Progressive Taxation in Raintree County
August 8, 2008
As any faithful reader of the Tax Foundation blog knows, our current tax system leaves much to be desired. The loopholes, the hidden taxes, the high rates, and the complexity are just some of its serious problems. However, our tax system has seen some improvements in the last 60 years, as a recent article by Professor J. Giertz of the University of Illinois, “Taxes in the Shade of the Raintree,” 120 Tax Notes 489, August 4, 2008, points out.
American Studies majors—or anyone with an interest in environmental fiction—are probably familiar with a book called Raintree County, by Dr. Ross Lockridge, Jr. A literary as well as financial success, Raintree County became a Book of the Month Club choice, with the screen rights sold to MGM. Author Lockridge earned $150,000 (approximately $1.5 million in today’s dollars), not including royalties. Interestingly, Lockridge knew the tax penalties he faced from the book’s success, as described by Giertz:
In 1947 the U.S. income tax was highly progressive with extremely high marginal rates. There were 24 brackets, with marginal rates ranging from 19 percent to 86.45 percent—the highest applying to taxable income exceeding $200,000. Also, there was no income splitting available for families before 1948 – one year too late for Lockridge and his wife. All taxpayers had to file single returns. Moreover, there was no explicit forward or backward averaging. Income averaging made an appearance in the U.S. income tax laws from 1964 to 1986, but it did not exist in 1947.
Aware of these laws, Lockridge requested that the MGM prize be paid over several years, not all at once. When he accepted the prize, he believed that this request had been accepted. He was mistaken—the prize was to be paid in one lump sum in 1947.
Now, as a supporter of Franklin Roosevelt, Lockridge was not necessarily opposed to high taxes. But he was certainly opposed to the way that the progressive design of the code harmed individuals such as himself. Giertz calculates that Lockridge would be in the 89% bracket, and of the $125,000, he would have had to pay $85,092 in federal tax. If income splitting with joint returns and a five-year distribution of the $125,000 been available to Lockridge, his tax liability would have been only $34,343, a difference of about $50,000, or $500,000 in today’s dollars.
Lockridge had spent years earning comparatively little while working on Raintree County, and he had no other projects on the horizon. He had counted on the book to provide for his family. Needless to say, he was extremely troubled by the amount of his income that he had lost due to taxes. On March 6, 1948, Lockridge completed an income tax return for his mother, wrote his lawyer a detailed letter dealing with his personal tax affairs, and made plans to listen to a radio broadcast of a Bloomington High School basketball game. That night, he was found dead in his garage from carbon monoxide poisoning.
This is not to say that Lockridge committed suicide over taxes. Lockridge’s tax disappointment was one among several problems, along with the editing and cutting of his work for film that were magnified by his depression. But this anecdote shows one problem with high progressive rates imposed on annual income. It also shows that as bad as our tax system is now, it could be worse. It should also give us some hope that a change (those are the buzzwords of the year, aren’t they?) to a simpler, neutral tax code is possible.