As Americans send off their tax returns by Monday’s deadline, they don’t have to worry about their neighbors knowing how much they earned or paid. But for a while in the 1920s, everybody’s tax payments were public records for all to see. And the richest Americans were not happy about it.
One goal of the 1924 tax publicity law was to show whether wealthy Americans and large corporations were paying their fair share of taxes. Newspapers published big stories on 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, equal to about $123 million now. Next was automaker Henry Ford, who paid $2,467,400.10, or $41 million today. Douglas Fairbanks and Gloria Swanson were the highest-paying movie stars. Incomes weren’t disclosed, though they could be roughly inferred.
The Big Reveal was short-lived. In 1926, Republican President Calvin Coolidge, under pressure from rich taxpayers, got Congress to end the public tax payments.
President Biden, in his fiscal 2023 budget, is proposing a “Billionaire Minimum Income Tax” of 20 percent on households with more than $100 million in both income and “unrealized gains.” The proposal wouldn’t make tax payments public but seeks to adjust a “tax code that results in America’s wealthiest households paying a lower tax rate than working families,” the White House said. Critics contend the plan would hurt long-term investments.
Tax payments were secret after the modern federal income tax was established in 1913. But in the early 1920s, reformers began calling for disclosure, as former Republican president Benjamin Harrison had urged in an 1898 speech on the “Obligation of Wealth.”
“Each citizen has a personal interest in the tax return of his neighbor,” Harrison said. “We are members of a great partnership, and it is the right of each to know what every other member is contributing to the partnership, and what he is taking from it.”
In 1924, Coolidge and Treasury Secretary Andrew Mellon, of the ultrawealthy Pittsburgh banking family, got the Republican Congress to cut the top individual tax rate from 58 percent to 46 percent. In return, progressive senators, including some Republicans, won a provision to make all federal tax payments public, arguing that this would deter tax dodgers.
That fall, the Internal Revenue Service’s first release of tax payments for 1923 made headlines across the country. Mellon, who had vigorously opposed public release, was reported to have paid $1,178,988 in taxes, equal to $19 million today. Railroad magnate Frederick Vanderbilt paid $800,000 in taxes, equal to $13 million now. Papers also published long lists of payments by local, ordinary taxpayers.