Efforts by the state to regulate or suppress vice and crime bring about reactions on the part of the interests affected not unlike those which follow from the attempt to regulate legitimate business.[62] The corrupt practices thus occasioned are among the commonest and most objectionable that society has to contend with. Very large money returns in the aggregate are obtainable by political organisations which protect vice. It is doubtful, however, whether such sources of income are ordinarily so productive financially as the various corrupt relationships between business and politics described above. On the other hand the alliance between politics and the underworld has the advantage, from an unmoral point of view, that it yields not only money but also strong support at the polls. And as some of the voters whose support is thus secured may be depended upon for work as repeaters, ballot-box staffers, and thugs, the net political power which they wield is much greater than their number alone would indicate. There is one other important difference between the corruption arising from the attempt to regulate legitimate business and that which arises from the regulation of vice. In the former case a “deal” can frequently be consummated between two principals, the leader of a centralised business interest on the one hand and the leader of a centralised political organisation on the other. Something of the secrecy and the binding personal obligation of a “gentleman’s agreement” are thus obtained. Of course to carry out the compact the political leader must control the action of his dependents in public office, but the latter, whatever they may suspect, know nothing definite about the agreement into which the boss has entered. The protection of vice cannot be managed by so small a number of conspirators. Compliance by the whole police force with orders from the “front” is necessary. Every patrolman knows what is going on when he is told that he must not molest dives, gambling hells, or brothels. Members of the force may or may not be used to collect protection money and pass it “higher up,” but since there are many establishments which must pay tribute the employment of a considerable corps of collectors is necessary. In any event the number of those who have knowledge amounting to legal evidence is likely to be much larger in the case of the protection of vice than in the case, for example, of a corrupt franchise grant. Exposure either by some disgruntled police officer or by some overtaxed purveyor of vice is likely to come at any moment.
When revelations of this kind are made the moral uprising which follows seldom lacks force. Cynics may sneer at such popular manifestations as paroxysms of virtue, but practical political leaders are not likely to underestimate the damage which they are capable of inflicting. Even if the machine emerges comparatively unharmed from such a period of attack the heads of some of the leaders are likely to fall before the popular fury. Remembering Fernando Wood’s caution about the necessity of “pandering a little to the moral element in the community,” farsighted bosses are therefore more and more inclined to limit their operations in the field of vice protection and to seek support from their relations with legitimate business interests. If this process is carried on further, as now seems likely, the general problem we are considering will be simplified by the reduction to a minimum of corruption by the vicious element, although, of course, we would still have on our hands the large question of corruption in the interests of otherwise legitimate business.
With all their mistakes and wasted energy moral uprisings will help this development materially. After a “spasm” things seldom fall back into the lowest depths of their former state. We need more frequent spasms, at least until we shall have learned to live continuously and steadily on a higher plane. The gravest evil of the present intermittent situation would seem to be that in our occasional fits of indignation we write requirements into the law which, considering the prevalence of minor vicious habits among large masses of the people, are impossible of execution. One of the lessons which we have learned in attempting to regulate business is that legislation of this sort must be supplemented by special administrative agencies if it is to have any effect whatever. Admirable child labour laws, for example, remain absolutely futile without labour commissioners and a force of inspectors created particularly to see them enforced. Yet in the regulation of vice we rush on heedlessly piling one new duty after another upon an already overburdened and underpaid police force. As a consequence its chiefs become habituated to the idea that they can exercise discretion as to what laws are to be enforced and what laws may with impunity be neglected. Usually the police decision of such questions is that crime must be dealt with vigilantly and severely, vice, on the other hand, with large tolerance. No better situation could be devised for the schemes of corruptionists. Moreover the latter are materially aided in their nefarious work by the high standards and the severe penalties which the moral element has written into the law. Using these as clubs the corrupt politician can extort much larger contributions than would otherwise be possible. There are only two ways in which this situation may be met. Either we must reduce our too ambitious programmes for the regulation of vice, or we must strengthen our police forces until they are adequate to meet the demands placed upon them.
In whatever way this question may be decided there is ample ground for demanding the application of the most thoroughgoing civil service reform rules to our police establishments. It is well known that the rank and file of our police forces despise the dirty work forced upon them by the political wretches “higher up.” No man capable of the heroic deeds which are commonplace in the annals of the police service rings the doors of bawdy houses and collects a tithe from the sorrowful wages of shame except under the compulsion of the sternest bread and butter necessity. Usually it is necessary to select the yellow dogs of the force for this particular devil’s work, and the promotion of such creatures for their pliancy is a stench in the nostrils of their honest comrades. If one doubts that this is the real spirit of the police force let him consider the character of the fire departments of nearly all of our cities. The men in the latter service are chosen from the same class, face dangers of the same magnitude, and receive wages of about the same amount as policemen. In the main they deserve and receive high praise for their efficiency and honesty. It is true that they are not exposed to the corrupt temptations which surround policemen, and also that their work is held up to exacting standards by business men and insurance companies. The fact remains that our police forces are constructed of the same human material as our fire fighting forces. It is difficult to avoid the conclusion that if we adapt our requirements in the regulation of vice to the capacities of our forces, (or vice versa); if we criticise and appreciate their work in the same way as we do the work of their sister department; if we place their appointment, tenure, and promotion, upon grounds of merit and utterly exclude the influence of the corrupt “higher-ups,” we will have gone a long ways toward drying up the most despicable of the sources of political corruption.
Certain of the moral aspects of tax dodging have been dealt with in an earlier connection.[63] Contrary as it may seem to the principle of economic interest there is a good deal of carelessness and stupidity in this field, and cases are occasionally found of property that has been over-assessed. On the other hand more or less deliberate dodging is indulged in very largely. So far as this practice deserves the stigma of corruption it is a stigma which rests to a very considerable extent upon the so-called class of “good citizens.” Certain residents of “swell suburbs” who daily thank God that their government is not so corrupt as that of the neighbouring city are among the worst offenders of this kind. As directors of corporations men of the same standing are sometimes responsible for monumental evasions. Of course what was said with regard to the reaction of business against state regulation holds good here also. There are plenty of legitimate methods of protesting against unjust or oppressive taxes,—before the courts, before legislatures, and by open propaganda designed to influence party organisations. But the furtive concealment or misrepresentation of taxable values is a matter of entirely different moral colour, and it is the latter practice that we now have to consider.
Tax dodging is so common and so well established that it has built up an exculpatory system of its own. Instead of bringing his conscience up to the standards set by the law the ordinary property owner inquires into the practice of his neighbours, and governs himself accordingly. Wherever business competition is involved the threat of possible bankruptcy practically forces him into this course. Yet withal our citizen is likely to be somewhat troubled in his mind about his conduct, at least until he learns how shamelessly John Smith who lives just a little way down the street has behaved. This information quite restores his equanimity, and at the next assessment he may outdo Smith himself. Thus the extra legal, if not frankly illegal, neighbourhood standard tends constantly to become lower. And not only taxpayers but tax officials themselves are affected by local feeling and fall into the habit of closing their eyes to certain kinds of property and expecting only a certain percentage of the valuation fixed by law to be returned.
Back of such neighbourhood ideas on taxation there are at least two lines of defence. One is that our present tax system is highly illogical, bothersome, and burdensome. To a considerable extent, unfortunately, this is the case, but it does not justify illegal methods of seeking redress. Not much argument is required to convince the ordinary property owner that all the inequities of the existing system fall with cumulative weight upon his devoted head. His pocketbook affirms this view more strongly perhaps than he would care to admit, but anyhow the net result is that he feels himself more or less pardonable for evading the burden as far as he can. The other common excuse for tax dodging is supplied by the conviction that much of the money raised by government is wasted or stolen. The logic based upon this premise is most curiously inverted, but none the less it sways the action of great multitudes. Politicians are a set of grafters, says our taxpayer. The more money they get the more they will waste and steal. I will punish the rascals as they deserve by dodging my taxes, that is by becoming a grafter myself. Seldom, however, is the latter clause clearly expressed. Yet the existence of corruption on one side of the state’s activities is thus made the excuse for corruption on another side whereby the state is mulcted of much revenue which it might receive. Of course evasion results in higher tax rates, which, by the way, fall crushingly upon the citizen who makes full and honest returns, and thus part of the loss in income to the government is made up. It seems clear, however, that in the long run government income is materially reduced by the feeling prevalent among taxpayers which has just been described and the procedure based upon it. On the whole this is by far the most serious single economic consequence of political corruption. It is bad enough that public money should be stolen, that public work should be badly done, and that politicians and contractors should grow rich in consequence, but it is far worse that the state should be starved of the funds necessary to perform its existing functions properly and to extend its activities into new fields. In the regulation of industry, in education, philanthropy, sanitation, and art, American government is very far from achieving what it should do in the public interest and what it could do more efficiently and cheaply than any other agency. Yet our progress toward this goal is perpetually hindered by the existence of waste and corruption on the one hand, and the consequent peremptory shutting of the taxpayers’ pocketbooks on the other hand.
Consideration of the theory underlying tax dodging reveals certain broad lines of correction. In proportion as our tax system approximates greater justice, the evasion which defends itself on the ground of the inequities of the present system will tend to disappear. To show how this may be done is beyond the limits of the present study. Suffice it to say that the work which reformers and students of public finance are now doing on inheritance, income, and corporation taxes, on the taxation of unearned increment, on various applications of the progressive principle, and so on, should eventuate in the tapping of much needed new sources of income, and thus facilitate the correction of present unjust burdens. The introduction of economical methods and the elimination of the grosser forms of corruption in the field of government expenditure will weaken the excuses offered for evasion on the ground of public waste and graft. There is an overwhelming mass of evidence to show that the American taxpayer, once convinced of the necessity of a given public work and further assured that it will be honestly executed, is generous to the point of munificence. The annals of our cities are full of the creation of appointive state boards composed of men of the highest local standing and intrusted with the carrying out of some great single project,—the erection of a city hall building, the construction of a water works and filtration plant, or of a park system. Very few such commissions are grudged the large sums of money necessary for their undertakings. If every ordinary branch of our government enjoyed public confidence to a similar degree such special boards would no longer be needed, and ample funds would be forthcoming from taxpayers for all our present functions and for other new and worthy functions which might be undertaken greatly to the public advantage. Finally our system of tax administration, like our system of government regulation of business, needs strengthening. Larger districts and centralised power in the hands of the assessors will help to lift them above the neighbourhood feeling which is responsible for so much evasion. Higher salaries will bring expert talent and backbone sufficient to resist the pressure brought to bear by large interests. As a matter of fact the first threat of a virile execution of the laws wipes out a considerable part of the tax dodging in a community.
There would also seem to be much virtue in the plan for the reduction of the tax rate advocated by the Ohio State Board of Commerce.[64] Given a community with a high general tax rate it may be the case, for example, that only about fifty per cent of true value is being returned. Everybody knows it; everybody is sneakingly ashamed of it. Still fundamental honesty is supposed to exist in the man who does not cut the percentage below say, forty; the really mean taxpayer is he who risks twenty-five per cent on what he feels obliged to return and conceals whatever he can into the bargain. Under such circumstances it is proposed to take the heroic step of reducing the tax rate to one-half its existing figure or even less.[65] If this can be done it is hoped that taxpayers can be induced to return their property at full value, and that much personal property will come out of the concealment into which it has fled under the menace of a high general property tax rate. In support of this argument cases are cited where a reduction of the personal property tax rate alone has brought in much larger returns and converted into a source of revenue a form of taxation which everywhere under high rates shows a tendency to dwindle to practically nothing.