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Rich People's Movements: How They Dupe Tea Party Followers
It is important for pastors to understand the history of political organizing around taxes and wealth inequality, matters of life and death in a complex economy.
By David Cay Johnston
Four years ago, the modern Tea Party seemed to emerge from nowhere, leaving journalists bewildered and the public with few reference points to understand seemingly spontaneous rallies by middle-class people seeking lower tax rates. A search for the phrase “tea party” in connection with “politics” in major newspapers yielded fewer than 100 mentions in 2008—and when the words did appear linked together, they suggested studied formality and decorum. The next year, they appeared more than 1,500 times, often connected to “protest demonstration.”
But little was spontaneous about the new party. “Social movements that explicitly defend the interests of the rich and the almost-rich have been a recurring feature of American politics,” Isaac William Martin, a sociologist at the University of California, San Diego, reminds us in his new book, Rich People’s Movements: Grassroots Campaigns to Untax the One Percent. “Such movements shook the American polity before the Obama era, before the Reagan era, and before Barry Goldwater ran for president—before, even, the New Deal.”
With meticulous research, Martin shows how the modern Tea Party grew from decades of efforts by American oligarchs to de-tax themselves. They relied on cranks, rogues, and a few scholars to polish the most effective ideological marketing pitches. Their goal was selling the notion that if the rich bear less of the burden of government, all of us will somehow end up better off. These pitches have worked best when some newly proposed government initiative—like President Barack Obama’s Affordable Care Act—arrives to pose the threat of major policy change. They have depended on diverting attention from obvious questions, such as just how does a smaller tax bill for the Koch brothers benefit us?
Spanning decades, the residue of relationships, movement-building skills, and organizations from past enlistments of the affluent many to agitate for the interests of the super-elite few could be seen merely as an example of what Seymour Martin Lipset and Earl Raab called “cultural baggage” in their 1971 book The Politics of Unreason: Right-Wing Extremism in America, 1790-1970. Instead, Martin says, these movements bequeathed to us “not just a suitcase we drag along behind us” but “a toolkit” to remake American public policy. Martin also concurs with historian Richard Hofstadter, who pointed out a half-century ago how many practitioners of his famous theory—the paranoid style in American politics—found their roots in the arrival, in 1913, of the 16th Amendment. That amendment, ratified on the eve of World War I, resolved disputes over the meaning of the phrase “direct taxes shall be apportioned,” and in doing so ushered in the modern income tax.
By the 1920s, Martin writes, corporate boardrooms were rife with “rich men who were scared of progressive taxation, but did not know how to fight it.” Along came J.A. Arnold, a semi–con man who told them he knew what to do. Arnold grew up in central Illinois, near the birthplace of rabble-rousing William Jennings Bryan and a few years behind him. Populist movements fueled by abuses of railroads and their underwriters surrounded him in his youth. Arnold saw opportunity—not in fighting the railroads but in fighting the progressives. By age 34, he had discovered what Martin calls “a talent for flattering rich and powerful men.” Again and again, Arnold would “seek out a rich patron, turn the conversation to politics, profit.”
Arnold, allied with traditional bankers, fought the Texas land banks that helped small farmers prosper. Then he hit the big time, organizing “tax clubs” that, like the Tea Party, seemed to emerge from nowhere. In just 33 days, as 1924 became 1925, Texas tax clubs held an astonishing 216 gatherings. The clubs “were in the pure image of the Texas Farmers’ Union and the Farmers’ Alliance,” Martin writes. “The participants in the tax clubs, however, were not farmers: They were overwhelmingly bankers.” Indeed, all but 7 percent of conference chairs were bankers, the great majority of them bank presidents. Their pitch was that lowered taxes would encourage productive investments, an idea that resonates with today’s economic and tax debates. (Knowing this kind of backstory makes it less surprising when today’s Heritage Foundation professionals describe their employer as a leading advocate for the poor.)
Arnold found his greatest support in the Old South, where he had organized the Southern Tariff Association to promote tariffs over income taxes. Delta plantation owners and their economic peers “worried that federal spending threatened their political power” because broader economic opportunity would “endanger the willingness of the black poor to work for low wages.” Martin notes that Mississippi had been among the first states to ratify the 16th Amendment, because Mississippians had so little income to tax. But by 1940, the legislature voted to repeal it—even though fewer than 300 Mississippi residents owed enough income tax to expect any income tax cut.
Martin also shows how adept tax opponents have been at using sleight-of-hand arguments. Back in the 1920s, for example, the brothers Pierre and Irénée DuPont attacked the federal enforcement of Prohibition—“a particularly sore point to pious rich.” In the elite view, the federal government unfairly made up for its lost revenue with higher income taxes, “thereby letting the sinners off scot-free while shifting the costs of their sins onto the rich.” But one rich people’s organization found that its appeal met greater success after abandoning the narrow argument that legalizing and taxing liquor sales would ease the burden on the teetotaling wealthy. The new idea was that ending Prohibition would “provide additional revenue to state and federal governments in crisis.” Thus it was that in the early days of the Great Depression, ending Prohibition gained early favor with lawmakers “in states that were increasingly stressed to pay for basic public services.” Pennsylvania led the way in stopping the funding of enforcement. This kind of shift in rhetoric remains relevant today as congressional Republicans push a 25 percent cut in the IRS budget just as more states ponder legalizing—and taxing—the sale of marijuana.
In time, J.A. Arnold lost favor, partly because he prospered even as his movements faltered. But others came along eager to pick up the slack. Edward Aloysius Rumely, a onetime Progressive turned right-winger by Franklin Roosevelt’s 1936 effort to pack the Supreme Court, and a specialist in direct-mail publicity, “would do the most to transform the movement to untax the rich.” Among Rumely’s successors was Connecticut manufacturer Vivien Kellems—a veteran of the fight for women’s suffrage (the civil--disobedience techniques of which she brought into the anti-tax movement) and a standout in the man’s world of 1930s big business who grew much richer thanks to New Deal and World War II government contracts. Still, she compared IRS agents to Hitler’s enforcers. She insisted that small business was “marked for liquidation,” and in one jeremiad warned that “we are one step removed in this country from the Firing Squad and the Concentration camp.” In a 1948 Los Angeles speech, Kellems announced she would cease withholding income taxes from her employees’ checks. The gesture made her a hero to this day to the virulent, sometimes violent cliques that claim the paying of taxes is voluntary and the federal government is a criminal organization.
Martin also examines more sophisticated anti-tax advocates, like Robert Dresser, a New England textile heir, Harvard-educated lawyer, and union opponent who led the way in what Martin calls “clever policy crafting,” an essential feature of rich people’s movements. Dresser’s work toward a constitutional amendment limiting the federal government’s power to tax helped make the once-fringe cause “increasingly palatable” to mainstream conservatives starting in the 1940s, almost four decades before Californians enacted Proposition 13.
In his dotage, at Stanford’s Hoover Institution, Dresser embraced John Bircher conspiracy theories. It’s but one thread in a taut fabric Martin weaves from many connections among Southern racists, anti-communist crazies, corporate welfare queens, and rich people’s de-tax movements. Another thread is the little-known story of the young organizer Grover Norquist’s many trips in the early 1980s to Angola. He went there to learn tactics from the Marxist turned anti-communist revolutionary Jonas Savimbi, who had the support of many of the right-wingers around President Ronald Reagan; Norquist would soon put what he learned into practice as he transformed a new organization, Americans for Tax Reform, from a “short-term lobbying project” into the vehicle for a “war of attrition against the American welfare state.”
A recurring dream of the century-long effort Martin chronicles is getting the top tax rate down to 25 percent or even 15 percent. Reagan got tantalizingly close with the 28 percent top rate in the 1986 Tax Reform Act, enacted with bipartisan support. George W. Bush won the number that matters most—long-term capital gains and dividend rates down to 15 percent—from 2003 to 2012. More than 30 percent of America’s capital gains now flow to the fewer than 8,300 households with annual incomes of $10 million or more, while the nearly two-thirds of U.S. households making less than $50,000 collect just 3 percent.
Martin’s title is an homage to Frances Fox Piven and Richard Cloward’s seminal 1978 book Poor People’s Movements: Why They Succeed, How They Fail. Piven and Cloward showed that the poor get heard when they stop being docile. Or, as Frederick Douglass put it, “Power concedes nothing without a demand.” Mass demonstrations, strikes, and even riots scare the oligarchs into paying attention.
The problem with disruption as a strategy is that the wealthy, having smart advisers and plenty of money, co-opt threatening movements. We can see this in the 1971 memo that Lewis Powell, later a Supreme Court justice, wrote for the U.S. Chamber of Commerce as it tried to understand and undercut the burgeoning consumer movement. Powell’s proposed strategies included creating subtly anti-consumer institutions modeled superficially on the work of consumer advocates like Ralph Nader, adding a patina of concern for public interest to obscure their agenda.
In the case of the modern Tea Party, we now know that a good chunk of the money to stage events came from the Koch brothers, inheritors of wealth who are no strangers to the benefits of government-granted corporate monopolies as well as to laws that let them avoid, defer, and even escape taxes. That the mainstream news gives so little attention to the Kochs’ behind-the-scenes manipulations is a tragedy. The Tea Party’s very name sows confusion: The original 1773 Tea Party opposed tax favors for the wealthy owners of the British East India Company. Contrast this with modern Tea Party demands that a congress and president—elected by the people—lack legitimacy and must reduce taxes, especially on business and owners of capital.
Rich people’s movements waxed and waned over much of the last century, going dormant only to reappear when roused by a new policy threat. They have yet to achieve many of their goals. But thanks to decades of well-funded organizing, favorable laws in Washington and state capitals that passed while few noticed, and now the dark-money opportunities of Citizens United, they are here to stay. Martin’s book is useful in understanding a forgotten history that preceded the seemingly sudden assaults on consumers, unions, and workers by legislatures and governors in Michigan, North Carolina, North Dakota, Ohio, Texas, Wisconsin, and other states where extremists are currently in power. While the actions are indeed abrupt, contemptuous, and cruel, they grow from a neglected but by now lengthy tradition of lessons the rich and their advisers learned from failures past.
This article appeared at The American Prospect. David Cay Johnston, a 2001 Pulitzer Prize winner, teaches at Syracuse University College of Law and writes columns for TaxAnalysts.com and CJR.org. The Fine Print, the third book in his series on hidden aspects of the economy, is now in paperback.
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