Illinois Staats-Zeitung -- December 27, 1867The Whiskey Tax Swindle (Editorial)
Chicago boasts that it is the metropolis of the West, as New York is the metropolis of the East. Unfortunately, however, this similarity extends not only to the result of legitimate, but also illegitimate, enterprise. It is a most deplorable fact that, in Chicago, the Government is defrauded of just as enormous sums, through the notorious whiskey tax fraud, as are lost in the same manner in New York.
Illinois, as everybody knows, or at least should know, produces more whiskey than any other state of the Union; twenty million gallons per year is a conservative estimate of the local production. But the statistics for the last fiscal year show that the receipts in whiskey taxes amounted to only $400,000. That means that taxes were paid for only one out of every one hundred gallons. So, for every $200 that should have been received by the treasury from this 2source, only 200 cents were actually received.
This state of affairs is certainly revolting in the extreme. It probably has no parallel in the entire history of United States taxes. The monetary loss thus suffered by the people is bad enough; the consumers of whiskey actually pay the tax; as it is included in the sale price of the product. However, since not the Government, but thievish distillers and government officials receive the tax, the amount thus lost to the Federal treasury must be supplied through other taxes. Not Andrew Johnson, not McCollough, are defrauded, but Peter and John and every other citizen of the United States, yea, every resident of our country, because each and every person in America pays a tax on everything that he buys--either directly or indirectly. Thus, every inhabitant of the United States has a right to look upon these thievish distillers and their partners in crime, the bribed Federal officers, as mean, low thieves, who have taken money from his pocket.
But the worst part of this unparalleled success of the whiskey swindle is that 3the public in general does not share our view of this matter; that the defrauders can continue their evil practices undisturbed; that they need not fear that they will be ostracized from decent society by public opinion; thanks to their ill-gotten gains, they can occupy prominent places in those circles in which the possession of wealth is the criterion of respect.
Such fraudulent practices corrupt our entire public life; for if the public notices that people acquire honor and wealth through acts which merit a sentence to the penitentiary, but that honest businessmen are ruined through inability to compete with thieves, it must accustom itself to the thought that dishonesty and ignorance are identical terms. Thus the natural sense of right and morals is lost and success becomes the only criterion of morality. We are actually not very far from the moral teaching of the Spartans, who considered a cleverly executed theft a virtue, and condemned and despised a thief only if his infamous deed was discovered. If logic has any value, we may be sure that such demoralization of public opinion must ultimately lead to the downfall of the performance of duties assumed by the nation as a whole.4
It is perfectly clear that the colossal fraud practiced in connection with the collection of the whiskey tax could not be carried on if the tax officials were not guilty of accepting bribes. It is not humanly possible that these officers could be so ignorant as to be duped by the distillers. Why should they be the only persons who are unaware of matters that are known to every businessman? And how could the accounts in tax books be correct unless they were manipulated with the full knowledge and consent of the respective Federal employees? Or can anyone imagine that tax officials know nothing of it when raw whiskey is pumped from the cellars of bonded warehouses to rectifiers located on the second story? Can anybody imagine that they know nothing of it when unusually large quantities of whiskey are entered upon the books as "leakage" or "loss through distillation," so that very little remains to be taxed? Or can anybody conceive that educated men are not aware that "something is rotten in the state of Denmark" when frequently entire shipments disappear in transit from a local bonded warehouse to one in New York (according to distillers' records) and no claim is filed against the carriers by the owners of the liquor?
No, indeed. Mentally sound people do not doubt in the least that distillers and 5tax officials are working hand in hand, and that the latter also must be prosecuted if the former are to be brought to account before court. Congress should appoint a committee to investigate the administration of local tax collectors and their relations with the distillers. Any Federal employee who would offer lame excuses, or refuse to answer questions excepting in the presence of a counsel, or resort to other well-known subterfuges, should be looked upon and treated as an accessory to a crime; for it is as clear as day that a man who knows that he is innocent will do everything in his power to facilitate an investigation. The truth can stand the test of a rigid investigation.
This is what can be done by legislation to decrease the evil (for there is no hope that it can be entirely removed):
1) The quantity of mash can be taxed, instead of the amount of distilled liquer.
2) Bonded warehouses can be abolished and any credit whatever for taxes refused to those who must pay them.6
3) A penitentiary sentence can be meted out for every fraud, offer or acceptance of a bribe, and for every attempt to "fix a case".
4) Immunity can be given to those participants in fraud who act as informers or government witnesses.
This last recommendation is in agreement with the proposal which was made to the New York Constitutional Convention, by Mr. Opdyke, for the prevention of bribing legislators. We see no reason why the principle could not be applied to bribing administrative officers of the Government. It is a desperate means to use an accessory in crime for the purpose of convicting and punishing his partner in crime; but this procedure is not new to English law. Many a leader of criminals has been brought to justice through evidence furnished by one of his band.
"Settling" a case against perpatrators of fraud--a practice frequently resorted to in tax fraud cases--only tends to encourage transgression of Federal laws. It is known that, in following this method of disposing of cases, the guilty 7one is often set at liberty after paying only one-fourth or even a smaller fraction of the amount which would normally have been paid. In these instances, the tax administrators are actually accessories in robbing the people. The abuse can be removed only if tax frauds are classed as a felony, thus excluding any possibility of a settlement," which would then become a compound felony.
We hope that the members of Congress will devote their Christmas vacation to a good purpose--to making a thorough investigation of this morass of crime, and gathering facts and figures to back up their demand that the Government "clean house" thoroughly.
Not only the reputation of Chicago and Illinois, but also the moral welfare of the nation, is at stake.
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