Liquid Friday with author Steven C. Levi

This week we are featuring author and historian Steven C. Levi and his book The Cannabis Stampede.

But before we research Steven C. Levi’s book, lets find out what is his recommendation for a Friday cocktail.

0015-bloody-maryMy mixed drink of choice is a Bloody Mary. It’s got a snap while other mixed drinks are just, well, mixed drinks. ANY FRIDAY is a good day for a Bloody Mary — or a book review. My self-published book, available on Kindle, is The Cannabis Stampede.

Ingredients:
  • 4.5 cl (3 parts) Vodka
  • 9 cl (6 parts) Tomato juice
  • 1.5 cl (1 part) Lemon juice
  • 2 to 3 dashes of Worcestershire Sauce
  • Tabasco
  • Celery salt
  • Pepper
Preparation:

Add dashes of Worcestershire Sauce, Tabasco, salt and pepper into highball glass, then pour all ingredients into highball with ice cubes. Stir gently

Blurb:

With so many sides to the legalization of marijuana, how do you know who’s right?

Based on what is happening in Alaska right now, The Cannabis cannabisStampede is an on-the-ground, narrative nonfiction look at the legalization of marijuana told from 30 perspectives. These perspectives include the housewife, aging hippy, police chief, doctor, school teacher, historian, Evangelical, Republican, Democrat, liberal, conservative, THC refugee, and half-way house owner along with the people who will be making the money: pot delivery man, grower, importer and edible product inventor.

Excerpt:

Nevets Harrison

Writing history is like being married; no matter what you say you were wrong. It doesn’t make any difference if you are a white male economic historian, black revisionist, Japanese deconstructionist or a Filipino-Mexican-Aleut creative nonfiction novelist. Whatever you say will be wrong. No matter how it is written or how many footnotes bolster the claim, there will always be someone in the reading crowd who will swear that his great grandfather was not the drug smuggler your footnotes proved him to be and her great aunt Harriet did not die of a heroin overdose while working as a prostitute on the South Side of Chicago – she actually died in the Ladies of Charity hospice of multiple ailments while serving the needs of the unfortunates of varied ethnic persuasions.

The criticism was be never ending. That is the price of quality scholarship. They make no statutes to historians, only bruises. All historians ever receive for their effort are curses and kicks because everyone wants to recall the past as the good old days even though they were not that good and all everyone who lived them wants to remember are the two good moments and not the avalanche of catastrophes that caused them to the marry the wrong man, accept the worst job, buy the wrong house, take the wrong fork in the road, backslide the wrong addiction or taunt the IRS. Everyone has regrets but they are easiest to forget. What is easy to recall are the golden moments and those are called “memories.” The rest of life is called “wasted.”

It was because of this juxtaposition of reality that Nevets renamed himself. In print. At home and on his paycheck he was Steven but his articles listed the author as Nevets which, as it turned out, was an unexpected blessing because it kept the bores from finding his name in the phone book and on the Internet. Often the greatest philosophical value comes from the reverse. The reward of abiding by the seven virtues is avoiding the brake on your progress applied by the associated seven vices. Chastity may not make you the vice president; lusting after the president’s daughter might. But then again, over the long run, as the old Italian expression so aptly states, “if you marry for money you will earn every penny of it.”

Nevets was well aware that destiny is not a destination but a direction of travel. He never viewed his future from the distance but from the myopic. The first step on his long journey to the future began with a blank sheet of paper, an odd metaphor for a man who was focused on a monitor screen and not a spread of parchment. Odd it was, he always said, that he started his career where he would finish his life, under wood.

Historians make no friends; they simply collect critics. When the marijuana initiative passed statewide with a more than 70% of the vote, Nevets was the only public voice of caution. That 70% of the vote, he pointed out, was not indicative of anything because the voter turnout was the lowest in eight decades. Further, the only opposition to the initiative were the gadflies who were against everything anyway. Rank and file Republicans supported the effort because it brought money into the state treasury so there would be no need to raise taxes on every other industry and Democrats were in favor of it because it was another dimension of being pro-choice. The No Party registered voters were tired of the police spending their time arresting marijuana smokers who were only going to be released on their own recognizance by the courts. The courts were tired of the time they spent convicting marijuana smokers while meth labs were burning down apartment buildings and the police were tired of elected officials who talked tough about drug abusers and then expected special consideration for their DUIs. Everyone wanted a break from reality and the Marijuana Initiative did exactly that.

Nevets never passed up the opportunity to urge people to vote and read history. At the first he clearly failed in the recent election so he was not about to let the second slip by his newspaper column. Whether or not the legalization of marijuana was a good idea was immaterial. What was a bad idea was not to be aware of the consequences of the vote. History was better than a crystal orb when it came to seeing the future. The best advice for fortune telling was to look backwards because, as Winston Churchill famously stated, “the farther back you can look, the farther forward you are likely to see.” And in this town you did not have to look that far backward to see forward.

If there ever was a town based on the boom it was this one. At the beginning of the Second World War the community boasted a picture alaskapopulation of just under 5,000 people. At the end of the war, courtesy of the United States Army base, the town had tripled in size. The exploitation of the natural gas resources, coal seams and copper deposits in the hinterlands had required the city’s airport to triple in size and the teamster union to quadruple in population. Then came the construction boom. In addition to the prison and Air Force Base, there was a secret United States Navy military intelligence communication satellite complex that everyone knew about and a massive alcohol and addictive drug rehabilitation facility that no one knew anything about.

The road into town swelled to highway and then freeway and was still plugged with double-trailers loaded with nails, beer, girders and condoms. The cargo wing of the airport overspread the outskirts of town like a molasses being poured on a flat table. The only thing not coming by air or macadam was fresh water and clean air. The first was a bounty of nature courtesy of a shallow water table. It would last a century. The air was another matter: the exodus of clean air from the assault of smog proved that Gresham’s Law was multidimensional.

By 1965 the city of Anchorage had increased in size by a factor of ten from the Second World War and that was when the real trouble started.

All Virtues are linked with Vices. Patience, Kindness and Charity may be virtues but they can be overdone. Tough love, intervention and reporting charlatans to the IRS have their place as well. A better view of the Seven Virtues and Vices is to understand that they are, individually, at the extreme ends of seven continuums. Chastity can slide to Lust but not to Wrath or Pride. Envy can evolve to Kindness but not Diligence. But there is great difficulty with this metaphysical pairing because, in fact, the coupling was made in an epic poem by Aurelius Clemens Prudentius about 410 of the Christian Era when the Seven Virtues were easy for the poor to understand because they had no choice and the Seven Vices gave the poor hope that the rich who were indulging there in were going to “get theirs in the next life.” In fact, the Seven Virtues and Seven Vices are not on seven continuums but on the flip side of seven cosmic coins. Starving your family in the name of Charity is neither intelligent nor Christian while, on the other side of the coin, Avarice is not such a bad thing when the multibillionaire donates a substantial chunk of his fortune to worthy charitable causes. Philosophy – and real life – is complicated as all Virtues have their downsides while the vices have their upsides.

The same could be said of money, the seminal origin of the boom halibutthat transformed the city from a rural town to a metropolitan community. With the economic blooming came a population spurt and there was so much money it was, quite literally, running down the streets. All you needed to make a fortune was a cash registers. . Change was coming so fast that traditional transformation of the small business environment missed the twin steps of mom-and-pop to boutique and then the ethnic take over. Mom-and-pop stores simply exploded into big city takeover which were then swallowed by national chains. Ma and Pa retired to Florida while their kids left the state to universities they never dreamed they could afford.

The downside to this economic prosperity was a sizable snake in the grass. While everyone was making money hand over fist so fast that a cash register was a hindrance. That was because the money being made was in cash. The economic boom had come in the 1950s when everyone but blacks were doing well. No one had checking accounts. You were paid in cash ever Friday. You lived on credit during the week and paid your bills in cash on Friday. Everyone was doing it so it was OK. If you were a business, you had no receipts. Just as balance book of accounts. So when it came to taxes, you estimated what you had made, what you owed, paid the balance to the government in cash and that was that.

Well, ‘that was that’ lasted until 1956 when the IRS came to town.

And it came to town in a very big way.

Prior to 1956 the United States government had given no indication that it was concerned as to what happened in the city. After all, Anchorage was in Alaska and that city was a long way from anywhere important. In fact, more than one federal bureaucrat said that Anchorage was as far away from Washington D. C. you could get and still speak English. This was proof positive of the mantra of the federal bureaucrat that a city’s importance was indirectly related to its distance from Washington D. C. If Washington D. C. didn’t care what happened in Anchorage there was no reason to conduct business the way it was being done in Des Moines, Atlanta or Denver.

So the businesses didn’t.

And when the IRS showed up just after the back of winter had been broken in 1956, it could be said that the head of the pit viper in the grass made its presence known. Within three weeks there were a dozen Restraint of Trade federal law suits that included every industry from the rail yards to the flat lands. Every industry included the taverns, plumbers, electricians, grocery stories, taxicabs, restaurants, clothing stores, shoe stores, toy stores, pharmacies, labor unions, barbers and the wide range of people and businesses that called themselves doctors, nurses, naturopaths, healers, massage therapists, psychics, healers, psychic healers and healers of the psyche. There were only two industries that were not hit, the hospital because there was only one and the brothels because they did not exist in federal eyes. Everyone else, every other business in town, got the bad news by post. One day every business in town – except the hospital and brothels – were blissfully supplying and servicing the public with what it needed and wanted and the next day they were up to their armpits in an ocean of red tape.

That was the good news. When the IRS made its appearance, the waters went over their collective heads.

The United States government believed in what is known in boxing as the one-two punch. The first blow is to set the victim up for the second. The first punch was the Restraint of Trade document. What businesses in the city had been doing since the Second World War was meeting with others in their industrial ilk and setting prices. That is, in the early days no one wanted to drive a competitor out of business. The easiest way for everyone to make a living was to make sure that no one business was undercutting another. So all the bars and taverns set the price of beer at $.25 and every electrician in town only charged $.85 an hour. Paint, apples, clearing a plugged toilet and filling a tooth cost the same across the city. You did not get a better deal shopping around; you got the same deal.

While this was – and is – being done sub-rosa in every community across the United States, in every other community across the United States it is called “market forces.” In Anchorage it was called collusion. “Market forces” are legal; collusion is not. So on that fateful day in 1956, every business in the city came to understand that there was a difference between “market forces” and collusion and they, collectively, were on the wrong side of the economic concept.

The follow-up punch came quickly.

Prior to 1956 the entire economy of the city had been cash. No one kept books the way such accounting was done in the other states. Receipts were a waste of time. Cash registers slowed business and double-entry bookkeeping akin to black magic. So no one kept receipts, did not buy cash registers and guesstimated their obligation to the United States government. After all, if you had no accounting books the United States government had to take your word for what you made and what you owed. Even more important, the United States government had been “taking the word” of the businesses in the city since the business had been operating since the 1920s so no one anticipated a change.

They anticipated in error.

Right on the heel of the Restraint of Trade charges came the IRS. Its agents arrived in force and proceeded, door by door. These were not a friendly calls. Each agent assessed the value of every business. Every agent assessed what the income of the business probably was and then compared it to what the business had filed with the United States Department of Revenue. When there was a disparity, the business was billed the difference. Then the bad news got worse. The debt owed was increase seven fold for the taxes not paid the previous years and, for bad measure, interest and penalties were tacked on as well.

The initial response to the federal oversight was three-fold. Every single one of the businesses hit with the Restraint of Trade charges and the bill for back taxes believed three things to be absolutely true: 1) they had already paid their fair share of taxes, 2) because of the isolation of the city from the rest of the United States the feds were lucky anyone was paying anything at all and 3) the way the city was doing business was the way business had to be done in an isolated quasi-frontier community.

So what was the problem?

The problem, the federal authorities stated in response to the list of three was 1) no you have not, 2) distance does not make you immune from taxes, and 3) you are not special.

If this had the extent of the problem then arrangements could have been developed with the federal government – known as the feds and usually swallowed with an expectoration. But if life were simple there would be no problems. First, because of the convoluted nature of doing business in an isolated setting, the businesses had developed unique methods to be efficient and profitable. One of them had been the printing of what were called bingles.

The usual method of paying one’s bills in the city had been to live on credit from week to week. Everyone was paid in cash on Friday so, on Friday, everyone paid their bills for the week. This was not a problem for most business because the numbers were large. That is, a housewife would get $10 worth of groceries during the week and pay the $10 on account on Friday. The grocer simply kept the housewife’s name in an account book and added expenses as the groceries were bought and zeroed out the account on Friday. If the housewife bought food three times a week, there were only three entries which was not that time consuming.

But what time consuming and prone to errors was dealing with the smaller items, the occasional shopping and children. If a child wanted a piece of candy she just went in to the grocery store had the piece of candy, $.01 put on the family’s bill. When the husband needed more tobacco he just put that $.08 on the bill and if the housewife was downtown and needed some dish soap for $.06 that was put on the bill as well. Multiply these occasional buys by 3,000 people and it was possible to make a mess of the accounting book.

To deal with the deluge of what would later be called nickel-and-dime transactions, the merchants in town became printing small aluminum coins which resembled currency. They were for the smaller purchases and were thus in denominations of penny, dime, quarter and dollar. These aluminum coins, called bingles, were not illegal in the eyes of the federal government because they were being distributed by specific businesses for the use in their specific businesses. But Washington D. C. was far away and children did not understand that an Anderson dime could only spent in an Anderson store. So the Ferguson store took Anderson and Sullivan bingles and three stores would occasional meet and exchange the bingles they had and made up for the difference in cash.

But there were real problems with bingles that only came light when the Restraint of Trade and the IRS became looking at the businesses of the city with a microscope. First, the use of bingles was so widespread that there looked upon as cash that could be used anywhere in town. They showed up in change for large purchases, could be used to buy stamps in the United States Post Office and were good as tips in the restaurants. If this had been the extent of the use of bingles, the feds could have continued to turn a blind eye to the exchange. As long as everything came out in the wash, no foul no harm.

But that was not the way the system worked.

In fact, the bingles were, in themselves, duplicitous. On one hand they had value when spent in a store. That is, when a young girl bought candy for $.01, an economic transaction had occurred. The young girl got a piece of candy and the store got $.01 in payment. But at the end of the week when the grocer paid his workers, he might pay them in bingles. On his books the payment of the $10 in bingles was recorded as a debt of $10 of American money. But the clerks were saying that since they were being paid in bingles which were not American money, they had earned no American money so they had no income tax to pay. Had they been paid in American money they would have had to pay taxes of that American money earned. But since they had earned no American money, they owed no taxes. Then the deception spiraled. The landlord did not count the bingles as American money received so their reduced his income tax. So too did the electrician and plumber, the taxi cab company and the tavern owner. Bingles were as good as cash to everyone – except the IRS.

Then the problem moved up the food chain. Larger ticket consumer items like cars, washing machines and even land were bought with a collection of American dollars and bingles. The bingles were accepted as legitimate moneys but not listed on the books as having been received. So a $300 automobile bought with $100 American dollars and $200 in bingles was listed as a loss of $200 on the car company spread sheet while the automobile dealership paid its employees in the $200 worth of bingles. Thus the dealership had an artificial loss on its books and its employees were listed as having been paid in cash. But at the end of the year the employees did not list the bingles as income which reduced their tax burden.

But this was chicken feed when it was compared to how the big money moved. Since taxes had to be paid on income, the big boys and big girls in town avoided income altogether by exchanging land instead of cash. If a debtor had a debt of $1,000, he sold a piece of property worth $1,000 to the debtee for $1. The income to the debtee was thus $1 and no taxes needed to be paid on the transfer. This, however, is a very simplistic way to view the transfer of money at the top of the food chain. To muddy the waters as much as fiscally possible, those transferring the property went to convoluted lengths to hide even the ownership of the property. This was relatively easy in the days before the internet and the impact of those transactions would not be felt for decades.

Fast-forwarding to 2010, Nevets was able to use the increasing power of the internet to trace some of the land transfers – and it was this research that made him persona non grata with realtors, land title companies and banks across the city. Truth is relative and often very expensive.

With the aid of the internet Nevets was able to piece together how land had been transferred to avoid income taxes and – at the same time – how much of that same land was transferred to and from the same person so the sale of a piece of property was a way to wash cash and, at the same time, allow the land to follow a circuitous route of $1 transactions back to the individual who wanted the cash washed in the first place. In simpler terms, suppose two individuals, George and Harry, have too much cash on hand and want to avoid paying income taxes on that cash. So each buys a piece of property from the other for $10,000. Now George has paid Harry $10,000 which is an income tax deduction. And Harry has paid George $10,000 so he has a $10,000 income tax deduction. Then Harry and George sell their respective properties to Sam for $1 each and Sam, in turn, sells Harry and George back the properties they just sold for $1 each. In the next round of transactions, Sam is one of the buyer/sellers and Harry or George will be the disinterested third party. When all is said and done, Harry and George end up with $10,000 tax free dollars in their pocket, a piece of real estate and no income to report.

To convolute the process Harry, George and Sam will make the paper trail even harder to follow. Before the Second World War there were three sets of land books. One was to record property that was in the downtown area. Another was for land in what would be called midtown and the third was for property that was out of town.

At least that was the logic.

The reality was that Harry, George and Sam were constantly shuffling the recording of their land transactions through the three sets of books over a wide range of dates. Trying to keep the explanation as simple as possible, the three men would be constantly juggling a dozen land transactions at any one time through a labyrinthine process that defied logic and made the actual ownership of the land impossible to determine. As an example, one plot of land owned by Harry would be sold to Sam who then sold the land to Harriet who then sold it to Richard who then sold it back to Harry.

Maybe.

That was because the sale of the land to Sam – which was downtown – was recorded in the out of town books three years after the initial sale. That is, the actual transfer of the lot from Harry to Sam was made on January 1, 1936 but it was not recorded in the out of town books until March 17, 1939. In the intervening years, the plot of land was registered as having been sold from Harriet to Richard in the downtown books on April 3, 1937 and recorded on May 3, 1938. The sale of the same land by Sam to Harriet was recorded in the midtown books on February 3, 1929 even though the actual date on the sale document was December 15, 1925. Completing the peripatetic lot of land, it was then sold back to Harry, the original owner in this example, on November 5, 1929 – which was seven years before the alleged initial sale – but not recorded as belonging to Harry until it was recorded in the out of town books on June 19, 1934. So who owned that piece of property on any one day between November 5, 1929 and the May 3, 1938 was impossible to determine. And this was just one piece of property. Multiply this baffling alleged sequence of sales and recording with a dozen pieces of property being juggled at any one time and it is easy to see that by the time the IRS arrived it was not possible to see who owned what.

But the dozen participants knew exactly what they were doing. The IRS does not tax land transfers. It only taxes income. Buying land is a tax deduction. So Harry, Sam, George, Harriet and Richard kept washing the cash through land transfers. Harry gave same cash to Sam which gave Sam income. But Sam then gave the cash to Harriet for land which made the cash Sam got from Harry a wash. Then Harriet bought land from Harry for the same amount and around and around the cash went, one hand washing the other and at the end of the day, no one had made a dime of income but everyone in the cycles of deception was getting rich with cash and land transfers. Even more historically and fiscally delicious from the point of view of the land jugglers, when the feds finally came to the frozen north in 1956 and dove into the murky waters of the land transactions, all they could do was seize the land being juggled. Thus, at the end of the day, the IRS ended up with two dozen pieces of property of dubious value which were owned by everyone – and no one – at the same time.

As an historian Nevets had no trouble understanding the historical lesson being presented in these land transactions. Even though he was looking at land transactions seven decades old, he understood the present day relevance. Even more important, he could see the shadows of the future starting to fall. It did not take an auger to see what was going to happen next. All one had to do was watch television.

Speaking at the chamber of commerce shortly after the Marijuana Initiative passed, Nevets stated that there was no such thing as the present. It was simply the razor’s edge of where the past meets the future. The problems of the so-called present had come from the past. The problems you do not solve yesterday become the problems you must face tomorrow. And you solve the problems of tomorrow by looking into the past.

For a specific example for the budding legalization of marijuana salesmen and saleswomen, he advised them to look at what was happening in the other states who were legalizing cannabis as well as the history of the city. He reminded them that the city had been founded on a foundation of covering cash transactions with land sales so no income was generated. Then he pointed to what was happening in those states where marijuana was finally legal.

The problem, he pointed out, was that marijuana may be legal as far as the state was concerned but it was still an illegal drug as far as the United States government was concerned. What this meant was that the banks could not be involved in any aspect of the new industry. On a street-level, this meant that you could not buy a marijuana product with a bank instrument like a check, debit card or credit card. It was a cash-only transfer.

It also meant that the companies selling marijuana had to pay their bills in cash. Their employees were paid in cash. Their electric bill was paid in cash. Their laundry bill was paid in cash. Their car payments were made in cash.

Actually, this last statement was not true, Nevets said mischievously to the audience. Since the banks would not deal with drug money – and he made artificial quote marks in the air with his fingers around the term drug money – as soon as the banks figure out who is in the drug business – again the quote marks in the air – those car loans might be called. And home loans. And when the marijuana workers can be identified by the IRS – which will happen when they file their income taxes – the banks can’t take their cash either.

So, Nevets warned the chamber members, be prepared for a journey into the past. The Marijuana Initiative will bring the state and municipal governments tax revenues, yes, but it is also going to create massive headaches. Now the multiplier effect was going to work in reverse. Just as every dollar spent with a credit card will turn over four or five times in the city, so too will the cash dollar spent. But the difference will be that the cash dollar is going to require more workers. The grocery story is going to have to hire extra people to handle the cash. The banks will have to hire more tellers because the cash from the grocery stores and the liquor stores and shoe stores will be legal tender even though drug money – once again the quote marks in the air – was used to tomatoes and beer and sneakers. Businesses that have never seen a hard dollar paid for their services, like doctors and dentists, are going to need a cash register.

And that was the good news.

The bad news was that an entire underground economy was going to develop, a cash-only economy. It will move a legion of wage earners off the grid, so to speak. They will not be able to tracked. They will pay the plumber and electricians in cash and the plumbers and electricians will underpay their taxes. Pilfering will go up. Embezzlement will go up. A black market will erupt because as long as there is cash involved people will find a way to dodge their tax bill.

Nevets than gave a sly smile because, as a quality speaker and historian, he know how to finish with a professional flourish. “And the city was return to its past. The big money will go into land – again. And you are going to see the same land shuffling schemes of the 1930s again. But this time it is going to be on a much larger scale. There are going to be millions in tax dollars that cannot be collected. Cash is hard to use today because most of us do not use it. We use checks and credit cards and debit cards. But the moment cash washes into the local economy like a tidal wave there are going to be all kinds of opportunities to get goods and services for less if you pay in cash. If you think we have a problem with the black market now, wait until the black market includes plumbers and dentists and liquor stores. To misquote Yogi Berra, it’s going to be deja-vu all over again.”

About Me:

Steven C. Levi is an Alaskan historian and writer.  A 40-year resident of Anchorage, he has 80 books in print and on Kindle. His nonfiction books on Alaska history include BOOM TO BUST IN THE ALASKA StevenGOLD FIELDS, an historical forensic investigation into the sinking of Alaska’s ghost ship, the Clara Nevada, as well as a history of Alaska’s bush pilot heritage, COWBOYS OF THE SKY. Levi believes that his books – both fiction and nonfiction – should be readable, understandable and educational. They must be all three for the reader to keep turning the pages. He is also dedicated to making history interesting to young readers. His MAKING HISTORY INTERESTING TO STUDENTS series on Kindle is a collection of eight books specifically written to teach middle and high school students what they are supposed to be learning in their history classes

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