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Martin Luther King. Jr.
Library of Congress, Public domain, via Wikimedia Commons

Estimated reading time: 8 minutes

I am the only lawyer in my family. That’s important to my story because – as you’ll read in a minute – my thinking about the legal system, especially the criminal justice system, was largely shaped by popular culture. I grew up believing that as long as you did the right thing, you’d never be in trouble. I thought that folks who ended up in jail clearly did something wrong. I thought that justice was blind to race, gender, and economics. I now know that’s not the case.

More than 50 years ago, Dr. Martin Luther King, Jr., a leader in the civil rights movement, was on the receiving end of repeated harassment by tax authorities. Inquiries into Dr. King’s finances were not new: He was investigated in two separate states (Georgia and Alabama) on numerous occasions and together with his legal team and members of the Southern Christian Leadership Council (SCLC), Dr. King was repeatedly investigated by the Internal Revenue Service (IRS).

It was clear to many of his supporters that Dr. King was targeted because of the color of his skin and the words that he dared to speak about inequality. In 1960, he made news as the first person ever criminally charged in the state of Alabama on tax fraud (you can read the statement issued “Committee to Defend Martin Luther King, Jr.” accusing the state of Alabama of falsely distorting Dr. King’s 1958 income tax return in an attempt to indict him here).

After his indictment, Dr. King was asked by a reporter, “Have your income tax returns been investigated before?” He replied, “Oh yes, they have been investigated two or three times before. This is nothing new.” The case would eventually go to trial.

On today, Martin Luther King Jr. Day, as I always do, I am re-posting an article, without edits, that I wrote years ago about that trial and the legal profession. You might have seen it before: it remains one of my favorite posts to this day. It reminds me of how important it is to continually seek out justice. I hope you enjoy it.

I’ll be frank. I don’t always love being a lawyer.

When I was a little girl, I used to watch Perry Mason with my grandfather on TBS. That constituted my entire legal experience before entering law school. And it was flawed.

You see, on TV, none of the lawyers lied to Perry Mason over the phone about being amenable to a continuance and then told the Clerk of Court differently. Nobody faxed Perry Mason a witness list the day before a hearing along with evidence that they “forgot” to send prior. A lawyer didn’t claim proper service on Perry Mason and then fail to deliver the notices to his law offices. You never saw a lawyer represent clients who had sent Perry Mason death threats via email in an attempt to assert that Mr. Mason was the one being unreasonable. You didn’t see cases drag on for years and years (yes, plural) because counsel just couldn’t get it together enough to resolve the matter. On TV, no matter how dire, how dramatic, there was ultimately justice.

The law is supposed to be about justice, about finding the truth. And increasingly it feels like it’s not. It’s more about touting your wares, putting yourself on commercials during daytime television standing in front of legal books shouting about maximizing money, about doing anything to get paid. And that is sad.

A few months ago, I attended a hearing that made me question my role in the law. You’re probably assuming that the hearing somehow didn’t go well. That isn’t true. It went remarkably well. Our client was an excellent witness. The judge was fair and very accommodating. We walked out of the hearing knowing that we had done a good job. The thing was, I felt relieved that it was over. I was happy for my clients. But I wasn’t happy for me. Truth be told, I hated every minute of preparing for the case. Well, not every minute. The theory, the strategy? That I didn’t mind. Our strategy was simply to tell our story. And we somehow felt that should be enough. In the end, I think it was.

But the getting there? The games? The complete lack of professionalism exhibited by opposing counsel? Lying about continuances? Surprise witnesses? Last-minute evidence? Maybe that seems exciting on TV, but in real life, it’s not exciting. It’s sickening. It’s stressful. It’s not fair to good lawyers who spend their time crafting a case. It’s not fair to clients who don’t know what to expect in the courtroom. And yet somehow, month after month, this behavior doesn’t seem so unusual.

And as opposing counsel sat in her chair in her too-tight blouse with the clickety-click of her little heels on the floor, the same counsel who called my clients’ claims frivolous, the same counsel whose supervising partner at Big Law Firm once commented to me that she didn’t understand why a small firm like mine would go up against a big firm like hers, I thought about why we were all at that place, how it all happened that we were in the same room believing two different versions of the truth. I couldn’t explain it.

Later that same day, while reaching for my Moscow Mule (yes, my favorite cocktail du jour, even before Rachael Ray put it in her magazine last month – grr) at the Union League, I understood why the partner at my former firm kept a bottle of wine in his desk: the pressure of being a lawyer, the pressure of having to win, it’s a lot to take in. And while other professions can often look to each other for reassurance, we don’t really have that in the legal profession with few exceptions. It is, by its very nature, adversarial. It is competitive. It is cutthroat. And me? I am not. Of course, I like to win. I like to think that I am good at it. And then maybe I think that’s not something to be particularly proud of.

So, over the past few weeks, which have been professionally difficult, I have tried to remember why it is exactly that I became a lawyer – and what about it I used to love. And I was reminded of my favorite scene in the movie Philadelphia. The one where Andrew Beckett sums up what’s actually good about the law:

Joe Miller: What do you love about the law, Andrew?
Andrew Beckett: I… many things… uh… uh… What I love the most about the law?
Joe Miller: Yeah.
Andrew Beckett: It’s that every now and again – not often, but occasionally – you get to be a part of justice being done. That really is quite a thrill when that happens.

And so I tried to think of when that happened last – when justice was actually done. Not when I won a case or when I got a client out of trouble – that happens often enough. But remember, winning and justice aren’t the same thing. I had to think for a while.

Later, I was preparing to write a post about Martin Luther King, Jr. Day. I figured I’d just put up a copy of his famous “I Have A Dream” speech and call it a day. But as I researched, I found part of his autobiography which, I will confess, I had never read in full. And I saw something interesting: I knew that Dr. King had been arrested several times for various accusations, but I didn’t realize that he had been on trial for tax evasion.

Yep. On February 17, 1960, a warrant was issued for the arrest of civil rights leader Dr. Martin Luther King Jr. on charges of tax evasion. He was accused of allegedly falsifying his Alabama income tax returns for the years 1956 and 1958; he was the only person ever prosecuted under the state’s income tax perjury statute. It seemed like an inevitable victory for the government.

In his autobiography, Dr. King described the trial like this:

This case was tried before an all-white Southern jury. All of the State’s witnesses were white. The judge and the prosecutor were white. The courtroom was segregated. Passions were inflamed. Feelings ran high. The press and other communications media were hostile. Defeat seemed certain, and we in the freedom struggle braced ourselves for the inevitable. There were two men among us who persevered with the conviction that it was possible, in this context, to marshal facts and law and thus win vindication. These men were our lawyers-Negro lawyers from the North: William Ming of Chicago and Hubert Delaney from New York.

And something quite remarkable happened. On May 28, 1960, only after a few hours, Dr. King was acquitted by an all-white jury in Montgomery, Alabama (statement downloads as a PDF).

Dr. King said about his trial:

I am frank to confess that on this occasion I learned that truth and conviction in the hands of a skillful advocate could make what started out as a bigoted, prejudiced jury, choose the path of justice. I cannot help but wish in my heart that the same kind of skill and devotion which Bill Ming and Hubert Delaney accorded to me could be available to thousands of civil rights workers, to thousands of ordinary Negroes, who are every day facing prejudiced courtrooms.

And it dawned on me: no matter how many slick-haired, silver-tongued attorneys do their best to make a quick buck at the expense of the reputation of the profession, you can’t dispute that justice is attainable. And justice is good. And justice is important. And even if it is infrequent, it’s worth it when it happens.

As more and more states legalize marijuana, pressure has been growing for Congress to take some action. This week, the House passed legislation that would end the federal ban on marijuana.

The Marijuana Opportunity Reinvestment and Expungement Act (MORE Act) garnered support from both sides of the aisle, passing with a 228-164 vote in the House. Under the terms of the bill, marijuana would be removed from the Controlled Substances Act.

History Of the Criminalization Of Marijuana

In the early part of the 20th century, booze was illegal during Prohibition, but marijuana was not. Under the 1937 Marihuana Tax Act, there was a two-part tax on the sale of marijuana, one which functioned like a sales tax and another which was more akin to an occupational tax for licensed dealers. Violations of the Act resulted in severe consequences.

In 1969, Timothy Leary challenged his arrest for possession of marijuana under the Act; the case of Leary v. United States made it to the Supreme Court. The Court invalidated part of the Act as a violation of the Fifth Amendment (against self-incrimination). The result was a new law, the Controlled Substances Act, passed in 1970, which criminalized the possession or sale of marijuana. It has remained so to this day.

While still prohibited by federal law (possession can lead to fines and jail time), today, forty-four states and the District of Columbia currently have laws legalizing marijuana for either medical or recreational use. States which allow marijuana for medical use include Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Texas, Utah, Vermont, Washington, and West Virginia – as well as the District of Columbia (some states allow CBD oil use only, including Georgia, Indiana, Iowa, Kentucky, Texas, Virginia, and Wisconsin). And, one in three Americans lives in a state that allows for recreational use.

According to a 2019 Pew poll, a whopping 91% support making medical marijuana legal, and 67% of Americans think marijuana should be legal, full stop. Despite the trend, possession of marijuana remains a federal crime. Under federal law, marijuana is still classed as a Schedule I drug – on par with heroin, LSD, and ecstasy – which means that it is not legal in any form. It is against federal law to grow, sell, or use marijuana for any purpose, including medical purposes. 

The MORE Act

The MORE Act would change that.

The Act would also, among other things, impose a 5% tax on marijuana to fund community and small business grant programs, make Small Business Administration (SBA) loans and services available to cannabis-related legitimate businesses, and prohibit the denial of federal public benefits based on certain cannabis-related conduct or convictions.

Economic Considerations

Currently, taxpayers and the government bear the burden of costs (but do not enjoy the revenue) to investigate and prosecute marijuana crimes. The federal government spends approximately $33 billion a year on drug control, while state and local governments spend nearly the same on criminal justice expenditures related to drug crimes. According to the National Drug Intelligence Service, the war on drugs costs the United States almost $200 billion a year in indirect costs (downloads as a PDF).

Current drug laws target users, peddlers, and hardcore dealers. In 2018, there were 1.65 million arrests for drug violations in the U.S. Of those related to marijuana, more than nine-in-ten arrests were for possessing marijuana (92%), rather than selling or manufacturing (8%). 

What does that mean to you? Tax dollars. In 2015, the total state expenditure – not including federal costs – on prisons among 45 reporting states was around $43 billion.

In 2012, it was estimated that the legalization of marijuana (not just for medical purposes) could take $10 billion away from the cartels and dealers. A 2018 presentation before the Joint Economic Committee in Congress reported that the marijuana economy totaled more than $8 billion in sales in 2017, with sales estimated to reach $11 billion in 2018 and $23 billion by 2022.

While marijuana sales are reportable – even if not legal – the Internal Revenue Service (IRS) has not always been successful in collecting the related revenue. As marijuana is increasingly legal in various states – while still illegal at the federal level – the IRS is taking steps to educate taxpayers about the tax consequences. The agency has even released a new marijuana business webpage to help business owners understand and meet their tax responsibilities.

However, since marijuana remains illegal for federal purposes, the IRS still takes the position that some related expenses are disallowed under Section 280E of the Tax Code:

§280E. Expenditures in connection with the illegal sale of drugs. No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.

Today, only the cost of goods sold is deductible for marijuana businesses. Traditional business costs, like employee payroll and marketing, remain non-deductible. The result is that marijuana businesses can be left with an effective tax rate between 40 and 70 percent.

Of course, this would change if marijuana is made legal for federal tax purposes. And even though the MORE Act passed the House, there’s no a guarantee that it will pass the Senate where it’s expected to face some opposition.

You can read the text of the bill here.

On this day in 1931, Al Capone was found guilty of tax evasion. The gangster who had reportedly boasted, “They can’t collect legal taxes from illegal money” was sentenced to 11 years in prison for failing to file tax returns.

Alphonse Gabriel Capone was born in Brooklyn, New York, in 1899, to Italian immigrants. His parents, Gabriele Capone and Teresa Raiola, found working-class jobs and settled into their new lives. Capone, however, had trouble fitting in and was expelled from school at age 14 for hitting a teacher.

After he left school, Capone tried his hand at odd jobs, but nothing stuck. Capone eventually turned to a friend, Johnny “The Fox” Torrio, who was just getting started building an empire. Torrio would go on to be called “the father of American gangsterdom” by Elmer Irey, the first chief of the Internal Revenue Service (IRS) Enforcement Branch, now referred to as the IRS Criminal Investigation Division (you can find out more about IRS-CI in my podcast interview with former IRS-CI Chief Fort here).

Torrio introduced Capone to Frankie Yale—and his first real taste of the underworld. Yale owned a number of clubs where patrons could go to drink, gamble and pay for sex, and gave Capone a job as a bouncer and bartender. While at work, Capone, who wasn’t known for being even-tempered got into a fight. During the melee, he was slashed across his left cheek three times with a knife, leaving a permanent scar and earning the nickname “Scarface.” Supposedly, the fight was over a girl.

At age 18, Capone met and married Mae Coughlin. Soon after, the couple had their first child, Albert Francis “Sonny” Capone. Sonny’s birth gave Capone pause—briefly—to consider making an honest living. The family moved to Baltimore where Capone intended to become a bookkeeper – working the numbers on the right side of the law.

An Offer He Couldn’t Refuse

But Capone couldn’t resist the allure of the gangster life, and when Torrio asked Capone to move to Chicago to help run his mob empire, it was an offer that Capone couldn’t refuse.

The dark side quickly caught up to Torrio. In 1925 he barely survived an assassination attempt by rival mobsters Hymie “The Pole” Weiss, Vincent “The Schemer” Drucci and George “Bugs” Moran. After spending three weeks in the hospital, and even more time in prison, Torrio wanted out. He decided to leave Chicago, handing over control of his empire to Capone.

Capone was a natural at making money and quickly expanded the business. By the mid-1920s, Capone was reportedly taking home nearly $60 million annually ($891 million in today’s dollars), and his wealth continued to grow, reportedly topping $100 million ($1.5 billion in today’s dollars).

U.S. v Sullivan

As Capone’s empire grew, so did his penchant for violence. The bodies piled up in Chicago, and most had Capone’s fingerprints all over them. The feds, however, couldn’t make charges of violence stick against Capone. But something happened in 1927—miles away from Chicago—that would prove to be a turning point. On May 16, 1927, the U.S. Supreme Court ruled in U.S. v. Sullivan that “[g]ains from illicit traffic in liquor are subject to the income tax would be taxable” (274 U.S. 259). It was just the ruling the feds needed.

(Fun footnote: The Justices noted in Sullivan that “It is urged that if a return were made the defendant would be entitled to deduct illegal expenses such as bribery. This by no means follows but it will be time enough to consider the question when a taxpayer has the temerity to raise it.”)

“Get Capone”

In 1928, finally fed up, the Secretary of the Treasury summoned Irey and told him to simply “get Capone.”

Irey is said to have replied, on behalf the IRS-CI, “We’ll get right on it.”

St. Valentine’s Day Massacre

Even as Irey was investigating Capone, the violence continued. The lawlessness culminated on February 14, 1929. Capone was in Miami at the time of the shootings but was immediately blamed for what came to be known as the St. Valentine’s Day Massacre

On the day of the murders, witnesses saw four men enter the garage: two of the men were dressed as police officers. The “officers” ordered Moran’s gang to line up against the wall where they were hit with a spray of machine-gun and shotgun bullets: 70 rounds of ammo were fired. All seven men inside died – most of them immediately.

One of the victims, Frank Gusenberg, survived long enough to allegedly tell police, “No one shot me.”

What triggered the dispute? Likely territory. Moran controlled the North Side of Chicago, while Capone controlled the South Side.

Moran escaped the violence, but just barely: He was late to the scene and missed the shootings by minutes. A few days later, he allegedly told reporters, “Only Capone kills like that.” It was a line so famous that it made it into the movies.

Capone allegedly reponded, “The only man who kills like that is Bugs Moran.”

There were no witnesses who lived to tell the tale, there was no evidence, and no one was ever prosecuted. However, the feds believed that Capone was responsible, and in 1930, Capone was dubbed “Public Enemy Number One,” a label he reportedly hated (his older brother, Ralph “Bottles” Capone would earn the title “Public Enemy Number Three”).

Capone grew more bold, believing that he was untouchable. He failed to answer a subpoena to appear before a federal grand jury, claiming he had bronchial pneumonia and was confined to bed rest.

He was arrested on contempt charges after prosecutors produced evidence that he had been gambling at the track and cruising in the Bahamas. He was released on bond but was re-arrested on concealed weapons charges and sentenced to prison at Philadelphia’s Eastern State Penitentiary, where he reportedly lived in luxury amid French furniture, plush rugs and a Victrola radio in his cell.

Federal Tax Case

During this time, the feds were quietly building a case against Capone. Despite his public and extravagant lifestyle, Capone never filed a federal income tax return, claiming that he had no taxable income. IRS Special Agent Frank Wilson and the “T-Men” followed the money, gathering evidence that Capone had made millions of dollars on income that was never taxed. It paid off: Capone was indicted on 22 counts of federal income tax evasion.

He wasn’t alone: his brother, Ralph, Jake “Greasy Thumb” Guzik, Frank Nitti and others were also charged. Capone bragged that he had reached a plea agreement that would have sent him to jail for just two years. The judge refused to accept the deal, and the case went to trial.

Capone was found guilty on October 17, 1931. One week later, on October 24, 1931, Capone was sentenced to a then unheard 11 years in prison. He was fined $50,000 ($798,055 in today’s dollars), charged court costs and ordered to pay back taxes of $215,000 (now, $3,431,640).

He immediately appealed and was denied a rehearing.

Prison: From Atlanta To Alcatraz

Capone’s first prison stop after his conviction was Atlanta. Initially, Capone bribed prison officials to get what he wanted, just as he had done in Philadelphia. When he was found out, he was punished by being relocated to Alcatraz. Alcatraz proved to be Capone’s undoing.

The warden, James Aloysius Johnston, wasn’t as easily swayed as those Capone had previously encountered. When Johnston asked Capone his name, the mobster allegedly responded, “You know who I am.” Johnston is said to have retorted, “Here you are now known as AZ-85.” Capone eventually admitted, “It looks like Alcatraz has got me licked.”

Capone spent more than four years at Alcatraz, where he worked doing jobs like laundry (as most grade school kids know thanks to Gennifer Choldenko). During his sentence, his health eventually got the best of him: He had contracted syphilis years before, and it worsened, leading to “intermittent mental disturbances.”

In 1937, he again appealed his sentence, this time to District Court, arguing that his verdict had been inconsistent. The appeal was dismissed.

Capone moved again in 1939, this time to a mental hospital, to serve out the remainder of his sentence before retiring to Florida. Before his death, his physician determined that he had deteriorated to the point where he had the mental capacity of a 12-year-old. Capone, once the most feared man in America, died on January 25, 1947, at the age of 48.

Find Out More

Today, Capone’s story lives on in the movies – and in museums. You can find an actual section of wall from the St. Valentines Day massacre now on display in the Mob Museum in Las Vegas, NV.

Geoff Schumacher, the Vice President of the exhibits and programs at The Mob Museum, spoke with me about how the museum obtained the wall and other memorabilia related to Capone, IRS-CI, and organized crime in the latest episode of the Taxgirl podcast.

“I drunk his liquor,” said one potential juror.

“And honestly, I really like moonshine,” said another.

The jury selection in a 2018 trial in western North Carolina was proving to be complicated.

On paper, the matter appeared straightforward. A woman called 9-1-1 when her husband attempted to kill himself. Responders to the scene found marijuana and illegal booze. As a result, the woman, Michelle Lynn, and her husband both faced charges. Lynn was specifically charged with one felony (intent to sell or deliver marijuana) and several misdemeanors (possession of marijuana paraphernalia, possession of non-tax-paid alcohol, and maintaining a dwelling for a controlled substance).

It was the non-tax-paid alcohol that was problematic.

The alcohol allegedly belonged to Popcorn Sutton, a legend in the area. Sutton was born in 1946 in Maggie Valley, North Carolina. He was a modern-day bootlegger, not only producing but selling and promoting moonshine. For those of you who didn’t grow up in the South (or watching the Dukes of Hazzard), moonshine typically refers to alcohol made in secret – by the shine of the moon.

Sutton became something of a moonshine hero, writing an autobiography and being featured in documentaries and a self-produced video. He once remarked, “I’ve made all kinds of liquor in my time. I’ve made the fightin’ kind, the lovin’ kind, the cryin’ kind. I even made some one time and sold it to this couple – they was happily married. The next damn week, they was divorced.”

His rebel persona was bolstered when he was convicted – for the second time – of owning untaxed liquor in 2007. The following year, his property was raided again after he told an undercover federal officer that he had nearly 1,000 gallons of moonshine for sale: he was subsequently charged with producing moonshine and owning a firearm after being convicted of a felony. A guilty plea in 2009 resulted in two 18-month sentences to be served concurrently. The 62-year-old man committed suicide rather than serve time.

Not surprisingly, his legend lived on. There was even a song written about him:

Unlike Sutton, Lynn eschewed a plea and took her chances at trial. She disputed the charges against her, claiming, among other things, that the liquor found on her property was part of an inheritance. She told the court that, “Popcorn said the taxes on the liquor had been paid.”

While the jury was deliberating the charges, the bailiff relayed several questions to the judge, including one involving paying taxes on moonshine that is gifted to someone. Lynn was eventually found guilty of maintaining a dwelling for a controlled substance, but not guilty of possession with intent to sell or deliver marijuana.

The jury deadlocked on the moonshine charge. That piece was slated to go back to trial, but it never happened. The detective handling the matter left the sheriff’s office, and the case was dismissed.

A week later, Lynn filed a motion to get her moonshine back. The state’s response? It has to be destroyed.

Authorities had initially argued that the taxes had not been paid when the moonshine was seized in 2016. While Lynn disputed that fact in her first trial, she provided the court a receipt and stamps indicating that she paid the tax ($230.40) on June 21, 2019 – about two weeks before she filed for its return. But Agent Steve Myers, (now retired, SBI, Alcohol Law Enforcement division) had originally testified during Lynn’s trial that “illegal liquor can’t transmogrify into lawfully possessed liquor simply by paying taxes to the N.C. Department of Revenue.”

The judge eventually ruled that “only a local ABC Board or a properly licensed distillery can pay excise tax on liquor” and gave deputies 30 days to destroy the liquor. Lynn – now Michelle Sutton – appealed the matter, but it was ultimately dismissed.

She’s still holding out hope after filing a stay of destruction, telling local media, “He’s history, a historic figure in Haywood County.”

“People used to come from all around to see him and get his liquor. Anywhere I go, as soon as I say I’m from Maggie Valley, people ask about Popcorn Sutton. Now I’m fighting for the last bit of his liquor there is on this earth.”


(Author’s Note: In 2010, Hank Williams, Jr. announced a partnership with J&M Concepts LLC and Popcorn’s widow, Pam Sutton, to distill and distribute whiskey named after Sutton. In 2016, Sazerac bought the distillery, but not the brands.)

Chances are that you are spending today gathered around a grill or trying to soak in some sun. Labor Day weekend is considered summer’s last hurrah and ushers in fall and, including, in areas like mine, the beginning of the school year.

(You can read more about the tie-in to the school year and Labor Day weekend here.)

But Labor Day is actually less about sunshine and beaches than… offices and factories. Here’s a little Labor Day history mixed with tax trivia:

  1. The holiday falls on the first Monday in September each year. The earliest national recognition of Labor Day happened on June 28, 1894, when President Grover Cleveland signed a law making it a national holiday. The date was made official as part of a law signed by President Johnson on June 28, 1968, to “provide for uniform annual observances of certain legal public holidays on Mondays, and for other purposes.”
  2. The U.S. income tax – as we know it today – didn’t exist in 1894. Instead, Congress pushed through the Revenue Act of 1894, also called the Wilson-Gorman Tariff of 1894, considered the country’s first peacetime tax. It was a flat tax of 2% on corporate and individual income over $4,000 (about $120,512.09 in today’s dollars). The following year, the tax was found to be unconstitutional in Pollock v. Farmers’ Loan & Trust Co., 157 U. S. 429 (1895), and affirmed in Pollock v. Farmers’ Loan & Trust Co., 158 U. S. 601 (1895). For several years following, there was no formal federal income tax until 1913 when the Sixteenth Amendment to the federal Constitution was ratified, giving Congress the power “to lay and collect taxes on incomes.”
  3. The idea for what is a leisurely holiday today was actually inspired by less restful events. The American Industrial Revolution (sometimes called the second Industrial Revolution) quickly grew the American economy – spurred on by the expansion of the railroads. But it also came at a price. American workers toiled up to 12 hours a day, seven days a week. An influx of immigrant workers, women, and due to the relative absence of child labor laws, children, worked for lower wages in mills and factories. Labor unions demanded change and began organizing strikes rallies. By summer’s end in 1882, there was a call for a “working man’s holiday” as a public show of solidarity.
  4. To counter the waves of immigration, that same year, Congress passed the Immigration Act of 1882, which levied a head tax “for every passenger not a citizen of the United States” arriving by steam or sail vessel from any foreign port. The tax was fifty cents per person payable to the U.S. Treasury and deposited into the “immigrant fund.” The Act also blocked (or excluded) the entry of any “convict, lunatic, idiot, or any person unable to take care of himself or herself without becoming a public charge.” The latter group mostly consisted of single women.
  5. We’re not quite sure who came up with the idea of Labor Day. Some say it was Matthew Maguire, secretary of the Central Labor Union of New York, who proposed the holiday (he’s credited with saving the first parade – read on). Others claim that it was Peter J. McGuire, general secretary of the Brotherhood of Carpenters and Joiners and a co-founder of the American Federation of Labor. McGuire is also considered the father of May Day, the international Labor Day.
  6. The Central Labor Union eventually broke up, and many former members rejoined as the American Federation of Labor (AFL), now the American Federation of Labor and Congress of Industrial Organizations (AFL–CIO). The AFL was founded in 1886, and the CIO was founded in 1935. The two merged in 1955. Today, the federation represents 12.5 million working men and women in 55 national and international labor unions. It is supported by a per capita tax on affiliated unions and organizing committees (yes, it’s really called a tax).
  7. The first Labor Day holiday was celebrated on Tuesday, September 5, 1882, in New York City. In 1887, Colorado, Massachusetts, New Jersey, New York, and Oregon created the Labor Day holiday in their respective states. By 1894, most states had adopted the holiday, and on June 28, 1894, Congress passed an act making the first Monday in September of each year a legal holiday in the District of Columbia and the territories.
  8. You may know that a federal holiday typically means a tax holiday (extra day to file and pay) for taxpayers. But a statewide legal holiday only delays a due date for filing a federal income tax return if the Internal Revenue Service (IRS) office where you’re required to file is located in that state. For individuals, a statewide legal holiday also delays a due date for filing a return for residents of that state. But, a statewide legal holiday doesn’t delay a due date for making a federal tax deposit.
  9. The first Labor Day parade almost didn’t happen. When it came time to start the parade, Grand Marshall William McCabe and a few dozen marchers were in place, but there was no music. They started out, intending to walk a few blocks when Mathew Maguire of the Central Labor Union of New York ran over to advise that 200 marchers from the Jewelers Union of Newark Two had just crossed the ferry and they had a band. They kicked off the tunes with “When I First Put This Uniform On” by Gilbert and Sullivan. By the end, reports of the total number of marchers ranged from 10,000 to 20,000 (more showed up for the after-party).
  10. Taxpayers sometimes foot the bill for parades and other gatherings in towns and municipalities. Some governments charge a fee to cover the cost of special services during these events. Still, not everyone is comfortable passing along the expense – especially to non-profit organizations that arrange for the festivities. There are also First Amendment issues. Famously, a unanimous Supreme Court ruled in Cox v. New Hampshire, 312 U.S. 569 (1941) that while the government cannot regulate speech in parades or gatherings, it “may charge a license fee reasonably adjusted to the occasion, for meeting administrative and police expenses.”
  11. I grew up believing that you can’t wear white after Labor Day (in the South, it’s a considerable fashion sin). How that evolved is somewhat controversial. According to Valerie Steele, director of the Museum at the Fashion Institute of Technology, it was marked a social divide, separating those with old money from new money, with “insiders trying to keep other people out… and outsiders trying to climb in by proving they know the rules.” Or it could be something more logical: with the end of summer, it was time to put away breezy white dresses and vacation-oriented clothes in favor of more suitable work clothing which tended to run darker, like navy suits and gray sweaters.
  12. Like fashion rules, tax rules for clothing can vary depending on the state (or locality) and clothing type. There are special exemptions and definitions (what exactly is an accessory in Pennsylvania anyway?) which control whether and how much your clothing will be taxed at purchase. Fortunately – so far as I know – the color of your garb isn’t one of those factors.

It’s my annual Taxes from A to Z series! If you’re wondering how to figure basis for cryptocurrency or whether you can claim home office expenses during COVID, you won’t want to miss a single letter.

X is for X Tax.

Yes, there really is an X tax. And while it sounds like something developed by scientists (or aliens, cause clearly, I watch too much television), it’s actually a tax developed by a Princeton economist named David Bradford.

Bradford, who is now deceased, was a professor of economics and public affairs at Princeton since 1966. He also served three U.S. presidents, including serving as a member of President George H. W. Bush’s Council on Economic Advisors and consulting on what would become the 1986 Tax Reform under President Ronald Reagan. 

According to Bradford, the X tax is based on a combination of company and individual taxation. It’s a variant of the Hall-Rabushka (1995) Flat Tax, and is a “two-tiered consumption tax.” 

It functions a little bit like a flat tax, at least in part. Under the business part of the tax, all businesses are liable for tax at a single rate on the difference between proceeds from sales and purchases from other businesses. As now, payments to workers are deducted. 

Individuals are taxed only under the compensation tax for labor. But while the business part of the tax is flat, the compensation tax is graduated, with a zero bracket amount and some set of higher rates on larger amounts received, up to a top rate that is the same as the business tax rate. There is also a deduction based on family size (almost like the Earned Income Tax Credit).

Financial transactions are excluded from both business and compensation tax bases. That includes transactions such as borrowing and lending, issue and repurchase of stock, and payment and receipt of dividends. The idea is that exempting dividends, capital gains, and the like means that calculating and administering the tax would be easier and less prone to avoidance.

 Clearly, the tax never became policy, but it remains significant to American tax policy history.

You can read a white paper here which explains the structure (downloads as a PDF).

You can find the rest of the series here:

This week, New York Gov. Andrew Cuomo had restaurant owners calling “fowl” on new rules requiring bars to serve food with their drinks. The New York State Liquor Authority (NYSLA) issued guidance making clear that, “Pursuant to Executive Order 202.52, effective Friday July 17, 2020, all licensed establishments with on premises privileges (e.g. restaurants, taverns, manufacturers with tasting rooms, etc.) shall not serve alcoholic beverages unless such alcoholic beverage is accompanied by the purchase of a food item which is consistent with the food availability requirement of the license under the Alcoholic Beverage Control Law.”

Today, Cuomo ruffled feathers even more at a press conference when he appeared to suggest that sandwiches were more “substantial” than chicken wings, recalling that “To be a bar, you had to have food available. soups, sandwiches, etc.” He added, “More than just hors d’ oeuvres, chicken wings. You had to have some substantive food — the lowest level of substantive food were sandwiches.”

For some, those sounded like fighting words.

Under current law (NYS Alcohol Beverage Control Law, Article 5, § 64-a, Section 8), special on-premises licensees must have food available for sale. The new COVID guidance amps that rule, requiring that patrons are seated and order a food item if they want to have a drink outside. What constitutes “food” has become something of an issue, with some establishments serving less than the bare minimum. Cuomo has vowed to crack down on businesses that aren’t complying – which is what led to today’s controversy.

Under current guidance, establishments must sell “sandwiches, soups or other foods, whether fresh, processed, precooked or frozen” if they also intend to sell alcoholic beverages. The Authority clarified that “Other foods’ are foods which are similar in quality and substance to sandwiches and soups,” further noting that “For example, salads, wings, or hotdogs would be of that quality and substance; however, a bag of chips bowl of nuts, or candy alone are not.”

A spokesperson later confirmed via Twitter that wings qualify as “substantive food.” And he did it not once, but twice:

But what about sandwiches? @CrimeADay (a must-follow on Twitter in my opinion) decided to resolve sandwich-gate by heading to the ultimate authority on food: tax law.

Tax law has actually been useful in settling a lot of “is it or isn’t it” debates including whether Pringles are actually potato chips (they’re not) and how many doughnuts constitutes a meal (no more than five in Virginia).

In New York, there is an actual Tax Bulletin on Sandwiches (it’s TB-ST-835). @CrimeADay posted a screenshot which notes that “Sandwiches include cold and hot sandwiches of every kind that are prepared and ready to be eaten, whether made on bread, on bagels, on rolls, in pitas, in wraps, or otherwise, and regardless of the filling or number of layers. A sandwich can be as simple as a buttered bagel or roll, or as elaborate as a six-foot, toasted submarine sandwich.”

The bulletin goes on to note examples of taxable sandwiches, including burritos (but not tacos), “cheese-steak sandwiches,” and hot dogs. There’s a lot to parse here, but I offer three things to consider:

  • I don’t understand how something that can also be purchased from a freezer (burrito) can be regarded as a sandwich;
  • You can’t trust a New York cheesesteak because you simply don’t hyphenate cheesesteak. Get your cheesesteaks from a city where they can both prepare and spell them correctly (Philadelphia); and
  • By law in New York, hot dogs are sandwiches (I don’t write the rules, I just report them).

So there you have it. You know what a sandwich is (and isn’t). And under the guidance in New York, sandwich or wings and booze, yes. Nuts/hors d’oeuvres/candy and alcohol, no.

Failure to follow the rules – and racking up three COVID-19 violations – can result in a suspension of an establishment’s liquor license. Cuomo reported earlier this week that the NYSLA has suspended 27 bar and restaurant alcohol licenses for violations of social distancing rules, including four in New York City and Long Island.

The new rules remind some of the Raines Liquor Tax Law, sometimes just referred to as “Raines Law.” The law, passed in New York in 1896, was named for legislator John Raines (you can read his thoughts here). Among other things, it made the sale of liquor illegal on Sundays. However, there was an exception: bars could sell liquor on any day of the week if sold at a hotel. A hotel was defined as a place that served food and had at least 10 rooms for rent. Bar owners scurried to bring in beds and served – and sometimes recycled – the barest of meals. You can imagine that it didn’t go well: the law was eventually repealed in 1923 (yes, three years after Prohibition began).

More than 50 years ago, Dr. Martin Luther King, Jr., a leader in the civil rights movement, was on the receiving end of repeated harassment by tax authorities. Inquiries into Dr. King’s finances were not new: He was investigated in two separate states (Georgia and Alabama) on numerous occasions and together with his legal team and members of the Southern Christian Leadership Council (SCLC), Dr. King was repeatedly investigated by the Internal Revenue Service (IRS).

It was clear to many of his supporters that Dr. King was targeted because of the color of his skin and the words that he dared to speak about inequality. In 1960, he made news as the first person ever criminally charged in the state of Alabama on tax fraud (you can read the statement issued “Committee to Defend Martin Luther King, Jr.” accusing the state of Alabama of falsely distorting Dr. King’s 1958 income tax return in an attempt to indict him here).

After his indictment, Dr. King was asked by a reporter, “Have your income tax returns been investigated before?” He replied, “Oh yes, they have been investigated two or three times before. This is nothing new.” The case would eventually go to trial.

On today, Martin Luther King Jr. Day, as I always do, I am reposting an article that I wrote years ago about that trial and the legal profession. You might have seen it before: it remains one of my favorite posts to this day. Enjoy!


I’ll be frank. I don’t always love being a lawyer.

When I was a little girl, I used to watch Perry Mason with my grandfather on TBS. That constituted my entire legal experience before entering law school. And it was flawed.

You see, on TV, none of the lawyers lied to Perry Mason over the phone about being amenable to a continuance and then told the Clerk of Court differently. Nobody faxed Perry Mason a witness list the day before a hearing along with evidence that they “forgot” to send prior. A lawyer didn’t claim proper service on Perry Mason and then fail to deliver the notices to his law offices. You never saw a lawyer represent clients who had sent Perry Mason death threats via email in an attempt to assert that Mr. Mason was the one being unreasonable. You didn’t see cases drag on for years and years (yes, plural) because counsel just couldn’t get it together enough to resolve the matter. On TV, no matter how dire, how dramatic, there was ultimately justice.

The law is supposed to be about justice, about finding the truth. And increasingly it feels like it’s not. It’s more about touting your wares, putting yourself on commercials during daytime television standing in front of legal books shouting about maximizing money, about doing anything to get paid. And that is sad.

A few months ago, I attended a hearing that made me question my role in the law. You’re probably assuming that the hearing somehow didn’t go well. That isn’t true. It went remarkably well. Our client was an excellent witness. The judge was fair and very accommodating. We walked out of the hearing knowing that we had done a good job. The thing was, I felt relieved that it was over. I was happy for my clients. But I wasn’t happy for me. Truth be told, I hated every minute of preparing for the case. Well, not every minute. The theory, the strategy? That I didn’t mind. Our strategy was simply to tell our story. And we somehow felt that should be enough. In the end, I think it was.

But the getting there? The games? The complete lack of professionalism exhibited by opposing counsel? Lying about continuances? Surprise witnesses? Last-minute evidence? Maybe that seems exciting on TV, but in real life, it’s not exciting. It’s sickening. It’s stressful. It’s not fair to good lawyers who spend their time crafting a case. It’s not fair to clients who don’t know what to expect in the courtroom. And yet somehow, month after month, this behavior doesn’t seem so unusual.

And as opposing counsel sat in her chair in her too-tight blouse with the clickety-click of her little heels on the floor, the same counsel who called my clients’ claims frivolous, the same counsel whose supervising partner at Big Law Firm once commented to me that she didn’t understand why a small firm like mine would go up against a big firm like hers, I thought about why we were all at that place, how it all happened that we were in the same room believing two different versions of the truth. I couldn’t explain it.

Later that same day, while reaching for my Moscow Mule (yes, my favorite cocktail du jour, even before Rachael Ray put it in her magazine last month – grr) at the Union League, I understood why the partner at my former firm kept a bottle of wine in his desk: the pressure of being a lawyer, the pressure of having to win, it’s a lot to take in. And while other professions can often look to each other for reassurance, we don’t really have that in the legal profession with few exceptions. It is, by its very nature, adversarial. It is competitive. It is cutthroat. And me? I am not. Of course, I like to win. I like to think that I am good at it. And then maybe I think that’s not something to be particularly proud of.

So, over the past few weeks, which have been professionally difficult, I have tried to remember why it is exactly that I became a lawyer – and what about it I used to love. And I was reminded of my favorite scene in the movie Philadelphia. The one where Andrew Beckett sums up what’s actually good about the law:

Joe Miller: What do you love about the law, Andrew?
Andrew Beckett: I… many things… uh… uh… What I love the most about the law?
Joe Miller: Yeah.
Andrew Beckett: It’s that every now and again – not often, but occasionally – you get to be a part of justice being done. That really is quite a thrill when that happens.

And so I tried to think of when that happened last – when justice was actually done. Not when I won a case or when I got a client out of trouble – that happens often enough. But remember, winning and justice aren’t the same thing. I had to think for a while.

Later, I was preparing to write a post about Martin Luther King, Jr. Day. I figured I’d just put up a copy of his famous “I Have A Dream” speech and call it a day. But as I researched, I found part of his autobiography which, I will confess, I had never read in full. And I saw something interesting: I knew that Dr. King had been arrested several times for various accusations, but I didn’t realize that he had been on trial for tax evasion.

Yep. On February 17, 1960, a warrant was issued for the arrest of civil rights leader Dr. Martin Luther King Jr. on charges of tax evasion. He was accused of allegedly falsifying his Alabama income tax returns for the years 1956 and 1958; he was the only person ever prosecuted under the state’s income tax perjury statute. It seemed like an inevitable victory for the government.

In his autobiography, Dr. King described the trial like this:

This case was tried before an all-white Southern jury. All of the State’s witnesses were white. The judge and the prosecutor were white. The courtroom was segregated. Passions were inflamed. Feelings ran high. The press and other communications media were hostile. Defeat seemed certain, and we in the freedom struggle braced ourselves for the inevitable. There were two men among us who persevered with the conviction that it was possible, in this context, to marshal facts and law and thus win vindication. These men were our lawyers-Negro lawyers from the North: William Ming of Chicago and Hubert Delaney from New York.

And something quite remarkable happened. On May 28, 1960, only after a few hours, Dr. King was acquitted by an all-white jury in Montgomery, Alabama (statement downloads as a PDF).

Dr. King said about his trial:

I am frank to confess that on this occasion I learned that truth and conviction in the hands of a skillful advocate could make what started out as a bigoted, prejudiced jury, choose the path of justice. I cannot help but wish in my heart that the same kind of skill and devotion which Bill Ming and Hubert Delaney accorded to me could be available to thousands of civil rights workers, to thousands of ordinary Negroes, who are every day facing prejudiced courtrooms.

And it dawned on me: no matter how many slick-haired, silver-tongued attorneys do their best to make a quick buck at the expense of the reputation of the profession, you can’t dispute that justice is attainable. And justice is good. And justice is important. And even if it is infrequent, it’s worth it when it happens.

Today, there will be lots of fireworks, parades, speeches, and hot dog eating contests to celebrate Independence Day. The day is often believed to be the day we officially gained our independence from Great Britain. But it’s a little more complicated than that: Independence Day wasn’t the end of the road to independence, it was only the beginning. Here’s what you need to know, including the role that taxes play in the story.

On July 4, 1776, in Philadelphia, Pennsylvania, the Continental Congress formally adopted the Declaration of Independence. The Declaration of Independence is exactly what it sounds like: an announcement to the world that America was declaring its independence from King George III and Great Britain – our own version of Brexit. The Declaration came more than a year (442 days) after shots were fired at Lexington, Massachusetts, considered the start of the first battle of the American Revolutionary War.

The Declaration of Independence did not mark the end of the Revolutionary War. Instead, it signaled that the United States no longer wished to accept British rule – a pretty big deal. The British had ruled the colonies since the early 17th century when the Virginia Company became the Virginia Colony in 1624, the first of the original thirteen British colonies.

The United States wasn’t the only part of the world – or even the only part of the Americas – subject to British colonization. The British had also exerted control over parts of Canada, the Caribbean, and South America.

But ruling the world is expensive. Guarding colonies and occasionally invading new lands takes money. And not everyone agrees as to who owns which lands so fighting occasionally breaks out. That’s precisely what happened in the mid-18th century when Great Britain found itself battling many countries – but primarily France – in the Seven Years’ War. When the war ended in 1763, Great Britain could declare a win against France, but the years of fighting had come at a high cost: The British government was nearly bankrupt.

King George III needed to raise revenue and quickly. What better way than a series of taxes and tariffs? And who better to tax than subjects who were far enough away – like the American colonists – to stifle the complaining? There was just one problem with this plan: The King underestimated exactly how loudly the colonists would react.

The first significant post-war tax imposed on the colonists was the Stamp Act of 1765. These stamps don’t have anything to do with postage. Instead, stamps were considered an official confirmation of compliance with a particular rule or requirement. In the case of the colonists, printed materials used in the colonies, like magazines and newspapers, had to be embossed with a revenue stamp, showing that the tax had been paid. It was a direct tax – complicated and costly – and the colonists didn’t like it. Thankfully, the Stamp Act was repealed the next year. It didn’t go away quietly, though, as Parliament declared that it had the right to pass laws in the colonies “in all cases whatsoever.”

Great Britain tried again: another attempt to raise revenue followed through a series of acts called the Townshend Acts of 1767. Individually, they were the Revenue Act of 1767, the Indemnity Act, the Commissioners of Customs Act, the Vice-Admiralty Court Act, and the New York Restraining Act. The Townshend Acts were a little bit different than the Stamp Act since they were indirect taxes on imports like tea and paper. Since the colonists didn’t directly bear the costs, King George III assumed that they wouldn’t mind as much, but he was wrong.

The colonists weren’t happy at all: a tax was a tax. Philadelphia lawyer John Dickinson spoke out against the taxes in a series of essays called “Letters from a Farmer in Pennsylvania” arguing that taxation without representation was not allowed. In the letters, he asked, “[W]hat signifies the repeal of the Stamp Act if these colonies are to lose their other privileges, by not tamely surrendering that of taxation?” He later questioned whether the British had the right to impose any tax to raise revenue without consulting with the colonists, writing, “I answer, with a total denial of the power of parliament to lay upon these colonies any “tax” whatever.” Shortly after those letters made the rounds, the Townshend Acts were partially repealed.

The “partially” repealed bit is important. In 1773, the Tea Act was introduced on top of the remaining Townshend Acts. It was the last straw for many colonists even though it wasn’t a new tax. What the Tea Act did was keep in place the duty (tax) on tea imported to the colonies already in place under the Townshend Act. And this time, the purpose of the Tea Act wasn’t to raise revenue but rather to give the East India Tea Company a trade advantage, cutting out the ability of the colonists to do business on their terms. Tax or not, the colonists viewed the Tea Act as another way they were being controlled.

The colonists protested by turning away ships carrying tea headed for the colonies. The colonists were successful in Philadelphia and New York, but not in Boston. The Governor of Massachusetts wouldn’t allow the ships to be turned away and the colonists would not let the ships unload in the harbor, creating a stand-off. On December 16, 1773, colonists snuck onto the ships and dumped out the tea, an event that came to be known as the Boston Tea Party.

The Boston Tea Party did not immediately lead to the Declaration of Independence or the Revolutionary War, even though we like to link them as though they happened in quick succession. What the Boston Tea Party did was annoy the British Parliament. As far as the British were concerned, the Boston Tea Party was the equivalent of the Americans throwing a giant tantrum and destroying their nice things. In response, the British attempted to punish the Americans through a series of laws called the Coercive Acts. Boston was hit particularly hard: Boston Harbor was closed to merchant shipping, town meetings were banned, and the British commander of North American forces was appointed the governor of Massachusetts.

The colonists had enough. They convened the First Continental Congress in Philadelphia on September 5, 1774, to consider their next steps. Resistance against the British increased – that’s what led to those first shots triggering the Revolutionary War. The Second Continental Congress convened in Philadelphia on July 2, 1776, and voted to separate from Great Britain. Two days later, on July 4, the Declaration of Independence was formally adopted by 12 of the 13 colonies (the one holdout, New York, approved it a couple of weeks later).

The Declaration of Independence was drafted as a letter to the King. The colonists felt that it was important that the exact reasons for their unhappiness were made clear. The most extensive section of the Declaration – after the lines that we all memorized in elementary school – is that list of grievances. Of course, taxes were included:

The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States. To prove this, let Facts be submitted to a candid world.

For imposing Taxes on us without our Consent:

The word “Consent” was important. Under the British Constitution, no British subjects could be taxed without the consent of their representatives in Parliament. But the colonies didn’t elect representatives to Parliament. They were, however, taxed. The colonists considered the constant imposition of taxes without a vote to be unconstitutional – just as Dickinson had written years earlier. It was, they felt, “taxation without representation.”

The idea that the colonists had such little control over their own lives didn’t just lead to the drafting of the Declaration of Independence and the accompanying vote; it set the United States down the road to real independence. In 1783, with the signing of the Treaty of Paris, the United States formally became an independent nation. But the date that we most associate with our independence is the day that those in the Continental Congress were brave enough to officially declare it to the world: July 4.

I spent much of the weekend wandering around my old stomping grounds in Raleigh, North Carolina, with my daughter. We stopped into one of my favorite spots for dinner, and the waiter brought out the beverage list: There was practically an entire page dedicated to local beers. It was quite a change from back in the day and speaks to the popularity of craft beer in America these days (for the record, I opted for a brown ale from Lonerider). According to the Brewers Association, small and independent brewers collectively produced 25.9 million barrels and realized 4% total growth last year.

Beer is so popular that it even has its own day: National Beer Day falls on April 7 and marks the day that beer was allowed to be legally manufactured and sold following a long, dry Prohibition. On March 22, 1933, President Franklin Roosevelt signed the Cullen–Harrison Act into law, which moved the U.S. away from Prohibition by allowing the manufacture and sale of beer that was approximately 4% alcohol by volume (just a little less than the average today) and some wines. After he signed, Roosevelt reportedly remarked to his aide Louis Howe, “I think this would be a good time for a beer.”

Prohibition would officially remain in place for a few more months, but the ability to drink beer and wine was worth cheering. Here are a few more facts about beer—and its close relationship to tax—to help you celebrate in 2019:

1. Egypt was likely the first civilization to tax beer. Queen Cleopatra imposed a tax on beer in order, she claimed, to discourage public drunkenness, though it is believed that the tax was used to raise money to fund a war with Rome.

2. Beer is the most popular alcoholic beverage in the United States. According to a 2018 Gallup poll, 42% of Americans who drink alcohol say they prefer beer, up a couple of points from last year. In 2017, the federal government collected $3.6 billion in excise taxes on domestic and imported beer.

3. In 1695, Great Britain raised taxes on beer, making gin the cheapest beverage in England. Gin was taxed at 2d (about 2 pennies) per gallon, while beer was taxed at 4 shillings 9d (about 57 pennies) per gallon. The difference in price is considered the root of a serious drinking problem in the country in the 18th century, especially among the poor.

4. In the United States, taxes on the production, distribution, and sale typically eat up 41% of the retail price of beer. That amount includes all taxes imposed on beer. In previous years, the federal excise tax was about 5 cents per drink (the nickel comes from the assumption that the average beer has an alcohol content of 4.5%).

5. If you thought the Tax Cuts and Jobs Act (TCJA) only lowered income taxes, you’d be mistaken. The TCJA reduced the federal excise tax on beer according to output. Those rates were reduced to $3.50 per barrel on the first 60,000 barrels for domestic brewers producing fewer than 2 million barrels annually and $16 per barrel on the first 6 million barrels for all other brewers and all beer importers; the excise tax remains at $18 per barrel rate for those producing over 6 million. If those rates sound familiar, they closely mirror previously proposed legislation, including the BEER Act of 2013. There is one downside: Under tax reform, most corporate changes under tax reform are permanent and most individual changes are effective through 2025, the changes affecting the beer market will expire in 2020.

6. German beers are often labeled “Gebraut nach dem Bayerischen Reinheitsgebot von 1516,” which translates roughly to “brewed according to the Bavarian Purity Law of 1516.” The law originally limited the ingredients that can be used to make beer in Germany (barley malt, hops, yeast and water) and allowed the government to tax beer. The Reinheitsgebot became an official part of the German tax code in 1919 but was largely gutted when Germany became part of the European Union.

7. To help pay for the Civil War, Congress imposed an excise tax on beer. The Revenue Act of 1862, signed into law by President Lincoln, included a tax on “all beer, lager beer, ale, porter, and other similar fermented liquors, by whatever name such liquors may be called.” It may not be popular but taxing beer wasn’t a bad idea from an economic standpoint, as it generates billions in revenue each year.

8. Arthur Guinness II—the father of Guinness stout—altered the family beer recipe to include unmalted roasted barley instead of black malt. The unmalted barley wasn’t subject to extra taxes (more on those here), which made it affordable for the Guinness family—and also made the beer’s taste distinctive. By the end of the 19th century, Guinness was the largest brewery in Europe.

9. According to the Beer Institute, directly and indirectly, the beer industry employed nearly 2.23 million Americans in 2016, providing more than $103 billion in wages and benefits. The industry pays nearly $63 billion in business, personal and consumption taxes.

10. In 1991, President George H.W. Bush signed a bill that raised taxes on luxuries such as furs, yachts, private jets, jewelry and expensive cars (despite the “no new taxes” pledge). That same bill nearly doubled the tax on beer. Bush called for the repeal of the tax just two years later, and while most of the taxes included in the bill were eventually repealed, the tax on beer remained in place and is still there today.

11. The most expensive state to buy a beer may be Tennessee, where state excise taxes reach a whopping $1.29 per gallon, plus sales tax, making it the highest in the country. The cheapest state to buy a beer? Wyoming, where the excise tax is just $.02 per gallon. You can see where your state ranks here (downloads as a PDF).

12. The oldest operating brewing company in the U.S. is D.G. Yuengling & Son, owned by billionaire Richard Yuengling, Jr. Yuengling (“Ying-ling” and not “Yoong-ling” or “Yang-ling”), based in Pottsville, Pennsylvania, is one of the country’s five largest beer companies, with an estimated $550 million in annual revenue in 2015. The company added a new location in Florida and won’t promise to remain in Pennsylvania, blaming the state’s tax climate in 2012: “Pennsylvania is a great location. But it’s not very business-friendly. You look for fair tax breaks, fair taxation. And the bottom line is more jobs. That’s what it’s all about.”

13. What’s the best state for craft beer? According to C+R Research, the craft beer capital is Vermont. It probably helps that Vermont has a relatively low excise tax on beer (it ranks in the middle, but more than $1/gallon less than the top). You can see how your state ranks here.

14. Sales of craft beer increased 8%, up to $26.0 billion, according to the Brewers Association, and now account for more than 23% of the beer market. California leads the way, boasting 2.2 breweries per 100,000 adults over the age of 21. You can see how your state ranks here.

15. In addition to sales of beer, “beer tourism” is a real thing. Sites like BrewTrail.com help consumers plan road trips and vacations around visits to breweries, which bring additional travel tax dollars. States and regions have gotten into the spirit, offering info on their own “ale trail” recommendations.

16. How does beer figure into the economy overall? According to a 2016 report (downloads as a PDF), the beer industry contributed more than $350 billion in economic output—equal to nearly 1.9% of the U.S. Gross Domestic Product (GDP).

17. Cenosillicaphobia is the fear of an empty beer glass. Okay, that’s not a tax fact, of course, just a fact. Don’t live in fear: go, get a beer.

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