Americans’ taxes were public under Calvin Coolidge – until the wealthy revolted
One of the purposes of the Tax Publicity Act of 1924 was to show whether wealthy Americans and large corporations were paying their fair share of taxes. Newspapers ran great stories about the first release of tax payments. Oil heir John D. Rockefeller Jr. was America’s biggest taxpayer, with a tax bill of $7,435,160.41, or about $123 million today. Next came automaker Henry Ford, which paid $2,467,400.10, or $41 million today. Douglas Fairbanks and Gloria Swanson were the highest paid movie stars. Revenues were not disclosed, although they can be roughly inferred.
The Big Reveal was short-lived. In 1926, Republican President Calvin Coolidge, under pressure from wealthy taxpayers, got Congress to end the payment of public taxes.
President Biden, in his fiscal year 2023 budget, proposes a 20% “billionaire minimum income tax” for households with more than $100 million in income and “unrealized earnings.” The proposal would not make tax payments public, but seeks to adjust a “tax code that makes America’s wealthiest households pay a lower rate of tax than working families,” the House said. White. Critics argue the plan would hurt long-term investments.
Tax payments were secret after the creation of the modern federal income tax in 1913. But in the early 1920s reformers began to call for disclosure, as former Republican President Benjamin Harrison had demanded. in an 1898 speech on “the obligation of wealth”.
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“Every citizen has a personal interest in their neighbor’s tax return,” Harrison said. “We are members of a great partnership, and everyone has the right to know what each other member brings to the partnership and what they get out of it.”
In 1924, Coolidge and Treasury Secretary Andrew Mellon, of the ultra-wealthy Pittsburgh banking family, got the Republican Congress to cut the top individual tax rate from 58% to 46%. In return, progressive senators, including some Republicans, won a provision to make all federal tax payments public, arguing it would deter tax evaders.
That fall, the first release of the Internal Revenue Service’s tax payments for 1923 made headlines across the country. Mellon, who had vigorously opposed public release, reportedly paid $1,178,988 in taxes, or $19 million today. Railroad tycoon Frederick Vanderbilt paid $800,000 in taxes, or $13 million today. Newspapers also published long lists of payments made by ordinary local taxpayers.
The annual disclosures revealed that, as today, the ultra-rich often paid relatively low tax rates after suffering statutory write-offs. In 1924, taxes for Chicago chewing-gum king William Wrigley Jr. dropped to $2,681, or about $44,000 today, from $865,815 in 1923, or $14 million today . Representatives for Wrigley said he had “reversed some losses of the past 10 years,” the Chicago Tribune reported.
Comedian Will Rogers wrote that for taxpayers, “this publication of the amounts” was “a test of their honesty”. He concluded that “income tax has made more liars of the American people than golf”. To prevent the wealthy from taking advantage of tax loopholes, Rogers suggested, “you should impose a new kind of tax every year or two, so they don’t know how to beat it.”
Not all newspapers have joined the tax dump. The Boston Herald called the exhibit an “outrage” that violated taxpayer privacy. The Minnesota Tribune, in an article titled “No Aid For Snoopers,” pledged to protect the privacy of the ordinary taxpayer: “He should be allowed to hug his small income to his bosom, in joy or sorrow, without let the public sniff around him.”
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Many newspapers feared that publishing the lists was illegal. This issue was clarified in May 1925, when the Supreme Court unanimously ruled that newspapers could not be sued for printing tax lists.
That fall, the Washington Post dove in, under the headline “Spotlight on 1924 Income Tax Payments.” Leading in Washington was the paper’s own publisher, EB McLean, who paid $281,125 in taxes, or $4.6 million today. Coolidge paid $14,091, or $219,000 now. “In several cases, reputedly wealthy men made small incomes,” the newspaper reported.
The Post noted that a “striking increase has been seen in the number of women making individual returns, evidence of their growth in the business and professional world.” Leading in Washington was Kate Willard Boyd, of the Willard Hotel family, whose tax payment was $31,842, or $528,000 now. The Post also listed payments alphabetically for many townspeople, starting with Aussell L. Alden of 809 L St. NW, who paid $58.41 in taxes, or $960 today.
The Chicago Tribune’s state-by-state articles on top corporate taxpayers read like a roll call of consumer products like washing machines and automobiles: “Maytag Highest Iowa Taxpayer,” Studebaker “noted in Indiana List,” and “Nash Tax Is Largest in Wisconsin.
The Tribune noted that a group of local citizens were missing from the taxpayer rolls: “The revenue-seeking of the city’s underworld nobility, beer porters, smugglers, crooked politicians, gunmen, gang leaders and their ilk were indicating that unless they cheated on Uncle Sam, they have no income.
The Pittsburgh Courier, a black newspaper, lamented the lack of African Americans among big taxpayers. “The most astonishing fact” about New York’s list of black millionaires from “Harlem is that there are none,” the newspaper said. Later, the Courier reported that there was a black millionaire, Watt Terry, who owned properties in Harlem but lived in Brockton, Mass.
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Treasury chief Mellon led wealthy opposition to the revelations. “There is no excuse for the current advertising provision except to satisfy idle curiosity and fill space in the newspapers,” he argued. Many low-income taxpayers also protested the public exposure of their payments.
In 1926, at Coolidge’s urging, Congress again reduced the top tax rate, this time to 25%, and repealed tax filings. Sen. George Norris (R-Neb.), a leading proponent of disclosure, predicted that repeal would facilitate “by covert manipulation large taxpayers to avoid payment of the honest taxes they owe under the law”.