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"We Want Our Money Back!": the Story of the National Farmers Process Tax Recovery Association Jean Choate Iowa State University

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Iowa State University Capstones, Theses and Retrospective Theses and Dissertations Dissertations 1992 "We want our money back!": the story of the National Farmers Process Tax Recovery Association Jean Choate Iowa State University Follow this and additional works at: https://lib.dr.iastate.edu/rtd Part of the Agricultural Economics Commons, Economics Commons, and the United States History Commons Recommended Citation Choate, Jean, ""We want our money back!": the story of the National Farmers Process Tax Recovery Association " (1992). Retrospective Theses and Dissertations. 9825. https://lib.dr.iastate.edu/rtd/9825 This Dissertation is brought to you for free and open access by the Iowa State University Capstones, Theses and Dissertations at Iowa State University Digital Repository. It has been accepted for inclusion in Retrospective Theses and Dissertations by an authorized administrator of Iowa State University Digital Repository. For more information, please contact [email protected]. INFORMATION TO USERS This manuscript has been reproduced from the microfilm master. UMI films the text directly from the original or copy submitted. Thus, some thesis and dissertation copies are in typewriter face, while others may be from any type of computer printer. The quality of this reproduction is dependent upon the quality of the copy submitted. Broken or indistinct print, colored or poor quality illustrations and photographs, print bleedthrough, substandard margins, and improper alignment can adversely affect reproduction. In the unlikely event that the author did not send UMI a complete manuscript and there are missing pages, these will be noted. Also, if unauthorized copyright material had to be removed, a note will indicate the deletion. Oversize materials (e.g., maps, drawings, charts) are reproduced by sectioning the original, beginning at the upper left-hand corner and continuing from left to right in equal sections with small overlaps. Each original is also photographed in one exposure and is included in reduced form at the back of the book. Photographs included in the original manuscript have been reproduced xerographically in this copy. Higher quality 6" x 9" black and white photographic prints are available for any photographs or illustrations appearing in this copy for an additional charge. Contact UMI directly to order. University Microfilms International A Bell & Howell Information Company 300 North Zeeb Road, Ann Arbor Ml 48106-1346 USA 313/761-4700 800/521-0600 Order Number 9223921 "We want our money back!" The story of the National Farmers Process Tax Recovery Association Choate, Jean Marie, Ph.D. Iowa State University, 1992 Copyright ©1992 by Choate, Jean Marie. All rights reserved. UMI SOON.ZeebRd. Ann Arbor, MI 48106 "We want our money back!" The story of the National Farmers Process Tax Recovery Association by Jean Choate A Dissertation Submitted to the Graduate Faculty in Partial Fulfillment of the Requirements for the Degree of DOCTOR OF PHILOSOPHY Department: History Major; Agricultural History and Rural Studies Approved : Members of the Cqiranittee; Signature was redacted for privacy. of Major Wank Signature was redacted for privacy. Signature was redacted for privacy. For the Major Department Signature was redacted for privacy. For Graduate College Iowa State University Ames, Iowa 1992 Copyright Jean Choate, 1992. All rights reserved. li TABLE OF CONTENTS Page CHAPTER I. INTRODUCTION; THE SUPREME COURT STRIKES DOWN THE PROCESSING TAX 1 CHAPTER II. THE "LONG DRAWN FIGHT": THE NATIONAL FARMERS PROCESS TAX RECOVERY ASSOCIATION IN IOWA 15 CHAPTER III. REACHING INTO MINNESOTA 53 CHAPTER IV. D. B. GURNEY'S CAMPAIGN 78 CHAPTER V. ORGANIZING ILLINOIS 102 CHAPTER VI. NEBRASKA, MISSOURI, KANSAS, THE MISSING STATES 126 CHAPTER VII. "THE GREATEST LEGALIZED STEAL IN AMERICAN HISTORY" 146 CHAPTER VIII. "A PROGRAM FOR THE FARMERS" 176 CHAPTER IX. "THE LEGISLATIVE REMEDY" 223 CHAPTER X. CONCLUSION 270 BIBLIOGRAPHY 281 ACKNOWLEDGEMENTS 293 1 CHAPTER I INTRODUCTION Speaking before a packed courtroom on January 6, 1936, Supreme Court Justice Owen Roberts read the court's decision in the case of U.S. v. Butler, which challenged the constitutionality of the New Deal Agricultural Adjustment Act. Although the decision was to affect millions of American farmers, the case which brought on the decision came from a suit between the federal government and eastern business interests. The Federal government had brought legal action against the receivers of a bankrupt New England textile company (Butler et al.) requiring them to pay a processing tax on cotton. They refused, lost in the District Court but won on appeal to the Court of Appeals. Then the Supreme Court decided to hear the case.i In late November of 1935 the lawyers for the cotton mills and their receivers filed their brief. Their arguments were along these lines: that Congress exceeded its limited powers and trespassed upon the powers reserved to the states in authorizing and applying the taxes under the Agricultural Adjustment Act. The processing tax was a violation of the fifth amendment, because it taxed one class for the benefit of another. The AAA was "invalid in that it delegates legislative power to the secretary of agriculture."^ 2 During this time many processors had begun to put their taxes in special court supervised accounts. Some company officials felt in the event of a decision against the processing tax, they would be able to recover their processing taxes more quickly from court accounts than if they had been paid into the treasury. Payers of processing taxes, according to some estimates, had recently diverted some 70 percent of the processing taxes into court registries and only 30 percent of the taxes were being paid into the treasury. Some estimates of the amount of taxes impounded ran as high as $120,000,000.^ The possibility of the voiding of the AAA had been discussed within the Department of Agriculture. Department of Agriculture Secretary Henry A. Wallace, when questioned by reporters about the possible outcome of an adverse Supreme Court decision, replied that if the Supreme Court found all or part of the AAA unconstitutional, "I have no doubt we will have something to offer." This, and other evidence suggests that officials in the Department of Agriculture had been considering alternative action if the AAA was declared unconstitutional.* In early December, the lawyers for the cotton mills and the lawyers for the federal government began their oral arguments before the Supreme Court justices.5 Two hours were allowed for each side to state their position. U.S. Solicitor General Stanley Reed presented the case for the AAA and former Republican Senator from Pennsylvania, George Wharton Pepper, argued for the textile manufacturing company interests. Supreme Court Justices asked pointed questions of the lawyers. Reed was asked about 3 Congressional delegation of tax powers by some of the more conservative justices of the Court, including Justices James McReynolds, Pierce Butler, and George Sutherland. On the other hand. Justices Louis Brandeis and Harlan Stone, who were generally considered liberals, asked questions which seemed more friendly to the government position. Solicitor Reed argued that the processing taxes were for revenue and not for regulation.® Some people guessed that the Supreme Court might issue a split decision. McReynolds, Butler, and Stone seemed antagonistic in their questioning. Brandeis and Cardozo were more friendly. The two men who often had held the balance of power in the court, Hughes, and Roberts, were silent.^ On the second day of arguments, Pepper, the counsel for the Massachusetts cotton mills had shouted that the Agricultural Adjustment Act was forcing the farmer to "sell his freedom for a mess of pottage." He also prayed that God would avert the "regimentation" of America. Government defense, Solicitor General Reed, had said that the AAA was needed for the "general welfare." When he went on to argue another case before the Court, he became ill and collapsed. Justice Hughes adjourned court fifteen minutes early.® Later that day the government rested its case. The Supreme Court justices then deliberated and later recessed for Christmas. Observers hoped that the court would announce its decision when it met again on January 6, 1936. During that recess editors across the country speculated as to what the decision of the court would be. The 4 editors of Business Week suggested that the Court "will probably sustain the act, and if it does invalidate it, the reason assigned will probably be of a sort that will permit a quick remedy by the Congress in the early weeks of the session."® While the editor of The Daily Republic, a South Dakota newspaper, feared that the Supreme Court would decide against the AAA and commented that "A decision seriously crippling the AAA would be a disaster to this section of the nation."^" When the justices filed into the courtroom at noon on January, 6, 1936, the room was packed, "jammed to capacity, and outside long lines were waiting.The clerk called the room to order and ended with the refrain, "May God save the United States." The spectators resumed their seats. Within eight minutes Justice Owen Roberts fixed his glasses on his nose and began to read the majority opinion of the court in the case of U.S. V. Butler, the court's long awaited decision on the constitutionality of the AAA. The audience listened carefully, trying to catch a glimpse of what the decision would be. First, Roberts began by reviewing the account of Hamilton's broad view of the powers of Congress to tax and spend for the general welfare. This was contrasted with Madison's more narrow view of these powers. When Roberts seemed to be focusing on Hamilton's view, his hearers believed that the AAA was safe under this broader interpretation. Roberts did not deny that the federal government had the power to tax for regulatory purposes if the purposes were within the powers of the federal government.
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