Part 13

Back of such neighbourhood ideas on taxation there are at least two lines of defence. One is that our present tax system is highly illogical, bothersome, and burdensome. To a considerable extent, unfortunately, this is the case, but it does not justify illegal methods of seeking redress. Not much argument is required to convince the ordinary property owner that all the inequities of the existing system fall with cumulative weight upon his devoted head. His pocketbook affirms this view more strongly perhaps than he would care to admit, but anyhow the net result is that he feels himself more or less pardonable for evading the burden as far as he can. The other common excuse for tax dodging is supplied by the conviction that much of the money raised by government is wasted or stolen. The logic based upon this premise is most curiously inverted, but none the less it sways the action of great multitudes. Politicians are a set of grafters, says our taxpayer. The more money they get the more they will waste and steal. I will punish the rascals as they deserve by dodging my taxes, that is _by becoming a grafter myself_. Seldom, however, is the latter clause clearly expressed. Yet the existence of corruption on one side of the state’s activities is thus made the excuse for corruption on another side whereby the state is mulcted of much revenue which it might receive. Of course evasion results in higher tax rates, which, by the way, fall crushingly upon the citizen who makes full and honest returns, and thus part of the loss in income to the government is made up. It seems clear, however, that in the long run government income is materially reduced by the feeling prevalent among taxpayers which has just been described and the procedure based upon it. On the whole this is by far the most serious single economic consequence of political corruption. It is bad enough that public money should be stolen, that public work should be badly done, and that politicians and contractors should grow rich in consequence, but it is far worse that the state should be starved of the funds necessary to perform its existing functions properly and to extend its activities into new fields. In the regulation of industry, in education, philanthropy, sanitation, and art, American government is very far from achieving what it should do in the public interest and what it could do more efficiently and cheaply than any other agency. Yet our progress toward this goal is perpetually hindered by the existence of waste and corruption on the one hand, and the consequent peremptory shutting of the taxpayers’ pocketbooks on the other hand.

Consideration of the theory underlying tax dodging reveals certain broad lines of correction. In proportion as our tax system approximates greater justice, the evasion which defends itself on the ground of the inequities of the present system will tend to disappear. To show how this may be done is beyond the limits of the present study. Suffice it to say that the work which reformers and students of public finance are now doing on inheritance, income, and corporation taxes, on the taxation of unearned increment, on various applications of the progressive principle, and so on, should eventuate in the tapping of much needed new sources of income, and thus facilitate the correction of present unjust burdens. The introduction of economical methods and the elimination of the grosser forms of corruption in the field of government expenditure will weaken the excuses offered for evasion on the ground of public waste and graft. There is an overwhelming mass of evidence to show that the American taxpayer, once convinced of the necessity of a given public work and further assured that it will be honestly executed, is generous to the point of munificence. The annals of our cities are full of the creation of appointive state boards composed of men of the highest local standing and intrusted with the carrying out of some great single project,—the erection of a city hall building, the construction of a water works and filtration plant, or of a park system. Very few such commissions are grudged the large sums of money necessary for their undertakings. If every ordinary branch of our government enjoyed public confidence to a similar degree such special boards would no longer be needed, and ample funds would be forthcoming from taxpayers for all our present functions and for other new and worthy functions which might be undertaken greatly to the public advantage. Finally our system of tax administration, like our system of government regulation of business, needs strengthening. Larger districts and centralised power in the hands of the assessors will help to lift them above the neighbourhood feeling which is responsible for so much evasion. Higher salaries will bring expert talent and backbone sufficient to resist the pressure brought to bear by large interests. As a matter of fact the first threat of a virile execution of the laws wipes out a considerable part of the tax dodging in a community.

There would also seem to be much virtue in the plan for the reduction of the tax rate advocated by the Ohio State Board of Commerce.[64] Given a community with a high general tax rate it may be the case, for example, that only about fifty per cent of true value is being returned. Everybody knows it; everybody is sneakingly ashamed of it. Still fundamental honesty is supposed to exist in the man who does not cut the percentage below say, forty; the really mean taxpayer is he who risks twenty-five per cent on what he feels obliged to return and conceals whatever he can into the bargain. Under such circumstances it is proposed to take the heroic step of reducing the tax rate to one-half its existing figure or even less.[65] If this can be done it is hoped that taxpayers can be induced to return their property at full value, and that much personal property will come out of the concealment into which it has fled under the menace of a high general property tax rate. In support of this argument cases are cited where a reduction of the personal property tax rate alone has brought in much larger returns and converted into a source of revenue a form of taxation which everywhere under high rates shows a tendency to dwindle to practically nothing.

As against the plan it may be said that taxpayers are habitually suspicious and extremely likely to regard any change whatever as certain to increase their burdens. Many of them would see nothing in the proposition beyond a tricky device to screw up their valuations under the pretext of low rates with the intention of falling upon them later with rates as high or higher than before. Unless the reform were fully understood and then backed up by the most vigorous administration there would be grave danger that revenues would materially suffer. Given these conditions essential to success, however, the plan would seem decidedly worth trying. A community willing to take the plunge, it is pointed out, would enjoy large advantages over its less enterprising competitors in the advertising value of a low tax rate, particularly as a means of inducing new industries to locate in its midst. The reform would probably not increase revenue, indeed it does not aim to do so, but it would yield a moral return of immense value. Self respect would be restored to many otherwise thoroughly good citizens, and public opinion, to the tone of which the taxpaying class contributes largely, would be lifted to higher planes. Under the present vicious system there must be a considerable number who realise secretly and more or less vaguely the inherent kinship between their conduct and that of the corrupt political organisation under which they live, and who in consequence remain inactive and ashamed when movements for better things in city, state, or nation, are on foot.

* * * * *

In our earlier study of the nature of political corruption an effort was made to distinguish between bribery and auto-corruption. As examples of the latter, legislators may employ knowledge gathered on the floor of the chamber or in committee rooms for the purpose of speculating to their own advantage on stock or produce exchanges; administrative officials who by virtue of their position learn in advance any information which may affect the market (_i.e._, crop reports) can do likewise; knowledge of important judicial decisions before they are handed down may be exploited in a similar fashion; insiders who have access to plans for projected public improvements are in a position to acquire quietly the needed real estate for sale at much advanced prices to the city or state when condemnation proceedings are actually begun. In addition to large and striking transactions of this sort there are innumerable smaller possibilities for auto-corruption which present themselves to public functionaries ranging in rank from the highest places in the official hierarchy to that of the policeman on his beat. Logically the practices under consideration are not separable from the general forms of political corruption as the term is applied in the present discussion. Instead they would seem to be a special method of carrying on corrupt transactions of many different kinds. All cases of auto-corruption, however, have the common feature that bribery by an outside interest is excluded, and this absence of bribery has sometimes led to the assertion that the practices included under this heading are “honest grafts.” An illusory appearance of innocence is also conferred by the difficulty of tracing the incidence of the burdens resulting from such transactions. There is no moral ground for such favourable distinctions, however. On the contrary, auto-corruption is clearly worse than bribery in that an entire transaction of this character must be guiltily designed and executed wholly by one person, and that person an official charged with knowledge which should be used only in the public interest. Moreover the profits of his secret treachery may be turned entirely into his private bank account. If so he cannot even plead in justification that he has been acting in behalf of a party organisation by gathering and contributing the funds necessary to its management. The latter feature of auto-corruption stands in need of special consideration.

It may be laid down as a principle of fairly general applicability that political corruption as such is disadvantageous to the party organisation permitting it. From a purely tactical point of view it would be the extreme of bad party management to tolerate loose conditions under which a large number of officials could graft freely on their own account and place the entire proceeds in their own pockets. Whether they confined themselves to auto-corruption or accepted bribes singly or in combinations the case would not be materially altered. A day of reckoning at the polls would surely come, and it would find the party treasury unprovided with the means of defence. Yet conditions of this character prevailed pretty generally prior to the advent of strongly centralised political machines. Corruption was extremely diffuse, personal responsibility for it widely scattered, party responsibility not so clear. Manipulation required whole corps of lobbyists, “third houses,” “black horse cavalry,” and the like. Under present conditions the party organisation with strongly centralised management has a direct interest in limiting corruption and also in seeing that contributions which arise from such practices as it tolerates actually flow into the party war chest. Corruption in purely selfish interest becomes treachery to the party as well as treachery to the state. Of course even under strong centralised and permanent party control cases of auto-corruption still occur, and at times officials receive bribes without turning in their quotas. If so, however, it may fairly be presumed that they make their peace with the organisation in other ways. They may be exempt from paying tribute, but they are nevertheless obliged to deliver votes or influence. Many sins are laid at the door of the machine. It has at least the advantage of enabling us to centralise responsibility for all corrupt practices which occur under its management.

From this point of view one may undertake an outline of the form of corruption connected with political control. All the preceding forms of political corruption may be considered the obverse, this is the reverse of the die. None of the practices earlier considered can be carried on without danger; the corruption of political control is the crooked means of avoiding the cumulative effects of these practices. It is not popular, it is not good politics even in the narrowest practical acceptance of that term, for a political organisation to grant corrupt favours to business, to wink at the violation of the law by vice, to allow its partisans in office to sell government property cheap and buy government supplies dear. If any of these things are permitted the organisation, like the common criminal, must take care to lay aside “fall money” against a day of trial.

One might feel greater confidence in the restraining influence of party centralisation were it not for the fact that the more dangerous to party success are the forms of corruption which an organisation tolerates the more lucrative they are apt to be. Though its sins be as scarlet still they produce funds sufficient to buy indulgences and to leave a handsome profit over. In connection with business regulation, for example, bribery in any considerable amount is not possible until legislation is enacted or close at hand. And legislation of this kind is not likely to be passed or threatened unless a strong public sentiment demands action. Political manipulation which attempts to frustrate regulation at such a juncture must sooner or later prepare itself to reckon with the public sentiment which it has flouted. Vice cannot be tolerated except in contravention of laws against it, and to do so means to offend the moral sentiment in the community which placed such laws on the statute books. Franchise grabbing is not profitable on a large scale until the experience of earlier public service corporations has impressed upon the public mind the great value of such grants. If, nevertheless, grabs are permitted by the machine, the boodle must be sufficient to pay both for the personal services involved and to repair any resulting damage to party prestige at the next election. Of course many citizens are apathetic with regard to such abuses or even ignorant of their existence, and there are others who are so involved in corrupt practices, particularly in connection with tax dodging, meter fixing, and the protection of vice, that they feel themselves allied in interest with the party organisation and accordingly vote its ticket. Always, however, there is a contingent, and frequently it is large enough to hold the balance of power, which is neither ignorant nor apathetic, and which, although perhaps too quiescent ordinarily, will rise in revolt against any organisation which grafts too boldly and too widely.

The situation of the venal machine is, therefore, substantially this: more money can be obtained at any time if certain practices dangerous from the point of view of party expediency are tolerated. If they are tolerated greater expenditures of money and of other party resources must be made when the final accounting with public sentiment takes place. To put the matter in another way: the forms of political corruption earlier described, _i.e_., corruption in connection with the regulation of business and of vice and corruption in connection with the buying and selling operations of the state, are for the most part sources of income, whereas corruption in the form of political control is mainly expenditure. Under George III., according to Mr. Dorman B. Eaton, a “Patronage Secretary of the Treasury” was appointed

“whose duty it was to stand between members and partisan managers appealing for places for their favourites, on the one side, and the heads of offices who needed to have these places filled with competent persons, on the other side. This Secretary measured the force of threats and took the weight of influence; he computed the political value of a member’s support and deducted from it the official appraisement of patronage before awarded to him. It is said that actual accounts, Dr. and Cr., were kept with members by this Patronage Secretary.”[66]

Whether or not “accounts Dr. and Cr.” are kept by our political organisations, a calculus of essentially the same character must underlie the determination of their policy.

On the spending, or political control, side of their ledgers the various heads are comparatively simple. Office holders must be kept in line, and to this end patronage, promotion, and the control of primaries are important. The direct use of money for bribes may play only a small part in this process; opportunities for auto-corruption may be left open in special cases, but personal and party loyalty and ambition can be relied on to a large extent. Back of the office holders of the hour, however, there are the constantly recurring necessities of election day. Party organisation must be kept up continuously, involving the reward in some way of swarms of assistants and hangers-on who cannot all be remunerated directly at public expense. At times votes must be bought, and repeaters, thugs, and ballot-box stuffers must be paid for their services. A heavy toll is apt to be taken out of the funds used for such purposes by every hand through which they pass on their way down. In addition to the expenditures already noted there are many other occasions, some of them quite legitimate in character, and others unobjectionable or even laudable, for the lavish use of money to secure party success and party control.

The situation which has just been described is so common that the only justification for repeating its description here is the necessity of completing an outline the other parts and interrelations of which are somewhat more obscure. In the gradual awakening of the American people to corrupt conditions existing in their government the first evils clearly seen were the abuses of the patronage and the defilement of the ballot-box. Civil service reform and corrupt practices acts (the latter term seems lamentably narrow in its original usage to the present somewhat more sophisticated generation) were the result. Later the presence of purveyors of vice immediately behind much of the prevailing electoral corruption was clearly discerned, and the battle on that score is still being waged. It is beyond question that our present local option movement is directed against the saloon not so much because it is a place where intoxicating liquor is sold, as because it is a political centre which did not know how to be moderate in its exercise of power during the days of its ascendancy. Still later the more secret relationship between grafting business and political corruption was laid bare. Renewed determination to impose the necessary measures of state regulation and, more specifically, the campaign contribution issue were the results. The problems presented by corrupt practices in connection with political control are still far from adequate solution. Reforms already achieved in the right direction, and still more the determination to press for further reforms, are the most hopeful features of the present situation. In our national government, for example, the civil service movement has reached a gratifyingly high development, but it still needs much extension and strengthening in our states and cities. We have some stringent legislation against ballot-box crimes, but, an election once settled, our tolerance on this subject is amazing and deplorable. Every act which simplifies our governmental machinery, which places responsibility squarely upon a few shoulders and provides means for enforcing it, which shortens our cumbersome ballots, which makes the primary accessible to independent voters, will help in the solution of the problem of honest party control.

Without undertaking a summary of the argument on the various forms of business and political corruption the same point may be made with regard to them that was made with reference to the corruption in the professions, journalism, and the higher education,—namely that the major forms of evil are recognised and savagely criticised. To an even greater extent legislative action has been secured against the primarily political forms of corruption. The fight for the regulation of business is the great unsolved problem of our time, but so far as it is successful we may expect not only more honest business practices but also a favourable reaction upon political life. A great many means may be brought to bear to secure honesty in the buying and selling operations of the state and to prevent the corrupt toleration of vice. Their success will mean that the corrupt political manager will find himself deprived of some of his most lucrative sources of income. A strong impression prevails at the present time that corruption funds in general are much smaller in amount than a few years ago. In part this is perhaps due to a change of heart, in part to the fear, intensified by recent events, of exposure. Perhaps, however, it is still more largely the result of a conviction that the “goods” could not, or would not, in the present state of public opinion, be delivered by the politicians. It is evident that the more successful we are in thus drying up the income sources of venal political organisations the smaller will be the resources available in their hands for the extension and perpetuation of their power of control.

FOOTNOTES:

[53] “Sin and Society,” p. 78.

[54] “Back to Beginnings,” Commencement Address, Oberlin College, June 28, 1905.

[55] “The Nature of Political Corruption,” p. 46, _supra._

[56] Limitation of the scope of this study to the internal forms of corruption makes it impossible to discuss this very interesting topic. It may be noted, however, that in international cases certain peculiarities occur regarding the personal element of corruption. When the military secrets of one government are purchased by another, the faithless official of the former who makes the sale is, of course, corrupt in the highest degree. What shall be said of the nation making the purchase? Personal interest on its side is merged in the collective interest of a commonwealth numbering millions of inhabitants it may be. The case is not entirely unlike those in which group interest rather than self interest impels to corrupt action (see p. 65), except that in the latter the groups are subordinate and not sovereign. If, however, the state which buys the secrets of another government runs counter to international law or morality in so doing, it may be held to be pursuing a relatively narrow interest regardless of the broader interest of humanity as a whole. From this point of view the state which uses money for such ends is guilty of corruption although, of course, it is a highly socialised form of corruption.

[57] “Law and Opinion in England,” p. 216.

[58] _Cf._ H. C. Adams, “Public Debts,” pt. iii, ch. iv, for a very able discussion of the influence of the commercial spirit on public officials.

[59] _Cf._ sec. vii, “Die Organisation als Klassenerhöhungsmaschine,” in Robert Michel’s very thorough and illuminating study of the organisation of the German social-democracy. _Archiv. f. Sozialwissenschaft und Sozialpolitik_, Bd. xxiii, Heft 2 (September, 1906).