In 1903, as stated in a previous chapter, Governor La Follette began an investigation of the railroads in Wisconsin, in relation to illegal deductions from the gross earnings returned by them as a basis for taxation. The investigation covered the period from 1897 to 1903, and it was found that $10,500,000 of illegal tax deductions had been made in that time, about $7,000,000 of which was in the form of unlawful rebates and discriminations. Every railroad of any importance in the State had paid rebates every year in large amounts both on passenger traffic and freight business. Here is a table of the rebates paid in violation of the Interstate Commerce Act and the Elkins Law by the leading railways in Wisconsin, so far as brought to light by the investigation:^[179]

These figures represent only part of the rebates really paid, and do not touch in any way the vast amount of favoritism which does not take the rebate form nor appear in any cash item.

Part of the Wisconsin rebates were paid on State business, but far the larger part was on interstate traffic. The Elkins Law, instead of putting an end to the payment of rebates, as so many railroad men have declared, had no effect whatever, apparently, on the volume of rebates paid. Here is the monthly record of rebates paid in 1903 by one of the principal railroads operating in Wisconsin:

The Elkins Act went into effect February 19, 1903; yet the rebates in February and March were larger than in January; and the rebates for July were nearly three times the January figure. It is clear, however, that when the light of publicity was turned on by the investigation, which began September 29, 1903, the rebate payments that could be checked up on the books dropped from $46,000 in September to $9,000 in October, $666 in November, and $2,032 in December. Instead of paying cash rebates the railroads began to issue a great many “midnight tariffs,” that is, rate schedules printed on purpose to give favored shippers advantages over others and then revoked or superseded as soon as the purpose has been accomplished, so that the midnight tariff has, in a different way, done exactly what is done by the payment of the cash rebate.

The impotency of the Elkins Law is still further shown by the fact that the total rebates paid by the railroads in 1903 were greater than the rebates of 1902. The Northwestern road, for example, jumped from $212,075 rebates in 1902, before the Elkins Law, to $410,476 in 1903, mostly after the Elkins Act took effect.

We have seen in Chapter III how President Mosher of the Northern Grain Company fought La Follette’s railroad reforms because of his deep sympathy with, and appreciation of, the rights of railroads that were paying his company $30,000 a year in secret rebates. Another man who bitterly opposed La Follette, denouncing him as “an inciter,” a demagogue, etc., was an officer of one of the refrigerator companies that carries beer for a big Milwaukee brewery. At the very time this official condemned La Follette, his company was receiving from one to three thousand dollars a month in rebates from a single one of the Wisconsin railways, in addition to the mileage profits on the cars. No wonder the brewers and their allies opposed all progressive railroad legislation when they were getting $73,240 a year in mileage rentals, and many thousands more in secret rebates or commissions from the Chicago, Milwaukee, and St. Paul alone. These men were strongly of opinion that there was law enough already.

An investigation in Minnesota a little before that of Wisconsin showed precisely the same sort of facts, namely, enormous amounts in rebates were paid by the Great Northern, the Northern Pacific, and other Minnesota railroads. But in the Minnesota cases, to forestall further agitation and publicity, most of the railroads paid the additional taxes demanded by the State.

The railroads do not by any means confine their rebate operations to the States in which their lines are located. The case of the Camden Iron Works, recently before the Interstate Commerce Commission, shows that a railroad will reach half across the continent with a rebate in its hand to grasp important shipments. In this case the Northern Pacific gave R. D. Wood & Co. of Philadelphia, the owners of the Iron Works, a rebate of 5 cents a hundred on 1,500 tons of iron pipe. The Great Northern, the Canadian Pacific, the Delaware & Hudson, and other roads had agents on the spot trying to get the business away from the Pennsylvania, which would naturally have taken the shipment, but the 5 cent rebate carried the day and the iron went via the B. & O., the Great Lakes, and the Northern Pacific. The rebate was paid by a check for $1,500, and no one but the traffic managers knew of the transaction, which would probably never have come out except for the complaint of a traffic agent on the Pennsylvania, who had offered a rebate of 1 cent a hundred but did not get the business and was therefore blamed by his superiors.