Once upon a time, a new Republican governor arrived in Madison, Wisconsin. The state was in debt, and their cash on hand was poor. The answer?
For Robert La Follette in 1900, it was simple: raise taxes.
He didn’t do it willy-nilly, but took careful aim at the inequity in corporate taxation that benefited the railroads at the expense of ordinary citizens, and the corruption in politics that enabled these corporate tax breaks to get so out of control. From La Follette’s Autobiography (see pp. 243-245):
The railroads at that time paid taxes in the form of a license fee upon their gross earnings. The report of the Tax Commission showed that while real property in Wisconsin paid 1.19 per cent, of its market value in taxes, the railroads paid only .53 per cent, of their market value (based on the average value of stocks and bonds) or less than one half the rate paid by farmers, manufacturers, home owners and others. Upon this showing we contended that the railroads were not bearing their fair share of the burdens of the state. The Tax Commission suggested two measures of reform. One of their bills provided for a simple increase in the license tax, the other provided for a physical valuation of the railroads and a wholly new system of taxation upon an ad valorem basis, measures which I had earnestly advocated in my campaign speeches, and recommended in my message. I regarded this latter as the more scientific method of taxation. The Commission stated that while they had so framed the bills as to err on the side of injustice to the people rather than to the railroads, the passage of either of them would mean an increase of taxes paid by railroads and other public service corporations of more than three quarters of a million dollars annually.
No sooner had the taxation and direct primary bills been introduced than the lobby gathered in Madison in full force. Lobbyists had been there before, but never in such numbers or with such an organization. I never saw anything like it. The railroads, threatened with the taxation bills, and the bosses, threatened by the direct primary, evidently regarded it as the death struggle. Not only were the regular lobbyists in attendance but they made a practice during the entire winter of bringing in delegations of more or less influential men from all parts of the state, some of whom often remained two or three weeks and brought every sort of pressure to bear on the members of the legislature.
Republican La Follette stuck to his guns, and eventually won passage of his proposals over the objections of the railroads, their lobbyists, and the political bosses.
The result of ending sweetheart deals and forcing corporations to pay their fair share of the tax burden? Let’s let La Follette tell the story (pp. 288-290) . . .
So, at last, after all these years of struggle, we wrote our railroad tax legislation into the statutes of Wisconsin. As an immediate result, railroad taxes were increased more than $600,000 annually. When I came into the governor’s office, on January 1, 1901, the state was in debt $330,000 and had only $4,125 in the general fund. But so great were the receipts from our new corporation taxes, and from certain other sources, that in four years’ time, on January 1, 1905, we had paid off all our indebtedness and had in the general fund of the treasury $407,506. We had so much on hand, indeed, that we found it unnecessary to raise any taxes for the succeeding two years.
Indeed, we so reorganized and equalized our whole system of taxation that the state to-day is on a sounder, more businesslike foundation than ever before. We brought in so much property hitherto not taxed or unequally taxed that, while the expenses of the state have greatly increased, still the burden of taxation on the people has actually decreased. W’hile corporations in 1900 paid taxes of $2,059,139 a year, in 1910 they paid $4,221,504 a year, or more than double. Wisconsin to-day leads all the states of the union in the proportion of its taxes collected from corporations. It derives 70 per cent, of its total state taxes from that source, while the next nearest state, Ohio, derives 52 per cent.
In 1903 we passed an inheritance tax law which yielded us $26,403 in the following year and has increased steadily since.
In 1905 I recommended a graduated income tax which has since been adopted by the state.. It is the most comprehensive income tax system yet adopted in this country. Those who receive incomes of over $500 must make a return to the tax assessor. ‘The tax at 1 per cent, begins on incomes — above $800 in the case of unmarried people and above $1,200 in the case of married persons, increasing one half of 1 per cent, or thereabout for each additional $1,000, until $12,000 is reached, when the tax becomes 5 per cent. On incomes above $12,000 a year the tax is 6 per cent.
All of these new sources of income have enabled us to increase greatly the service of the state to the people without noticeably increasing the burden upon the people. Especially have we built up our educational system. In 1900 the state was expending $550,000 a year on its university; in 1910 it appropriated over $1,700,000, and there has been a similar increase for our normal and graded schools and charitable institutions. Under the constitution the state debt is limited to $100,000, so that we must practically pay as we go. Recently we have been building a state capitol to cost $6,000,000, at the rate of $700,000 to $1,000,000 a year from current funds.
La Follette didn’t stop there. He then got the legislature to pass a law that allowed them to audit the books of the railroads, to make sure they were reporting their income properly. They found that the railroads were providing kickbacks to big shippers (illegal under the interstate commerce act) and not paying taxes on the income that they otherwise should have been charging. After a court battle, the state of Wisconsin won a judgment of over $400,000 in back taxes.
Fast forward 100 years or so, and another Republican governor arrived in Madison in a time when the state debt was problematic.
For Scott Walker, the answer is simple: cut taxes to give away millions to corporations, cut state services like Badgercare, carve out loopholes for cronies and supporters, cut taxes, demonize the University of Wisconsin, cut taxes, and attack all those who dare to want to be able to negotiate all the terms of their employment. And then cut taxes again.
Somehow, I don’t think Walker’s plan of “More Sweetheart Deals for Big Business and Cronies” will end up nearly as effective as La Follette’s efforts to end deals like that.
But that apparently won’t keep Walker from trying to roll back the legacy of Robert La Follette, Sr. — one of Wisconsin’s most famous and most respected politicians.