Throughline: The Tax Collector
Hosted by Rund Abdelfatah and Ramtin Arablouei | NPR | Released May 15, 2025
1. The Valentine's Day Massacre and Organized Crime
00:29 – 02:10
The episode opens with a chilling recount of the infamous Valentine's Day Massacre on February 14, 1929. Historian Joe Thorndike narrates the event where George "Bugs" Moran, a prominent Chicago gangster, and his men were brutally gunned down in a garage by assailants masquerading as police officers. Despite extensive investigations, the culprits remained elusive, fueling speculation about the involvement of Moran's rival, Alphonse "Al" Capone.
Joe Thorndike sets the scene:
"Seventy rounds later, Moran's men lie slumped on the ground in a pool of their own blood. The shooters get back in the Cadillac and drive away."
(00:29)
2. Prohibition and the Rise of Al Capone
02:10 – 04:08
Ramtin Arablouei and Paul Camacho, a retired special agent for the IRS Criminal Investigation Division, delve into how Prohibition (enacted in 1920) inadvertently fostered a lucrative black market for illegal alcohol, paving the way for organized crime to flourish. Chicago, with its central location and corrupt law enforcement, became a hotspot for bootlegging operations led by Capone, who became the face of the criminal underworld.
Paul Camacho emphasizes Capone's dominance:
"Turned by police. The most dangerous man alive was sought over the nation today."
(02:05)
3. The Birth of the IRS Intelligence Unit and the Pursuit of Capone
04:21 – 08:36
As the gangsters grew more untouchable, the federal government sought alternative methods to curb their influence. Enter Elmer Irie, a dedicated postal inspector recruited to lead the newly formed IRS Intelligence Unit. Under his leadership, the IRS shifted from a traditional tax-collecting agency to a formidable force against tax evasion and corruption.
Joe Thorndike introduces Elmer:
"Elmer's middle name was Lincoln, and yes, he was named after that Lincoln. His dad was a huge fan. Elmer would be too."
(09:08)
Historian adds context:
"The IRS is a law enforcement agency."
(05:13)
4. Prohibition, Government Corruption, and IRS Integrity
08:36 – 17:34
Under Prohibition, the demand for illegal alcohol skyrocketed, leading to rampant corruption among enforcement agents. Elmer Irie spearheaded efforts to root out corruption within the Prohibition Service, demonstrating his commitment to integrity by firing and prosecuting numerous corrupt agents.
Elmer Irie reflects on resistance:
"They can't do this to us. Roper nodded and answered, they certainly can't."
(15:05)
"I'm afraid you're stuck. Yes, I guess we are stuck, Mr. Roper. No, Mr. Ivory, we're not stuck. You're stuck. Me? I'm resigning."
(15:19)
5. Tax Evasion Lawsuit and the Strategy Against Capone
17:34 – 21:49
A pivotal Supreme Court ruling in 1927 declared that individuals must report and pay taxes on illegal income. This legal groundwork empowered Elmer Irie to target high-profile criminals like Al Capone through tax evasion charges. Through meticulous paper trail analyses and undercover operations, Irie's team built a compelling case, ultimately leading to Capone's conviction.
Paul Camacho highlights the outcome:
"Capone gets convicted of tax evasion."
(20:07)
6. The New Deal, Taxation, and Political Implications
21:49 – 35:31
With the onset of the Great Depression and the election of Franklin D. Roosevelt, the federal government's role expanded dramatically through the New Deal. Roosevelt leveraged the IRS's enhanced capabilities to implement widespread tax reforms aimed at redistributing wealth and funding extensive public works programs. This era marked a significant transformation of the IRS from an obscure agency to a central pillar of federal policy enforcement.
Joe Thorndike summarizes Roosevelt's impact:
"For Roosevelt, the income tax was symbolic, a way to rebuild trust with the public and restore that feeling people had when Elmer Irie took down Capone, that everyone was expected to pay their fair share."
(32:41)
Historian discusses the New Deal's tax policies:
"And so in 1935, Roosevelt started to gear up for his first reelection campaign... the wealthiest of the wealthy were paying."
(35:00)
7. Expansion of the IRS and Modern Legacy
35:31 – 46:34
The New Deal era entrenched the IRS as a vital entity in American governance, responsible not just for tax collection but also for enforcing economic regulations. The introduction of tax withholding during World War II further streamlined tax collection, making it a seamless process integrated into everyday life. However, this expansion also sowed seeds of distrust and resistance, exemplified by figures like Vivian Kellam, who vehemently opposed compulsory withholding and the burgeoning role of government.
Historian explains tax withholding:
"And so in 1943, they thought, hey. Let’s put withholding in place because then we'll get it before the taxpayer ever earns it."
(45:29)
Vivian Kellam's dissent:
"Withholding was, quote, a deliberate plan to keep the system of free enterprise from surviving."
(47:14)
8. War Financing and Tax System Innovations
46:34 – 52:07
World War II necessitated massive government spending, leading to innovative tax strategies like the Victory Tax. This period saw a dramatic increase in income tax participation, with the IRS playing a critical role in funding the war effort. The introduction of withholding taxes made income tax collection more efficient and ingrained tax compliance into the American workforce.
Joe Thorndike on the Victory Tax:
"Victory Tax plan adopted. All individuals earning more than $12 a week affected the Baltimore Sun."
(42:22)
Historian on mass taxation:
"In 1939, only about 5% of American workers were paid income tax. By the time Victory Tax came along, it had risen to 75%."
(43:12)
9. Opposition, Legacy, and Modern Reflections
52:07 – End
Post-war America grappled with the expanded role of the IRS and government. While the agency had solidified its role in tax enforcement, incidents of political abuse and public distrust emerged. The legacy of figures like Elmer Irie contrasts sharply with modern challenges faced by the IRS, including budget cuts and political pressures. The episode concludes by reflecting on the delicate balance between effective tax collection and maintaining public trust.
Lawrence Reed offers a philosophical perspective:
"Taxes are the price we pay for civilization... The problem has been throughout the ages that government doesn't know when to quit."
(53:18)
Jason Scott Smith connects historical events to contemporary issues:
"There are plenty of Americans that are upset... origins of the new right really do lie in the 1930s and the kind of business reaction to the power of the New Deal."
(51:16)
Final Reflections:
"And without an Elmer Irie in the picture, someone to be the trustworthy face of the government. Building that goodwill has proven difficult for the agency entrusted with our taxes."
(51:56)
"In the century since, the IRS has been embroiled in scandals, political retribution, and not everyone is always paying their fair share."
(52:32)
"But this imperfect system is what helps keep the lights on, the roads operating, the water running."
(53:14)
Notable Quotes:
-
Paul Camacho:
"Nearly all men can stand adversity, but if you want to test a man's character, give him power."
(09:31) -
Elmer Irie:
"I'm afraid you're stuck. Yes, I guess we are stuck, Mr. Roper. No, Mr. Ivory, we're not stuck. You're stuck. Me? I'm resigning."
(15:19) -
Lawrence Reed:
"But once he took office, the kinds of advisors he listened to were the ones telling him that, no, we've got to go whole hog for as much government spending and relief programs as we can."
(28:35) -
Jason Scott Smith:
"The New Deal is trying to save capitalism from the capitalists."
(29:48)
This episode of Throughline masterfully intertwines the narrative of organized crime during Prohibition with the evolution of the IRS and federal taxation in the United States. By highlighting pivotal figures like Elmer Irie and Al Capone, the podcast sheds light on how tax policy became a tool for enforcing justice and shaping the modern American government. The journey from the streets of Chicago to the halls of power illustrates the profound impact of taxation on society, governance, and public trust.