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of corporations; but the House adopted instead a tax of 2 per cent. upon all incomes of more than $4,000, the tax to remain in force until January 1, 1900. This clause was adopted on January 24th by a vote of 204 to 140, and the bill as a whole received the approval of the House on February 1st, by a vote of 182 to 106-61 members not voting. When the result was announced by the Speaker, it was received with a burst of Democratic cheering, and Mr. Wilson was showered with congratulations by his followers and friends.
But after the bill reached the Senate, affairs took a decidedly different turn. The Democratic majority in the upper house was a very small one, and its close cohesion had already been destroyed, while there were many reasons why a tariff measure such as the Wilson Bill should encounter serious opposition there. These reasons may be indicated briefly as springing, first, from personal opposition to President Cleveland, and, second, from the fact that the Senate, unlike the House, was controlled by powerful financial interests, which were ably represented on the floor. The personal animosity to the President, which did not at once find open expression, was in part an inheritance from his first administration; in part a result of the masterful way in which he had forced the repeal of the Sherman Act; and to a large degree, it represented the traditional antagonism which most Senators entertain toward every President who has not had Congressional experience sufficient to make him understand and properly respect the usages, the prerogatives and the prejudices of the Senatorial body. In various ways, Senators of the United States feel themselves to be above the President. They are elected not by a direct vote of the people, but by the legislatures of the several States, and therefore they are less directly influenced by the popular will. Their term of office is longer than the Presidential term of office; and a Senator who is either a man of real distinction or who is a master of political manipulation is certain to be elected term after term, so that in very many instances, a seat in the Senate is held by what is practically a life
tenure. Finally, the ramifications of so-called "senatorial courtesy" traverse party lines and create among the members of the Senate an esprit de corps, which is often stronger than the dictates of party loyalty. As to the interests other than political interests which at times control the action of individual Senators, these may be sufficiently divined from what has been set forth in a preceding chapter. Most Senators are wealthy men, and their private and personal affiliations are not unnaturally with those who represent the power of wealth in public life.
It was something more than ominous that the Wilson Tariff Bill after passing the House by a majority of 76, and after having been referred by the Senate to its Finance Committee, should have been held back by that committtee for almost two months. When reported (March 20th), it had been so clipped and trimmed as to exhibit a very curious metamorphosis. Yet in the Senate itself the measure fared still worse. As might have been expected, the Republicans fell upon it tooth and nail; but acting in entire harmony with them, were certain Democratic Senators who seemed to have forgotten altogether the solemn pledges which their National Convention of 1892 had given to the country. Foremost among these were the blandly inscrutable Senator Gorman of Maryland, and the newly elected Senator Brice of Ohio. The two appeared upon the Democratic side of the Senate as the unavowed yet efficient agents of the protected interests, and their object was plainly to modify and mutilate the Wilson Bill in such a way as to deprive it of any real significance and character. As its schedules were discussed, Messrs. Brice and Gorman played upon the local interests of little knots of Democratic Senators, so that amendment after amendment was made, each one putting back a part of the remitted duties. In all, the Senate made 634 changes in the House measure, destroying entirely its original scheme. Coal, iron ore, lumber and sugar were removed from the free list altogether, leaving wool the only raw material to be let in untaxed.
The action of the Senate upon the *See THE BOOKMAN for July, pp. 478, 479.
sugar schedule led to a most deplorable and humiliating scandal. The House had put all sugar-both refined and raw-upon the free list, thereby giving governmental aid neither to the Sugar Trust nor to the domestic producer. The two Senators from Louisiana, however, having in mind their sugar-growing constituency, insisted that raw sugar must be taxed. Without their votes, the bill could probably not be carried at all, so close was the division. Furthermore, other Senators believed that such a duty was necessary as a revenue measure; since the funds in the Treasury were low, and the receipts from the income tax would not be available for many months. Hence, the Senate imposed a duty upon raw sugar of 40 per cent. ad valorem, equivalent to about one cent a pound. But a duty on raw sugar without a countervailing duty on refined sugar would have been a serious blow to the Sugar Trust. All the powerful influences at the command of this monopoly were immediately brought to bear upon the Senate. Here was a direct issue between one of the most notorious of Trusts on the one side, and the purpose of crippling Trusts avowed by the Democracy on the other. The Democratic platform had spoken of "Trusts and combinations" as "a natural consequence of the prohibitive taxes, which prevent . . . free competition." Would Democratic Senators, in the face of this declaration, impose a prohibitive tax at the bidding of a Trust whose monopoly had control of one of the necessities of life?
The debate upon this subject soon waxed hot. While it was in progress, ugly rumours began to fly abroad. The certificates of the Sugar Trust fluctuated in value every day as the Senate seemed first favourable and then unfavourable to its interests. The story was first whispered, and then published all over the country, that certain Senators were buying and selling sugar certificates-speculating, that is, in sugar on the basis of their own official action. So great an outcry went up, and such sweeping charges were made, that an investigation was instituted by the Senate itself-an in
*The President himself was favourable to this modification-not as a measure of protection, but for raising revenue.
Pennsylvania most characteristically admitted that he had speculated in sugar, and that his speculations had been guided by his official knowledge of the Senate's action. With even greater effrontery, he justified what he had done, adding as an afterthought, that his financial interest in the affair had not in the least degree influenced his course on the floor of the Senate! Other Senators were less impudent if not less culpable. Definite knowledge could not be had; it must come, if at all, from New York brokerage firms through which the speculative Senators had sent their orders by telegraph. There was some difficulty about getting this evidence, and in the end nothing was accomplished save to leave a leprous taint upon the names of several Senators and to disgust the country with the whole tariff controversy.
One somewhat instructive feature of this investigation was found in the testimony given to the committee by Mr. Henry O. Havemeyer, the President of the Sugar Trust. Mr. Havemeyer was
asked about the relations of his Trust to the great political parties, and their State campaign funds. Did it contribute to the funds of both parties? "Yes," said Mr. Havemeyer with cheerful frankness, “we always do that. In the State of New York, where the Democratic majority is between 40,000 and 50,000, we throw it [the Trust's contribution] their way. In the State of Massachusetts, where the Re
publican party is doubtful, they probably
have the call. Wherever there is a dominant party, wherever the majority is very large, that is the party that gets the contribution, because that is the party which controls the local matters." Mr. Have
meyer further remarked that this practice of dividing money between the two political parties was the practice of "every corporation and firm and Trust, or whatever you may call it." This illumining discourse of Mr. Havemeyer's was, on the whole, the most valuable contribution to knowledge made by the Senate committee when it finally reported.*
But meanwhile, the Trust had its way. Refined sugar was taxed one-eighth of a cent a pound, with an additional duty of one-tenth of a cent on refined sugar imported from countries giving an export bounty. This tax, minutely insignificant though it may appear, was ample to continue and confirm the Sugar Trust in its supremacy. The fractional duty of oneeighth of a cent a pound meant to the treasury of the Trust not less than $20,000,000 of profit every year.
After months of wearisome delay, with frequent scenes of disorder and indecorum, the Senate finally, on July 3d, allowed the mutilated tariff bill to pass, by a scant majority of five votes (39 to 34), with twelve Senators not voting. During these proceedings, President Cleveland had watched the course of the Senate with a very natural indignation. In his message of the preceding December he had said:
"Success can only be attained by means of unselfish counsel on the part of friends of tariff reform, and as a result of their willingness to subordinate personal desires and ambitions to the general good. The local interests
*Senate Report No. 485 (June, 1894).
Mr Havemeyer estimated it at a lower figure, $12,000,000.
affected by the proposed reform are so numerous and so varied, that if all are insisted upon, the legislation embodying the reform must inevitably fail."
As the events showed, there had been no "unselfish counsel" in the Senate. "Personal desires and ambitions" had not been subordinated. "Local interests" had been most greedily insisted upon. It was "inevitably fail" so far as it professed to now evident that the legislation would embody a reform, unless the Senate could be induced to rescind some of its amendments.
The bill went back to the House for its Mr. Wilson, rising in his place on July 7th, urged that as altered and amended, it be not passed. He spoke with force and eloquence, and then took the unusual step of reading to the House a personal letter addressed to him by the President on July 2d, anticipating the action of the Senate. It was an extraordinary letter, and the reading of it was still more extraordinary; for thus the Executive was made to criticise the action of one house of Congress in a letter practically written to be read before the other house. From a party point of view, a Democratic President was arraigning Democratic Senators before both Democratic and Republican Representatives. The most significant sentences of the letter were the following:
"My public life has been so closely related to the subject, I have so longed for its accomplishment, and I have so often promised its realisation to my fellow-countrymen that I hope no excuse is necessary for my earnest appeal to you that in this crisis you strenuously insist upon party honesty and good faith, and a sturdy adherence to Democratic principles.
"It is quite apparent that this question of free raw materials does not admit of adjustment on any middle ground; since their subjection to any rate of tariff, great or small, is alike a violation of Democratic principles and Democratic good faith. . . .
tariff reform may fail; but they are much more downcast and apprehensive in their fear that Democratic principles may be surrendered.
"Every true Democrat knows that this bill in its present form is not the consummation for which we have long looked. . . . Our abandonment of the cause or the principles upon which it rests means party perfidy and party dishonour."*
That President Cleveland should have permitted such a letter to be read at such a time has seemed to many the clearest possible evidence of his incompetence as a party leader. It was most certainly a gage of defiance to the Senate-a body already inimical to him. It violated to some extent the proprieties of executive courtesy toward one branch of the national legislature. It was sure to give the bitterest offence to Senators of every party. What, then, could the President hope to gain by what was, on its face, a serious indiscretion? The answer to this question is probably to be found in the remark of an English student of Mr. Cleveland's political career. As this observer wrote in 1896, Mr. Cleveland was possessed of "an enduring faith in the common sense of the nation. He had always acted on the rule that the people were capable of understanding the truth, if it was clearly and frankly put before them."t This does, beyond all doubt, sufficiently explain why, as President, Mr. Cleveland so often sent to Congress long messages advocating measures which he knew very well would not be considered for a moment by that body. His arguments were in reality addressed, not to the Senators and Representatives, but to the whole nation. And so his letter to Mr. Wilson, by the very unusual circumstances through which it received publicity, was not by any means a peevish plaint, uttered in a moment of irritation, but rather a well-considered disclaimer of responsibility for the action of the Democratic Senators. It was an appeal from the politicians to the people.
But the effect of it in the Senate was to seal irrevocably the fate of the Wilson Bill as a measure of true reform. Although *Congressional Record, xxvi., p. 7712 (July,
Whittle, President Cleveland, p. 179 (London, 1896).
the President had named no names in his accusation of "party perfidy and dishonour," the shaft went unerringly to its proper mark. Senator Gorman, stung by those pungent words, brought the subject before the Senate, with a show of virtuous indignation. Senator Hill defended the President in a long speech (July 20th); but Mr. Gorman having prepared himself for battle, went into the whole question on its personal side (July 23d). After some satirical remarks directed against Mr. Wilson for having made public what he (Senator Gorman) assumed to be a private letter, he went on to say that Mr. Cleveland's charges were wholly disingenuous. He asserted that the President had been consulted with regard to the Senate amendments, and had given them. his approval. In corroboration of this. statement, Mr. Gorman called upon two other Democratic Senators (Messrs. Vest and Jones) to bear him out in what he had just said; and, in short, he distinctly raised a question of veracity between the President and himself.
Whatever view the Senate took of this personal controversy, its opposition to Mr. Cleveland's wishes became solidified and irrevocable. The House refused to concur in the Senate's changes, and the bill was sent to a conference committee of both houses. In conference, the Senate's representatives refused to yield at single point. The House could take the bill precisely as it left the Senate, or the bill could fail, leaving the McKinley tariff still in force. In the end, the House was forced to accept the amendments in their entirety, and to pass the bill which Mr. Cleveland had stigmatised as involving perfidy and dishonour.
The predicament of the President was a cruel one. He could not put his signature to such a measure. He could not veto it, and make the professions of his party utterly ridiculous. And so he let it become a law without his signature (August 28th), giving his reasons for so doing in a letter to Mr. Catchings of Mississippi. The Wilson Act was, he said, in some of its provisions, better than the existing tariff law. It carried an average reduction of duties less by eleven per cent. than those of the McKinley tariff. It provided for the admission of free wool.
The tax on incomes would relieve the Treasury. But he then went on to speak of the sinister influences that had marred the measure as a whole. The war against those influences had only just begun.
"Tariff reform will not be settled until it is honestly and fairly settled, in the interest and to the benefit of a patient and long-suffering people.
"I take my place with the rank and file of the Democratic party . . . who refuse to accept the results embodied in this bill as the close of the war; who are not blinded to the fact that the livery of Democratic tariff reform has been stolen and worn in the service of Republican protection; and who have marked the places where the deadly blast of treason has blasted the councils of the brave in their hour of might. The trusts and combinations-the communism of pelf—whose machinations have prevented us from reaching the success we deserved, should not be forgotten nor forgiven."
Humiliating as this lamentable fiasco was to that section of his party which had been steadily loyal to the President, there still remained a no less disappointing sequel. Many who felt chagrin over the defeat of genuine tariff reform, had comforted themselves with the remembrance that, at least, the section of the Wilson Bill establishing an income tax had been saved. This section had, in fact, proved to be the most popular of any in the bill, as the majorities given it in both houses very clearly showed. To the Western and Southern Democrats and also to the Populists, an income tax seemed, perhaps, of greater immediate importance than a revision of the tariff-the more so as it was bitterly opposed by Eastern capitalists. In the Senate, Mr. Hill of New York had attacked it with an energy and force most unusual in him. This income tax, said Mr. Hill, is unconstitutional, because it is a direct tax, and a direct tax, not based upon the population, can be levied only by the several States and not by the Federal Government. It is odious because it is a war-tax and has never been imposed in time of peace.* It exempts incomes.
*The first income tax imposed in the United States was during the Civil War. By the Act of August 5, 1861, a tax of 3 per cent. was laid on all incomes over $800. The Act of 1862 laid a tax of 5 per cent. on incomes ranging
of $4,000 and less, and therefore represents class legislation, distinguishing between the rich and the poor. Finally, its administration is necessarily offensive, for it establishes the sort of inquisition into the individual citizen's private affairs, which amounts practically to espionage.
No sooner, however, had the Wilson Bill become a law, than preparations were made by the Treasury to collect the tax which Senator Hill had so energetically denounced. The necessary blanks and other papers were printed, and the collecting officers began the distribution. Opposition to the measure was no less prompt. Several test cases were prepared.* These cases presently reached the Supreme Court, where they were argued at length, and (to anticipate) a decision was rendered on April 8, 1895. The Court pronounced that part of the law unconstitutional which taxed values derived from land and from State or municipal bonds. But a final decision on the law as a whole was deferred, owing to the absence of Mr. Justice Jackson, who was ill. A few weeks later, however, Justice Jackson, having recovered, handed in his opinion, so that the decision as finally handed down pronounced the income tax unconstitutional as being a direct tax.†
There were circumstances connected with this decision that caused deep feeling throughout the country. It had been long since a case before the Supreme Court had attracted such general attention. A brilliant array of counsel had submitted arguments, among them exSenator Edmunds, Mr. James C. Carter, Mr. Joseph H. Choate, and the AttorneyGeneral himself. The final judgment, as given on May 20th, involved the reversal
from $600 to $5,000; a tax of 71⁄2 per cent. on incomes from $5.c00 to $10,000; and a tax of 10 per cent. on incomes over $10,000. The Act of 1864 taxed incomes from $600 to $5,000 at the rate of 5 per cent., and all incomes above $5,000, at the rate of 10 per cent. The tax on incomes expired in 1872.
*Moore vs. Miller; Hyde vs. The Continental Trust Company; and Pollock vs. The Farmers' Loan and Trust Company.
Constitution of the United States, Sect. ix. § 4. "No capitation or other direct tax shall be laid unless in proportion to the census or enumeration hereinbefore directed to be taken."