Names!

Every year, the IRS gives us a peek inside the wallets of the highest-earning 400 Americans. It's full of juicy facts like their average income ($318 million in 2014), how much they give to charity ($37 million each) and how much they pay Uncle Sam ($73.5 million). But there's one set of facts the IRS guards as carefully as the secret formulas they use to decide who gets audited — the top taxpayers' names.

That wasn't always the case. Back in 1924, the stock market was soaring, flappers were dancing the Charleston, and bootleggers were exploiting arbitrage opportunities in cross-border commodity transactions. The federal income tax wasn't quite the big deal it is today. For starters, it didn't kick in until you earned $5,000 of taxable income (about $71,000 in today's dollars). Just seven million out of 114 million Americans even filed returns. Form 1040 and its instructions were just two pages each.

That's when Congress decided to shake things up. Tax rates were still near their wartime highs, and new gift and estate taxes were unpopular. So the Revenue Act of 1924 dropped the top rate to 46% on incomes over $500,000, reduced the estate tax, and repealed the gift tax entirely. And, much to the delight of gossips everywhere, it directed local tax collectors to publish the names, addresses, and tax bills for every filer in their district.

Topping the national list, to nobody's surprise, was Standard Oil heir John D. Rockefeller, who paid $6,277,669 (just north of $89 million today). Henry Ford and his son Edsel brought home the silver and the bronze. Treasury Secretary Andrew W. Mellon was number four. And lucky Payne Whitney, heir to the Payne and Whitney family fortunes, was number five.

The rest of the top 100 includes plenty of old-money names like Vanderbilt, Astor, and Guggenheim, along with newer Gilded Age tycoons and their progeny. The average top earner was married, fiftyish, with two children and five servants. But there were a few exceptions to that predictable profile: tobacco heiress Doris Duke, "the richest girl in the world," paid $252,241 in tax — at age 17!

Of course, not everyone on the list inherited their fortune. John G. Shedd began his career as a stock clerk for Marshall Field, then rose to run the company. Thomas Lamont, who started out as a reporter for the New York Tribune, became a partner of J.P. Morgan and helped President Wilson negotiate the Treaty of Versailles. Arthur Cutten started out as a $4/week clerk for a Chicago commodity broker before speculating his way into, then out of, a $100 million fortune. He died under indictment for tax evasion.

Why did Congress pass a law making federal income tax bills public? Progressive supporters argued it would discourage cheating. Big-city newspapers split on whether to publish the information, with about half going for what today's editors call "the easy clickbait" and the others sanctimoniously resisting the temptation. Just two years later, the buzzkills in Washington repealed the publicity provision, and tax returns have been private ever since.

Most of yesterday's fortunes have long since faded into history, divvied up by generations of heirs or diverted into philanthropic foundations. But there's one lesson that survives a century of changing fortunes, and it's worth heeding, whether you're a flashy celebrity or a discreet millionaire next door: the key to paying less is planning. So count on us to help you keep more of your fortune!

Survey Says . . . !

The people who work at the IRS can be proud to do an important job. They're the "accounts receivable" department for the federal government, and whether you think we need more government or less, we should collect the revenue to finance it as effectively as possible. Treasury Secretary Mnuchin has already stated that the incoming administration's ban on new government hiring shouldn't apply to the IRS — perhaps because he's seen the research showing every dollar invested in tax enforcement yields seven dollars in tax. (If you could spend one dollar to make seven, you might do it all day long!)

At the same time, IRS staffers understand the work they do isn't especially popular. As Louis XIV's Finance Minister Jean-Baptiste Colbert once said, "the art of taxation consists in so plucking the goose as to procure the largest quantity of feathers with the least possible amount of hissing." So you could say the IRS is similarly looking out for ways to boost the plucking while minimizing the hissing.

Towards that end, the IRS collections division has engaged the Pacific Consulting Group to send a "Customer Satisfaction Survey" (Form 13257-A, revised April, 2016) to a random group of taxpayers who have gone through the collections process. It included the usual collection of questions you would expect from a government survey, like rating how much you agree with statements like, "I received an adequate description of the collection process," and "I was treated with respect during the collection process." But we thought there were a few more questions that might have made sense — like these:

    "Did you feel violated when agents picked you up by the feet to shake the change out of your pockets?"

"Did the Revenue Officer put the cushions back on the couch after searching for spare quarters that might have fallen between them?"

"What would you have done with that money if you didn't have to pay your taxes?"
"If you could tell the government exactly how to spend your tax dollars, what would you tell them?"
"Does the tax code make any more sense to you than it does to us?"
"Be honest . . . you'd rather give the money to us than to the sales tax goons, amirite?"
"When the robots finally take over, how do you think we should tax them?"
"Pinch yourself. Does it hurt? If so, consult IRS Publication 502, Medical and Dental Expenses."
"You seem nice . . . what are you doing next Thursday?"
"What's your favorite BBQ joint? (Asking for a friend.)

Here's another question they should ask, but probably never will. "Do you have a plan in place to pay less tax so you don't get caught up in collections in the first place?" If not, call us, and see if we can silence some of the hissing!

Better Call Saul!

On January 20, 2008, AMC debuted a promising new drama called Breaking Bad. The series chronicled the highs and lows of high-school chemistry teacher Walter White, who was diagnosed with terminal lung cancer and put his knowledge to work opening a meth lab to secure his family's financial future. Millions of viewers became addicted to White's exploits as he plunged deeper and deeper into a life of crime, breathlessly watching him juggle relationships with his DEA-agent brother-in-law, arms dealers, cartel soldiers, and crooked strip-mall lawyer Saul Goodman. All fun to watch, sure . . . but there's a reason the announcer always says, "Kids . . . don't try this at home."

Jack Vitayanon is a 41-year-old, Ivy League-educated attorney in the IRS Office of Professional Responsibility, where he investigates crooked accountants, attorneys, and IRS agents. He even taught a class called "Tax Lawyering and Professional Responsibility in Tax Practice" at Georgetown Law School. But apparently he needed to crank out some adventure in his life. And while we may never know if he drew his ambition from AMC's antihero, it's crystal clear that he decided to join the methamphetamine trade.

Agents from the Department of Homeland Security say that back in December, they intercepted a FedEx package containing 460 grams of meth at the end of its journey from Arizona to Long Island. (Everyone knows you ship your drugs FedEx instead of regular mail — who needs U.S. Postal Inspectors all up in your grill?) The unlucky recipient did what everyone does when they get busted with a pound of meth — he flipped and agreed to rat out someone further up the supply chain. Unfortunately, that chain included Vitayanon, who had been dealing with the Arizona sender since 2014.

Two weeks later, our new confidential source recorded a video chat with Vitayanon, "who was observed in his Washington DC apartment smoking what appeared to be methamphetamine from a glass pipe." (C'mon, Jack, you never get high on your own supply!) Vitayanon promised to send a "zip" (one ounce of meth) to the source. A day later, he texted to confirm he was packaging the shipment and helpfully provided a FedEx tracking number for the delivery. (You'd expect that sort of attention to detail from an IRS attorney, wouldn't you?)

Last month, agents tailed Vitayanon as he shipped two more zips to the same source on Long Island. At that point, he was pretty much cooked, and on February 1 he was arrested. Naturally, the Justice Department dropped a Breaking Bad reference in the press release announcing the bust.

Now the disgraced attorney is looking at spending several years surrounded by fellow Walter White wannabes. Adding insult to injury, he might face another smack for failing to pay tax on his side gig. Remember, the IRS doesn't care how you make your money. They even tweaked the tax code with a special provision, Section 280E, that prevents drug dealers from writing off their legal business expenses. No deductions for delivery and shipping, business use of the home, or even "cost of goods sold"!

Jack Vitayanon won't be making much money over the next few years, so taxes will be the least of his worries. Unfortunately, you don't have that luxury. So count on us to help you pay less — legally, morally, and ethically!