State Looteries

Historical Continuity, Rearticulations of Racism, and American Taxation

Kasey Henricks, David G. Embrick

• Publisher: Routledge
• Year: 2016
• Topic: Social Sciences
• eBook ISBN:
  9781317970781
• Subtopic: Ethnic Studies
• Index: Social Sciences

Fifty years ago, familiar images of the lottery would have been strange, as no state lottery existed then. Few researchers have uncovered the obscure role lotteries play in the changing composition of American taxation. Even less is known about what role race plays in this process. More than simply taxing those on the social margins, the emergence of state lotteries in contemporary American history represents something much more fundamental about state fiscal policy. This book not only uncovers the underlying racial factors that contextualize lottery proliferation in the U.S., but also reveals the racial consequences that lotteries have in terms of redistributing tax liability.

1 “No Taxation Without Discrimination”

“The Lottery Tax,” State Finance, and Racism

“Racism is like a Cadillac, they bring out a new model every year.”

~Malcolm X¹

The above quote is one Malcolm X would often tell his followers. Although newer models look much different than older ones, the fact of the matter is that a Cadillac is still a Cadillac. Likewise, racism is still racism, regardless of how it has changed throughout the years. Time and time again, when minority groups gain access to public services, white backlash follows suit. One instance in which this occurred includes the post-bellum era when newly freed black slaves entered into developing public schools. White communities banded together to oppose black education and engage in political tactics that hoarded white resources from funding black education. Another includes the civil rights era, when de jure segregation was outlawed and federal orders mandated schools to integrate. Ruby Nell Bridges Hall in Louisiana, the courageous Little Rock Nine in Arkansas,² Rita Buchanan and Linda McKinley in Nashville, Tennessee, and countless others across the U.S. witnessed white outrage that ranged from derogatory racial remarks to racial terrorism to tax revolts.

Taxes are often seen as the resources making public schools possible, and thus, they are consistently singled out as a symbol of angst by white reactionary movements. Perhaps we should expect as much when considering the words of Eduardo Bonilla-Silva (2001), “fundamental changes in racialized social systems are accompanied by struggles that reach the point of overt protest” (p. 43). Though this point has been long stressed by those looking at overt protests spearheaded by people of color (e.g., Franklin and Moss 1947), we want to emphasize new ways in which dominant group members reassert their interests to alter tax practices during eras of changing racial dynamics.

Taxes say something about the ever-changing structures of social life. They offer a blueprint, in both symbolic and concrete terms, for uncovering the primary arrangements in society—racial hierarchy included. State Looteries revisits some formative episodes of tax rebellion throughout American history, as well as other moments that many may have forgotten or never known. In this book, we devote most our attention to dissecting the consequences these rebellions have caused; consequences like the proliferation of lotteries and the fundamental reconfiguration of America’s tax code. The intent is to uncover how racialized tax practices change in patterned yet resilient ways. Soon after the Civil War ended, as Eric Foner (1988) points out, for example, a wave of tax revolts proliferated in the South. Self-proclaimed white “Redeemers” were angered to see their own tax dollars spent on a welfare state they perceived to be as extravagant as it was coercive (Du Bois 1910).

Before His Time, Early Observations on Racialized Taxation

A young W.E.B. Du Bois and his colleagues (1901) were the first, and still among the only, to identify racialized processes of hoarding and redistribution via taxation:

“We congratulate the South on resisting … the many millions it has spent on Negro education. But it is only fair to point out that Negro taxes and the Negroes’ share of the income from indirect taxes and endowments have fully repaid this expenditure, so that the Negro public school system has not in all probability cost the white taxpayers a single cent since the war”

(p. ii, emphasis original).

Despite this observation, Du Bois never undertook a systematic study of these revolts. However, some historians, like John Hope Franklin ([1961] 1994), J. Mills Thornton (1982), and others, have offered insights on the matter. They detail various ways that whites collectively organized and retaliated against a scallywag, carpetbagger, and a black Republican Party.

Fed up with the idealism of emancipation, as well as an “imposter,” bayonet rule government that vastly expanded the state’s size and scope, white Redeemers rebelled with legal reforms to roll back Reconstruction’s accomplishments (Franklin [1961] 1994). These included instituting new taxes, establishing universal education, extending social services, and investing in infrastructure (Du Bois 1910, [1935] 1992; Kousser 1980; McMillan [1955] 1978; Woodward 1971). Among the new taxes levied were those on property, which, for the most part, only whites possessed (Woodward 1971). In some states, property taxes increased four- to eightfold during Reconstruction (Thornton 1982; see also Du Bois 1910), and debt more than quadrupled (McMillan [1955] 1978). White Southerners confronted not only losing the war, but living in a devastated economy of evaporated wealth (i.e., former slaves) and worthless currency.

Meanwhile the Reconstruction government expected them to pay taxes that financed services such as education for emancipated slaves, as well as to sit idly by while their perceived unequals gained legal protections (e.g., Civil Rights Act of 1866, Congressional Reconstruction Acts of 1867), such as the right to create and enforce contracts, purchase and sell property, and participate in court proceedings (Foner 1988). From a Redemption standpoint, Reconstruction had surpassed its point of excess and many whites aspired to reclaim their “rightful” social standing (Franklin [1961] 1994). Some wore sheets and practiced physical and mental violence. Others wore suits and preferred peaceful exploitation. It was exploitation, nonetheless. As the federal government was turning its back on Reconstruction, and eventually withdrawing federal troops from the South, Redemption campaigns began retrenchment strategies state-by-state to recapture political control and bring about an idealized racial state. They accomplished this feat by many measures, through black voter suppression with poll taxes, voter identification laws, gerrymandering, and replacing elections with appointments, among a host of other tactics (Rogers 1970). Once political control was in hand, reforming the tax code was a logical starting point for change.

Racial Retrenchment in the Tax Code under Redemption

During the U.S. Supreme Court’s landmark case Oliver Brown et al. v. Board of Education of Topeka, et al. (1954), numerous whites spoke in favor of preserving segregated schools. They presumed that black folks did not pay enough taxes to get a say in government spending, and therefore fell outside the burdens and benefits of citizenship (Walsh Forthcoming). These types of narratives are old hat and echo sentiments present in the late 19th century. “[R]edemption governments, often describing themselves as the ‘rule of the taxpayer,’ ” writes C. Vann Woodward (1971), “frankly constituted themselves champions of the property owner against the property less and allegedly untaxed masses” (p. 59). Making these claims, white Redeemers pursued retrenchment strategies of tax reform that hoarded what resources they possessed, redistributed capital others had accumulated, or sometimes a hybrid of both.

In Alabama, for example, a reclaimed Democratic gubernatorial office moved to replace the 1868 Constitution (McMillan [1955] 1978). Leaders of the movement, like Leroy Pope Walker, denounced the document as:

a piece of unseemly mosaic, composed of shreds and patches gathered here and there, incongruous in design, inharmonious in action, discriminating and oppressive to the burthens it imposes, reckless in the license it confers on unjust and wicked legislation, and utterly lacking in every element to inspire popular confidence and the relevance and affection of the people

(“Journal of the Convention” 1875: 5).

Claiming the mantra of “reverse discrimination,” Walker and others called for a constitution that acknowledges “the perfect political and civil equality of all men, of whatever race, color, or previous condition” as well as limit government’s fiscal capacity because the “power to tax is power to destroy” (“Journal of the Convention” 1875: 5–6). Another leader, Francis Strother Lyon, claimed,

The highest aim of the late convention was to insure the safety of the people against the possibilities of extravagance and corruption

(“Journal of the Convention” 1875: 169).

Redeemers aimed to return the out-of-touch, extravagant, and crooked fiscal state to “the people” of Alabama and protect their interests from overreaching BIG government (Du Bois 1910).

Paralleling events that transpired in California nearly a century later (Martin 2008), Alabama’s property tax rates were reduced across the board and constitutional obstacles to tax increases were put in place. These feats were accomplished by replacing the Reconstruction Alabama Constitution of 1868 with a Redeemer Alabama Constitution of 1875, which was backed by the white supremacist Democratic Party and a reclaimed gubernatorial office (McMillan [1955] 1978). The newly enacted constitution segregated schools (Article XIII), abolished the state’s board of education (Article XVII), placed a debt ceiling on spending (Article XI), required a two-thirds majority for appropriations (Article III), and limited the tax powers of state, county, and municipal governments (Article XI). The changes had a direct effect on education finance, with funds reducing from $484,000 to $348,891, or 27.9 percent, during the 1875 Constitution’s first year in effect (McMillan [1955] 1978). Inadvertently, these reforms rolled back government’s size and scope, and entrenched a tax structure for decades to come through procedural barriers yet to be fully overcome (Newman and O’Brien 2011).

Contrary to Alabama, other states moved to expand rather than contract their tax structure. In Kentucky (1874), legislators enacted a “uniform”³ system of school finance. What came with it was a number of tax laws that promoted white interests at the expense of blacks. “The sources of the revenue for the schools” writes Gilbert Thomas Stephenson ([1910] 1969), “were (1) a tax of twenty cents on the hundred dollars upon the property of Negroes, (2) their poll taxes, (3) their dog taxes, (4) taxes on deeds, suits, and licenses collected from colored persons, (5) fines, penalties, and forfeitures collected from them, (6) sums received from Congress, provided the apportionment to each colored child did not exceed that to each white child, and (7) gifts, donations, and grants” (p. 197). These laws were later ruled unconstitutional in 1885 (see Dawson v. Lee, 83 Ky. 49), but they nonetheless represent a pattern that proliferated across the South, and later in other regions, whereby people of color were held liable to pay for their own “public” benefits (Du Bois [1935] 1992).

Historical Echoes: The Continuities of Race-Driven Tax Revolts

Were W.E.B. Du Bois alive to witness the emergence of lotteries as part of modern state finance, we doubt he would be surprised. Many of the same trends he identified in the 1870s and 1880s would repeat themselves throughout the nation a century later. Soon after the formal end of Jim Crow, white-led tax revolts emerged in California and then most states. These reactionary movements were largely responding to growing militancy among the Black Freedom Struggles. As Kenneth Neubeck and Noel Cazenave (2001) point out:

By the mid-1960s, it was increasingly clear to most African Americans that gaining fundamental legal civil rights in the South was not enough. The primary goal of the civil rights movement began changing to economic equality with whites for African Americans everywhere, North and South. This goal threatened the race-based economic privileges enjoyed by all whites

(p. 120).

This is among the reasons why, argue Thomas Byrne Edsall and Mary Edsall (1991), whites responded during the 1970s with racial discourse that came to embody all that was wrong with unbalanced budgets, bureaucratic incompetence, programs in the war on the racialized poor, school desegregation efforts, and a coercively redistributive tax state.

Growing white animosity drove them to rebel against the state for what they saw, once again, as policies that pandered to minorities. Clarence Lo (1990) points out that many whites organized to cut government “waste” by slashing taxes seen as undermining and destroying their quality of life. Government initiatives, like integration mandates in public schools, became viewed as costly programs that undercut white interests paid out of pocket by their own “hard-earned tax dollars.” An expanding population, comprised by mostly Latina/o and Asian immigrants, further stroked white anxiety. Words like “tax revolt” had become, pointed out Senator George McGovern (1978), codespeak for race. These “mad as hell” white folks retaliated by taking to the ballot box, and in the process, they fundamentally reformed state tax codes. Through the passage of state-level amendments that set up institutional barriers to progressive taxation (e.g., tax limitations, supermajority requirements), ones that emulate Redeemer constitutions, they all but forced politicians to entertain alternative ways to keep state finances in order.

Enter the lottery tax.

Taxation, a Neglected Subject of Study

Despite the practical and substantive importance of taxation in people’s everyday lives, few contemporary scholars, including social scientists and even those in sociolegal studies, have examined this presumably dreary and lifeless topic as a central subject of study. Charles Tilly (2009) offers three reasons why scholars need to pay attention to taxation:

First, over the long run it constitutes the largest intervention of governments in their subjects’ private life, so much so that the history of state expansion becomes a history of violent struggles over taxes, and the history of state consolidation becomes a history of tax evasion by those who have guile and power to frustrate the fisc. Second, follow the money: the circulation of resources from subjects to government-initiated activities provides a sort of CT scan for a regime’s entire operation. Third, it dramatizes the problem of consent [regarding the “Social Contract”]

(p. xiii)

As a whole, we as scholars have ignored the broad implications of taxation and how it cuts across a seemingly endless list of institutional domains. All these oversights occur, argue Isaac William Martin, Ajay Mehrotra, and Monica Prasad (2009), despite the fact that it is through taxes that group relations are formalized (see also Martin and Prasad 2014).

Matters of the individual and society, bureaucratic administration, distributions of public and private capital, and, what is most important to this study, the reproduction of racial inequality all run through taxation. For these reasons, Joseph Schumpeter ([1918] 1991) wrote:

The spirit of a people, its cultural level, its social structure, the deeds its policy may prepare—all this and more is written in its fiscal history, stripped of all phrases. He who knows how to listen to its message here discerns the thunder of world history more clearly than anywhere else

(p. 101).

Only until recently, this call for “fiscal sociology” has mostly fallen on deaf ears. The study of taxation has been left to those mostly in the realm of applied research. Centers like the Center on Budget and Policy Priorities, Citizens for Tax Justice, Council On State Taxation, Institute on Taxation and Economic Policy, National Taxpayers Conference, Tax Foundation, and Tax Policy Center have been the ones to address a subject matter that affects most everyone.

Under what has been labeled “the new fiscal sociology,” some notable scholars have taken up Schumpeter’s call to unmask “the thunder of world history” through the study of taxation. This nascent movement has yielded numerous insights. James O’Connor ([1973] 2002), for example, identifies how budgetary shortfalls in government are inevitable under capitalism, since the state must simultaneously perform contradictory functions of maintaining business profit and preserving social harmony. Kimberly Morgan and Prasad (2009) offer a comparative historical analysis of France and the United States to show what role taxation has played in shaping these countries’ different trajectories of state development. Lo (1990) and Martin (2008) trace the nexus between taxation, social movements, and constitutional change by illuminating the bottoms-up reactionary origins of the 1970s property tax revolts in California. Katherine Newman and Rourke O’Brien (2011) offer a historically comparative focus that contrasts how tax regimes of the South (and later the West) have diverged from all other regions, since this region not only has the highest regressive tax system but the highest concentration of poverty in the nation. One notable omission from much research within “the new fiscal sociology,” with some exception, regards matters of race, racism, and racial conflict.

Towards a New Fiscal Sociology of Race, Racism, and Racial Conflict

Whereas most of the af...

Table of contents

• Cover
• Title
• Copyright
• Dedication
• Contents
• List of Figures
• List of Tables
• Preface: Bound for Glory, A Word of Thanks
• Foreword: Racialized Taxation: Furthering Racialized Social Systems Theory
• Acknowledgments
• Introduction: Black Dollars, White Pockets: Looting by Another Name
• 1 “No Taxation Without Discrimination”: “The Lottery Tax,” State Finance, and Racism
• 2 Lottery Studies and Their Discontents: A Critical Review
• 3 “Mad as Hell” Tax Rebels and a Changing Tax Composition: A Historical Corrective for How State Lotteries Emerged
• 4 Dissecting the Evolution of Lotteries and Their Racial Implications
• 5 Who Plays? Who Pays? A Case Study of Illinois
• 6 The Hidden Mechanisms of Racism: Placing Lotteries in Broader Contexts of How Race Works in America
• Postscript: Going All In: Available Policy Alternatives
• Appendix A: Supplementary Material
• Appendix B: Methods
• References
• Index