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Since Americans submit their tax returns by Monday’s deadline, they don’t have to worry about their neighbors knowing how much they’ve earned or paid. But for a while in the 1920s, everyone’s taxes were public records so everyone could see. And the richest Americans were not happy about that.
One of the purposes of the Tax Publicity Act of 1924 was to show whether rich Americans and large corporations paid their fair share of taxes. Newspapers published big stories about the first tax exemption. Oil heir John D. Rockefeller Jr. was America’s largest taxpayer with a tax bill of $ 7,435,160.41, equivalent to about $ 123 million now. Next was carmaker Henry Ford, who paid $ 2,467,400.10, or $ 41 million today. Douglas Fairbanks and Gloria Swanson were the highest paid movie stars. The income was not disclosed, although it could be roughly deduced.
The great revelation was short-lived. In 1926, Republican President Calvin Coolidge, under pressure from wealthy taxpayers, forced Congress to suspend state taxes.
In his fiscal budget for 2023, President Biden is proposing a “minimum tax on billionaires’ incomes” of 20 percent for households with more than $ 100 million in both income and “unrealized profits.” The proposal will not make tax payments public, but seeks to amend the “tax code, which means that the richest American households pay a lower tax rate than working families,” the White House said. Critics say the plan would hurt long-term investment.
Tax payments were secret after the modern federal income tax was created in 1913. But in the early 1920s, reformers began calling for disclosure, as former Republican President Benjamin Harrison called in a 1898 speech on The Duty 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 contributes to the partnership and what it takes from it.”
In 1924, Coolidge and Treasury Secretary Andrew Mellon of the super-wealthy banking family in Pittsburgh forced the Republican Congress to reduce the highest individual tax rate from 58 percent to 46 percent. In return, Progressive senators, including some Republicans, won a provision to disclose all federal tax payments, arguing that this would deter tax evaders.
That fall, the first announcement of the Internal Revenue Service in 1923 became headlines across the country. Mellon, who vigorously opposed public disclosure, reportedly paid $ 1,178,988 in taxes, equivalent to $ 19 million today. Railway tycoon Frederick Vanderbilt paid $ 800,000 in taxes, which now amount to $ 13 million. The documents also published long lists of payments from local, ordinary taxpayers.
Annual revelations have revealed that, as now, the ultra-rich often pay relatively low tax rates after legal write-offs. In 1924, Chicago King William Wrigley Jr.’s taxes fell to $ 2,681, or about $ 44,000 today, from $ 865,815 in 1923, or $ 14 million now. Wrigley officials said he had “written off certain losses over the past 10 years”, the Chicago Tribune reported.
Humorist Will Rodgers writes that for taxpayers, “this publication of sums” is “a test of their honesty.” He concluded that “the income tax has done more lies to the American people than golf.” To prevent the rich from taking advantage of tax loopholes, Rodgers suggested “you have to pay a new type of tax every year or two so they don’t know how to get over it.”
Not all newspapers joined the tax dump. The Boston Herald called the revelation a “disgrace” that violates taxpayer privacy. The Minnesota Tribune, in an article titled “No Sniper Help,” vowed to protect the privacy of the average taxpayer: “He should be allowed to embrace his own small income to his chest, in joy or sorrow, without the public sniffing around . “
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Many newspapers feared that publishing the lists would be illegal. This issue was clarified in May 1925, when the Supreme Court unanimously ruled that newspapers could not be tried for printing tax lists.
That fall, The Washington Post dived under the headline “Spotlights Look at 1924 Income Tax Payments.” At the top in Washington was the newspaper’s own publisher, EB McLean, who paid $ 281,125 in taxes, or $ 4.6 million now. Coolidge paid $ 14,091, or $ 219,000 now. “In several cases, men believed to be rich made a small profit,” the newspaper said.
The Post notes that “the increase in the number of women making individual returns is a testament to their growth in business and the professional world.” The host in Washington was Kate Willard Boyd of the Willard family, whose taxes were $ 31,842, or $ 528,000 now. The Post also listed in alphabetical order the payments of many residents of the city, starting with Donkey L. Alden from 809 L St. NW, which paid $ 58.41 in taxes, equivalent to $ 960 today.
The Chicago Tribune’s stories of the state’s largest corporate taxpayers are read as a personal call for consumer products such as washing machines and cars: “Maytag, Iowa’s Top Taxpayer,” Studebaker, Indiana, and “Nash Tax Is Largest.” in Wisconsin. ”
The Tribune notes that a group of local citizens is missing from the taxpayers’ lists: have cheated on Uncle Sam, they have no income.
The Pittsburgh Courier, a black newspaper, complains about the lack of African Americans among high-ranking taxpayers. “The most amazing fact about the list of black Harlem millionaires in New York is that there are none,” the newspaper said. Courier later reported that there was a black millionaire, Wat Terry, who owned a property in Haarlem but lived in Brockton, Massachusetts.
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Chief of Finance Mellon led the opposition of the rich to the revelations. “There is no excuse for the current publicity provision other than to satisfy empty curiosity and fill the newspaper space,” he argued. Many lower-income taxpayers also protested against the public display of their payments.
In 1926, at Coolidge’s insistence, Congress again reduced the highest tax rate, this time to 25 percent, and abolished tax notices. Senator George Norris (R-Neb.), A leading proponent of information disclosure, predicted that the repeal would make it easier “for large-scale manipulation of large taxpayers to avoid paying the fair taxes they owe by law.”
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