While the state luxury tax was 2%, New Orleans enacted a city tax as well, so New Orleanians faced a total 4% tax. This city tax was to be a temporary, stopgap motion to bring the city out of debt and balance the budget; 85 years later, the city sales tax still exists and is currently at 5%.
Image by Seale Paterson. Luxury Tax Token and 1929 Sanborn Map provided for use by the City Archives & Special Collections at the New Orleans Public Library.
The first Louisiana state sales tax was introduced as the “Luxury Tax Act of 1936.” It levied 2 percent tax on what were deemed luxuries: cakes, candy, cosmetics, clothing that cost over $3, etc. These tax revenues would go toward social services, supporting “the unemployable” of Louisiana.
Because of pricing in the 1930s, these taxes would often present as fractions of cents. To ensure consumers would only pay the exact tax amounts, luxury tax tokens were manufactured: very thin aluminum 1-mill and brass-washed 5-mill tokens with triangle center cutouts. These tokens could only be used to pay the taxes on goods, not the goods themselves.
Before the tokens were even introduced, New Orleans merchants started protesting, claiming it was too complicated and that corner grocers and other small vendors shouldn’t be expected to do that level of calculation and bookkeeping. A housewife suggested reenacting the Boston Tea Party by throwing all the tokens in the Mississippi River.
The tokens debuted on October 1, 1936, and instantly became problematic. Cashiers at cafes and shops were backed up with 40-minute waits for patrons to pay. People were walking out on bills. Waitresses complained of tokens left in lieu of tips. Some businesses were too confused by the tax and just ignored it completely; others applied the tax to everything. And the city immediately ran out of tokens with which to make change.
Months later, the tokens were still taxing goods as well as consumers’ patience, but had also worked their way into the cultural fabric of the city. Newcomb College put on a luxury tax-based drama series called Token Toters Campus Night. Mardi Gras revelers created costumes by tying them onto clothing and masks. A time capsule placed in the cornerstone of the 1938 restoration of the French Market contained a handful of the tokens.
Over the following years token shortages, inconsistencies with collection and general disdain continued. On January 1, 1941, the state tax was abolished, and the tokens were no longer needed or used. Merchants and consumers had three months to redeem the 61 million tokens in circulation.