So today there was a Beatles tribute band in the courtyard at work. While they were singing Taxman I started thinking about the oft-told story how George Harrison wrote the song to complain about the high amount of taxes that super-rich people would have paid in England at the time, explaining why rock stars such as some of the Rolling Stones went to live in the south of France.
So, how much of their income/fortune was going to taxes, and how much would they save by becoming tax exiles, in France or Monaco or Switzerland for example?
I’m not sure what the tax rates were in 1966 when the song came out, but when Margaret Thatcher came to power more than a decade later, the top marginal rate was 83% plus a 15% surtax on unearned income. Music royalties and the like are generally treated as unearned income.
By comparison, the top marginal rate in the US in 1966 was 70% with no surtax, down from 91% before JFK’s tax cuts.
I found that in 1973, the top marginal rate was 75%, so we’re getting closer. You can see a chart here:
http://www.hmrc.gov.uk/stats/tax_structure/incometaxrates_1974to1990.pdf
An extract from the volume The Beatles Anthology (Cassel & Co., 2000) can be found here. Harrison comments on Taxman as follows:
It was in April 1966 that we started recording Revolver. “Taxman” was on Revolver. I had discovered I was paying a huge amount of money to the taxman. You are so happy that you’ve finally started earning money - and then you find out about tax. In those days we paid nineteen shillings and sixpence out of every pound (there were twenty shillings in the pound), and with supertax and surtax and tax-tax it was ridiculous … Anybody who ever made any money moved to America or somewhere else.
Supertax was introduced by Lloyd George in 1909, renamed surtax in 1929 and discontinued in 1973 when Heath’s government merged income tax and surtax into one entity.
A confirmatory source for Harrison’s assertion of 97.5 percent taxation would be useful but I can’t find a tax rate table going back to 1966. George actually contradicts himself in the song with ‘one for you, nineteen for me’ (95 percent taxation) but one may assume this is because it scans better than ‘one for you, thirty-nine for me’.
All the rock stars moving out didn’t do anything. It was later found that they still had to pay all the money. Exiles on Main Street is a great album, but didn’t actually save the Stones anything, all the major bands (I believe Pink Floyd and Genesis also?) had to pay the money in the end.
I am basing this on a news article about them paying it back from several years ago, but I can’t find any other reference to it.
Well, of course there were tax avoidance strategies that these guys were totally ignorant of at the time: retirement savings, investments, etc. They were making an insane amount of money and were taken by surprise that they couldn’t keep it all. Because, after all, all you need is love, not financial advisers.