Wednesday, December 11, 2013

The Tariff, the Sugar Trust, and the Income Tax

In an otherwise not very interesting post about the politics of the late-19th-century tariff, Heather Cox Richardson offers us this wonderful cartoon about the Wilson-Gorman Tariff of 1894, entitled "Gorman's Triumph -- A Humiliating Spectacle."  (After seeing this, I found that the cartoon also illustrates the Wikipedia page on the 1894 tariff.  Alas; I really wanted to credit Richardson).

Anyway, Richardson does not gloss this very complicated image or even mention the Sugar Trust at its center (the Wikipedia entry says little more).  Richardson explains only that "tariffs symbolized a much larger struggle between rich and poor, employers and workers, capital and labor" in the late-19th century, which is true in only a limited if not downright simplistic sense -- as Richardson obviously knows as a leading scholar of the subject.

In her defense, Richardson wrote the posted essay for a children's magazine, called Cobblestone, that promises "to meet curriculum standards for history-social studies" in grades 5 through 9 while "bringing history to life with primary sources, lively graphics, historical photographs, and maps."  It is odd that this lively graphic, if it survives in the published version, will remain mysterious to the students and teachers who ostensibly will be using it to understand tariff politics.  We can also note the disheartening intrusion of conservative political ideology into this "classroom magazine" that "fosters an appreciation for the past while making connections to the present."  The Cobblestone issue that will carry Richardson's essay in March 2014 was advertised under the title Robber Barons but is now set to be called Captains of Industry.  And they say that policing the rhetorical boundaries of "political correctness" is a liberal preoccupation!

The point of the cartoon was that the Wilson-Gorman Tariff, by granting hefty tariff protection to the infamous Sugar Trust, constituted a political triumph for Senator Arthur Pue Gorman and a humiliating defeat for President Grover Cleveland and House Ways and Mean Chairman William L. Wilson, both of whom had championed major tariff reductions.  

So: Gorman drives the chariot, Cleveland follows behind it in chains, and Wilson is crushed under the wheel.  Cleveland has fallen from a pedestal and Wilson is dressed as a scholar for some reason (this is William L. Wilson, not Woodrow Wilson, who in 1894 was a 36-year-old Princeton professor only beginning to dip his toes into politics).  The chariot is a sugar barrel and, in an especially nice touch, it is pulled by a donkey instead of a horse, signaling the fact that all three of these politicians were Democrats.

The party affiliation is significant.  In the late-19th century, the Republicans were the party of high tariffs and the Democrats were the party of low tariffs.  The Republicans had won a massive tariff hike in the 1890 McKinley Tariff (this time it was the future president, William McKinley).  By 1894, however, with the Democrats controlling the presidency and both houses of Congress for the first time since the Civil War, everyone expected very big tariff cuts, not least as the party's response to a desperate economic situation.  A stock market crash in 1893 had inaugurated what turned out to be four years of deep depression.   

As the suffering spread, however, the Democrats proceeded to talk their tariff bill nearly to death.  After the House, under Wilson's guidance, passed a bill with serious rate cuts in February 1894, the Senate, guided by Gorman, gutted it slowly by adding 634 separate amendments that hiked many of the protective rates, took until July to adopt, and then required a House-Senate conference committee that delayed the final bill into August. While the Senators dickered, "armies" of unemployed men crisscrossed the country, most famously Jacob Coxey's Army that marched from Massillon Ohio to Washington D.C., only to see their leader arrested for attempting to speak on the Capitol grounds.  Then, when the massive Pullman Strike shut down much of the nation's rail traffic, Cleveland, over the furious objections of the Illinois governor (John Peter Altgeld), sent soldiers to Chicago to break the strike -- on the same day that the Senate finally passed its bloated tariff bill.

The Republicans swept back into power in 1896 and more than restored the high McKinley rates in the Dingley Tariff of 1897, just in time to let the protectionists take credit for the return of prosperity.  The Wilson-Gorman Tariff, in other words, was a fiasco.

The bigger truth of the cartoon, however, addresses a totally different issue, the precise issue that Richardson may have had in mind in using it to illustrate the tariff's political significance.  This issue is the fact that to the extent that anyone remembers the Wilson-Gorman Tariff today, it is not because of its protectionism in general or the cushy deal it handed to the powerful Sugar Trust (which controlled 85 percent of all sugar refining east of the Mississippi River). Today, we remember the 1894 tariff because it contained an income tax.  This income tax was tiny, imposing 2 percent on income over $4,000, which was the equivalent of $108,000 today.  The tax was also relatively uncontroversial.  The House adopted it because they thought their major tariff cuts would cause large budget deficits and the conservative Senate did not touch it in any of its many amendments.  

But the political significance of this income tax  rocketed upward when the Supreme Court ruled it unconstitutional in Pollock v. Farmer's Loan and Trust Company (1895).  The Pollock opinions, filled with hysterical rhetoric about class warfare, socialism, and anarchism, meant that the modern federal income tax would have to await the adoption of  the Sixteenth Amendment in 1913.

The cartoon reminds us that protectionism and the Sugar Trust were the politically salient issues in 1894.  The income tax had a big future, but it was basically trivial at the time.