Rich people’s movements attracted surprising partners during the Great Depression and World War II, but since the 1950s they’ve come to rely on reactionary coalition fed by anti-government paranoia. (More)

Rich People’s Movements, Part IV: The Reactionary Coalition (Non-Cynical Saturday)

This week Morning Feature looks at Isaac Martin’s Rich People’s Movements: Grassroots Campaigns to Untax the One Percent. Wednesday we began with the most current such movement, the Tea Party and the Republican battle to dismantle the 2010 Affordable Care Act. Yesterday we looked back a century to what the far right call “the revolution of 1913,” the passage of the Sixteenth Amendment. Yesterday we saw the birth of Rich People’s Movements between the two world wars. Today we conclude with how the John Birch Society took over the post-war Rich People’s Movements and gave us the Tea Party.

Isaac Martin is a professor in the Department of Sociology and the Urban Studies and Planning Program at the University of California, San Diego. In addition to Rich People’s Movements, Dr. Martin is the author of The Permanent Tax Revolt and a co-editor of the books The New Fiscal Sociology and After the Tax Revolt: California’s Proposition 13 Turns 30. He has published articles about social movements and public policy in the American Journal of Sociology, Law and Society Review, Journal of Policy History, Socio-Economic Review, and Urban Affairs Review, among other journals.

“Letting the sinners off scot-free while shifting the costs … onto the rich”

After J.A. Arnold’s success with rural bankers in the American Taxpayers’ League, the Great Depression seemed like an opportunity to push even further. But Arnold met an unexpected obstacle: the Depression was devastating the entire economy, and rural bankers did not see income or estate taxes as the problem.

Into that gap stepped Thomas Wharton Phillips Jr., an industry scion and once proud Prohibitionist. By the late 1920s, however, Phillips came to believe Prohibition was a waste of money, as Dr. Martin writes:

The cost of enforcing Prohibition was a particularly sore point to pious rich people because Prohibition had eliminated federal liquor taxes, and the federal government made up the lost revenues with income taxes – thereby letting the sinners off scot free while shifting the costs of their sins onto the rich.

The eventual repeal of Prohibition inspired Phillips to propose what has become a touchstone for anti-tax advocates: repealing the Sixteenth Amendment and all federal income and estate taxes. But Phillips was no grassroots organizer. In Dr. Martin’s term, he tried to “bully” voters into accepting his argument. Not surprisingly, he failed.

“A saturnalia of government extravagance”

Rich people realized that, in the depths of the Depression, they would not attract much sympathy from the suffering poor. The amendment to repeal the income tax was crafted by Robert Dresser, who knew federal income taxes had existed before the Sixteenth Amendment, until the Supreme Court overturned them in Pollock v. Farmers’ Loan & Trust Company. But the Court of 1936 was more progressive than it had been in 1895. Even without the Sixteenth Amendment, the Court might uphold any tax Congress passed, especially in amidst the suffering of the Depression.

Dresser’s solution was to craft an amendment that both repealed the Sixteenth and set a hard limit on Congress’ taxing authority, with a top marginal rate of 25% on any wealth tax. But even after tax increases to pay for the New Deal, only 4% of Americans earned enough to pay the top marginal rate, and most did not earn enough to pay any federal income tax at all.

So they turned to supply side economics. The federal income tax discouraged the rich from investing to create jobs, Phillips argued, and caused the Great Depression:

It can truthfully be said that the adoption in 1913 of the Sixteenth Amendment, giving Congress the right not only to discriminate in taxes, but to levy such high taxes that they become virtually confiscatory, opened the door for a saturnalia of government extravagance, which has much to do with the present Depression.

It was, Dr. Martin writes, an argument “contrary to all common sense.” But Phillips convinced himself it was true and, moreover, he began to pitch it to labor groups and working-class housewives. “There can be no relief from present conditions,” one pamphlet insisted, “until the Sixteenth Amendment is repealed and government returns to its original fundamental principles.”

In today’s parlance, Phillips wanted to “take our country back.” But events overtook his campaign. The onset of World War II left little doubt that, sooner or later, the U.S. would be involved. Dresser rewrote his proposed amendment several times, adding exceptions for war and later for other national emergencies.

“The most sinister lobby ever organized”

Edward Rumley had grown up in, studied, and worked in the Progressive movement. But when President Roosevelt attempted to remake the U.S. Supreme Court, Rumley turned on the New Deal. He joined with newspaper magnate Frank Gannet to form the National Committee to Uphold Constitutional Government, which later became the Committee for Constitutional Government. One CCG trustee, Willford King, described the Roosevelt administration as “an almost typical fascist government,” arguing that only constitutional limits on income and wealth taxes could check presidential power.

Rumley based his campaign tactics on the new science of mass media and advertising, and focused especially on targeted direct mailings. He also revived Arnold’s idea of grass roots tax clubs, starting in Texas, where the Supreme Court had just struck down all-white primary elections in Smith v. Allwright. The language of race entered the tax debate, with mailers arguing that only a repeal of the federal income tax could halt the “encroachment” of federal government.

But Rumley met his “perfect nemesis” in Rep. Wright Patman, a Populist and World War I veteran who had never forgiven Andrew Mellon for opposing the veterans’ bonus. He had led the move to impeach Mellon in 1932, forcing Mellon to resign as Secretary of the Treasury. Now Rep. Patman took on Rumley and his wealthy backers, issuing subpoenas for the entire CCG leadership, and launched a publicity campaign of his own, calling them as “the most sinister lobby ever organized.”

The campaign stopped Rumney and the CCG dead in their tracks. For a while.

“This is a one-woman Westport tea party”

So announced Vivien Kellems in Kansas City, in 1944. She continued, “and I cordially invite you to put on your Indian war paint and feathers and join me.”

She was convinced that Roosevelt administration was bringing communism to the U.S., and as a preacher’s daughter she believed money was the root of all evil. To end the threat, she declared, the people must cut off the government’s money supply, namely, the federal income tax. She announced that she would no longer pay her income taxes and waited to be arrested as a martyr.

But she wasn’t arrested. Instead, Treasury agents vilified her, intercepting and releasing love letters between Kellems and Frederick von Zedlitz, an industrialist she had met in Germany before the war and who was now living in Argentina. Walter Winchell derided her as a “Swasticutie,” and Rep. John Coffee (D-WA) denounced her as a “tool of the Goebbels propaganda machine.”

Kellems resumed paying taxes during the war, but she began organizing against the income tax again soon after, and she pitched her campaign to women. With the Korean War raging, Kellems told anti-war mothers that only cutting off the federal income tax could stop the U.S. from fighting in foreign wars. With a new federal law that extended Social Security to household workers, she told upper middle class wives the government was turning them into slaves by compelling them to deduct Social Security taxes from their household staffs’ wages. She said the introduction of joint filing for married couples discriminated against women, by taxing wives’ (usually lower) income at their husbands’ (usually higher) rates.

Kellems also founded the Liberty Belles in southern California, a group dedicated to “the eradication of all socialism, communism, and corruption from our American life” and “the revision and reduction of all taxes and of all government spending.” She and the Liberty Belles increased the use of civil disobedience and public protests as tools to attract attention and spread their message.

Perhaps most important, she shifted the anti-tax rhetoric from utilitarian arguments about economic growth to the language of civil rights. The federal government, and the taxes that supported it, were evil. Whether ending income taxes would improve or worsen the economy was beside the point, and compromise was out of the question. She proudly wore a mink coat to demonstrate the benefits of rugged individualism:

You see the little wild mink has to fend for itself. It has to protect itself from the bitter cold in the winter; that’s why it grows such a beautiful coat.

Hers was, Dr. Martin writes, “the voice of someone who had no idea how her arguments might sound to people who were not rich.” Indeed.

“Invading the realm of sacred private enterprise”

The problem, Willis Stone realized, was most people liked what government did. From schools to roads to law enforcement to Social Security pensions, government offered essential services. Eliminating the income tax, and other taxes now under attack in many states, would leave a barren wasteland. That might not matter to rich people like Kellems, but it mattered to the voters that anti-tax advocates needed to push their agenda.

Stone’s rhetorical flourish was privatization. Government should sell off any asset or service that competed with private industry and use the proceeds to pay off the national debt. This new, greatly slimmed government would not need to tax income or wealthy estates. A relative handful of protective tariffs – and fees for services that only government could provide – would be enough. He proposed a constitutional amendment that would forbid government from, in his words, “invading the realm of sacred private enterprise.”

Stone also reached out to whites in the South who were outraged by the Supreme Court’s order to integrate public schools in Brown v. Board of Education. The solution, obviously, was to eliminate public schools. Private schools would allow white Southerners to escape “the ever-growing octopus of Federal control.” Racism was now fully embedded in the anti-tax movement.

“A dedicated, conscious agent of the communist conspiracy”

When the Liberty Belles and related groups in Southern California faded and Stone resigned from the Liberty Amendment Committee, their mailing lists were passed on to Robert Welch, the founder of the John Birch Society. Once a fringe group – Welch had denounced President Eisenhower as “a dedicated, conscious agent of the communist conspiracy” – the Birchers had been slowly working their way into the Republican Party hierarchy. California Governor Ronald Reagan had several Birchers in his senior staff, some of whom had previously led the push for what ultimately became Proposition 13, the state constitutional amendment that strictly limited taxes.

The Balanced Budget Amendment movement of the 1970s brought Reagan, and the Birchers, into the GOP mainstream. Bircher Lewis Uhler, who had served in Gov. Reagan’s cabinet, recruited libertarian economists like Milton Friedman and William Niskanen into the movement. And when framed in simplistic terms, most voters agreed that the federal government should “balance its checkbook, just like a household.”

But the Balanced Budget Amendments did not require balanced budgets. While “Balanced Budget” appeared in their titles, the text proposed caps on federal spending and, more importantly, caps on income and estate taxes, with two-thirds majorities in Congress required to pass any tax increase. If operating by that formula did not yield a balanced budget – and it hadn’t in California – the solution was to cut still more spending (for the poor), sell off more government assets (to the rich), and privatize more government services (from which the rich would profit).

This is the agenda of the modern Tea Party, whose emergence was seeded by the Koch Brothers, whose father co-founded the John Birch Society. It is an agenda designed by and for the 1%, given a populist veneer by reactionaries infused with racism and anti-government paranoia.

Far from unprecedented, the Tea Party isn’t even new. It is simply the current manifestation in a century-long evolution of … Rich People’s Movements.

Progressives have defeated these movements before, and we can and will again, because most Americans still agree with the Long Consensus. Most of us want a government where “We the People” means all of us. Money and clever rhetoric can make that difficult … but hard work and history are on our side.

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Happy Saturday!