Paul L. Caron

Wednesday, August 4, 2021

Zelenak: 1924, 2021 — Taxes Of The Ultrarich, And Mark-To-Market Reforms

Lawrence Zelenak (Duke), 1924, 2021: Taxes of the Ultrarich, and Mark-to-Market Reforms, 172 Tax Notes Fed. 583 (July 26, 2021):

Tax Notes Federal (2020)In this article, Zelenak tells the story of Treasury’s disclosures of the income tax payments of plutocrats almost a century ago, which mirror the recent ProPublica revelations of the income tax payments of the 25 richest Americans, and he explores why those earlier disclosures — unlike the recent ones — didn’t spark interest in mark-to-market taxation of the ultrarich.

In early 1942 Irving Berlin contributed to the war effort by composing a song, “I Paid My Income Tax Today,” and donating the copyright to the federal government. The lyrics included the lines, “You see those bombers in the sky / Rockefeller helped to build them / So did I.” Twelve years earlier, “On the Sunny Side of the Street” (music by Jimmy McHugh, lyrics by Dorothy Fields), among the biggest popular song hits of the early Depression, featured the lines, “If I never have a cent / I’ll be rich as Rockefeller.” In the 1920s, and continuing through the Depression and World War II, Rockefeller was the songwriters’ obvious choice to represent both the biggest income taxpayers and the ultrawealthy. Today, names such as Bezos, Bloomberg, Buffett, and Musk could well replace Rockefeller in an updated version of “On the Sunny Side of the Street” (at least if the names happened to scan), but the same names might not work nearly as well as Rockefeller replacements in “I Paid My Income Tax Today.”

Rockefeller, Ford, and their fellow plutocrats of a century ago had taxable sources of income — especially dividends — in amounts at least somewhat reflective of their net worth and of the unrealized appreciation in their stock. That is not true of the American plutocrats of the 21st century. Absent a most-unlikely sea change in the dividend policies of the corporations whose shares are the source of the wealth and economic income of today’s multibillionaires, mark-to-market taxation may be the only way to achieve even the very rough congruence of the 1920s between lists of the payers of the highest income taxes and lists of the wealthiest Americans.

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