Tax Day![fn1]

April 17, 2012 | 11 comments
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By 1908, Elder Heber J. Grant had begun to lead LDS lobbying on behalf of Prohibition. By 1917, Utah had joined the ranks of the “dry” states, and on January 16, 1919, Utah became the 35th state to ratify the 18th Amendment. In October of that year, the Volstead Act implemented the Amendment, and alcohol was banned in the U.S.

I saw part of Ken Burns’s documentary on Prohibition the other day, and one thing really stood out to me: the 18th Amendment was made possible by . . . the 16th. See, prior to 1913, some 30-40 percent of the government’s revenue came from excise taxes on alcohol. But the income tax provided an alternate (and effective) manner of raising revenue for the federal government. (In fact, Prohibitionists were big supporters of the introduction of an income tax.[fn2]) With the alternate source of revenue, the government had no compelling reason to oppose Prohibition.

When Prohibition ended, it ended over President Grant’s objection. Why did it end? I imagine that, among other things, people wanted to drink and were tired of the violence. But it also ended shortly after the Great Depression, when income tax revenues plummeted and the government realized that it was leaving a significant revenue stream on the table.

[fn1] Yes, I know that today is April 17. When the 15th falls on a weekend, income taxes are due the first subsequent business day. And April 16, which was Monday, is Emancipation Day, a holiday in D.C. So today is Tax Day, at least for federal purposes. (Illinois taxes, on the other hand, were due yesterday.)

[fn2] Note that, notwithstanding the connection between Prohibitionists and the federal income tax, either Utahns weren’t Prohibitionists in 1913, didn’t understand the connection between Prohibition and the nice tax, or didn’t care. Utah was one of four states that rejected the 16th Amendment and never subsequently ratified it.

11 Responses to Tax Day![fn1]

  1. Kent Larsen on April 17, 2012 at 9:51 am

    I assume “By 197″ means “By 1917″?

    We should probably note that Utah is often said to have been the deciding state in ratifying the 21st amendment, which repealed prohibition, although Pennsylvania and Ohio also approved the amendment the same day, making the question of which state was the deciding state ambiguous.

    As for taxes itself, it may also be worth mentioning that the Church has had to discourage tax-protesting members from failing to pay income taxes by threatening excommunication.

    Oh, and I can’t help but mention that baseball fans like me would really prefer the filing deadline was moved to another day, so that the day when all baseball players wear #42 is unencumbered.

  2. Last Lemming on April 17, 2012 at 10:13 am

    So do you think revenue considerations will eventually lead to the legalization of marijuana, harder drugs, and other illegal activities that are currently going untaxed?

  3. Sam Brunson on April 17, 2012 at 11:29 am

    Kent, fixed it. Thanks.

    LL, there’s no real incentive to do so now. We don’t have a history of raising revenue from illegal activities. Sales taxes are a state phenomenon (which may explain some of the federal-state divide on marijuana), and people who make money illegally still owe taxes on their illegal income (see Capine, Al). Still, who knows.

  4. Julie M. Smith on April 17, 2012 at 12:32 pm

    Very interesting post. Strange bedfellows, and all that.

  5. Cameron on April 17, 2012 at 12:35 pm

    Utah was latest in terms of time zones, so I believe the designation still stands.

  6. Last Lemming on April 17, 2012 at 1:29 pm

    We don’t have a history of raising revenue from illegal activities.

    Yes, but you just gave an example of legalizing something so that we could tax it. Excise taxes are the easiest to impose and raise, especially those associated with “sin,” so if we legalized more sinful things, we could tax them and avoid raising income taxes a little longer.

    Not that this would be good tax policy or anything, but it seems like something that would be attractive to certain factions. Instead, what we get is Ron Paul, who wants to legalize things but still not tax them.

  7. Jax on April 17, 2012 at 7:44 pm

    I for one am deeply saddened by the fact that Utah doesn’t have a single dry county in it. With all of those who are opposed to alcohol I don’t understand why none of them are willing to take that step. There are dry counties spread all across the country (mostly in the south) but in ‘ultra-religious’ Utah where they should have more than enough votes to get it done, it is non-existant. I don’t live there any more, but would love to see my fellow LDS people vote their convictions!

  8. Sam Brunson on April 17, 2012 at 8:48 pm

    LL, true, but the U.S. had imposed excise taxes on alcohol pretty much since its founding, with the exception of the Prohibition years; alcohol excise taxes were a tried-and-true method of raising revenue to which the government could return, post-Prohibition.

    The states have stepped strongly on the legalize marijuana to increase tax revenues bandwagon, and that’s where I’d expect to see any action. (One of the big obstacles to a U.S. VAT is that states depend on sales tax revenue, and aren’t big fans of ceding that revenue stream to the federal government.)

    On the other hand, my thoughts on the matter may well be clouded by the fact that I think, both as a policy matter and as a revenue-raising matter, sin taxes aren’t good taxes. Because, like you say, it seems like it would be an attractive idea to certain segments of the population.

  9. Mark D. on April 18, 2012 at 12:59 am

    If we ever have a national VAT/GST/RST, I am sure it will be on top of state sales taxes rather than in lieu of them. Canada has such a system, for example.
    http://en.wikipedia.org/wiki/Sales_taxes_in_Canada

  10. Meldrum the Less on April 18, 2012 at 6:36 pm

    Members of my family who were friends with J. Golden Kimball claim that President Heber J. Grant had a fit when he realized that the Mormon people had not followed his direction on voting to repeal prohibition. He blamed the Relief Society for it and switched from leaning towards being a McKay style Correlation minimalist supporting a strong and independent Relief Society to being a full-bore Clark/Lee et. al. style Correlation enthusist. This so the Relief Society would never again out-smart the Priesthood.

    He also punished the wayward Mormon people by putting teeth into the Word of Wisdom and making the consumption of coffee and tea a big deal. When before it was rather vague what hot drinks included and they had had been more like suggestions. Suggestions Uncle Golden would never follow and be loved for it, without terminating his close friendship with “Heb.” His swearing was a side show compared to some of his other faults.
    So this explains how ice tea is related to income taxes to us whacky Mormons.

  11. David Scott on April 22, 2012 at 12:18 pm

    Very interesting. Thanks for the info and insight, Sam.