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The Essence of Liberty, Part 83

June 8 2007 at 9:33 AM
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The Essence of Liberty, Part 83

A Summary of: Those Dirty Rotten Taxes: The Tax Revolts that Built America by Charles Adams

Summarized by Ashlee Worley
Edited by Dr. Jimmy T. (Gunny) LaBaume
Discovering the Roots of the IRS and The Second Whiskey Rebellion

In recent times the Ku Klux Klan has been labeled as being cruel to southern blacks and as a “white supremacy” organization. Initially, disenfranchised veterans of the Confederacy formed the Klan in Tennessee. The Radical Republicans destroyed the political rights and power of the southern establishment and brought in carpetbaggers. Yankee bureaucrats, with the votes of ex-slaves, took over southern governments and ruled southern society. The Klan's goal and purpose was simply to protect Southern civilization from the alien Yankee bureaucrats who had invaded from the North to reconstruct the society of the Confederacy.

In the early days the main targets of the Klan were federal tax collectors, deputy marshals and informers (especially black informers). It was in this way that the Klan became the underground organization for moonshiners fighting the federal tax collectors.

Time after time Southern states sent complaints to Washington about the misconduct of federal tax agents and the abuses of the Internal Revenue Bureau. The North Carolina legislature complained to the Congress that the federal tax law was “oppressive and inquisitorial… legalizing unequal, expensive, and iniquitous taxation, and as enforced in this state, is a fraud upon the sacred rights of our people, and subversive of honest government.” Alabama lodged a similar complaint—that federal taxmen had “raided over our country with large bodies of armed men and, regardless of law and decency, have abused and insulted the people without cause.” Georgia charged that heavy-handed federal tax collectors engaged in a policy “to terrify the people into obedience.” These complaints fell on deaf ears—just as they do today.

But, the taxpayers (moonshiners) fought back. This became the Second Whiskey Rebellion and it was not a peaceful one. It lasted over thirty years. There were lots of casualties on both sides—including murders.

This rebellion is often considered only a local struggle by semiliterate, poor farmers, from the backwoods of Appalachia. However, it was a major event in the history of the twentieth century because it gave birth to the Internal Revenue Bureau (IRB). It started the expansion of federal power over all citizens for taxes. This expansion of federal power has continued and spread from a simple tax on whiskey to the regulation of every aspect of our civilized lives.

The IRB was a harbinger of things to come. It set the stage and provided the attitude with which all federal bureaucracies would come to operate. If you understand this early tax event you understand today's federal government—which is a carbon copy of that early bureaucratic extension of federal power—just much bigger.

The revolt started soon after Lee's surrender at Appomattox. Also, the violence and viciousness on both sides suggest that it was an extension of the war.

Federal taxmen scoured the mountains for stills making untaxed whiskey. They destroyed thousands of stills, killed scores of men, arrested and sent to jail thousands more—all over a tax that ranged from 50 cents to $2 a gallon. However, not all of the moonshiners were hard-core Confederates carrying on the War of Yankee Aggression. Many were against government, period—both Confederate as well as union. They organized secret societies against the Confederacy with a bewildering array of passwords, signs, grips, and blood-curdling oaths.

The use of such excessive amounts of deadly force over simple tax evasion may seem uncivilized today--but not necessarily. Remember the lethal force used against the religious group at Waco, Texas as well as against a small family at Ruby Ridge, Idaho? Both of those atrocities were for similar federal infractions. That is directly traceable to the force used against the moonshiners. No amount of force against the evaders was thought excessive in enforcing the whiskey tax. That same policy of use of deadly force in enforcing federal laws has carried over to this day.

Federal taxmen had no hesitation about shooting and killing moonshiners—even those that were just simple farmers making a little liquor for their own use. Those who sold some of their product were often selling their only cash crop. Rarely were any of them living above the poverty line. Making “a little licker” had been a long tradition. Thus the moonshiners were “soundly convinced that the law is unjust, and that they are only exercising their natural rights.” So long as they did not harm anyone, they felt that making mountain dew was a natural and inalienable right.

Opposition to the whiskey tax included all ranks of society—even Republicans. One would expect a federal judge to be supportive of federal law. However, one from North Carolina observed: “Prominent political speakers of both political parties often address the people and for the purpose of winning popular favor, denounced in strong language the injustice wrong, oppression, and outrage of the Internal Revenue Laws. These laws have but few defenders except the Courts and the officers of the Government.”

Women joined the fray along side their men. Women sounded alarms to warm the moonshiners of the coming of the revenuers. One was charged with attempted murder for shooting at a revenuer. The agents were met with vulgarity and profanity yelled at them by women as they passed through the countryside.

The military was called into the service of the tax authorities. However, it was never very enthusiastic about the mission—displaying little desire to act as tax collectors. As a result the moonshiners avoided hostile action when federal troops were with the tax posses.

Tax collectors and their deputies were paid by the number of arrests made and warrants issued. This means of compensation was supposedly justified because no one would take the job without it. But, this “piecework” corrupted the agents and resulted in a lot of innocent people being arrested and jailed on very flimsy evidence. As a result, traveling revenuers had difficulty buying food and obtaining lodging at any price and local law enforcement frequently came down hard on them.

Even the bureau admitted that many of its agents were “the roughest sort of illiterate men, who were unnecessarily severe,” and the “Prosecutions have been brought in some districts, apparently only for the purpose of making fees. Great injustice is thus done to individuals and the Government.”

The worst scandal was the revenuers use of “professional witnesses”—who were often the taxman's relatives. They traveled from district to district and give testimony against innocent farmers. The piecework payments for the number of arrests, as well as the payments to informers and witnesses, aggravated the local populace. It certainly added justification for their violence against trumped-up charges and the corrupt tax administration.

Enforcement sometimes was humorous. Moonshiners sometimes answered an arrest warrant by bringing their families to act as witnesses—so they could receive the witness fee and travel allowance. For many, jail, was a vacation with free meals. Many sheriffs would let the moonshiner roam around town, playing cards and drinking whiskey, provided he returned for “eatin' and sleepin.' “

Federal legal jurisdiction was limited to the tax laws. Evaders were not felons. They had only committed a misdemeanor. Also during those days, assaulting or killing a federal taxman was only a state offense and violated no federal law. This meant that moonshiners and revenuers would both be tried in state and local courts. Today we have overcome those “problems”— almost everything is a felony and assaulting a federal taxman has been a federal offense since 1934.

One notorious case dragged on for four years (1878 to 1882). It involved an incident in South Carolina and a federal officer by the name of Durham. Durham had set out to arrest a moonshiner by the name of Lewis Redmond who had led a raid on a county jail to break out some fellow moonshiners. Durham's posse surrounded what they thought was a house Redmond was visiting. When the revenuers charged the house a man started for the back door. Durham thought he was Redmond and shot him twice in the back. He died shortly thereafter but he was not Redmond. The revenuers claimed they had a warrant—but they didn't. So, to cover the mistake, they backdated a warrant. In the end, the case was transferred to the federal court and Durham was acquitted—just like the way such things work today.

Informers, an important third party to this rebellion, were from four main groups:

First there were neighbors who had a grudge against a particular moonshiner—similar to the famous feud between the Hatfields and the McCoys. In that case, both families were making illegal whiskey until one of the McCoy clan turned in a Hatfield to claim a reward. That started the feud.

Second were those who operated commercial stills and paid taxes. Obviously, their motivation came from the fact that the moonshiners could undersell the higher-priced taxed liquor.

Third were those who were in it for the money—e.g. the witness fees and rewards for informing.

Finally, there were the prohibitionists. They saw liquor as the Devil's work so they joined in the fray against the moonshiners with great religious and self-righteous zeal.

Informants were in great danger. Many were ambushed and murdered. The prohibitionists and revenuers didn't really get along—due mainly to their economic conflict of interests. The revenuers were after taxes and had jobs to defend. If whiskey was illegal and distilling was prohibited, there would be no work and, consequently, no pay.

There are many lessons to be learned from the Second Whiskey Tax Rebellion but it is doubtful that they will be. That contention is based on the fact that some of these lessons are as old as history itself and have not yet been learned.

To raise additional federal tax revenues without increasing the tariff, Congress did the obvious in 1894. It increased the whiskey tax. The need for more revenue came from the financial Panic of 1893. The acceptable rate of 50 cents per gallon on whiskey was raised to $1.10. According to theory, that should have doubled tax receipts but it didn't. Revenues declined drastically. That was not because people stopped drinking whiskey. It was because of tax evasion and a mushrooming of illicit stills not just in the Appalachia but also throughout the whole country.

Politicians can't seem to think past the simple mathematics of increasing taxes. It seems irrefutable that if you double the tax rate revenues will also automatically double. Taxpayers have never responded that way but politicians keep hoping they will.

David A. Wells was an economist who developed the revenue laws during the War of Yankee Aggression. He warned against the high tax rate when this massive tax increase for whiskey was proposed. He felt that it would foster evasion, which it did. Arrests almost doubled in a year. Seizures of illegal stills increased from 1,016 to 2,273. So, at least the increased rates kept the revenuers busy.

Federal bureaucracy continued for over a decade after the end of the War of Yankee Aggression. This was called “reconstruction which consisted mostly of military occupation and rule of the South. Reconstruction failed and, to this day, some southerners still sign their correspondence “Unreconstructedly Yours.” This failure resulted in the federal government giving up whatever bureaucratic power it had over the South that it did not have before the War.

Carpetbaggers disappeared and one federal agency after another withdrew from American society. However, the Internal Revenue Bureau persisted and established itself as a permanent part of American life. The federal justice system and the federal tax bureau became permanent institutions in the lives of the southern people.

The whiskey tax was not taxation by consent. Even worse, brutal enforcement procedures involved lethal force against an unwilling people. The tax system shifted from one (supposedly) based on consent to one based on fear and brutality. Rebellious taxpayers were put on the same plane as villains. These were simple men who were otherwise excellent citizens. They might have been poor but they were proud and independent—except for the Yankee's unjust tax.

The old Internal Revenue Bureau survived in spirit. Its policy of armed aggression against the disobedient has infected the many new federal bureaucracies, which currently intrude into the lives of all citizens in ways unimagined at that older time. Enforcing an income tax in the whole nation is simply an expanded version of the enforcement of the whiskey tax in Appalachia.

The first whiskey rebellion ended when Jefferson took office in 1800 and repealed the tax. The rebels won. But the second rebellion is different. It never did end. It continues today only without the violence—except occasionally on the part of the Internal Revenue Service.

Simply summarized, the Internal Revenue Bureau found bigger fish to fry when the federal income tax was adopted.

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At the time this work was completed, Ashlee Worley was a student in the School of Agricultural and Natural Resource Sciences at Sul Ross State University where Jimmy T. LaBaume, PhD, ChFC is a Professor of Economics and Statistics.

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