to have caused an important reduction in the production of oleomargarine as the following statement' indicates:

This statement seems to indicate that the law of 1902 caused a great decrease in the amount of oleomargarine produced. It must not be forgotten, however, that 1903 and 1904 were years of comparatively low prices for butter, and that this fact helped to decrease the amount of oleomargarine produced. Beginning with 1905 there was a general rise in the price of butter. This gave rise to a greater demand for oleomargarine and was sufficient cause to increase the production and consumption of the butter substitute. The imposition of a tax of ten cents in the law of 1902 was of course an important factor. Its effect was to make it more profitable to produce uncolored oleomargarine; but this fact distinguished it from butter and had a tendency to lessen its demand. It made the production of colored oleomargarine very expensive, and some time had to elapse before ways and means could be devised by which the manufacturers and dealers could evade the new law without technically violating it. The law requires a tax of ten cents on oleomargarine artificially colored that makes it look like butter. Oleomargarine, however, can be colored by

'From Reports of U. S. Internal Revenue Commissioner.

means of highly colored oils used as nutritive ingredients in the product. Such oils are peanut oil, soya-bean oil, soy-bean oil, mustard oil, etc.' These are sufficiently neutral and, as they are also nutritive, they can be used as regular ingredients. The real purpose of their use is of course to color the oleomargarine, in semblance of butter. Oleomargarine thus colored is not artificially colored within the meaning of the statute, and can not be taxed, therefore, at the rate of ten cents per pound, but must be taxed at one-fourth cent per pound. It is perhaps not erroneous to say that this evasion of the spirit of the law played an important rôle in increasing the production of oleomargarine.

The history of the manufacture and sale of oleomargarine since the passing of suppressive or regulative laws, dating back as far as 1877, is full of evasions of the law. Behind these evasions the enterprising manufacturer is nearly always visible. He has plenty of capital at hand to engage the best legal talent in the country and to pay the fines of the dealer that gets into trouble with the state or federal authorities.

The census of 1900 gives the cost of materials in the manufacture of oleomargarine in the United States for that year at $7,639,501, and the value of the product at $12,499,812. Not taking capital costs into account, this shows a profit of over 50 per cent, which is of course enormous. This high profit is responsible for the insidious and persistent efforts of the oleomargarine interests to manufacture and sell their product.

The dealer, however, also frequently takes the initiative to adulterate or in various ways to defraud the public or evade the law. These methods are recorded in the

1

1 Vide, Report of the U. S. Internal Revenue Commissioner for 1911, P. 18.

I

reports of the state dairy and food commissioners. Many are very clever and make interesting reading matter. One of the earliest and commonest frauds of which the dealer has been guilty, is the mixing of butter and oleomargarine in his own store. This evil called forth a provision in the law of 1902 declaring a dealer guilty of such an act to be a manufacturer of oleomargarine, and to be subject to the special tax of $600. The Internal Revenue Commissioner as late as 1911 reports that dealers frequently buy the uncolored oleomargarine and then color it in their store. This is done by buying a tub of colored oleomargarine and paying the special tax of $48 for dealing in colored oleomargarine. The dealer buys a lot of uncolored oleomargarine, colors this artificially, and puts it in the tub that still contains some of the colored oleomargarine that he bought from the manufacturer. This has been discovered by field officers, but its practice is very difficult to prove. The Commissioner says that by this simple process the dealer "can add 934 cents to every pound manipulated, and, by furnishing this to his customers when they call for butter, he is enabled to dispose of this product, which cost him from twelve to fifteen cents per pound, at anywhere from twenty-five to forty cents a pound. The comparative immunity from detection and punishment and the great financial profit growing out of the transaction have proved sufficient inducement to cause thousands of otherwise reputable grocers, market men, and dealers to engage in the nefarious business of defrauding the Government of its revenue and perpetrating a fraud on their customers. It is confidently believed that the oleomargarine law is, at this

1 Report, p. 17.

time, corrupting and debauching more taxpayers and affords the opportunity for greater fraud upon the public than any other statute with which the internal-revenue bureau has to deal.”

Violations of the law still continue, as may be seen by the Commissioner's statement: "A total of 2,704 violations of this law were reported during 1914 as against 1,745 for 1913. These violations involved 2,327 persons-67 for violations as manufacturers, including the cases of illicit manufacture through the additional artificial coloration to the uncolored product, 89 wholesale dealers, and 2,171 retail dealers." a

The numerous frauds perpetrated in connection with the manufacture and sale of oleomargarine, the inability to say whether or not it was wholesome when it first appeared on the market, and the great agitation conducted by the dairy interests against oleomargarine, placed a stigma upon the product that it has not yet lived down. If the oleomargarine interests had been wise from the beginning, and had produced a wholesome product, had invited open inspection of their methods of manufacture, had plainly marked their product, had encouraged the dealers to sell it for what it is, and had widely advertised the product as oleomargarine, oleomargarine by now would not only have lost the stigma that at first attached to it, but it would have made a place for itself in the market second only to that of first class butter. Much of the money spent by the oleomargarine and dairy interests in agitating their sides of the question could have been more profitably used in their respective industries. Much of the time and money

'Report of the U. S. Internal Revenue Commissioner for 1914, p. 21.

spent in legislating and prosecuting could also have been used to better advantage.

There seems to be a disposition now among the oleomargarine interests to follow at least partially the plan above outlined. In New York City there appears at numerous places the advertisement worded thus: “Oleomargarine, the great American spread for bread.” A block of oleomargarine is shown and alongside a cow, beautiful and gentle in appearance, that is supposed to say: "You can thank me for the butter flavor." This is the attitude that the oleomargarine interests ought to have taken from the beginning. Instead of attempting to evade the law they should have complied with it. The law has been a serious hindrance to the kind of business policies to which they have adhered. In helping them to establish a reputation for the product, however, the federal law has been a great ally. This law puts its stamp of approval upon the method of manufacture and upon the wholesomeness of the product.

As a revenue measure the federal law is unsuccessful. The Internal Revenue Commissioner states that its administration entails great effort and expense. The following statement shows also that the total tax receipts from oleomargarine are small :

From 1887 to 1902, the year the rate of tax was changed, the federal oleomargarine statute yielded a gradually increasing revenue. In 1902 it amounted to nearly three million dollars. After this year it decreased very materially, but beginning with 1905 it began to