CHICAGO occupies more newspaper and magazine space today than any other city in the world. But unfortunately (his generous publicity only reenforces the old maxim, “Happy the people whose history is least interesting to read,” for much of the publicity about Chicago is hostile, critical, or sensational; much of it has to do with gangs, rackets,” and “racketeers.” And yet, when a writer in a recent number of Harper’s undertakes to chronicle the number and varied activities of Chicago’s rackets, he omits what is probably the greatest of them all—the tax racket.
It has fallen to the writer to disclose some of the facts in regard to this racket, which, during the past year, has brought Chicago to the brink of receivership. In fact, it has required two special sessions of the Illinois Legislature and the heroic effort of a Citizens” Committee headed by Silas Strawn, including the raising of $74,000,000 by private subscription, to save the city from outright bankruptcy.
These untoward developments have focused an unfortunate amount of attention upon the tax system in Chicago and upon the facts disclosed with regard to its modes of operation. About the facts themselves there is no longer the shadow of a doubt. They are being presented at this moment in the Federal Court in Chicago; and altogether they present an exceedingly sombre picture of the finances and government of a great city. Those business and social leaders who attempt to dispose of them by calling them “growing pains,” attributable to the youth and newness of the city, to its frankness in displaying its own shortcomings, and so forth, or who attempt to offset these sinister conditions by pointing merely to the phenomenal physical growth of the city, are, like the proverbial ostrich, displaying more of their tailfeathers than their heads. Indeed, it is largely because so many of the city’s business leaders have retreated to this unseemly position that the city is governed so often by its tailfeathers rather than by its head.
But it should be said, likewise, that these conditions are not entirely peculiar to Chicago. They have existed in other cities in times past; most of the ingredients of the Chicago situation exist now in greater or less degree in other cities of the United States and nurture the possibilities of developing into a similar situation at any time. To those, therefore, who still believe in the potentialities of democratic government, the situation in Chicago is not a subject merely for denunciation or cynicism, but one for serious examination.
Needless to say, no serious student of political history will anticipate that this situation can be explained by any single “cause.” The problem cannot be dismissed with a reference to “corrupt government,” “ignorant voters,” or any such simple explanation. Widespread conditions such as these are generally the result of a variety of forces, and the situation in Chicago is made up of ingredients common to most municipal communities in the United States but concentrated here with unusual intensity.
In the first place, Chicago finds itself imbedded in a legal structure most of which, like the Ark, was constructed many years ago, for special purposes. Some of these purposes were legitimate, and some were not; but they all rode the Ark till it stranded in the summer of 1928. Three elements of this legal heritage particularly affect the tax system.
The first is the great variety of independent and overlapping jurisdictions that have been created within Chicago and Cook County, including the city “corporate,” the Board of Education, the County Board, the Sanitary District, and a confusing variety of park boards, “towns,” villages, school districts, mosquito districts, and other special jurisdictions. Many of these jurisdictions have been created merely for the purpose of inflating the borrowing power or of transferring valuable patronage from the city to the governor or other jurisdiction. This governmental confusion does not directly affect the tax administration, since the unit of assessment is the county. But it has disastrous effects upon governmental expenditure; it fosters the growth of inefficient and corrupt administration; and it is a powerful influence in putting unscrupulous groups in control of the various local governments, who are thus enabled to extend their control over the assessment administration.
The second legal element is the uniformity clause of the Constitution, which, in addition to other ills this clause is heir to, has contributed directly to the existing situation by requiring the assessment and taxation of personal property upon the same basis as real property. In the case of most forms of intangible property and of many other kinds of personal property, this is utterly impossible, and no pretense is made of assessing such property with any approach to generality. Nevertheless the power to assess it is lodged with assessing officials and places in their hands almost unlimited autocratic power for the promotion of personal and political ends. With real estate assessments down to a level of 85 per cent of actual value, the tax rates in Illinois have risen until they now range from 4 to 6 per cent. In Chicago they average closely around 5 per cent. What greater control over a competitive situation could any monopoly wish than to have the power to exempt the capital and investments of one group entirely from taxation and to impose a tax of 5 per cent on another? A 10 per cent tax wiped out the issue of bank notes by the state banks; a 5 per cent tax would probably have been sufficient; and that is about the tax rate that assessing bodies, under the present personal property tax, now have the practical option of levying or not levying upon capital stock and intangible property. The authority thus conferred increases enormously the autocratic powers possessed by assessing officials, makes the control of these offices the object of greater effort on the part of political organizations, and thereby contributes very materially to the conditions existing in Chicago.
But the legal element that has contributed most decisively to the present situation is the system of assessment administration, created by legislation of dubious parentage in 1898. Much superfluous moralizing may be avoided by recognizing that to a large extent the conditions disclosed in Chicago are only the logical result of an utterly impractical system of administration. This system embraces thirty local assessors, a Board of Assessors composed of five members, and a Board of Review composed of three members. These officials are all elective, possessed of overlapping powers, virtually independent of each other, and numerous enough to pass the blame for anything that occurs back and forth among themselves indefinitely. It is a system characterized by absence of scientific method, duplication of function, diffusion of responsibility, and secrecy of operation.
We may summarize the essential legal “ingredients” in the situation, then, by saying that Chicago finds itself at the moment enmeshed in a system of decentralized, overlapping, conflicting municipal governments, which have been set up at various times since 1837; imbedded in a constitutional mandate, enacted in 1818, when Chicago’s sky line was nothing but a horizon on the prairie, which injects into the tax system all of the vicious elements associated with the present personal property tax; and subjected to an assessment administration, established in 1898, which specifically fosters inefficiency and irresponsibility.
This governmental structure has come down from the past; but one of the chief obstacles to its alteration and improvement lies in the political conditions that have prevailed in recent years. The level of politics and government, like other things, rises and falls over long periods of time. It would not be difficult, for example, to plot a “curve” of our national government over the past century and a half, with its long upward swings and downward dips, and with pretty general agreement at least as to the location of its “peaks” and “bottoms.”
In Illinois and Chicago the curves of both state and municipal government have sunk in recent years to the lowest levels since the Civil War, if not for a longer period. The scandals connected with recent state and city administrations, the record of the Sanitary District, the buffoonery associated with the Board of Education, the indictment of judges, the conviction and penal sentence of public officials, and the whole crime wave are only the more notorious episodes of the current status. They will not be discussed here; suffice it to say that under such conditions it would be a miracle if any system of taxation produced results greatly different from those that have been shown to exist.
No such miracle has occurred. On the contrary, we find, as we should expect, that the tax system has become the mere adjunct of whatever political organization is in power. Indeed, the most disheartening thing about it is not so much the fact itself but the frankness with which the fact is avowed by political representatives. Precinct captains and ward committeemen openly boast of their ability to “take care” of their constituents; and in general the representatives of political organizations throughout the city appear to take it as a matter of course that a part of their regular duties consists in making the necessary adjustments in the assessment of property.
The result is that, in addition to a regularly constituted board of assessors and board of review, Chicago has an extra-constitutional, ex officio board of revision, consisting of the representatives of party organizations throughout the city, who are engaged every day of the year, without regard to constitutional requirements or quadrennial limitations, in the business of revising assessments to suit the exigencies of party organization. But the most sinister consequence of it all is not so much the baneful character of the political organizations in control of the government as the fact that these organizations are built to a considerable extent upon the present tax system, derive their revenues and resources therefrom, and are therefore vitally dependent upon its continuance. The reader will apprehend how much of an obstacle this represents in the way of any proposed change in the present system of assessment and taxation.
One would suppose, in view of what the city has suffered financially and otherwise from its present tax system, that the business and financial interests and property owners as a whole would be overwhelmingly in favor of substantial changes in the system. But as a matter of fact there are large economic interests that are tied up in one way or another to the present régime— interests which may be said to hold equities of various types in the present tax system.
In the first place, there are the “vested rights” of members of the Board of Review, Board of Assessors, the thirty local township assessors, and other officials connected with the tax system, in the various offices to which, they have succeeded in the regular, processes of party organization. This vested interest has been advanced by some of the highest officials in the state as a serious consideration against any legislation that would deprive tax officials of the offices they now hold. The Speaker of the Assembly himself has asserted that it would be utterly unreasonable to ask a Republican legislature to abolish Republican boards and offices, the implication being that it would be unreasonable to ask the present Republican administration to act contrary to its partisan interest, however desirable or necessary it might be from the standpoint of the public.
But more ominous than the frank partisanship implied is the perfectly sincere and spontaneous assumption that a certain element of vested right inheres in these official positions. The explanation is not far to seek and, indeed, has been avowed with almost equal frankness. These offices have been conferred in the regular process of party organization, in return for services the incumbents will thereby be in position to render the political organization. This involves on the part of t he candidate the expenditure of large sums in connection with nominations and elections; and, more than this, it involves the assumption of a great variety of obligations, personal and otherwise. To deprive an incumbent of office before he has had opportunity to liquidate these obligations (some of which are continuing obligations) is worse than merely violating political understandings; it is like deliberately forcing an associate into bankruptcy. This is the nature of the vested interest which tax officials hold in the present system of assessment.
In any appraisal of the pecuniary value of this vested interest, the reader will understand that the salaries associated with the various offices are a negligible item. It is the indirect emoluments that figure, and they must amount to millions of dollars.
Outside of this close circle of vested interest, there are two wider circles of closely allied interests. The first is the zone of political “tax-fixing,” delicately referred to in the present trial of a member of the Board of Assessors in the Federal Court, when the prosecuting attorney announced to the court that one of the defendant’s sources of income would be shown to be “what is commonly known in Chicago as fixing taxes.” This zone embraces precinct captains, ward committeemen, and a whole hierarchy of party representatives. Prior to the recent reassessment ordered by the State Tax Commission, one could sit in the offices of the Board of Review and the Board of Assessors and see these men come in with their pockets bulging with the crumpled tax bills of constituents to be “fixed.”
Immediately outside of this circle is the still wider circle of allied interests made up of private and professional “tax-fixers,” whose methods and activities are too varied to be discussed in the space of this article and probably too well known to require discussion.
Outside of these three circles of rather special interests is the great circle of property interests that benefit from the present system. This includes, in the first place, entire districts which have been favored with low rates of assessment. In this circle will be found the whole of Calumet, industrial districts in the southern and southwestern sections of the city, and many of the “country” towns in Cook County outside of Chicago, including a number of the wealthier suburban districts along the North Shore.