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The Social Origins of the Texas Tax Club Movement, 1924–1925

Published online by Cambridge University Press:  17 June 2013

Isaac William Martin
Isaac William Martin*
Affiliation:
University of California, San Diego
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Journal of Policy History , Volume 25 , Issue 3 , July 2013 , pp. 404 - 421
Copyright
Copyright © Donald Critchlow and Cambridge University Press 2013 

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References

Notes

1. G. H. Colvin (Chairman, Texas Division, American Bankers’ League) to P. P. Langford, 1 November 1924, Box 195, Tax-Inheritance, July–December 1924; Andrew W. Mellon to J. A. Arnold, 19 November 1924, Box 195, Tax-Inheritance, July–December 1924, Record Group 56 (Office of the Treasury), Entry 191 (Correspondence of the Office of the Secretary of the Treasury, Central Files of the Office of the Secretary of the Treasury, 1917–32), National Archives, College Park, Md.

2. Leon L. Shield to Andrew W. Mellon, 26 November 1925, Box 196, July–December 1925, RG 56, Entry 191; see Susan Murnane, M., “Selling Scientific Taxation: The Treasury Department’s Campaign for Tax Reform in the 1920s,” Law and Social Inquiry 29, no. 1 (2004): esp. 845.Google Scholar

3. Representative James A. Frear (R-Wis.) credited the Texas and Iowa tax clubs with intimidating Democratic leader John Nance Garner (D-Tex.) and Ways and Means Committee chairman William Green (R-Iowa) into reversing their opposition to the tax cuts. See Congressional Record 67, part 1 (10 December 1925), 654. For similar scholarly assessments, see Ratner, Sidney, Taxation and Democracy in America (New York, 1980 [1967]), 424Google Scholar, who lumps the tax clubs together with the general “business campaign” that helped to push the Republican tax plan through Congress; Witte, John F., The Politics and Development of the Federal Income Tax (Madison, 1985), 94Google Scholar, who asserts that “Mellon’s proposals reflected the antagonism of business interests and numerous ‘tax clubs’ toward the estate and gift taxes and high surtax rates”; and W. Susan Murnane, “Selling Scientific Taxation,” who portrays the tax clubs as part of Mellon’s successful propaganda campaign for top-bracket tax cuts. Other scholars, including King, Ronald F., Money, Time, and Politics: Investment Tax Subsidies and American Democracy (New Haven, 1993), 109–10CrossRefGoogle Scholar; Smiley, Gene and Keehn, Richard, “Federal Personal Income Tax Policy in the 1920s,” Journal of Economic History 55, no. 2 (1995): 285–303CrossRefGoogle Scholar, and Elliot Brownlee, W., Federal Taxation in America: A Short History (New York, 1996), 59–65Google Scholar, do not mention the tax clubs but attribute the huge tax cuts of 1926 mainly to the ideological influence of Mellon on the Republican Party.

4. Ratner, Taxation and Democracy in America, 145–62; Buenker, John D., The Income Tax and the Progressive Era (New York, 1985)Google Scholar; Brownlee, Federal Taxation in America, 37–46; Sanders, Elizabeth, Roots of Reform: Farmers, Workers, and the American State, 1877–1917 (Chicago, 1999), 217–32.Google Scholar

5. King, Money, Time, and Politics, 110; Ratner, Taxation and Democracy in America, 415; see also Murnane, “Selling Scientific Taxation.”

6. Wiprud, A. C., The Federal Farm Loan System in Operation (New York, 1922), 16, 24–25Google Scholar; Shulman, Stuart W., “The Origin of the Federal Farm Loan Act: Issue Emergence and Agenda-Setting in the Progressive Era Print Press,” in Fighting for the Farm: Rural America Transformed, ed. Adams, Jane (Philadelphia, 2003), 113–28.Google Scholar

7. Shulman, “The Origin of the Federal Farm Loan Act,” 127; O’Hara, Maureen, “Tax-Exempt Financing: Some Lessons from History,” Journal of Money, Credit and Banking 15, no. 4 (1983): 425–41.CrossRefGoogle Scholar

8. George, Charles, “Validity of Federal Farm Loan Act,” The Lawyer and Banker and Southern Bench and Bar Review 11, no. 5 (1918): 425Google Scholar; Pope, Jesse Eliphalet, The Federal Farm Loan Act (Washington, D.C., 1917), 11.Google Scholar

9. U.S. Senate Committee on Banking and Currency, Hearings Before the Committee on Banking and Currency of the United States Senate, Sixty-Sixth Congress, Second Session, on S. 3109, A Bill to Amend Section 26 of the Act Approved July 17, 1916 Known as the Federal Farm Loan Act, January 10, 12, and 13, 1920 (Washington, D.C., 1920), 10.Google Scholar

10. Putnam, George E., “Recent Developments in the Federal Farm Loan System,” American Economic Review 11 (1921): 432.Google Scholar

11. Wiprud, The Federal Farm Loan System, 34–35.

12. Alston, Lee J., “Farm Foreclosures in the United States During the Interwar Period,” Journal of Economic History 43, no. 4 (1983): 885–903CrossRefGoogle Scholar; Alston, Lee J., Grove, Wayne A., and Wheelock, David C., “Why Do Banks Fail? Evidence from the 1920s,” Explorations in Economic History 31 (1994): 409–31CrossRefGoogle Scholar; Wheelock, David C., “Deposit Insurance and Bank Failure,” Economic Inquiry 30 (1992): 530–43CrossRefGoogle Scholar; Hooks, Linda M. and Robinson, Kenneth J., “Deposit Insurance and Moral Hazard: Evidence from Texas Banking in the 1920s,” Journal of Economic History 62, no. 3 (2002): 833–53.CrossRefGoogle Scholar

13. Mellon, Andrew W., Taxation: The People’s Business (New York, 1924), esp. 76, 79Google Scholar. Smiley, Gene and Keehn, Richard, “Federal Personal Income Tax Policy in the 1920s,” Journal of Economic History 55, no. 2 (1995): 285–303CrossRefGoogle Scholar, argue that the desire to curtail tax avoidance was a primary impetus for the Mellon Plan; Brownlee, Federal Taxation in America, 60 n. 9, argues that it was a “secondary motive.” Brownlee is correct that it was a secondary issue for Mellon and the Coolidge administration, but it was primary for the tax clubs.

14. Arnold to Winston, 9 January 1925, Box 163, Tax (General): January–March 1925, RG 56, Entry 191. Contrast Arnold’s account of his reception in Virginia: “I spent yesterday in Richmond and was somewhat surprised to find outstanding bankers and business men under the impression that there was nothing to do,” he wrote on 19 December 1924; “that the Republican party had won the election and all that was necessary was for Secretary Mellon to write a letter to Congress stating what he wanted; that we could get tax revision of any kind at any time the Secretary cared to dictate such a letter, and that any activity on the part of citizens, especially in the South, was unnecessary and might confuse the situation.” Arnold to Garrard B. Winston, 19 December 1924, Box 163, RG 56, Entry 191.

15. Bankers’ Encyclopedia Co., Polk’s Bankers’ Encyclopedia (Purple Book), 60th ed. (Detroit, 1924).

16. See the inventory of black-owned banks in Harris, Abram L., The Negro as Capitalist: A Study of Banking and Business Among American Negroes (Gloucester, Mass., 1968), 192.Google Scholar

17. Petition of W. C. Stonestreet et al. to Andrew W. Mellon, 31 October 1924, Box 195, Tax-inheritance, July–December, 1924, RG 56, Entry 191.

18. Petition of J. S. Rice et al. to Andrew W. Mellon, 15 November 1924, Box 195, Tax-inheritance, July–December, 1924, RG 56, Entry 191.

19. Author’s calculations from data reported in Federal Reserve Board, “Earnings and Expenses of Member Banks,” Federal Reserve Bulletin (June 1925), 402–5; Federal Reserve Board, “All Member Banks,” Federal Reserve Bulletin (March 1925), 216.

20. The figure of 188 is the author’s calculation from data in U.S. Office of the Commissioner of Internal Revenue, Statistics of Income: Individual Income Tax Returns, 1924 (Washington, D.C., 1926), 260–61.

21. The majority of tax conferences were in towns that met this description. Calculated by comparing the conferences listed in Nathan Adams to Andrew Mellon, 10 January 1925, and Nathan Adams to Andrew Mellon, 27 January 1925, Box 163, RG 56, Entry 191, to the enumeration of income-tax returns in U.S. Office of the Commissioner of Internal Revenue, Statistics of Income, 302, Table 17.

22. “Dallas Citizens Want Taxes Cut,” Dallas Morning News, 7 November 1924, n.p.; see also J. A. Arnold to Andrew W. Mellon, 24 November 1924, Box 163, Folder (binder). Tax (General), September–December 1924, RG 56, Entry 191.

23. Nathan Adams to Hon. Morris Sheppard, 10 January 1925, Box 163, Tax (General): January–March, 1925, RG 56, Entry 191.

24. W. C. Stonestreet et al. to Andrew W. Mellon, 31 October 1924, Box 193, RG 56, Entry 191.

25. J. S. Rice et al. to Andrew W. Mellon, 15 November 1924, Box 193, RG 56, Entry 191.

26. “Dallas Citizens Want Taxes Cut,” Dallas Morning News, 7 November 1924, n.p., attached to J. A. Arnold to Andrew W. Mellon, 24 November 1924, Box 193, RG 56, Entry 191.

27. Nathan Adams to Morris Shepard and Earle B. Mayfield, 10 January 1925, Box 163, RG 56, Entry 191.

28. Arnold to Winston, 3 December 1924, Box 163, RG 56, Entry 191.

29. American Taxpayers’ League, Bulletin No. 1, 15 January 1925, Box 193, RG 56, Entry 191.

30. J. A. Arnold to Andrew W. Mellon, 24 November 1924, Box 193, RG 56, Entry 191. Emphasis added.

31. Mellon, Taxation, 82, 92.

32. Included in Nathan Adams to Morris Shepard and Earle B. Mayfield, 10 January 1925, Box 163, RG 56, Entry 191.

33. On the Iowa tax clubs, see Murnane, “Selling Scientific Taxation,” 846–47; see also J. A. Arnold to Garrard B. Winston, 21 August 1925; Arnold to Winston, 27 August 1925; and Arnold to R. A. Crawford, 30 September 1925, Box 164, Tax (General), July–September, 1925, RG 56, Entry 191.

34. See Alston, “Farm Foreclosures,” 890.

35. U. S. Bureau of the Census, Statistical Abstract of the United States, 1924 edition (Washington, D.C., 1924), 252.Google Scholar

36. The data sources include Polk’s Bankers’ Encyclopedia (1924); U.S. Bureau of Internal Revenue, Statistics of Income (1924); Inter-university Consortium for Political and Social Research [ICPSR], United States Historical Election Returns, 1824–68 [Computer File]. ICPSR00001-v3. (Ann Arbor, 1999); U.S. Bureau of the Census, Census of Agriculture (Washington, D.C., 1925); University of Virginia Library, Historical Census Data Browser, Census Data for Year 1920, http://mapserver.lib.virginia.edu/php/start.php?year=V1920, retrieved 29 December 2008.

37. Harry Haas to Garrard B. Winston, 6 April 1925, Box 163, Tax (General), April–June, 1925, RG 56, Entry 191; U.S. Senate Subcommittee on the Judiciary, Lobby Investigation: Hearings Before a Subcommittee of the Committee on the Judiciary, United States Senate, 71st Congress, 2nd Session, pursuant to S. Res. 20, A resolution to investigate the activities of lobbying associations and lobbyists in and around Washington, District of Columbia, October 15 to November 15, 1929, vol. 1 (Washington, D.C., 1929), 697.

38. For an example of bank-to-bank outreach along these lines, see G. H. Colvin to P. P. Langford, 1 November 1924, Box 195, Tax-Inheritance, July–December 1924, RG 56, Entry 191.

39. Because the sample includes one bank per town, the town population is treated as if it were measured at the level of the bank, with no need for an additional town-level random intercept.