Saturday, Jan. 16, marks the 96th anniversary of Prohibition. On that date in 1920 the National Prohibition Act took effect, implementing the 18th Amendment to the U.S. Constitution. The Volstead Act, named for its legislative sponsor, Rep. Andrew Volstead (D-Minn.), banned the production and sale of beer, wine, and distilled spirits throughout the then-48 states.
Although exemptions were provided for sacramental wines, ciders, and physicians prescriptions, the Volstead Act criminalized the alcohol markets supply side, including exports and imports, but not the consumption of beverages containing more than one-half of 1 percent alcohol by weight or volume.Demon rum had at long last been outlawed, and Prohibitions supporters, spearheaded by the Anti-Saloon League and the Womens Christian Temperance Union, celebrated their victory, not with champagne, of course.
Opposition to immigration of the tired, poor, and huddled masses from southern and eastern Europe was running high then, prompting some commentators to see Prohibition as part of a Protestant backlash against Catholics and Jews.
But as with modern sin-tax regimes that impose high taxes on disapproved activities (such as New York Citys cigarette tax), booze buying and selling simply went underground, to speakeasies unlicensed bars street corners, and alleyways; bathtub gin and smuggled Canadian whiskey replaced some of the distilled spirits that many people still very much wanted to imbibe.
Bootlegging and smuggling thrived; violent crime flourished as the organized gangs that supplied alcohol to willing consumers protected their turfs; corruption among public officials and law enforcers was rampant. Some people were blinded or killed by adulterated black-market spirits. Prohibition empowered local and federal police forces to search for and seize illegal booze at gunpoint.
The noble experiment had failed to deliver on supporters promises of sober blue-collar husbands, attentive fathers, and a productive workforce spared the depredations of booze-soaked saloons and gin joints by caring political elites backed by the coercive powers of the state.
How did the nations 14-year-long Prohibition nightmare happen? The Baptists and Bootleggers theory of regulation emphasizes how public policy can be influenced by alliances of paternalistic pressure groups claiming the moral high ground about something they find objectionable, like drinking alcohol or smoking tobacco or cannabis (the Baptists), and special economic interests (the bootleggers) that can profit by filling the demand for banned substances or evading onerous taxes on sin.
Fast forward to December 5, 1933. Fewer than 14 years after the Volstead Act took effect, Prohibition was repealed by ratification of the 21st Amendment.
Franklin Delano Roosevelt, who liked a martini at days end, campaigned for the White House in 1932 on a platform promising to legalize (and tax) the sale of beer. As strong a supporter (at that time) of fiscal discipline as President Herbert Hoover, FDR wanted a federal beer tax to help offset the significant decline in income-tax revenue caused by the Great Depression, which would hit bottom just as he took office in March 1933. One observer of the presidential campaign remarked that FDR apparently hoped that Americans, if given a chance, would drink themselves into a balanced budget.
Roosevelts proposal for legalizing beer sales drew cheers from campaign crowds, and eight months after Inauguration Day, Prohibition was consigned to the dustbin of history. Evangelist Billy Sunday said that Hell will be forever rent.
Prohibition was emblematic of the government-dominated Progressive Era, which also bequeathed to America the income tax (16th Amendment), popular election of U.S. Senators (17th Amendment), womens right to vote (19th Amendment), and a raft of regulatory initiatives, including establishment of the Federal Reserve System, tougher antitrust enforcement (a new Federal Trade Commission was created with authority to enforce the Clayton Act of 1914), and the Harrison Narcotics Act, the first federal anti-drug law.
Like todays war on drugs, Prohibition imposed enormous costs on American society. Enforcement of the 18th Amendment started on January 16, a date worth remembering for public-policy hubris. But be sure to celebrate its repeal next December 5!
|William F. Shughart II is Research Director and Senior Fellow at the Independent Institute, J. Fish Smith Professor in Public Choice in the Jon M. Huntsman School of Business at Utah State University, and editor of the Independent Institute book, Taxing Choice: The Predatory Politics of Fiscal Discrimination.|
So-called sin taxesthe taxing of certain products, like alcohol and tobacco, that are deemed to be politically incorrecthave long been a favorite way for politicians to fund programs benefiting special interest groups. But this concept has been applied to such sinful products as soft drinks, margarine, telephone calls, airline tickets, and even fishing gear. What is the true record of this selective, often punitive, approach to taxation?