurring in four counties in western Pennsylvania, but 130 00:13:58.500 --> 00:14:04.160 actually it was only, that's only because in the Pittsburgh area, public officials were 131 00:14:04.160 --> 00:14:08.340 willing to try to collect the tax. 132 00:14:08.340 --> 00:14:13.100 That was the only place in the backwards areas of the United States, which is where the alcohol 133 00:14:13.100 --> 00:14:24.700 was being produced. Were they willing to even try to get that alcohol? The rebels harassed 134 00:14:24.700 --> 00:14:28.860 the public officials who tried to collect the tax. They sacked their houses and in a 135 00:14:28.860 --> 00:14:34.780 few cases, tarred and feathered the officials. This led Alexander Hamilton to suggest to 136 00:14:34.780 --> 00:14:41.540 President Washington that he lead an army into western Pennsylvania to crush the rebellion. 137 00:14:41.540 --> 00:14:48.620 Rebellion raised an army of over 13,000 soldiers and led it into Western Pennsylvania. 138 00:14:48.620 --> 00:14:53.900 To give you some idea, Murray Rothbard calls this the largest army ever assembled on the 139 00:14:53.900 --> 00:14:57.660 North American continent up until that time. 140 00:14:57.660 --> 00:15:05.300 Thirteen thousand would have been greater than the number of militia-aged males existing 141 00:15:05.300 --> 00:15:09.300 in the entire Western Pennsylvania area. 142 00:15:09.300 --> 00:15:17.380 The rebellion did melt away, a few rebels were arrested, two were tried, none were convicted 143 00:15:17.380 --> 00:15:21.660 or punished. 144 00:15:21.660 --> 00:15:27.820 But this show of force didn't lead to the collection of any excise taxes. 145 00:15:27.820 --> 00:15:31.140 So this big show of force didn't actually crush the revolt. 146 00:15:31.140 --> 00:15:36.540 It set it down while the soldiers were there, but as soon as the soldiers were gone, people 147 00:15:36.540 --> 00:15:59.540 The whole thing turned out to be quite a scam. It turned out very well for President Washington, who was the largest landowner in the western territories, as before the American Revolution, he was a western surveyor, and he would periodically go out and claim huge areas of land for himself. 148 00:15:59.540 --> 00:16:06.820 One story has it that at one point he waved his hand at the edge of the Ohio River and 149 00:16:06.820 --> 00:16:13.660 claimed all of the area west of the Ohio River for his own personal property. 150 00:16:13.660 --> 00:16:19.860 That didn't work, but he did have a lot of land and the soldiers had a lot of money out 151 00:16:19.860 --> 00:16:20.860 there. 152 00:16:20.860 --> 00:16:25.500 I mean, after all, they were spending almost all of the Federal Treasury to get this army 153 00:16:25.500 --> 00:16:49.500 The Coincidence was certainly a pro-pipitous one for his finances, and Washington himself said that this event, having happened at the time it did, was indeed fortunate. 154 00:16:49.500 --> 00:17:01.580 Okay, so while the army was a failure, the rebellion had another big impact. It turned 155 00:17:01.580 --> 00:17:09.700 Americans against government in huge numbers. And this again brings us back to Charlottesville. 156 00:17:09.700 --> 00:17:17.660 Not only was it the geographic epicenter of this revolt, but it was in a sense the political 157 00:17:17.660 --> 00:17:25.940 outcome as well, because the Anti-Federalist Americans, the back country Republicans of 158 00:17:25.940 --> 00:17:32.660 America turned out against the Federalist Party that imposed this tax. 159 00:17:32.660 --> 00:17:40.700 And so in the election of 1800, the Democratic Republican Party crushed the Federalist Party 160 00:17:40.700 --> 00:17:47.700 out of existence, basically, and that all hinged on the fact of these excise taxes and 161 00:17:47.940 --> 00:17:54.940 the whiskey revolt. It's considered a tight election. Jefferson was number one in the 162 00:17:55.780 --> 00:18:02.020 voting, Aaron Burr was number two, and it took 21 votes in Congress to actually decide 163 00:18:02.020 --> 00:18:06.180 who was going to be president and who was going to be vice president. So the history 164 00:18:06.180 --> 00:18:11.740 The history books sort of picture this as a close election, but it was actually quite 165 00:18:11.740 --> 00:18:16.260 decisive because Jefferson and Burr were in the same party. 166 00:18:16.260 --> 00:18:19.460 So the Federalists didn't even come in second place. 167 00:18:19.460 --> 00:18:22.940 They were all down in third and fourth place in this election. 168 00:18:22.940 --> 00:18:30.700 So Jefferson destroyed the Federalist party, and when he got into office he wiped out the 169 00:18:30.700 --> 00:18:31.700 excise tax on alcohol. 170 00:18:31.700 --> 00:18:38.140 Law, in fact he wiped out almost all internal taxes, all excise taxes, wiped out most of 171 00:18:38.140 --> 00:18:42.460 the debt, he wiped out most of government cut back military spending and the people 172 00:18:42.460 --> 00:18:49.420 loved it and the economy benefited greatly as a result. 173 00:18:49.420 --> 00:18:56.460 The biggest problem of course was that the impact of the tax revolt had been lost in 174 00:18:56.460 --> 00:19:00.020 our history books. 175 00:19:00.020 --> 00:19:09.300 Now, with FDR we have an entirely different story and I guess I come at this issue with 176 00:19:09.300 --> 00:19:14.180 the puzzle of why everybody liked Franklin Delano Roosevelt. 177 00:19:14.180 --> 00:19:19.700 I come from New York State and he was a beloved figure and still is in New York State. 178 00:19:19.700 --> 00:19:25.820 He was the governor of New York and of course is really an icon and then when I moved to 179 00:19:25.820 --> 00:19:33.300 Auburn, Alabama, I found out that not everybody really likes FDR. 180 00:19:33.300 --> 00:19:39.860 So this is a big shock, a very big shock, but I've come around to the more southern 181 00:19:39.860 --> 00:19:40.860 view on this. 182 00:19:40.860 --> 00:19:46.500 As a matter of fact, at our last conference, there was somebody with a bumper sticker there 183 00:19:46.500 --> 00:19:51.500 FDR, no longer the worst president in American history 184 00:19:51.500 --> 00:20:01.500 It's too bad they weren't for sale 185 00:20:01.500 --> 00:20:09.500 And everything that FDR is known for, World War II, the New Deal, and the Great Depression 186 00:20:09.500 --> 00:20:18.500 The Great Depression, you know, everybody points to that's why he's so great, but those three things are really bad things. 187 00:20:18.500 --> 00:20:23.500 I mean, we didn't get out of World War II until after he died. 188 00:20:23.500 --> 00:20:29.500 The New Deal is all bad from an economic point of view. 189 00:20:29.500 --> 00:20:37.500 And, you know, everybody says he got us out of the Great Depression, but, I mean, we were in the Great Depression for his entire presidency. 190 00:20:37.500 --> 00:20:56.500 and we didn't really get out of the Great Depression until after he died, so I have a hard time believing that those were the reasons, you know, for his fame with the American people. 191 00:20:56.500 --> 00:21:08.500 So, but what I have found is some interesting, I think some interesting information. 192 00:21:08.500 --> 00:21:14.820 David Bito published a book in 1989 published by the North Carolina University Press called 193 00:21:14.820 --> 00:21:20.860 Taxpayers in Revolt, Tax Resistance During the Great Depression, in which he showed that 194 00:21:20.860 --> 00:21:29.220 America was basically up in arms after the stock market crash in 1929 till 1933. Taxpayer 195 00:21:29.220 --> 00:21:35.820 resistance groups got started all over the country. People were refusing to pay their 196 00:21:35.820 --> 00:21:43.540 property taxes in cities and counties across the United States. People refused to have 197 00:21:43.540 --> 00:21:50.240 their properties foreclosed. Sheriffs would come out and people would have guns and all 198 00:21:50.240 --> 00:21:53.960 All their friends with their guns and the sheriff would say, I'm supposed to foreclose 199 00:21:53.960 --> 00:21:59.760 and they would say, well, try. 200 00:21:59.760 --> 00:22:08.640 And even when they did allow to have their property foreclosed, everybody in the area 201 00:22:08.640 --> 00:22:14.120 would basically agree that one of their friends would buy the property for a dollar and give 202 00:22:14.120 --> 00:22:17.100 it back to them at the auction. 203 00:22:17.100 --> 00:22:22.900 So that even if they did foreclose, you know, they would ultimately get the property back 204 00:22:22.900 --> 00:22:26.260 for a dollar and all their tax bills would be absolved. 205 00:22:26.260 --> 00:22:33.180 So people were in cahoots against the government and against taxes. 206 00:22:33.180 --> 00:22:40.420 And then in Vito's book in 1933, the tax revolt simply vanished, almost without a trace. 207 00:22:40.420 --> 00:22:46.420 attacks another tax revolt that vanished down the memory hole of American history. 208 00:22:46.420 --> 00:22:55.420 The author Beto attributes this to a lack of organized and a lack of ideological backbone in the American people. 209 00:22:55.420 --> 00:23:03.420 This, of course, is a true problem of all tax revolts, the lack of organization and the lack of an ideological backbone, 210 00:23:03.420 --> 00:23:13.420 I don't think that explains why everybody would lose their backbone all at the same time in 1933. 211 00:23:13.420 --> 00:23:21.420 The way I try to explain this is looking at the public finance of the age. 212 00:23:21.420 --> 00:23:29.420 Local government grew extremely fast during the 1920s, financed almost exclusively with the property tax. 213 00:23:29.420 --> 00:23:37.700 Tax. The Great Depression hit and taxes on the American population doubled as a percentage 214 00:23:37.700 --> 00:23:43.580 of their income. Their income was falling, taxes were continuing to rise, and so you 215 00:23:43.580 --> 00:23:51.360 can imagine taxes at the local, state, and federal level doubling over a four-year period. 216 00:23:51.360 --> 00:23:58.020 So there's good reason for a tax revolt. Tax delinquency on property taxes increased 217 00:23:58.020 --> 00:24:06.100 from 10% to 30%. There was increases in bankruptcy by the American people and so there's good 218 00:24:06.100 --> 00:24:13.180 reason for these tax protest groups to form spontaneously around the country in the hundreds 219 00:24:13.180 --> 00:24:19.520 of groups containing very often thousands and thousands of members, urban and rural 220 00:24:19.520 --> 00:24:26.320 but no national leader. 221 00:24:26.320 --> 00:24:29.600 Incomes Prohibition. 222 00:24:29.600 --> 00:24:36.240 Incomes the issue of Prohibition and FDRs, ultimately what I call his tax cut. 223 00:24:36.240 --> 00:24:41.480 The income tax allowed Congress to abandon the alcohol tax via Prohibition. 224 00:24:41.480 --> 00:24:47.480 In other words, as the income tax came in during the 19-teens and started generating 225 00:24:47.480 --> 00:24:54.680 and Revenue. By 1920, Congress had enough revenue so that they could abandon alcohol 226 00:24:54.680 --> 00:25:01.680 taxes, which made up a substantial portion of federal, state and local revenues. 227 00:25:05.160 --> 00:25:11.160 The income tax revenue continued to soar. It covered the foreign war, the alcohol war 228 00:25:11.160 --> 00:25:13.240 and Big Government. 229 00:25:13.240 --> 00:25:19.880 When the Great Depression hit in 1929, 1930, the income from the, excuse me, the revenue 230 00:25:19.880 --> 00:25:23.440 from the income tax fell by 60 percent. 231 00:25:23.440 --> 00:25:33.880 FDR, in the campaign of 1932, was forced to convert from a dry, or somebody who supported 232 00:25:33.880 --> 00:25:41.760 Prohibition to Becoming a Wet, and he did this apparently in a hotel room in Chicago, 233 00:25:41.760 --> 00:25:47.320 was forced by his advisors, and at that point he got the nomination for, the Democratic 234 00:25:47.320 --> 00:25:55.680 nomination for president, and he won, and he supported repeal of prohibition. 235 00:25:55.680 --> 00:26:02.720 Notice that prohibition of alcohol also wipes out all local and state revenues from alcohol, 236 00:26:02.720 --> 00:26:07.520 and it's hard to imagine but a huge portion of our government was actually 237 00:26:07.520 --> 00:26:15.280 financed by alcohol. Local government for example received excise taxes and sales 238 00:26:15.280 --> 00:26:20.600 tax revenues for both local and county so when repeal of prohibition went into 239 00:26:20.600 --> 00:26:25.720 effect the coffers of local governments started to fill up again from these 240 00:26:25.720 --> 00:26:31.900 alcohol revenues. State governments also had liquor taxes and they also had 241 00:26:31.900 --> 00:26:39.460 Liquor Monopolies and this helped fill up state coffers with revenue and states 242 00:26:39.460 --> 00:26:44.260 actually began turning over some of this money to local governments and then of 243 00:26:44.260 --> 00:26:48.940 course the federal government also has alcohol taxes so all three levels of 244 00:26:48.940 --> 00:26:55.500 government when prohibition was repealed started to getting new sources of funds 245 00:26:55.500 --> 00:27:03.500 so what I'm arguing here basically is that repealing prohibition was one way 246 00:27:03.500 --> 00:27:11.220 of helping to put down the tax revolt because every all levels of government 247 00:27:11.220 --> 00:27:18.180 were strapped for funds people were opposed to more taxes repealing 248 00:27:18.180 --> 00:27:23.380 prohibition and taxing alcohol was a way out there's a way to solve all problems 249 00:27:23.380 --> 00:27:29.980 at Once, and this ultimately is one of the things that made FDR so popular. 250 00:27:29.980 --> 00:27:36.300 In the area of property taxes and the tax revolt, local governments suspended property 251 00:27:36.300 --> 00:27:44.140 tax collections, they cut back rates, they had tax holidays, and they lowered assessment 252 00:27:44.140 --> 00:27:45.700 levels. 253 00:27:45.700 --> 00:27:53.780 So, in all these areas where there were tax revolters, in 1933, 1932 and 1933, they got 254 00:27:53.780 --> 00:27:56.980 tax relief. 255 00:27:56.980 --> 00:28:01.220 For alcohol consumers, it was a big boon as well. 256 00:28:01.220 --> 00:28:09.700 The price of alcohol was as much as 400% higher during Prohibition as before. 257 00:28:09.700 --> 00:28:16.820 So by repealing prohibition and putting alcohol taxes in place, they helped out both the alcohol 258 00:28:16.820 --> 00:28:22.740 consumer and local state and federal government at the same time. 259 00:28:22.740 --> 00:28:29.820 That fall in price, for example, generated what would in effect be a tax cut equal to 260 00:28:29.820 --> 00:28:35.260 2.5% of gross domestic product. 261 00:28:35.260 --> 00:28:40.700 Well is that important in the overall picture of the economy back then as well as today 262 00:28:40.700 --> 00:28:51.700 that if you reduce the price that greatly by 100% in effect or excuse me by 50% in effect, 263 00:28:51.700 --> 00:28:57.240 you give the economy a 2.5% tax cut. 264 00:28:57.240 --> 00:29:05.640 Today that would be the equivalent of about $275 billion or about $4,000 per household. 265 00:29:05.640 --> 00:29:09.420 So it's a significant tax cut in that sense. 266 00:29:09.420 --> 00:29:15.040 And the third aspect of the victory was that there were many property tax limitations put 267 00:29:15.040 --> 00:29:16.520 into place around the country. 268 00:29:16.520 --> 00:29:22.200 In other words, states would adopt constitutional amendments which would restrict the ability 269 00:29:22.200 --> 00:29:28.160 of State and Local Governments to increase property taxes or to put upward limits on 270 00:29:28.160 --> 00:29:39.280 what those property taxes could be. And actually revenues from property taxes fell in a number 271 00:29:39.280 --> 00:29:52.080 of states. So we see that this was an important tax event, a tax revolt, except in this case 272 00:29:52.080 --> 00:29:57.120 Instead of bringing Thomas Jefferson to the presidency, it brought Franklin Delano Roosevelt 273 00:29:57.120 --> 00:29:58.780 to the presidency. 274 00:29:58.780 --> 00:30:02.560 And there were other drawbacks. 275 00:30:02.560 --> 00:30:10.800 States adopted sales taxes and income taxes in order to avoid the property tax. 276 00:30:10.800 --> 00:30:16.560 Local governments became dependent upon the federal and state governments for their grants 277 00:30:16.560 --> 00:30:17.560 and aid. 278 00:30:17.560 --> 00:30:22.520 The cities were strapped for cash so the state and federal governments started giving them 279 00:30:22.520 --> 00:30:27.320 money to make up for some of these programs and city governments or local governments 280 00:30:27.320 --> 00:30:34.120 have become dependent upon the upper levels of government and Glenn Fisher, one of the 281 00:30:34.120 --> 00:30:41.120 big experts in this area, said that the overall government as a result has become more centralized 282 00:30:41.120 --> 00:30:50.880 And of course, the worst of all side effects of this tax revolt were FDR's popularity. 283 00:30:50.880 --> 00:30:56.480 I attribute a lot of FDR's popularity to the fact that he solved this tax revolt for 284 00:30:56.480 --> 00:31:03.560 government and he ended prohibition of alcohol. 285 00:31:03.560 --> 00:31:13.320 Comparing and contrasting these two tax revolts, one of the things we find is that tax revolts 286 00:31:13.320 --> 00:31:19.220 have gone down the historical memory hole. They're not in the textbooks, and if they 287 00:31:19.220 --> 00:31:24.320 are in the textbooks, they're not described as tax revolts. And what we need to do is 288 00:31:24.320 --> 00:31:32.360 show that tax revolts are very important in American history. This loss of historical 289 00:31:32.360 --> 00:31:39.360 is a loss of real historical patriotism. Patriotism that is essentially nonviolent. 290 00:31:39.360 --> 00:31:45.360 Most of these tax revolts were nonviolent. And one of the things that we definitely 291 00:31:45.360 --> 00:31:51.360 find in looking at tax revolts is that the big problem is that they are not 292 00:31:51.360 --> 00:31:57.360 ideologically and intellectually rigorous. They are driven from the fact that 293 00:31:57.360 --> 00:32:03.360 A lot of people involved find taxes too high, they find them unfair, and they want to do something about it. 294 00:32:03.360 --> 00:32:11.360 And what really needs to happen is that they need to have a better ideological and intellectual foundation. 295 00:32:11.360 --> 00:32:22.360 And what I conclude from looking at these tax revolts in American history, especially FDR's so-called tax cut, 296 00:32:22.360 --> 00:32:28.600 is that the future of American society depends on the success of tax revolts 297 00:32:28.600 --> 00:32:32.360 and that they really do need to be more intellectually 298 00:32:32.360 --> 00:32:35.360 and ideologically rigorous. Thank you very much.