ON March 19, 1928, eight years into the reign of constitutional Prohibition, Pierre S. du Pont wrote a letter to William P. Smith, one of the very few people he ever addressed by first name. Du Pont was among the wealthiest men in the world, chairman of both his familyÂs chemical colossus and the du Pont-controlled General Motors Corporation. Smith worked for a less well-known enterprise that Pierre du Pont also dominated: the Association Against the Prohibition Amendment.
ÂThe object of the organization, du Pont told his friend Bill, Âis not merely the return of the use of alcoholic beverages in the United States. He went on, ÂAnother important factor is the tremendous loss of revenue to our government through the Prohibition laws  the revenue once collected through taxes on liquor and beer. With the end of Prohibition, he wrote, Âthe revenue of the government would be increased sufficiently to warrant the abolition of the income tax and corporation tax.Â
[...]
Through the first nine years of Prohibition, income taxes went a long way toward covering the federal governmentÂs costs. But just as organized Drys had backed the income tax in 1913 in order to breathe life into Prohibition, a du Pont-led group of well-financed Wets would eventually seek to kill Prohibition so that the income tax might die with it.
The idea had first emerged in 1923, when the publisher of The Wall Street Journal, Clarence W. Barron, argued that ending Prohibition would enable the government to collect $2 billion a year and abolish the income tax. In 1926, Pierre du PontÂs brother Irénée told an associate that General Motors would save $10 million in corporate taxes each year with the return of the alcohol levies. IrénéeÂs specific solution  imposition of a 3-cent tax on every glass of beer  would, effectively, make the working poor and the unemployed finance tax relief for the rich.
These plutocratic longings began to take palpable form when prosperity was upended by the Crash of 1929. The Depression corroded tax collections: federal revenue based on 1930 incomes was down 15 percent, the following year saw a 37 percent drop, and the year after that 26 percent  a vertiginous 60 percent collapse in just three years. Capital gains taxes that had brought $1.5 billion into the Treasury from 1926 to 1929 dived into negative territory as the allowance for capital losses accrued. At the same time, the demand for government spending  for relief, for reconstruction projects, for anything to restart the comatose economy  soared.
By 1930, the chemical du Ponts had recruited a roster of other gilt-edged names to their anti-Prohibition cause: automotive Fishers, financial Harrimans, oil Harknesses, rubber Goodriches. Their publicity campaign featured pamphlets like ÂWhat Price Prohibition? (Answer: with the return of legal alcohol, Âthe necessity of levying income taxes would be eliminatedÂ) and ÂThe Cost of Prohibition and Your Income Tax.Â
[...]
I won't spoil the ending. ;-)
Needless to say, the super-rich have had their idealistic-sounding reasons for wanting government to do something, but in many (if not most) cases underneath it all there seems to be a desire to protect their own wealth and power.
Plus ça change, plus c'est la même chose.
Cheers,
Scott.