Beatles -- "Taxman"

Don't ask me what I want it for

If you don't want to pay some more

'Cause I'm the taxman

Only a month until election day!  (I see you shivering with antici . . . pation!)

The issues the voters seem most concerned about come down to $$$ -- the federal budget deficit, the cost of health care, unemployment, mortgages foreclosures and the real estate market, and . . . last but certainly not least . . . taxes.  

Are taxes too high on you and your middle-class pals?  Are they too low on those rich bastards?  (I have no idea what your income level is, but pretty much everyone I know sees themselves as middle-class, not rich.)

You might think that a Beatles song is an odd choice for a post about taxes and the 2012 election.  After all, weren't the Beatles all about peace and love?  They cared not a whit about money -- or about fancy cars or expensive houses or other material things.  As multimillionaire socialist and tax exile John Lennon famously sang:

Imagine no possessions

I wonder if you can

No need for greed and hunger

A brotherhood of man

George Harrison set the bar higher than even Lennon.  Every song that he wrote was purer of heart and more spiritual than the one before, especially "Living in the Material World," the title track from his 1973 solo album:

Met my friends all in the material world

John and Paul here in the material world

Though we started out quite poor

We got "Ritchie" on a tour

Got caught up in the material world

(The "Ritchie" reference is for Richard Starkey -- a/k/a/ Ringo Starr.  Is Harrison saying that the Beatles would never have become superstars but for the decision to replace original drummer Pete Best with Ringo?)

Of course, Madonna has a very different view of the material world:  

'Cause the boy with the cold hard cash

Is always Mister Right

'Cause we are living in a material world

And I am a material girl

Speaking of Madonna, she brought her "MDNA Tour" to the Verizon Center in Washington, DC recently.

Madonna had some interesting new outfits made for the tour:

She didn't take the stage until 10:30 pm -- a mere 2 1/2 hours after the posted showtime -- so the show didn't end until 12:30 am.  I'm sure everyone's favorite diva was well worth waiting for, if the Washington Post's description of just one number from the show is accurate:

During her rendering of “Gang Bang,” the stage became a seedy motel room in which [Madonna] chugged whiskey and used more firearms to gun down two generic bad guys. She mounted their carcasses for a theatrical but confusing pelvic thrust routine, yelling “Die b----!” a whole lot, though it wasn’t clear whether all the lyrics were being sung live. Meanwhile, the video screens showed enough splattered blood to make Quentin Tarantino nauseated.

Madonna plays with guns

But Madonna's tardy entrance put a major fly into the ointment.  You see, the Washington Metro subway system shuts down around midnight on weeknights, which meant that thousands of concertgoers were going to end up stranded in downtown DC.  The arena's management quickly made arrangements with Metro to stay open late -- at a cost of $29,500 per hour.  (I hope the Verizon Center deducted that from her paycheck, but somehow I doubt they did.  Wouldn't want to get on Madge's bad side!)

Where were we?  Oh, yes . . . back to George Harrison.

Once upon a time, Mr. Concert-for-Bangladesh had a very different attitude when it came to material things -- including income taxes.  The lyrics to Harrison's 1966 song, "Taxman," makes Arthur Laffer look a little soft on cutting taxes.

According to "Taxman," the top income tax rate in the UK was 95% -- "There's one for you, nineteen for me" ("me" being the taxman).  Harrison may have shaded the exact number up or down a little bit for the sake of the song, but he wasn't off by much.

I've been unable to ascertain exactly what the top marginal income tax bracket in the UK was in 1966, but it appears that 95% is pretty close.  The highest bracket reached 99.25% during World War II.  It was cut to around 90% during the fifties and sixties, then cut to 75% in 1971 (although there was a 15% surcharge on investment income, which took the top rate back to 90%).  In 1974, the top rate on earned income was at 83% -- with the 15% surcharge, that meant investment income was taxed as much as 98%.  

Believe it or not, it was even worse than that at times.  In 1967-68, the effective rate of taxation for those with more than 8000 pounds in investment income was 136.25%.  

I only took one semester of calculus, so I don't understand how such a thing is possible.  But those numbers come from the official website of Her Majesty's Revenue & Customs department.  Click here to see for yourself, all you doubting Thomases.  

If you were a big British rock star and the government was taking 95% (much less 136.25%) of your income, what would you do about it?  You'd get the hell out of the UK, that's what you'd do.  

The list of British tax exiles is a veritable "who's who" of rock superstars.  The Rolling Stones went to France.  (That's where they recorded Exile on Main Street.)  They've made 242 million pounds over the past 20 years or so, but have paid only 1.6% of that in taxes.  Nice!

Keith Richards in France, 1971

Phil Collins and David Bowie established residence in Switzerland to avoid UK taxes, while Ringo Starr headed to Monaco.  Rod Stewart moved to Los Angeles, John Lennon and Freddie Mercury to New York City.  Other tax exiles included the Who and Led Zeppelin.  

The Beatles broke up over money troubles as much as anything else.  The group formed Apple Corps as part of a tax-avoidance strategy -- but due to mismanagement (or nonmanagement), Apple gushed red ink.  Paul McCartney was overruled by the other Beatles when it came to hiring a new manager to clean up the company -- Paul wanted to hire his father-in-law -- and things went downhill quickly after that. 

There are still tax exiles today.  "Saint" Bono's heart bleeds over global poverty -- but not as much as it bleeds over paying taxes.  U2 Ltd. moved to the Netherlands from Ireland in 2006.  Previous to that, Ireland did not tax artist royalties.  (Talk about your great special-interest tax loophole.)

A cartoon protesting U2's tax dodge

All in all, an estimated six million high-income Brits live abroad.  To avoid being taxed as British residents, they must spend less than 1/4 of the year (or 91 days at most) in the UK.  Mick Jagger has managed to do that for the last 25 years.  

The new UK government inherited a very large budget deficit.  In April, the top marginal tax rate went back up to 50% for individuals earning more than $235,000.  I wonder how many more high-income Brits will move to Hong Kong or Switzerland or Dubai or Singapore (all very civilized places) if rates stay there or go even higher.

That would never happen in the United States?  After all, we have such a great country that no rich American would ever consider becoming a tax exile just to save a few million bucks a year.   Right?

By the way, the top 1% of American taxpayers (that's 1.4 million people) now pay more total dollars in federal income taxes than the bottom 95% (that's 134 million people).  Compared to other OECD countries, the U.S. relies more heavily on the top 10% of its taxpayers, while lower-income Americans have a lower income tax burden than lower-income people elsewhere.

One of the most famous fables credited to Aesop, a slave and storyteller who lived in ancient Greece in the sixth century B.C., is "The Goose That Laid the Golden Eggs."  In that tale, a poor farmer and his wife had a goose that laid a golden egg every day.  In one version of the story, the farmer demands that the goose start laying two eggs a day instead of one.  When the goose says no can do, the farmer loses his temper and kills it.

While UK tax rates may have been the coup de grace for the Beatles, there was another way out for the Fab Four.  Too bad the Beatles didn't follow the example of the Rolling Stones.  They could have all moved to France and kept putting out albums for another few decades.  The golden goose that was the Stones didn't wait for the farmer to bleed it to death -- Mick, Keith and the gang simply skedaddled to a farm with a less demanding farmer and lived happily ever after.

Aesop got it over 2500 years ago.  Some governments get it today.  But some don't.

Here's "Taxman," the first track from Revolver, which is arguably the Beatles' best album ever:

Click here to buy Revolver from Amazon:

Kinks -- "Shangri-La" (1969)

The gas bills and the water rates

And payments on the car 

Too scared to think about 

How insecure you are 

Life ain't so happy in your little Shangri-La 

Only three months until election day.  (It'll be here before you know it!)

With the American economy in the toilet, President Obama's campaign is beginning to emphasize social issues -- abortion, gay marriage, immigration, etc. -- because the polls show that the President has an edge over his opponent on such issues.

The polls also show that 35% of voters say that jobs is the top issue, while 23% say the budget deficit is number one.  Only 5% say immigration is the most important issue to them, while only 4% rank gay marriage as their number one concern.

Many Americans are feeling like Arthur, the middle-aged and middle-class British man who is the title character of the album on which this song appears.

Arthur has purchased a modest house in the suburbs, not to mention a car and a TV set.  But to be able to buy his "Shangri-La," he had to go into more debt that he really feels comfortable with. 

The little man who gets the train 

Got a mortgage hanging over his head 

But he's too scared to complain 

A few years ago, many Americans were taking advantage of low interest rates to buy houses they really couldn't afford.  Lenders became more liberal in their lending policies because they assumed that the price of houses would continue to rise, providing them with sufficient security even if some borrowers were unable to pay their mortgages.

But when interest rates started to go up and housing prices started to drop in 2006-2007, defaults and foreclosures started to increase.  The bubble burst, the house of cards came tumbling down, the chickens came home to roost -- feel free to use the cliché of your choice.

Mr. Micawber

Remember what Mr. Micawber said in David Copperfield?

Annual income twenty pounds, annual expenditures nineteen [pounds], nineteen [shillings], and six [pence], result happiness.  Annual income twenty pounds, annual expenditures twenty [pounds], ought [shillings], and six [pence], result misery.

For those of you who never mastered old-style English currency, let me help you out.  There were 20 shillings to the pound, and 12 pence to the shilling.  So according to Micawber, the difference between happiness and misery is the difference between spending half a shilling (six pence) less than your 20-pound income, or spending half a shilling more than your 20-pound income.

Half a shilling is 1/800 as much as 20 pounds -- that's not much.  But what matters is whether you're running a surplus or running a deficit.  When you have money in the bank -- that is, the bank owes you -- all is well.  But when you owe the bank, watch out.

Micawber didn't have the advantage of advanced instruction in economics, so he didn't understand how debt allows you to leverage profits, how it's a good thing when governments operate at a deficit, and so on.  He was operating on the very old-fashioned principle that you should live within your means, and avoid becoming a debtor at all costs.  That's soooooo passé!

The biggest asset of Americans as a whole is home equity -- the value of their homes less mortgage debt.  At the beginning of 2006, total home equity was valued at $14.9 trillion.  By the end of 2010, it had fallen to $6.3 trillion.  Almost a quarter of American homeowners are underwater on their mortgages -- that is, they owe more to the bank than their houses are worth.

If I was one of those people, I would have only one issue on my mind when I went into the voting booth on November 6 -- and it wouldn't be immigration, or gay marriage, or the war in Afghanistan, or any of the other serious issues facing our country.

I was fortunate enough to make the final payment on my mortgage earlier this year.  We bought our first home in 1984 (I was 32 years old) with the help of a 30-year mortgage.  When we moved five years later, we signed up for another 30-year loan.  But when we moved to our current house in 1997, I was wise enough to switch to a 15-year fixed-rate mortgage.  Low interest rates made that decision feasible, and I didn't want to be paying off a mortgage when I was 75 years old -- which would have been the case if we had opted for a new 30-year loan at that time.

Those of you who own your home free and clear probably agree that not having a mortgage hanging over your head is very comforting.  Even if worse comes to worst, you'll always have a place to lay your head at night if you've paid off your mortgage.  (Assuming you can handle the taxes, of course.)

Given how low mortgage rates are right now, it's tempting to refinance a house and take out cash to spend or invest elsewhere.  That may be a very wise strategy.  

But I don't care.  I like having my house all paid off.  I can't imagine what would make me change my mind and go into debt every again.  

(Actually, I can think of one thing.  I have 25-year-old twin daughters.  Both seem to enjoy the company of men.  It's probably only a matter of time until I have two weddings to pay for.)

"Shangri-La" is one of those rare rock songs that was written for mature adults, not teenagers.  I know at least a thousand songs that are about how much it hurts to be in love (or in lust, as the case may be), but I know of no other song which has as its subject the angst of the middle-aged suburban homeowner.  (I personally think it's the best song the Kinks ever recorded, and that's saying something.)

Calling Arthur's modest suburban home "Shangri-La" -- the name given to the fictional Himalayan utopia in James Hilton's 1933 novel, Lost Horizon (which Frank Capra turned into a movie) -- is pouring the irony on pretty thick, of course, but this is a song that is essentially sympathetic with the concerns of what used to be called the silent majority.

It doesn't trash the middle class for worrying more about the next mortgage payment than about poverty in third-world countries, or global warming, or animal rights, or all the other causes that some so zealously advance.

Instead, "Shangri-La" says "There, there -- life's not so bad.  At least you've got indoor plumbing -- more than your ol' granddad could say, eh?"

A London suburb

Living on a street where "all the houses . . . look the same" and spending your time washing the car, watching the telly, or simply sitting by the fire in your slippers after dinner may not sound like heaven on earth.  But for many of us, that's the highest "reward for working so hard" that we will attain.  

So "sit back in your old rocking chair."  You've "reached your top and you just can't get any higher."  It may not seem like much, but it's "your paradise," "your kingdom to command." 

Feel better now?  No?

Me neither.

Here's "Shangri-La":

And here's Ray Davies of the Kinks singing the song with the Crouch End Festival Chorus:



Click here if you'd like to buy Arthur from Amazon.  It's a remarkable album: