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Gov. Olson, 80 years ago, proposed progressive taxes and unemployment insurance

By some estimates, in January of 1933 more than 50 percent of workers on the Iron Range were out of work or working only a few days a month.

Floyd B. Olson
Courtesy of the Minnesota Historical Society
Gov. Floyd B. Olson

This week in 1933, Minnesota’s charismatic young governor took the oath of office for the second time. In his inaugural speech Floyd Olson embraced a progressive agenda as Minnesotans struggled with high unemployment and foreclosed farm mortgages.

Two years earlier, in November 1930, Olson had been elected governor just days after his 39th birthday. That year, Olson and his Farmer Labor Party had prevailed in three-way race with the long-dominant Republicans and the anemic Democrats, just as the Great Depression was tightening its grip. Now, he was beginning his second term while his state was reeling under the Depression’s full force.

Olson had run unsuccessfully for governor in 1924, before his newly created party had established a firm political footing in Minnesota. Over the next six years, the Farmer-Labor leader would make a name for himself as a crusading Hennepin county attorney, who battled municipal corruption in City Hall.

In 1930, as he prepared for a second gubernatorial run, the affable Olson was careful to cultivate his reformist image, while reaching out to those who may not have shared his left-leaning ideology.

“Not only did he keep his political fences in good repair by repeated personal contact with local Farmer Labor leaders, but he assiduously courted key politicians of the major parties, as well,” noted Olson’s biographer, George H. Mayer. “His pragmatic approach to problems melted the hostility of hard-headed conservatives, while his persuasive friendliness converted suspicion into open enthusiasm.”

Earlier, an olive branch

Olson was elected governor in 1930 on a Farmer Labor platform that tempered the party’s more radical inclinations. In his first inaugural address, the governor “came as close to offering all parties an olive branch as a political message can,” observed Mayer. Olson’s moderate program included an increase in highway construction, property tax reclassification and a statewide old age pension law.

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By January 1933, conditions in Minnesota and elsewhere throughout the country had worsened considerably. Unemployment was mounting, along with farm mortgage foreclosures. By some estimates, more than 50 percent of workers on the Iron Range were out of work or working only a few days a month. In St. Paul, Mayor William Mahoney declared that his city had to contend with economic and political difficulties more severe than anything it had seen in the past.

“Depression, unemployment, destitution, tax delinquency and an overwhelming demand for welfare relief all combined to present problems that have taxed the city’s resources and endurance to the limit,” Mahoney told the St. Paul Union Advocate.

Across the river, Minneapolis City Hall had been the site of angry demonstrations as throngs of unemployed men protested the city’s inadequate relief payments even as they faced the prospect of further cuts and the possible elimination of public relief altogether.

These dismal conditions provided the setting in which Olson delivered his second inaugural address on Jan. 4, 1933. Leaving behind the moderation of 1930, Olson embraced a full-scale progressive and even radical agenda that his critics on the right viewed as dangerous and destructive.

Raised specter of ‘rampant lawlessness’

Early in his speech, he laid the blame for the Depression’s ravages on “the failure of government and our social system to function in the interests of the common happiness of the people.” Then, drawing on his substantial rhetorical skills, Olson raised the specter of a “rampant lawlessness and possible revolution” if government at the state and federal level failed to change course.

Newly emboldened, Olson went on to call for a total restructuring of state government to make it an agent for social and economic change. Maintaining that change required new sources of revenue, Olson urged the Legislature to establish a graduated income tax, which he said was more equitable than the state’s current regressive property tax system.

“A government that blindly continues to make those who can least afford to pay bear the brunt of the burden is building a house of glass and laying a foundation in quicksand,” he declared. “The income tax is the most just tax thus far devised because it is the most equitable tax; it is based on ability to pay,” he added.

Olson augmented his income tax plan with a proposal for a state system of unemployment insurance — then considered a novel and untested extension of state authority. “Unemployment creates misery among those unemployed, adds to the burdens of the taxpayers because of the necessity of feeding housing and clothing the unemployed and their dependents, and injures business because of the lack of buying power of those unemployed,” he declared. To remedy these conditions, he called for an insurance system that would be financed through a 3 percent to 4 percent tax on employer payrolls, with exemptions for small businesses with few workers.

Urged increase in public relief

Finally, Olson urged a major increase in public relief efforts through direct state appropriations and expanded local government borrowing powers.

In western Minnesota, where farm foreclosures were rising rapidly, the Willmar Daily Tribune applauded the governor’s dramatic call to action. ‘The echoes of the ringing inaugural address of Gov. Olson are to be heard reverberating throughout the capital,” the paper declared. “It is probably the most fundamentally and distinctively progressive message which has so far been heard in any of these forty eight states.”

In the Twin Cities, the Minneapolis  Labor Review called the speech a “masterly constructive document,” adding “it was a message against starvation and a call to rally the resources of the state to oppose the depression.”

The Republican-leaning Minneapolis Star Journalwhile avoiding a full-scale attack on the address, signaled its reservations about Olson’s approach. The paper criticized the governor directly only for his comments about the potential for lawlessness and revolution, saying that it was “a serious mistake” for him to include those references in his speech.

Later in his second term, as Franklin Roosevelt’s New Deal was taking shape in Washington,   Olson was able to achieve some notable legislative victories but he also suffered some painful defeats. A watered-down version of his unemployment insurance plan was adopted by the House but blocked by the Senate, whose conservative leaders were adamantly opposed to the plan. Despite conservative opposition, he was able to win approval for modified versions of his income tax and relief expansion proposals.

In 1936, during his third term, Olson’s career  was cut short when he died in office from stomach cancer at the age of 44.