Property Owners in Chicago Refuse to Pay Taxes

Here are some dispatches from the Chicago property tax strikes of the Great Depression. First, from the New York Sun:

Won’t Pay Taxes in Chicago Now

Property Owners on Strike and City Is Broke.

Banks Shut Down on Credit

Hold Notes for $284,000,000 on a $276,000,000 Assessment.

by Owen L. Scott
Special Dispatch to The Sun

 School teachers, policemen, firemen, and others among the 18,000 employees of the city and county, continue to work without pay in Chicago, while the politicians whistle at an admittedly approaching bankruptcy.

The bankers of the city declared today that it will take $600,000,000 to place the local governments on a cash basis as a result of the grand financial spree of recent years. The taxpayers, so surly over the situation that they paid only $140,000,000 on a $276,000,000 assessment, are on strike.

If the property owners refuse to pay the taxes, what reason have the banks for increasing loans which already total $284,000,000, the local financiers ask. They point out that New York city tax paper sells readily at 1.4 per cent. interest, while Chicago’s is unsalable at 6 per cent.

“Our financial situation is so bad,” said Mayor Anton J. Cermak, “that I wish the newspapers would stop talking about the subject until we find a way out.”

The Day of Reckoning

It just happens that the day of reckoning for faulty taxation and over-ambitious spending, is at hand, said Melvin A. Traylor, president of the First National Bank of Chicago, and a careful student of public finance. This city is only putting on the first show, which later may be witnessed in other parts of the country when the time comes for paying bills.

“Most of the taxing machinery of the country was created at a time when the present volume of public debt was not thought possible,” Mr. Traylor said in analyzing the present condition of Government finance here and elsewhere. “It is, therefore, inadequately and inequitably adjusted to meet the emergencies of the present burden. The consequence is that in almost every major political subdivision of the country certain classes of wealth escape taxation or pay little, while other types of property are charged with an unbearable obligation.

“The duty of leadership, therefore, in this field, is two-fold: First, and most important, a greater degree of caution must be exercised in the creation of Government obligations; and second, an immediate reform in taxing machinery must be undertaken. Unless there is a return to sanity in the matter of public expenditures, default and reduction of public obligations cannot much longer be avoided.”

The banker said that “more disgraceful to Chicago than its reputation for gangsters will be its financial plight if we go on as we are going.”

Political Jobs at Stake.

“Naturally, those responsible for government desire to give their constituency the finest educational facilities, the best obtainable roads, streets, public parks, playgrounds and other facilities,” he continued, “but after all, there is no denying the fact that expenditures for such purposes bear a very close relationship to the individual because they mortgage his future earnings for consumable and rapidly deteriorating goods. Every bond issue for the public welfare is an installment debt on the earning capacity of every individual and enterprise in the community affected.”

In Chicago’s case the bankers have pointed the way out of a financial wilderness. All they ask in return for aid to tide over the city is the reform of the tax-assessing machinery and a reduction of city expenses. But approximately forty-five good jobs for politicians are involved and rather than give them up, the political leaders have so far preferred to gamble on the possibility of bankruptcy.

The taxpayers, in revolt against the situation, have refused in large numbers to pay their bills. They know that tax sales last year resulted in the sale of only $5,000,000 in titles out of $55,000,000 offered, and are willing to take a chance.

Next, from the Urbana Daily Courier:

Grand Jury Gets After Tax Rebels

 A grand jury investigation was added today to the weapons by which city officials hope to break the tax strike which has been instrumental, they assert, in bringing municipal finances to the brink of disaster and spread suffering among unpaid civil employes and pensioners.

A special Cook county grand jury was impaneled today charged to investigate tax strikers who are credited with withholding payment of about 60 per cent. of the $200,000,000 taxes in arrears to the city.

The jury was ordered to study the situation for evidence of possible racketeering in connection with the strike of taxpayers, many of whom have banded together in associations.

Mayor Leads On Other Front

Mayor Anton J. Cermak led a fight on another front to collect the overdue levies. He named three city officials to an emergency commission which has been empowered to withdraw civil privileges from large taxpayers who refuse to pay their levies despite financial ability to do so.

Commissioner of Public Works A.A. Sprague, one of those named to the emergency commission, decried the failure to pay taxes.

“It is time to end the city’s passive resistance to these tax strikers,” said Sprague. “Apparently there is no conscience in some of these people. Fifty per cent. of the taxpayers, including nearly all the [illegible], are paying for the services which the city has been giving good citizens and tax strikers alike.”

Ask Heavy Judgments

City attorneys asked tax judgments against two more large loop structures owing more than $300,000 in taxes. Receivers were asked for eight structures, six of them loop buildings and the others large apartment buildings on which big tax bills are long overdue.

The consequences of the strike of taxpayers have been felt thruout the city and county governments. Suffering has been frequent.

Another result disclosed today was inability of the county to pay the pensions it is obligated to provide for needy widows and their children.

Records of the county welfare bureau showed 1,900 mothers on the pension roll and 5,680 applications for pensions. The mothers are allowed pensions only upon proof of dire need. But due to lack of tax payments the county has been without funds.

Mothers Pensions Unpaid

Mothers on the county roll have received nothing . The payments provided by law total about $100,000 monthly. More than half a million dollars is now owed the pensioners with little hope of relief unless the tax strike is broken.

Investigation of the supposedly pensioned mothers and applicants showed most of them in desperate circumstances. Relief for about 200 has been obtained, county officials said, thru loans from the Illinois emergency relief commission.

The average pension the county is supposed to pay is $55 monthly, with a $25 monthly allowence for the first child and $15 for each additional.

I also found on-line “The Great Depression Tax Revolts Revisited” by Mark Thornton and Chetley Weise, from the Journal of Libertarian Studies.

This paper attempts to improve on the analysis of David Beito, in his book on the tax strike: Taxpayers in Revolt (). Thornton & Weise think that Beito underestimated the success of the tax strike. While Beito attributes the petering out of tax resistance nationally after to a lack of ideological coherence in the movement and the lack of a national organization to coordinate the various local resistance groups (Chicago was prominent but not alone in this sort of resistance), Thornton & Weise think that it is instead the result of the movement having largely achieved its goals:

In this paper, we argue that the anti-tax movement was a genuine success, and that this success is the reason the revolt ended. This success took two major forms. The first and most obvious was the tax limitation movement, which provided the political pressure to cut taxes and establish limitations on property tax rates. The second, which was both more important and far less obvious, was the passage of the Twenty-first Amendment, which repealed alcohol prohibition (hereafter, Repeal). Under intense political pressure from the tax revolt, politicians supported Repeal in order to provide federal, state, and local government with increased revenues to offset cuts in property taxes while simultaneously providing a drastic decrease in the price of alcohol, and, in effect, granting the American public a gigantic tax cut.