On April 29, 1909 — 102 years almost to the day before the Congressional Progressive Caucus proposed its “People’s Budget” – the British chancellor of the exchequer, David Lloyd George, introduced his own “People’s Budget” in Parliament. This budget included something called the “super tax,” designed specifically to redistribute wealth from the rich to the poor.
Half a century later, in his famous 1966 song “Taxman,” George Harrison, singing in the guise of a sardonic tax collector, warns listeners that he will keep 19 of every 20 pounds they earn, and concludes his advice with the reminder that “you’re working for no one but me.” “Taxman” was inspired by the fact that during their heyday, the Beatles were subject to the super tax, meaning that their earnings were taxed at marginal rates of up to 95 percent.
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That’s not a misprint. And if the story ended there — with a song — that would be one thing. But the oppressive British tax regime had real and dire consequences for the Beatles.
In 1967, the Beatles were informed that they would need to invest the large pile of cash they had amassed if they wished to avoid a major haircut from Her Majesty’s tax collectors. In late 1967 and early 1968, the Beatles duly started the ill-starred Apple group of companies — Apple Records, Apple Electronics, Apple Films, Apple Publishing, and the Apple Boutique.
Most of the companies under the Apple umbrella began losing money extravagantly and quickly. The Beatles’ manager, Brian Epstein, had died in August 1967, and they had no idea how to stanch the bleeding. John Lennon, after fearing publicly that he would be broke in another six months, brought in Allen Klein, a divisive figure who affected a gangster’s air of bluntness, to take an axe to the Apple tree. Over McCartney’s objections — he was outvoted 3 to 1 — Klein began to manage the Beatles’ affairs.
Klein was on a collision course with McCartney from day one. Klein’s laser focus on money often slighted artistic goals — witness the doctored Let It Be tapes, released without McCartney’s consent. McCartney, finding the prospect of continuing with Klein unacceptable, ultimately enraged the other Beatles by suing them to dissolve their partnership in 1970.
This story is widely known. But what often gets overlooked is the fact that without the potent tax dilemma, it is doubtful that the Apple group of companies would ever have been founded in the first place. In other words, no super tax, no Apple fiasco. No Apple fiasco, no Allen Klein. No Allen Klein, no lawsuit.
In fact, from beyond the grave, Lloyd George had forced the Beatles to spend more time figuring out how to shelter their wealth than making music. It is hard to believe that they would not have behaved more rationally, and stayed together longer as a working band, under a milder tax policy.
The Beatles were not an isolated case. These same tax pressures eventually drove the Rolling Stones to become expatriates in order to continue working, famously living in the south of France in 1971 while recording their masterpiece, Exile on Main Street. While the Stones survived as a working unit, they bore the pain of literal exiles — for some of them, permanent exiles — from their homeland.
Creative ruin. Litigation. Exile. Lloyd George unintentionally, but quite effectively, all but destroyed London’s status as the musical and artistic hub of the world as the 1960s gave way to the 1970s.
On this tax day, it is worth noting the lessons the Beatles and the Stones offer to today’s architects of tax policy about the possible unintended consequences of their “spending reductions in the tax code.”
They may be laying traps for artists and musicians yet unborn. As the song has it, tomorrow never knows.
Great article - worthwhile to remember how confiscatory tax rates got then, and what their real impacts are.
I believe the IRS claims people owe tax even if they flee the country, which seems hardly fair, so the Rolling Stones' escape wouldn't work for us :(.
Isn't it interesting that when Obama speaks of "the rich", it's like they are less than human?
I think it would be worthwhile to tell positive stories about rich people, like Steve Jobs, who stepped in to save his former company for only $1 a year, and Jim Jannard, who decided existing cinema cameras were not good enough for him, founded RED and is now flooding the market with his well-loved products. With confiscatory taxes, these people could have never done what they did.
Class warfare folks focus on the yachts and the private jets of the rich, without acknowledging that they need to employ people to run and maintain them - and that, for the most part, these are good, high-paying jobs that can't be outsourced. You soak the rich, you may have talked your way out of a potential job.
Wow, that's a real downer that the Beatles broke up because they had to protect their vast wealth. Its really a shame that Britain has provided free health care and a social safety net to all of their citizens. The British government's sense of obligation and care to their citizenry sickens me!
Britain had a income tax long before Lloyd George. Pitt the Younger introduced the first one and it was progressive. Even under Lloyd George's budget the top rate was still only 7.5%. The real screaming from the Tories was the introduction of a Henry George like land tax. In this period, the Landed Gentry still made up a major pillar of the Tory party but they were we might say "Land Poor." They had lots of land but due the the influx of agricultural products from the Americas and Australia their cash flow grew progressively worse and worse over the past 25 years. They saw the prospect of having to break up their estates going back generations to pay for this new land tax. The major change in Lloyd George's budget was the explicit re-distributive nature of it.
The major source of the rift with Allen Klein was that McCartney wanted his father-in-law, Lee Eastman, to manage the band after Epstein's passing. The Beatles had already begun to fracture a bit at this point and John, George and Ringo interpreted this as a powergrab by Paul, who they already felt was attempting to assume total creative control of the group. Even though they were warned about Klein's antics by Mick Jagger, they went with Klein anyway.
McCartney, however, never signed on to the management contract with Klein, which was smart. By never being contractually bound to Klein, he could sue to dissolve the group. In the end, the other three Beatles realized that Klein had hoodwinked them.
To: David H. Dennis
It is called the Liz Taylor law. Even if you renounce your citizenship, you are still subject to U.S. taxes for 10 years. When Taylor came back from Switzerland to marry Sen. Warner she got a tax bill for the years she was gone. At one time only the U.S. and Liberia were the only countries to tax the worldwide income of their citizens.
The Beatles broke up because the characters constituting the Godhead started acting like gods, to wit: McCartney stopped acting like a Beatle and started acting like the world-renowned Sir Paul McCartney we know today, Lennon stopped acting like a Beatle and retreated into his self-absorbing relationship with Yoko, and Harrison stopped acting like a Beatle and left the Material World altogether.
"Its really a shame that Britain has provided free health care and a social safety net to all of their citizens."
Free? Sure it was free. Health care just fell from the sky. It was on the ground every morning like manna. The great health care fairy left under their collective pillows.
Free? I think not.
BTW, the Beatles, because of the tax policy, did not pay for it. So how did the British people benefit from chasing the Beatles from the country entirely rather than letting them keep some of their wealth and live in Britain to pay taxes?
Also, in case it escaped your notice, the British health service is bankrupt and bleeding money (and the British taxpayer) at an alarming rate.
The author's main point is: "In fact, from beyond the grave, Lloyd George had forced the Beatles to spend more time figuring out how to shelter their wealth than making music. It is hard to believe that they would not have behaved more rationally, and stayed together longer as a working band, under a milder tax policy."
Any amateur Beatleologist who knows what the individual Beatles were doing day by day between the death of Brian Epstein and April 10, 1970 knows how ridiculous this claim is.
I remember reading an article within the last year about one of Britain's new tax increases aimed at rich performers and athletes. Essentially, many soccer players from other countries but playing for British teams are going to have a hunk of money stripped away.
Many of those players complained because this reduced their already agreed upon salaries. Had they seen the tax increase coming, they may have gone somewhere else.
And some of them will. The prediction was that the new tax would lessen Britain's playing power by driving away talent. Spain is attempting to scoop these players up and become dominant. Not sure how this is going now, as this tax thing is about the only intersting aspect of soccer I can think of.
CitizenC: There are two constants when it comes to liberals.
1st: Their all consuming greed. They are incapable of seeing someone who has more than they do, without immediately coming up with schemes to seize that wealth.
2nd: Their complete inability to think through the consequences of their schemes to grab other people's wealth.
It wasn't only the Beatles and the Stones and other musical groups that were affected. Tens of millions of copies of J.R.R. Tolkien's works were sold in the 1960s. When he visited his English publishers once in the late 60s, he was amazed to find that whole floors of the building were devoted to employees handling publication and distribution of his major four books specifically. His amazement was understandable because due to the UK's confiscatory tax rates, he never became rich off his staggering book sales and in fact had trouble making ends meet. After retirement from teaching, only a generous offer from his former employer, Oxford University, of free housing for JRRT and his wife for the remeainder of their lives, gave the author a little breathing room.
Nevertheless, the pinch of taxation forced Tolkien to sell away the film rights to The Lord of the Rings at the sacrifice price of £10,000 (less than USD $15,000). By way of comparison, the rights to Peyton Place had changed hands for $250,000 in the mid-1950s. But Tolkien had to sell, at any price, so it was a buyer's market. He had never wanted his novel filmed anyway, but too bad.
So his family and heirs garnered essentially nothing from the $2,000,000,000 gross of the three LOTR films in the 2000s.
Tolkien was a notoriously dilatory writer anyway, and finances weren't the only reason he never delivered a LOTR sequel (or First Age prequel, as he preferred to spend his time writing) in his lifetime. But certainly the fact that publishing another blockbuster success could have earned him nothing more than another crippling tax bill played a part in the lack of urgency he felt. That much is apparent in his published Letters.
eristic: Nice shoutback! Embryos are not people...yet.
MarkW: I lived in Britain for a year and had great healthcare. Rationing exists everywhere. Employer provided plans have rationing and "death panels".
Yes, taxes pay for the National Health Service, so it's not "free." However, universal health care is an excellent use of tax dollars and I look forward to when we have the same here in the US.
