Bad Presidents

Since I am watching the Jan 6 hearings and realizing yet again what a terrible president Donald J. Trump was, I have decided to post an excerpt from my dissertation, The Politics Of Alcohol Production: The Liquor Industry and the Federal Government, 1862 – 1900. This section deals with another one of our terrible presidents, Andrew Johnson.

In 1866 President Andrew Johnson, in an attempt to consolidate support for his Reconstruction policies and also with the hope of building a new political party consonant with his goals, began to use the considerable amount of patronage power available to him. Although clearly documented evidence of fraud and a obvious need for reform existed, these issues took a back seat to the political needs of Andrew Johnson, as well as those of his political opponents.

Both sides in the Reconstruction controversy desired to place “loyal” people in government jobs. The Treasury Department played a critical role in these plans since it had the second most patronage slots in the government. By replacing federal officials Johnson attempted to coerce adherence to his vision of Reconstruction. To avoid dismissal many employees maintained neutrality. The Tenure of Office Act of 1867, designed to prevent arbitrary dismissal of officials without Senate consent, helped these workers to feel more secure. Designed to protect middle level workers the law did not resolve the issue of removal of department heads.[1]

Andrew Johnson’s main target was the Treasury Department; however Secretary of the Treasury Hugh McCulloch refused to dismiss Republicans summarily. His steadfast support of Assistant Secretary William Chandler, disliked by other members of the Cabinet, reflected McCulloch’s desire to keep the staffing of the Treasury impartial.  McCulloch, writing in 1900, claimed the Assistant Secretary was “one of the few radical Republicans who did not permit their party allegiance to blind them to the merits of Andrew Johnson.” In a discussion with President Johnson Secretary of the Navy, Gideon Welles expressed a different point of view, claiming that McCulloch “had committed a great error in retaining Rollins, Chandler, and other Radicals . . .”[2]

The Secretary’s “neutrality” extended in the other direction of the political spectrum. McCulloch, a banker from Indiana, believed in an easy, swift restoration of the Southern states and a liberal interpretation of the Test Oath. McCulloch maintained that many competent Southerners would be excluded form revenue offices because they could not swear they had not taken part in the Rebel cause. After Cabinet discussion people who “could only take an oath for the faithful performance of their duties and obedience to the Constitution of the United States” held positions in the Bureau of Internal Revenue.[3]

Many people found Mcculloch’s hard-money fiscal policies unappealing; this added to the controversy surrounding the Secretary. McCulloch, however, remained loyal both to the President and a smooth running Treasury Department. On a practical level the Secretary and Commissioner divided the appointments to distribute patronage to both sides. This did not really satisfy anyone and certainly didn’t generate an efficient workforce.  Rollins, in his annual reports endorsed the concept of civil service for the Bureau of Internal Revenue yet nothing was less likely to happen.[4]

Through most of 1867 and 1868, Reconstruction and the impeachment proceedings preoccupied  Johnson, his cabinet, and Congress. During this time McCulloch stood loyally by the President. Still Johnson received several letters pleading with him to remove both McCulloch and Rollins.

“I now implore you to bring this worst, because he is most sly and deceitful of all your enemies, McCulloch to the Test.

Demand of him the resignation of Rollins, let him know that if he has not sufficient power over his subordinate, to get his resignation, that you will accept his resignation.”

As McCulloch has complete control over Rollins this will bring his resignation, as he is now trembling over his Printing Bureau and wants to remain to cover the stupendous defalcations that exist there.”[5]

The attempt to convict Johnson did not succeed and, as far as most historians are concerned, there is nothing to say about his administration after that point. However Andrew Johnson was still President and retained the prerogatives, albeit reduced, of the office. Much of Johnson’s behavior from his inauguration as Chief Executive was oriented towards running for the Presidency in his own right. His drive to create a new party failed and by June 1868 Johnson concentrated his efforts on winning the Democratic nomination. The President was however anathema to most politicians and in July the Democratic party nominated Horatio Seymour and Francis P. Blair Jr. as President and Vice-President. Bitterly disappointed Johnson still sought some degree of vindication for his policies. In an attempt to achieve this, the President turned to the arena his supporters had continuously urged him to investigate, the Bureau of Internal Revenue.[6]

[1]Michael Les Benedict, The Impeachment and Trial of Andrew Johnson (New York, 1973), pp. 39 – 40, 48 – 51.

[2] Hugh McCulloch, Men and Measures of Half A Century (New York, 1900), p. 236. William Chandler was not a Radical but he was a staunch and partisan Republican who consistently opposed Civil Service Reform.

[3] William Henry Smith, History of the Cabinet of the United States of America (Baltimore, 1925), p. 219; McCulloch, Men and Measures, p. 227.

[4]Herbert S. Schell, “Hugh McCulloch and the Treasury Department, 1865-1869,” Mississippi Valley Historical Review 27 (December 1930): 413-416; Hugh McCulloch to Andrew Johnson, 19 August 1867, Andrew Johnson Presidential Papers, Library of Congress, microfilm edition; U.S. Office of Internal Revenue. Annual Report of the Commissioner, 1867, pp. xv-xviii, xxxi; U.S. Treasury Department, Annual Report of the Special Commissioner, 1867, p. 31; U.S. Treasury Department, Annual Report of the Special Commissioner, 1866 p. 4. See also the report of the Revenue Commission for a discussion of civil service reform.

[5] R.W. Latham to Andrew Johnson, 6 February 1868, 24 January 1868,  Andrew Johnson  Papers.

[6] Albert Castel, Andrew Johnson (Kansas, 1979), passim; Eric McKitrick, Andrew Johnson and Reconstruction (Chicago, 1960), passim.

© All Rights Reserved. Do not reproduce without author’s permission. Amy Mittelman 2022.

Taxes and Inflation

Two things I read recently reminded me of the central argument of my dissertation and Brewing Battles. At the beginning of the month, I read a review of Roger Lowenstein’s new book Ways and Means: Lincoln and His Cabinet and the Financing of the Civil War. Eric Foner wrote the review. Eric is a very prominent historian and was my dissertation sponsor.

The other thing I read was from a newsletter I get from the New York Times DealBook. DealBook which is about business and economic news had a post that Roger Lowenstein wrote discussing inflation and how war can affect the economic climate of the country.

Both Eric’s review and Lowenstein post talked about the need of the north to finance the war which resulted in a myriad of taxes being a placed on a variety of objects and activities. Many years ago, I discovered that Salmon P. Chase, Treasury Secretary, and the Lincoln administration established taxes on alcohol and tobacco as well as creating an income tax. Although Congress repealed almost all the other taxes from following the end of the war, the Internal Revenue taxes on liquor and tobacco remained. These taxes provided over 50% of the federal government’s revenue until the enactment of the Internal Revenue tax in 1913.

What follows is an excerpt from Chapter Two of Brewing Battles that describe the efforts by Chase and the Lincoln administration to finance the war.

“From the moment Southern troops fired on Fort Sumter the Federal government required large sums of money to finance the Civil War. A Special Session of the Thirty-Seventh Congress (July­–August 1861) attempted to meet this need by increasing certain customs duties, imposing a direct tax of $20 million on the States, and instituting an income tax.[1]

It soon became clear that these measures alone could not relieve the country’s financial burdens. Secretary of the Treasury Salmon P. Chase was hoping to raise $85 million and sent a bill to the Thirty-Seventh Congress. Congress, which reconvened on December 2, 1861, reviewed his request for a small increase in the income tax and excise taxes on manufactured goods. Distilled spirits, malt liquors, cotton, tobacco, carriages, yachts, billiard tables, gross receipts of railroads, steam boats and ferries, and playing cards all became taxable items. Signed by President Lincoln July 1, 1862, the measure became effective the following month.[2] By the 1870s Congress had repealed most of the excise taxes; the liquor tax, however, has remained in effect until today. The Internal Revenue Act of 1862 marked the entrance of the federal government into the affairs of the liquor industry; it has never left.

The federal government did not regard the liquor industry as an ordinary business. Alcohol was more than a manufactured item — officials saw drinking as a luxurious, even evil, habit that deserved a heavy tax. Ignoring the mixed history of ante-bellum attempts at taxation, collection, and sumptuary legislation, Civil War legislators assumed that an excise on distilled and fermented beverages would raise a large amount of much needed revenue.

Civil War legislation of 1862 established the federal system of taxation of alcoholic beverages. At that time, the government instituted excise taxes on liquor, tobacco, and other items as well as imposing an income tax. Most of these Civil War taxes were short lived; the liquor and tobacco taxes were permanent. Until the imposition of the federal income tax in 1913, liquor taxes generated a significant portion of the nation’s internal revenue and played an important part in maintaining the economic health of the country.

Taxation provided the context for an explicit relationship between the state and industry, a pattern that would become more common later in the century. For the liquor industry as a whole the relationship did not develop smoothly. Throughout the nineteenth century, mismanagement and politicization of the Bureau of Internal Revenue led to fraud and corruption. The government did not seek and could not maintain regulatory power over the liquor industry. Although several individuals devoted themselves to reform efforts, officials failed to develop or maintain long range plans for efficient tax collection. Within this context, the brewing industry developed a good working relationship with the Bureau of Internal Revenue and was able to hold the line on tax increases”

[1] U.S. Department, Internal Revenue Service, History of the Internal Revenue Service 1791-1929, prepared under the direction of the Commissioner of Internal Revenue, (Washington, D.C.: U. S. Government Printing Office, 1930), 2.

[2] Ibid., 3; Charles A. Jellison, Fessenden of Maine: Civil War Senator (Syracuse, N.Y: Syracuse University Press, 1962), 149; Leonard P. Curry, Blueprint for Modern America: Non-Military Legislation of the First Civil War Congress (Nashville: Vanderbilt University Press, 1968), 149–181; Bray Hammond, Sovereignty and an Empty Purse: Banks and Politics in the Civil War (Princeton: Princeton University Press, 1970), 52; Charles Estee, The Excise Tax Law (New York: Fitch, Estee, 1863), passim.

©All Rights Reserved. Do not reproduce without the permission of the author. Amy Mittelman, 2022.

 

Smoking


Any practicing nurse in Massachusetts has to renew his or her license every two years. As part of the license renewal process every nurse has to have done 15 hours of continuing education credits otherwise known as CEU’s. Before I retired it was very easy for me to acquire those 15 hours because of trainings and in service workshops that the agency I worked for provided.

This year the renewal process snuck up on me and I had to figure how to meet the CEUs requirement. There are places online that allow you to fulfill the requirements by reading scholarly articles on various topics and then filling out a questionnaire. One of the essays I chose was about tobacco and smoking cessation.

I found the article informative. Something that stood out is that young people are continuing to become smokers. This is concerning because once you have the habit it is very hard to break it. Reading the essay about tobacco reminded me that in 2009 I had written a blog post about the liquor industry facing new regulations that the Obama administration had passed. I am reposting it below.

The interesting thing about the original post was that I discussed how tobacco’s fortunes had fallen while brewers and distillers were enjoying a great deal of public support. Public health advocates were not gaining much traction in their attempts to convince the public to drink less.

Society approval of the liquor industry, particularly beer, has only continued to increase in the 13 years since I posted about those tobacco regulations. Not only did the liquor industry get a tax break from the Trump legislation but most municipalities are thrilled to have a craft brewery in their town or city.

Neither the article I read for my CEUs or the blog post from 2009 talk about marijuana, but marijuana has also gained in public approval as many states including Massachusetts where I live now have recreational sale of THC.

Tobacco Legislation

6/16/2009

Last week, Congress passed, and President Obama signed legislation that greatly enhances federal regulation of the tobacco industry. As a historian, I generally think change happens slowly but the rapidity with which American society has transformed from cultural acceptance, even approval of smoking, to a completely negative view is startling.

When I was growing up, my parents and almost all the adults I knew smoked. As a teenager and young adult smoking was both everywhere – bars, restaurants, public events, and arenas – and heavily advertised on television. In the forty-five years since the Surgeon General’s report on the harm smoking causes, there has been a warning label, a ban on television advertising, the creation of smoke-free indoor space and, recently, smoke-free outdoor spaces.

The newspaper stories discussing the pending legislation use the term “addiction” to describe the practice of smoking. This also represents significant change. For much of American history, society has characterized nicotine, caffeine, and alcohol as legal, primarily harmless habits. Alcohol was usually the most problematic of the three. Now, nicotine, although legal, falls under the broad category of psychoactive, addictive substances, similar in their effects on the body.

Moralists have always viewed smoking as undesirable behavior. This attitude kept women from smoking for many years. When smoking and exposure to second-hand smoke became a public health issue, the battle lines changed. If alcohol use and or abuse ever became predominantly a public health issue rather than one of individual choice or morality, brewers and distillers could face more of an uphill battle to maintain the legitimacy of their industry.

 

Biden Administration

As I was thinking about what to write for today’s post, I came across a post from November 2008 that I wrote about the incoming Obama administration. We are in the first few weeks of the Biden administration which I think has been going very well and is a great change from the previous regime.

The post is one of those that I wrote before I had a wordpress blog; when Network Solution hosted my website. It is interesting that twelve years Obama was facing a huge financial crisis and that today Biden is facing multiple crises including Covid and the economy. Since I can’t link to the original post, I decided to post it today.

November 18, 2008

The New Administration

It is interesting that President-Elect Obama is reading Abraham Lincoln since there are many parallels between Lincoln’s first term and Obama’s. Lincoln was the first Republican president; he faced the mammoth task of financing the Civil War as well as staffing all of the departments and agencies of the government. Many loyal Republicans sought rewards for their support of the party and the President.

Here is an excerpt from Brewing Battles: A History of American Beer  about the issues the new government faced.

From the moment Southern troops fired on Fort Sumter the Federal government required large sums of money to finance the Civil War. A Special Session of the Thirty-Seventh Congress (July­?August 1861) attempted to meet this need by increasing certain customs duties, imposing a direct tax of $20 million on the States, and instituting an income tax.[1]

It soon became clear that these measures alone could not relieve the country’s financial burdens. Secretary of the Treasury Salmon P. Chase was hoping to raise $85 million and sent a bill to the Thirty-Seventh Congress. Congress, which reconvened on December 2, 1861, reviewed his request for a small increase in the income tax and excise taxes on manufactured goods. Distilled spirits, malt liquors, cotton, tobacco, carriages, yachts, billiard tables, gross receipts of railroads, steam boats and ferries, and playing cards all became taxable items. Signed by President Lincoln July 1, 1862, the measure became effective the following month.[2] By the 1870s Congress had repealed most of the excise taxes; the liquor tax, however, has remained in effect until today. The Internal Revenue Act of 1862 marked the entrance of the federal government into the affairs of the liquor industry; it has never left.

On July 22, 1862, President Lincoln appointed George Boutwell to be the first Commissioner of Internal Revenue. A two-time Governor of Massachusetts, Boutwell had been a Whig and a moderate anti-slavery man. This work plus political alliances with the Governor of Massachusetts, John A. Andrew, and Senator Charles Sumner led Secretary of the Treasury Salmon P. Chase to give Boutwell the job.[3]

Staffing and organizing the Bureau preoccupied Boutwell, who had almost four thousand jobs at his disposal. The size of the Federal Government expanded tremendously during the Civil War; the Treasury Department was no exception. The endless patronage possibilities caused both Boutwell and Secretary Chase to devote the first year of Internal Revenue’s existence to staffing. They paid little attention to other administrative or regulatory concerns. On August 7, 1862 Chase complained that he had “very little accomplished as yet, though much, I hope, in the train of accomplishment. Engaged nearly all day on selections for recommendation of Collectors and Assessors.”[4]

Six months after Boutwell took office, he had the department organized, at least nominally. The majority of employees were in the field. There were 366 collectors and assessors, 898 deputy collectors, and 2,558 assistant assessors. The Washington office consisted of the Commissioner, fifty-one male clerks and eight female clerks. The law authorized the establishment of collection districts which corresponded roughly to congressional districts. There were 185 districts in the loyal states.[5]
[1] U.S. Department, Internal Revenue Service, History of the Internal Revenue Service 1791-1929prepared under the direction of the Commissioner of Internal Revenue, (Washington, D.C.: U. S. Government Printing Office, 1930), 2.

[2] Ibid., 3; Charles A. Jellison, Fessenden of Maine: Civil War Senator (Syracuse, N.Y: Syracuse University Press, 1962), 149; Leonard P. Curry, Blueprint for Modern America: Non-Military Legislation of the First Civil War Congress (Nashville: Vanderbilt University Press, 1968), 149?181; Bray Hammond, Sovereignty and an Empty Purse: Banks and Politics in the Civil War (Princeton: Princeton University Press, 1970), 52; Charles Estee, The Excise Tax Law (New York: Fitch, Estee, 1863), passim.

[3] Thomas H. Brown, George Sewall Boutwell: Public Servant 1818-1905, (Ph.D. dissertation, New York University, 1979), 53, 56, 59, 110.

[4] Salmon P. Chase, Inside Lincoln’s Cabinet: The Civil War Diaries of Salmon P. Chase, ed. David Donald (New York, 1954), 110-111.

[5] History of Internal Revenue, 4; Schmeckebier and Eble, Bureau of Internal Revenue 8; Estee, Excise Tax Law, 310.

©

Copyright, Algora Publishing, 2007.

A few points about this history: It makes clear the large burden of setting up a new presidential administration especially during a crisis. It is also clear that in times of financial need the federal government often turns to the liquor industry and taxes for help. It is entirely possible that the Obama administration will eventually look at excise taxes for help with financing projects and reducing the deficit. State governments will probably follow suit.

Jay Brooks at Brookston Beer Bulletin has been writing a fair amount about taxes recently and nicely cited Brewing Battles as a sourceOne slight correction however- Jay maintains that the taxes stayed after the Civil War due to pressure from temperance advocates and prohibitionists. It is more accurate that the taxes remained because they developed into a steady, secure source of revenue for the federal government. It was not until a new source, the income tax, developed in the early twentieth century that the federal government could contemplate losing the money from liquor taxes. The prohibition movement had an ambivalent relationship to the federal liquor tax. They often decried the legitimacy the tax provided to the industry.

Of course when the federal government, in the depths of the Great Depression, needed a quick source of revenue, the 18th amendment was repealed. The liquor industry and the liquor tax became legal on December 5, 1933, seventy-five years ago. I will be writing more on the subject of Repeal in the coming days.

September Beer Roundup

Here are some articles about beer that I thought were interesting.

“September 9 Day of Action Planned to Urge Passage of Craft Beverage Modernization and Tax Reform Act.” The Brewers Association  and other allied trade associations such as American Mead Makers Association are spending today lobbying  for passage of the Craft Beverage Modernization and Tax Reform Act, S.362/H.R. 1175. The bill would make the temporary tax benefits that brewers, distillers, and other actors in the liquor industry received from Trump’s tax cuts of 2017 permanent Those tax cuts flowed mainly to very rich people and corporations while poor and working-class people received little benefit. Brewers did not complain since they were also beneficiaries of the law.

The liquor industry like other businesses has suffered during the pandemic. If the tax cuts go away, it could worsen their economic situation. This article reports that two breweries with beer gardens and beer-to-go in Everett Massachusetts have closed because a customer went bar hopping while awaiting the results of a COVID-19 test.

The Great American Beer Festival has been held for thirty-nine years. This year it will be virtual. I have always wanted to go but I haven’t made it out to Denver yet. The upside of everything being virtual during the pandemic is that you can attend events that in real life you might not have been able to go to. It runs October 16–17. On the 17th Marcus Baskerville, Weathered Souls Brewing Co. , will be speaking about the Black is Beautiful brewing project that I wrote about here.

Prohibition, 100 Years Later

On January 17, it will be 100 years since Prohibition went into effect. Because of the current political climate  around immigration, I  am posting an excerpt  from Brewing Battles that describes the treatment some German-American brewers received  during the enactment of Prohibition.

The brewing industry was overwhelmingly German; most German-Americans drank beer as did many other Americans. Although German-Americans maintained many ties to Germany, the vast majority were second or third generation Americans. The founders of most breweries had immigrated to America in the 1840s and 1850s. World War I generated a tremendous amount of public hostility against Germans and German-Americans. For brewers and their fellow ethnic citizens, the war period was a test of their dual identities.

Some of the nation’s most prominent brewers faced these issues of loyalty and cultural identification as soon as America entered the war. One of New York’s most prominent brewers was George Ehret, Sr., the nation’s largest brewer in 1877. In 1914, Ehret, an American citizen, returned to Germany to live. In 1918 his son, George Ehret, Jr., turned over the family property with a value of $40 million to the federal government. A. Mitchell Palmer, who was then the Alien Property Custodian, found Ehret, Sr. to be “of enemy character.” Ehret had not broken any laws but appeared to be friendly with and under the protection of “powerful men.” He had also given large amounts of money to the German Red Cross since 1914. Palmer stated that Ehret, who was 83, could get his property back if he returned to America. He would then lose “his enemy character.” The Ehret family’s status as influential New Yorkers and wealthy Americans apparently did not mean as much as his German affiliations.[1]

Lily Busch, widow of Adolphus Busch, suffered similar problems. The Buschs, if not the country’s wealthiest brewing family then certainly its most ostentatious, owned several estates including a castle on the Rhine in Germany. Adolphus died in 1913; estimates of the value of his wealth ranged from $30 to $60 million.[2] Both Adolphus and Lily were born in Germany; Lily had become a naturalized citizen of the United States. When World War I broke out she made her German home a war hospital and served as a nurse. The German government took her property because she was an American citizen; the United States viewed her as enemy alien since she was in Germany. When she returned to the United States in 1918 the government seized her property and placed her under a form of house arrest. She died in 1928.[3]

The prosecution, if not persecution, of these prominent brewers and their families indicated the deep unease Americans felt about the presence of Germans in their country. The rhetoric of the Prohibition movement for most of its existence had been positive, extolling the virtues that removing alcohol from society would bring. . . . The final push that brought Prohibition, the Eighteenth Amendment, and the Volstead Act into being became negative and played on people’s fears as American faced a world that was unfamiliar and rapidly changing.

Jacob Rupert, owner of the New York Yankees and Jacob Rupert Brewery with Miss Harwood, 1921. Photo courtesy of Library of Congress, Prints and Photographs Division.

 

[1] “Nation Gets Ehret Property,” New York Times, May 14, 1918, 1.

[2] “Adolphus Busch Dies In Prussia” New York Times, October 11, 1913, 15.

[3]; “Mrs. Lily Busch of St. Louis Dies,” New York Times, February 26, 1928, 27.

© All Rights Reserved Amy Mittelman 2020.

Molson Coors

At the end of last month, Molson Coors announced that it was restructuring and closing its offices in Denver and other places. This change could save the company up to 150 million dollars. Molson Coors is the parent company of Miller Coors. Although the company is laying off 500 workers, the restructuring will create some new white collar jobs in Milwaukee. Finance, human resources and other support services will consolidate and be based in Milwaukee. Milwaukee is the historic home of Miller beer.

Although some aspects of brewing will be in Milwaukee, the name Miller Coors will cease to exist. Instead it will become part of the North American division, headquartered in Chicago. Beside consolidating services and offices, the restructuring is part of a plan by Molson Coors Brewing to become Molson Coors Beverage company with a greater focus on products other than beer. Hard seltzer is on of the “new” company’s targets.

The loser in this plan is Denver. Coors has been a presence in Colorado for almost  150 years. The closing of the corporate offices will lead to 300 people losing their jobs. Colorado is facing this significant job loss as well as a loss of its corporate identity. The state remains second in craft brewing; California is first.

As the brewing industry seeks continued tax relief, perhaps  federal legislators will call Molson Coors to task for laying off 500 people. If you want more information on  Molson Coors, read here and here.

Roundup

These are some articles about liquor and the liquor industry that have come to my attention that may be of interest to my readers.

Five Things that No One Wants to Say About Italian Craft Beer by Evan Rail in VinePair. I didn’t even know there was craft beer in Italy.

Somerville Mayor Joseph Curtatone is boycotting Boston Beer, makers of Sam Adams because the founder, Jim Koch attended a dinner with President Trump  and praised Trump’s tax law which contained a big tax break for brewers. Of course, Trump is a teetotaler so, like everything else, he probably knows nothing about beer. I think I will probably stop drinking Sam Adams now. Let me know if you agree. You can read the article here.

Jim Koch and other craft brewers are happy about the new tax law but Anheuser Busch is in their rear mirror. The global company has bought 10 different craft breweries since 2011 and now is the country’s largest craft brewer. Most consumers of course don’t know that Goose Island and other crafts beers are actually owned by Anheuser-Busch.

I started wondering about  the wine industry in Massachusetts and discovered that there is a trade association, Massachusetts Farm Wineries and Growers Association which has over 20 wineries as members.  Organized in 2007, their biggest success has been the passage of legislation which allows the sale of wine at farmers markets.

 

White House Scandals

In honor of the scandal ridden Trump presidency, I am posting an excerpt from Brewing Battles which deals with a scandal during the Truman administration.

The United States government had essentially remained on a war footing since 1945, and the Korean War continued this approach. In the spring and summer of 1951, Congress considered legislation to finance rearmament. Military spending had more than tripled since 1950, and the armed forces had more than doubled in size. As part of the overall package, legislators planned to increase excise taxes on liquor, beer, wine, tobacco, automobiles, gasoline, and sporting goods. The House wrote legislation that included tax increases for both distilled spirits and beer which would help to generate $7.2 billion in revenue. The Senate held hearings on the legislation; various representatives of the different branches of the liquor industry appeared.[1]

Since 1940 the Alcohol Tax Unit of the B.I.R. had responsibility for regulation of the liquor industry. The larger bureau, which had existed since 1862, had not had any reorganization since 1917. Two wars and Prohibition had occurred as well as a dramatic increase in tax collections and employees. By the end of World War II, a person might wait twelve months or longer for a tax refund. In 1944 the federal government collected $42,125,986,550 in income taxes. This was an increase over 1943. Although income taxes played the largest role in the country’s tax situation, brewers and the liquor industry had also been significant contributors throughout the war.[2]

Staffing of the Bureau and its sixty-four collection districts had been done on a purely patronage basis with predictable results. An investigation of the agency in 1951 by Senator John James Williams, (R. DE) revealed that at least four different collectors in St. Louis, Boston, Brooklyn, and San Francisco had been engaged in fraud, embezzlement, bribery, and tax evasion. The most prominent member of the Administration to face corruption charges was Matthew J. Connelly, the President’s appointments’ secretary. Connelly received a two year sentence for tax evasion and influence peddling. He served six months in prison after the end of the Truman presidency: Truman eventually persuaded President Kennedy to pardon Connelly.[3]

Although not as large a scandal as the Whiskey Frauds of the late nineteenth century, President Truman did respond by reorganizing the Bureau, reducing the number of collection districts to twenty-five, and turning appointment power over to the Civil Service. John Wesley Snyder, a close friend of and powerful fundraiser for President Truman, was Secretary of the Treasury and was in charge of reforming the Bureau of Internal Revenue.[4]

The final legislation raised $5,691,000,000 in taxes and included a $9 a barrel beer excise tax.

[1] “Tax Bill 7.1 Billion; No Rise on TV Sets,” New York Times, May 26, 1951, 8; “Bootlegging Seen in Liquor Tax Rise,” New York Times, July 31, 1951, 15; Lawrence S. Wittner, Cold War America: From Hiroshima to Watergate (New York: Praeger, 1974) 79.

[2] Andrew J. Dunar, The Truman Scandals and the Politics of Morality (Columbia, MO: University of Missouri Press, 1984), 96; William Pemberton, Bureaucratic Politics: Executive Reorganization during the Truman Administration (Columbia, MO: University of Missouri Press., 1979), 162, “Federal Tax Yield $42,125,986,550 in 1944,” New York Times, February 13, 1945, 36.

[3] Dunar, The Truman Scandals, 98-99, 150-155; All had received appointments as collectors during the tenure of either Robert E. Hannegan or Joseph Nunan as Commissioner of Internal Revenue. Hannegan had been instrumental in helping Harry Truman win re-election to the Senate in 1940 and later served as chair of the Democratic National Committee when Truman received the vice-presidential nomination at the 1944 convention. See “Truman is Seventh Elevated By Death,” New York Times, April 13, 1945, 3.

[4] Dennis Merrill, ed., Documentary History of the Truman Presidency, University Publishers of America, 2000, vol. 28, xxxix, 271 -272; Rick D. Medlin, “Snyder, John Wesley,” American National Biography Online www.anb.org/articles, (accessed on January 9, 2003).

Brewing Battles: A History of American Beer, © 2008 by Algora Publishing, p. 143-145.

Frederick Lauer

On June 8, Reading, Pennsylvania held a celebration in honor of the renovation of a statue of Frederick Lauer, a founder and prominent member of the United States Brewers Association.  The statue was the first one ever erected in Reading. To help fund the project, the Berks Brewers Guild created a Lauer’s Fellowship ale. Sale of this beer raised over $5,000.  This article provides further details about the event.

I wrote about Lauer in both my dissertation and Brewing Battles.  In 2003 I wrote several entries about beer, brewing,  taxes, and cirrhosis for Alcohol and Temperance in Modern History, a two volume reference work edited by Jack S. Blocker, jr., David M. Fahey, and Ian R. Tyrell.

Here is the entry:

Frederick Lauer, one of  the nineteenth century’s most prominent brewers, was born in Germany in 1810. His family, wealthy Bavarian landowners, left for political reasons and immigrated to Reading, Pennsylvania in 1822.  In 1826, George Lauer, Frederick’s father built a brewery on the site of an Indian cabin in Reading.  Frederick eventually became the owner of this brewery, one of Reading’s prominent citizens, and a well-known lobbyist for the United States Brewers Association in Washington. Lauer actively participated in the USBA from the first national convention in 1862 until his death in 1883.

German-American brewers founded the USBA in response to the initiation of federal taxes on alcohol to help finance the Civil War.  The first national meeting was in New York on 12 November 1862 where Frederick Lauer was elected President of the new organization.  In 1863 the USBA appointed Lauer chair of a committee charged with overseeing the industry’s Washington affairs.

The most pressing concern of the brewers was a refund of taxes paid on beer brewed before the tax law had become effective. Lauer, along with other brewers, paid taxes on his stock on hand on 1 September 1862. The brewers’ argument for a refund was based on the specific fermentation and storage involved in producing lager beer.

Lauer worked diligently pursuing this matter with Congress but ultimately the brewers won the issue by suing and winning in the Court of Claims. Lauer achieved both a personal and industry victory.

In 1865 Secretary of the Treasury Hugh McCulloch established a commission to study the United States revenue system.  The USBA and the Association of Ale, and Porter and Lager Beer Brewers, a sister organization of ale-brewers,successfully  requested that a panel  be authorized to investigate the excise laws of Europe as they pertained to malt beverages.  Frederick Collins of New York and Mathew Read of Philadelphia were both ale brewers and they visited Great Britain for two weeks.  Frederick Lauer joined them in visiting Belgium, France, the German States and Switzerland.

David Wells, the chair of the Revenue Commission used the brewers’ report, published under the auspices of the USBA, verbatim. Lauer and the USBA were very successful in establishing an amicable, working relationship with government officials. The work they did with David Wells and the Revenue Commission in establishing the method of tax collection for beer was long-lasting.  The stamp attached to the spigot of every barrel removed from a brewery remained the way the federal government collected the excise until Prohibition.

Building on their success with refunds and collection the USBA established an Agitation Committee, which Frederick Lauer chaired.  This committee met regularly with officials and legislators, particularly when legislation was pending which was relevant to the industry.  Their greatest result came from holding the line on tax increases for 34 years. During the same time period, 1864 to 1898, taxes on distilled spirits increased three times.

Frederick Lauer was more prominent for his work as a brewing advocate than as a brewer. The Lauer brewery was never a national leader although it was the third largest in Pennsylvania at one time. Lauer turned over the running of the brewery to his sons, Frank and George in 1882. Lauer died on 12 September 1883.   In 1885 the USBA erected a statue in Frederick Lauer’s honor in City Park, Reading, Pennsylvania.  The statute still exists and is maintained by the Historical Society of Berks County Pennsylvania.

Reference

Downward, William L. Dictionary of the History of the American Brewing and Distilling Industry, Connecticut, Greenwood Press, 1980.

Mittelman, Amy H. “The Politics of Alcohol Production: The Liquor Industry and the Federal Government, 1862-1900”, Ph.D. dissertation. Columbia University, 1986.

Smith, Gregg. “The Fredrick Lauer Story”. The Real Beer Page

%d bloggers like this: