The Marihuana Tax Act of 1937

By David Jenison

The Pure Food and Drug Act of 1906 set the stage for cannabis restrictions, but the Marihuana Tax Act of 1937 marked the start of full-scale prohibition. The law did not explicitly ban cannabis in its wording, but that was clearly the intent. In the 1930s, the Treasury Department, run by the mega-rich Andrew Mellon as Secretary, determined that it could use the taxing power of the federal government to prohibit products he deemed problematic. By creating overly excessive taxes, the laws could create de facto prohibition for everybody but the wealthy. Herman Oliphant, the Treasury’s general counsel, employed this tactic with the National Firearms Act. Passed in 1934, the law attempted to ban or reduce shotguns and machine guns, and challenges to the law went all the way to the Supreme Court, which upheld its legality in March 1937. Two weeks later, Oliphant (along with arch-prohibitionist Harry Anslinger) introduced the Marihuana Tax Act directly into the House Ways and Means Committee, a powerful committee (and the oldest in Congress) with the unique ability to send bills directly to the House of Representatives.

Matt Rens, the Hemp King of America, started making hemp in 1914 as part of the First World War effort. Matt Rens Hemp Company eventually became the nation’s largest, which he ran until his death in 1950. The Subcommittee of the Committee on Finance in the Senate held hearings on the legislation in July 1937, and Rens spoke before the Senators and called out the taxes for what they were.  

“Such a tax would put all small producers out of the business of growing hemp, and the proportion of small producers is considerable,” Rens told the Senators. “The real purpose of this bill is not to raise money, is it?”

“Well, we're sticking to the proposition that it is,” said presiding Senator Prentiss Brown of Michigan.

“It will cost a million,” Rens added.

“We thank you, Mr. Rens,” said Senator Brown dismissively. “The next witness will be….”

President Franklin Roosevelt signed the Marihuana Tax Act on August 2, and the law took effect October 1 that same year. As part of the law, Anslinger’s Bureau of Narcotics received absolute administrative regulatory and enforcement powers. Moreover, the procedures associated with regulation and enforcement appeared not in the law itself but in the Regulations No. 1 addendum, which further heightened prohibition. For example, the Regulations said that any doctor who purchases the stamp to prescribe medical cannabis must immediately report the name, address and ailment of the patient to the Bureau in the form of a sworn statement. Any doctor who fails to do so can end up in jail.

Interestingly, many reform advocates argue that taxes levied on state-legal medical and recreational cannabis also discriminate against the plant, especially when compared to tax rates for alcohol. As more and more states legalize cannabis in some form, expect anti-cannabis groups to take a page out of the Anslinger and Oliphant playbook and introduce as many excessive and prohibitive taxes as possible.

What About (Farmer) Bob?

Harry Anslinger pushed for cannabis prohibition, and Herman Oliphant came up with the idea of a prohibitive tax, but it was Robert Lee Doughton who presided over the House Ways and Means Committee hearing and introduced the Marihuana Tax Act into congress. Doughton, the son of a Confederate Captain and named after General Robert E. Lee, was a wealthy banker, industrial farmer and Tar Heel State congressman. Doughton, who graced the cover of Time magazine in 1934, owned more than 5,000 acres of farmland by 1900, which inspired the nickname Farmer Bob.

Anslinger appeared before the House Ways and Means Committee on April 27, 1937, as Congress deliberated on whether to pass the Marijuana Tax Act. He testified, “Ten years ago we only heard about [marijuana] throughout the Southwest. It is only in the last few years that it has become a national menace … Since the economic depression the number of marijuana smokers has increased by vagrant youths coming into contact with older psychopaths.” He explained that part of its appeal was its price. “To be a morphine or heroin addict it would cost you from $5 to $6 a day to maintain your supply. But if you want to smoke a cigarette you pay 10 cents… it is low enough in price for school children to buy it.”

“And they have parties in different parts of the country that they call ‘reefer parties,’” chimed in John W. McCormack, a Boston Representative and future Speaker of the House.

Anslinger maintained that while opium was a necessary tool for doctors, cannabis was not. “Opium has all of the good of Dr. Jekyll and all the evil of Mr. Hyde. This drug [cannabis] is entirely the monster Hyde, the harmful effect of which cannot be measured.”

Dr. William C. Woodward, the legislative counsel representing the American Medical Association (AMA), spoke before the committee against the tax, but his argument fell entirely on deaf ears. Farmer Bob, the committee chairman, called cannabis “a menace” that makes “people lose their mental balance… [and] become criminals.” He added that the Tax Act was a “remedy for this evil.” His quotes make it clear that prohibition, not tax revenue, drove his support for the bill. Furthermore, many people think that ties to DuPont, a gunpowder mill-turned-huge conglomerate, contributed to Farmer Bob’s support as a way to reduce competition from hemp.

The AMA vs. Anslinger

When Narcotic Bureau chief Harry Anslinger made the case for the Tax Act before the Ways and Means Committee in 1937, he faced dissent from Dr. William C. Woodward, the legislative counsel representing the American Medical Association (AMA). “Most physicians would want to preserve the right to use it [cannabis],” Woodward testified on May 4, 1937. “To say, however, as has been proposed here, that the use of the drug should be prevented by a prohibitive tax, loses sight of the fact that future investigation may show that there are substantial medical uses for cannabis.”

Woodward also complained, “We cannot understand yet, Mr. Chairman, why this bill should have been prepared in secret for two years without any intimation, even, to the [medical] profession, that it was being prepared.”

He pointed out that the medical and hemp industries had been blindsided by the bill because it used the term marijuana in the title instead of cannabis. “The term ‘marijuana’ is a mongrel word that has crept into this country over the Mexican border and has no general meaning, except as it relates to the use of cannabis preparations for smoking. It is not recognized in medicine, and hardly recognized even in the Treasury Department. Marijuana is not the correct term. It was the use of the term ‘marijuana’ rather than the use of the term ‘cannabis’ or the use of the term ‘Indian hemp’ that was responsible, as you realized probably, a day or two ago, for the failure of the dealers in Indian hemp seed to connect up this bill with their business until rather late in the day.”

He then proceeded to pick apart Anslinger’s rhetoric. “We are told the use of marijuana causes crime. But yet no one has been produced from the Bureau of Prisons to show the number of prisoners who have been found addicted to the marijuana habit… You have been told that schoolchildren are great users of marijuana cigarettes. No one has been summoned from the Children’s Bureau… [But] in all that you have had here thus far, no mention has been made of any excessive use of the drug by any doctor or its excessive distribution by any pharmacist.” And he pointed out, “Newspaper exploitation of the habit has done more to increase it than anything else.”

The committee ignored the only medical doctor in this discussion and fast-tracked the bill into law. Interestingly, two years after the law took effect, New York Mayor Fiorello La Guardia commissioned his own study of cannabis by the New York Academy of Medicine. Released in 1944, the report stated, “Marijuana did not lead to violent, antisocial behavior, or uncontrollable sexual urges. Smoking marijuana did not alter a person’s basic personality structure… [and] does not lead to addiction in the medical sense of the word.”

The First Marihuana Tax Act Arrest

Trivia question #1: What was the first major U.S. city to legalize recreational cannabis?

The answer: Denver, Colorado.

In November 2005, city residents voted to legalize small amounts of cannabis, which inspired the Rocky Mountain News headline, “OK of Pot Issue Gives New Meaning to Mile High City.” The measure, which passed with 54 percent of the vote, was largely symbolic since state and federal law still prohibited the plant.

Trivia question #2: Where did the first cannabis arrest occur after the Marihuana Tax Act went into effect?

Answer: Denver, Colorado.

America’s unofficial cannabis capital also claims the first Drug War POW. Accounts vary, but most suggest that the police raided the Lexington Hotel in Denver and arrested 57-year-old Samuel Caldwell and 23-year-old Moses Baca the day (or a few days) after the law took effect. Caldwell, a local resident and unemployed farmer suffering under the Great Depression, was selling two cannabis cigarettes without a tax stamp.

Caldwell’s arrest made national headlines and motivated Narcotics Bureau chief Harry Anslinger to travel to Denver for the photo op. About a week after the arrest, Caldwell was indicted by a federal grand jury and sentenced to a $1000 fine and four years hard labor at Leavenworth Federal Penitentiary. Judge Foster Symes, who oversaw the trial, added, “I consider marijuana the worst of all narcotics, far worse than the use of morphine or cocaine. Under its influence men become beasts. Marijuana destroys life itself. I have no sympathy with those who sell this weed. The government is going to enforce this new law to the letter.”

Caldwell, who was born in 1880, finished his prison term in 1940. A year later, he died. Baca, meanwhile, was sentenced to 18 months for possession.

A lesser-known theory tells a slightly different story. As documented by journalist Daniel Glick in 2016, a cannabis historian called Uncle Mike uncovered police reports that suggest the police arrested 23-year-old Baca on a "Drunk and Disturbance" charge on October 3, and they found a quarter ounce of cannabis in a drawer upon searching his house. Two days later, the police busted Caldwell for selling three joints to a person named Claude Morgan, whose details are unknown, and the authorities subsequently found four pounds of cannabis in his room at the transient Lothrop Hotel. Per Uncle Mike, both Baca and Caldwell had a history of arrests, and the latter actually got busted for selling moonshine during alcohol Prohibition. 

Regardless of which account is correct, these men were the first POWs in the opening days of cannabis prohibition. Both characters appear to be anything but angels, yet their prohibition-related lawbreaking happened during a downturn in the Great Depression that affected people around the world. Still, whatever motivated their deeds that ran afoul of the law, no man should spend his final days in prison for a cannabis offense. 

Timothy Leary vs. Marihuana Tax Act

Over the decades, the government expanded the Marihuana Tax Act and passed other prohibition-minded legislation, but it was counterculture icon Timothy Leary who ultimately brought the tax down. The police arrested and convicted the former Harvard professor for cannabis possession without a tax stamp. Dr. Leary fought the charges all the way up to the U.S. Supreme Court. In 1969, the Justices heard arguments in Leary v. United States and unanimously sided in favor of Dr. Leary. The ruling, in effect, declared the Marihuana Tax Act unconstitutional, leading to its repeal, but Congress kept prohibition rolling by passing the Controlled Substances Act in 1970.

David Jenison (david@prohbtd.com) is Editor-in-Chief at PRØHBTD. Music provided by Format Entertainment formatent.com.

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