Déjà Vu All Over Again: The Selling of Tax Legislation

Date: Sep. 2, 2005

Full Text Published by Tax AnalystsTM

Marjorie E. Kornhauser is the W.R. Irby Professor of Law at Tulane Law School.

Copyright 2005 Marjorie E. Kornhauser. All rights reserved.


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The specter of tyranny by the majority looms over American democracy, and nowhere more so than in the area of taxation. Since the inception of the income tax, critics have warned of class warfare and of the masses "soaking the rich," thereby shifting most of the burden of paying for government onto a small group of wealthy taxpayers. That tyranny, however, has failed to materialize. Sometimes, however, the reverse occurs: The minority convinces the majority to support tax policies that favor the wealthy and even contradict their own interests, as occurred recently with the temporary repeal of the estate tax.

The minority often obtains the majority's support through a combination of lobbying, using media, and employing language heavily laden with powerful, symbolic rhetoric. The estate tax repeal campaign, for example, successfully used all those elements. It barraged legislators and the media with assertions that the estate tax would harm small businessmen and farmers -- the traditional backbone of America -- by forcing the sale of businesses to pay the tax. The campaign thus won "Everyman's" support by ignoring the fact that only a small percentage of taxpayers pay the estate tax; many provisions exist to ameliorate estate taxes for small businessmen, and no evidence exists that the estate tax has caused the actual break-up of any farm.

Those tactics, of course, are far from new. The invention of the radio and movies, however, opened new opportunities for political suasion, and by the 1920s politically motivated groups were using public relations techniques to reach the public and gain support for their legislative positions. The 1924 campaign for the Mellon tax plan and the campaign to abolish prohibition were probably the two largest and most successful political public relations campaigns of their era. A few years later, however, there was another campaign that some contemporaries believed was even more massive than those two. Whereas the relative size of the campaigns may have been debatable, there is no question that the 1935 campaign achieved its goal in the shortest period of time. As Congress contemplates the permanent repeal of the estate tax, the tale of this 70-year-old campaign to repeal another tax law may be instructive. It is certainly entertaining.

In 1934, in reaction to the widespread tax evasion and avoidance revealed in Senate hearings investigating the 1929 stock market crash (the famous Pecora hearings), Congress enacted a tax publicity provision. That provision required all taxpayers filing income tax returns to submit an additional form (printed on pink paper) containing name, address, gross income, deductions, net income, and tax liability. The pink slip would then become a public record available for inspection by anyone.

Less than a year later, a bill to repeal the pink slip was introduced in the House. The noted columnist Arthur Krock commented that the bill had little chance of success. Although there was some real opposition to tax publicity, by itself that natural opposition was unlikely to convince Congress to repeal the new provision at that time. Such a quick reversal of its actions could impair congressional authority by making Congress appear indecisive. Moreover, the conditions that had led to its passage still existed: outrage that wealthy taxpayers such as J.P. Morgan paid no taxes and a general concern about wealth concentration in the midst of the Depression. Because the pink slip applied to very few people -- less than 8 percent of the population -- it seemed unlikely that the affected persons could apply sufficient political pressure to persuade Congress to reverse itself so quickly under these circumstances. Krock thought that only President Roosevelt's support for repeal would apply sufficient political pressure to force Congress to repeal the pink slip. Roosevelt, however, never offered that support.

Despite those hurdles, less than three months after the first repeal bill was introduced in the House, Congress repealed the pink slip law. Many congressmen and other contemporaries credited the repeal to a campaign by a small group called the Sentinels of the Republic and to one man in particular, the Sentinels' national chair Raymond Pitcairn. The Sentinels had been working to preserve the "fundamental principles" of American government, in particular to fight socialism and the expansion of the federal government at the expense of states' rights since its formation. Nevertheless, despite all its activity (including the lawsuit Frothingham v. Mellon), the Sentinels of the Republic was generally so unknown when Pitcairn joined in late January 1935 that many people thought the group had just been formed to fight the pink slip.

The Sentinels' intense pink slip campaign under Pitcairn's direction put the group and tax publicity in the national spotlight. Through a combination of intensive lobbying and expert use of public relations stunts and the media, the repeal campaign captured the attention of Congress and the nation. Framed in rhetorical terms of privacy and small businessmen, it resonated with the public at large, rather than only the small proportion of the population actually affected. It transformed individual outrage into political action, thereby creating the pressure that spurred Congress into action. And it did so with lightning speed.

With the March 15 deadline for filing income tax returns -- and the pink slip -- fast approaching, Pitcairn had to mobilize support for the repeal immediately. He believed that a small number of people could sway legislation if they were united in action and loud enough, but he had to convince others of that truth. He knew that the best way to do that was to capture the public's (and Congress's) attention through intense lobbying and publicity stunts that appealed to the heart, not the head. Moreover, to create sympathy and stir enough people into action, he had to convince people and Congress that the law hurt not just the wealthy, but the small businessman.

He achieved those goals with a three-prong approach aimed at elected officials, the voting public, and the media. He lobbied intensively, sending repeal petitions to the secretary of the Treasury, every senator and congressman, and to President Roosevelt himself, often enumerating the dangers of publicity in a sensational manner. Publicity, the petitions said, would subject individuals to nosy neighbors and unscrupulous salesmen, expose business secrets to competitors, and make people vulnerable to blackmailers and, even worse, kidnappers. Congressmen received a folder containing copies of the protest slip, petitions, news clippings, and other information, with the contents neatly typed on the front. Local officials such as mayors also were presented with petitions.

The campaign deluged newspapers, businesses, professional and civic clubs, and educators with letters and petitions against the pink slip. Knowing the power of individual action, Pitcairn urged people to write individual letters on their own stationery to newspaper editors and to their congressmen protesting the pink slip. He encouraged taxpayers to submit their pink slips with nothing on them except for a statement protesting its invasion of privacy. By the end of the campaign, he had sent approximately half a million letters, accompanied by a facsimile pink slip emblazoned with the words "I PROTEST against this outrageous invasion of my right of privacy" and a green sticker with a similar protest slogan that recipients were urged to attach to their actual pink slip. "The Pink-Slip Strike," as told by Raymond Pitcairn, 208 The Saturday Evening Post 23, 46 (June 8, 1935). And the recipients did protest -- with some congressmen getting hundreds of letters a day.

The campaign courted the media. Pitcairn telegrammed Sen. Robert La Follette, the "father" of income tax publicity, inviting him to debate tax publicity on the radio. When La Follette failed to respond, Pitcairn published a transcript of what would have been the debate, printing only his comments and nothing for La Follette. He organized pickets and had "pretty girls" (his words) handing out stickers to taxpayers as they filed returns.

The flashy actions and inflamed rhetoric claiming that tax publicity harmed small businessmen and helped blackmailers and kidnappers were designed to get attention and they did. Not only did the newspapers carry articles about the campaign (including a photograph of the speaker of the house accepting a petition from Pitcairn), but they also published editorials, cartoons, and letters to the editor on the topic. The radio also mentioned the campaign.

In less than three months the campaign to repeal the pink slip income tax publicity provision went from hopeless to a complete success. The well-organized, well-funded, near constant, often sensational campaign had captured the attention of the press, the public, and Congress alike. The showy tactics guaranteed media attention and the rhetorical appeals to the small taxpayer and to fears of kidnapping motivated people to write their congressmen. Words and actions together created a juggernaut.

Although many people understood the partisan nature of Pitcairn's actions, his tactics had a facade of objectivity. The petitions, strikes, and challenges to debate were news. Reported as such in the media, they gained more attention, and possibly more importance, than simple political posturing. Even if they were only politics and not news, they were done in the name of American democracy, the Constitution, and the common man, not just on behalf of a privileged few. The pink slip applied to corporate as well as individual taxpayers, but the campaign focused on individual taxpayers, not corporations. Appealing to most people's natural desire for privacy, the repeal campaign galvanized many people into action by focusing on the dangers tax publicity posed for ordinary citizens. Although it did not ignore the damage publicity allegedly could inflict on their businesses (false view of finances, reveal business secrets), it concentrated on the danger to their person (nosy neighbors, solicitations by scam artists, and vulnerability to gangsters, blackmailers, and especially kidnappers). Although all of those dangers had some basis in reality, the repeal campaign continually stressed them using emotionally laden language. That emphasis, especially on kidnapping, resonated with the public -- whose attention was riveted by the Lindbergh baby kidnapping/murder trial that was in progress during the campaign.

Although many congressmen believed that the Sentinels of the Republic's campaign was using the little taxpayer to "shield" the big taxpayers, they could not deny the fact that hundreds of letters a day were pouring into congressional offices. Those letters from "ordinary" constituents provided the political cover congressmen needed to vote to repeal the pink slip, which -- perhaps not incidentally -- affected them personally.

In his first letter of the campaign Pitcairn had stated, "Minorities create news because they do daring things and act together. They get their way against larger numbers because they demand what they want and make a fuss about it" ("Dear Sir" letter of Feb. 6, 1935). The success of the pink slip campaign proved the truth of that statement. When the campaign to repeal the estate tax permanently begins in earnest, both Congress and the public should remember it. In a democracy, both minorities and majorities can impose their will.