Wayne Wheeler, the head of the no alcohol ever anti saloon league,
was fond of telling a certain story during his many speeches,
railing against alcohol in the US.
When he was a child,
working on his family farm in Ohio,
a drunken farmhand stabs him in the leg with a pitchfork while moving hay.
It was a defining moment.
Wheeler dedicated his life to banning alcohol.
He boasted that he wrote the 18th Amendment, Starting Prohibition.
But his burning passion for temperance had unforeseen consequences namely,
the birth of the income tax.
The call for prohibition started mainly as a religious movement in the early 1800s.
Maine passed the first state prohibition law in 1846.
The prohibition party was established in 1869.
The movement gained support in the 1880s and 1890s.
Social reformers saw alcohol as the cause of poverty.
Industrial accidents, the breakup of families,
urban America ghettos, political corruption,
and criminals in general.
The anti-saloon league and the Women's Christian Temperance Union founded
in 1874 and 1893 respectively,
became powerful crusaders against legalized alcohol.
Counties and states started passing laws to ban alcohol.
By 1916, 26 of the then 48 states,
had passed prohibition laws.
By the time the 18th Amendment would be passed,
around half of the country was already dry.
The government was feeling the effect.
Liquor taxes were a huge part of government revenue up to the 1910s.
It provided for 30 to 40 percent of the revenue for
the Federal government and was something they really couldn't function without.
National prohibition would go on to destroy
the fifth largest economy in the US or at least its legal side.
The government could read the writing on the wall.
They needed a different source of revenue.
The Federal income tax was the solution.
It allowed the government to function during
the prosperous 1920s when there wasn't a lot of income to be collected.
People at the time, thought the tariffs unequally affected
the lower class and that an income tax would help level the playing field.
At the time when it was implemented,
the income tax affected people who made around $2,000 a year,
which is around $115,000 a year, adjusted for inflation.
People around the country but especially in the south and west,
where people were less wealthy, supported it.
But people didn't actually stop drinking
alcohol and start going to church like Wayne Wheeler wanted.
Instead of spending their money on whatever you spend money on in the late 1920s,
people decided to spend their money on illegal alcohol.
In one year during the Prohibition, Al Capone,
the infamous mob boss, made $60 million.
Obviously, he didn't pay taxes on it.
The other moonshiners, bootleggers,
and gangsters, didn't pay taxes either.
Prohibition costs the government $11 billion dollars in lost tax revenue,
but cost them $300 million to enforce.
Historians say there may have been more than 30,000 speakeasies in New York City alone.
Even politicians who supported prohibition and public,
continued imbibing in private.
President Warren G, Harding for example,
stopped the White House with whiskey for his infamous poker nights.
While his Commerce Secretary Herbert Hoover,
liked to stop for a drink at the Belgian embassy,
where US law technically didn't apply.
One prominent bootlegger estimated that he supplied two thirds of Congress with liquor.
An ill advised government program to poison industrial alcohol
with the goal of stopping bootleggers
from readers re-distilling it into something drinkable,
reportedly led to thousands of deaths.
Having only a Federal income tax wasn't sustainable.
After the stock market crash in 1929,
the Great Depression began.
Income taxes fell dramatically.
By that point, ordinary workers had to pay income tax.
Labor unions began to oppose them.
Prohibition had forced an estimated 250,000 alcohol industry employees out of work.
There wasn't much income to be collected.
In 1932, income tax revenues were 46 percent lower than just two years earlier.
In 1933, they were a full 60 percent lower than in 1930.
The 21st Amendment was ratified on December 5th,
1933, and ended prohibition.
Beer today, wine will be the next thing and finally,
the repeal of the 18th Amendment.
The government needed the revenue from Federal liquors taxes.
But because they had kept spending during the Great Depression,
they needed more money than just that from liquor taxes.
So they kept the Federal income tax despite the repeal.
The new liquor tax funded much of the new deal.
With alcohol and other excise taxes bringing in $1.35 Billion,
nearly half of the Federal government's total revenue in 1934.
Individual income taxes brought in only $420 million that year.
Wayne Wheeler, according to his biographer,
was a true political operator.
He held sway over two presidents in six Congresses.
But even passion can't prevail over cold hard cash or a cold drink,
especially when the two mean the same thing.
Do you blame Wayne Wheeler for giving us the Federal income tax?
Let us know in the comments.
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