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.
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.
— George Cassidy is co-author, with Richard Courtney, of Come Together: The Business Wisdom of The Beatles.