This note comes from the New York Times:
Refusing to Pay the Liquor Tax
Cincinnati, . — The time for paying the Scott liquor law tax of $100 on beer and saloons and $200 for places where stronger drinks are sold expired . Acting upon the opinion of certain attorneys that the law will eventually be declared unconstitutional by the Supreme Court, 3,200 out of something over 3,500 saloon keepers have refused to pay the tax. The County Treasurer will bring suits in the magistrates’ court against all who are delinquent, and expects to have no difficulty in obtaining judgment against them for the original amount, plus the costs, and a penalty of 20 per cent. There will be considerable delay, however, and in the meantime two or three of the city departments, notably the Police Department, which depend for support upon taxes from this service, will be without funds. The aggregate amount of tax under this law which is up-paid [sic] exceeds $500,000.
A follow-up article noted that the city was having a hard time borrowing money to pay its bills. An injunction prevented the city from seizing property from the tax refusers.
The courts went back-and-forth on the constitutionality of the law, largely, it seems, based on the political make-up of the court. Shortly after the law was passed, a Supreme Court of four Republicans and one Democrat split on party lines to declare the law to be constitutional; in , a Supreme Court with three Democrats and two Republicans split on party lines to declare the law unconstitutional.
In the background of this struggle was the temperance movement, which was trying to ban saloons outright (Ohio went dry in , a year before national prohibition in the United States). Some alcohol industry folks thought that it was unwise to fight against this tax, since it would be a good argument against prohibition that taxes from alcohol sales were propping up government services and thereby possibly reducing other taxes. This is very similar to the way that advocates for ending marijuana prohibition in California are emphasizing the possibility of using taxes on marijuana to help fix the state government’s budget problems.
