“I had no idea how important liquor was to the federal government,” says Novick. “It started in the Civil War with the levy on beer and whiskey to help fund the war, and it never really went away. Some 30 percent to 40 percent of the government’s income came from the tax on alcohol. So Prohibitionists realized that the only way they’re going to have a ban was through income tax, which was a progressive cause and was really supposed to distribute wealth and to make things equitable during the robber baron era, where the wealth was being accumulated in a very small segment of the population.”
The 16th Amendment of 1913, allowing Congress to levy a federal income tax, helped pave the way for Prohibition, but World War I helped stir up the pot. When the United States entered the war in 1917, anyone of German heritage was suspect. Since most brewers were of German decent, the Anti-Saloon League used this to equate migrants and drinking with being anti-American.
On the other side, as the Great Depression deepened in the 1930s, income tax revenues plummeted and there was a question about why we were foregoing all that tax revenue and jobs from alcohol sales and production