Einstein was right: Income taxes are hard to understand

A 1952 Topps trading card for oil industry magnate, industrialist and philanthropist John D. Rockefeller sold for $720 at a February 2019 auction.

By Jim O’Neal

Next year promises to be another year when a major political party has an unusually large number (perhaps 20) of eager aspirants wanting to become president. Republicans had to contend with a similar problem in 2016. Sixteen hopefuls filled out the requisite forms. Most of them withdrew during the primaries and the last two – Ted Cruz and John Kasich – withdrew when Donald Trump won Indiana. On May 2, Trump became the presumptive nominee for Republicans.

There are advantages to having a broad, diverse group of candidates, but almost as many headaches. One that I suspect will become more prominent is “too many hogs at the trough.” Every candidate is challenged to find a unique angle to woo prospective voters, but it is surprising how many are making promises that will be impractical to keep. Free health care, college debt forgiveness, and free college tuition are fundamentally different than promises of lower taxes or new high-paying jobs.

Generally, populist proposals are “paid for” by taxing the rich with a “billionaire tax” or a radical wealth tax on existing assets. Since 70 percent of federal revenues come from the top 20 percent of taxpayers, the math just doesn’t work. This is especially true with 10,000 people retiring every day and existing entitlement projections squeezing out almost all other spending. One fact is certain: We can’t use the same tax dollar to pay for four different expenditures (unless we really crank up the printing presses … which are now just electronic gizmos).

Frederick Law Olmsted

Naturally, opponents are quickly stigmatizing all creative spending proposals as merely different variants of socialism. As “The Iron Lady” Margaret Thatcher wisely observed, “The trouble with Socialism is that eventually you run out of other people’s money.”

There may have been a time 150 years ago during the Gilded Age when some of these things made sense. America’s industrial success produced an era of financial magnificence when many basked in dynastic wealth of inexhaustible dimensions. John D. Rockefeller made the equivalent of $1 billion and paid no income tax. No one else did either since income tax didn’t exist in the United States at the time. Congress passed a 2 percent tax on earnings over $4,000, but it was ruled unconstitutional by the Supreme Court. Twenty years later in 1914, a modest income tax was finally approved. Albert Einstein said: “The hardest thing in the world to understand is the income tax.” I agree.

The wealthy in the 19th and 20th centuries found that spending all of their money became a full-time job. After emptying all of Europe’s fine art and artifacts, they built houses on a truly grand scale. The grandest of all were said to be the Vanderbilts. Ten mansions on 5th Avenue (one with 137 rooms). Next was Newport, R.I., where magnificent homes were quaintly called “cottages.” Then came George Washington Vanderbilt II (1862-1914), who, with successful and influential landscape designer Frederick Law Olmsted, built the Biltmore House – an estate outside Ashville, N.C. The house is believed to be the largest domestic dwelling in the United States, with 250 rooms nestled on 125,000 acres.

Olmsted and his senior partner, Calvert Vaux, designed America’s most famous park: New York City’s Central Park. The list of Olmsted’s projects is too extensive to list here even by category. The most fitting description of his work comes from the words of Daniel Burnham – the great American architect and urban designer: “An artist, he paints with lakes and wooded slopes, with lawns and banks and forest-covered hills, with mountainsides and ocean views.”

Worthy of a great man’s epitaph!

Intelligent Collector blogger JIM O’NEAL is an avid collector and history buff. He is president and CEO of Frito-Lay International [retired] and earlier served as chair and CEO of PepsiCo Restaurants International [KFC Pizza Hut and Taco Bell].

Lewis Cass among most important yet least known 19th century politicians

A rare political campaign daguerreotype of Lewis Cass from 1848 sold for $17,925 at a February 2007 Heritage auction.

By Jim O’Neal

By 1848, slavery had inexorably become a national issue. Opinions were slowly but surely being formed, much as wet cement hardens while baking in the sun. Generally, most people agreed that slavery should be “hands off” and left alone in the 15 states where it already existed.

However, they disagreed violently over whether it should be permitted in new regions. Pro-slavers insisted it be allowed to follow the U.S. flag. But anti-slavery backers (primarily Northerners) strongly opposed expansion into federal territories. Their logic was impeccable. Strong containment policies would eventually lead to complete elimination everywhere. This was the same flawed thinking that the framers of the Constitution had tripped over when they permitted a 20-year phase-out period. Except the difference, of course, was that without this clause, there were not enough votes to ratify the Constitution. Deception? Probably, but there was an overarching priority in favor of ratification … kick it down the road … maybe it will just wither away.

Naturally, the political leaders of both the Whigs and Democrats were just as anxious to duck the issue entirely. Both parties relied on support from voters in every section of the country. However, the issue was now much too prominent and the slavery issue ended up playing a major role in the 1848 presidential election.

Meeting in Baltimore in May 1848, the Democrats were the first to select candidates. For president, they went for Michigan Senator Lewis Cass. He had been a territorial governor for years and would be the first Democratic candidate from the area known as the Northwest. Many years later (1861), as James Buchanan’s Secretary of State, he begged the president to send reinforcements to Fort Sumter to keep the South from raiding its guns and supplies. He resigned when Buchanan predictably refused; it was the only option the 79-year-old diplomat had to display his strong objections.

Cass was 6 years old when his mother held him up to the window of their home to watch the bonfires blazing in the streets of Exeter, when New Hampshire became the ninth and final state required to ratify the Constitution. When he resigned, he memorably said, “I saw the Constitution born, and I fear I may see it die.” The Constitution survived, but 620,000 Americans died in the war to preserve the Union.

Cass was solidly known as an advocate for “squatter sovereignty” – the right of settlers in federal territories to decide the slavery issue for themselves. At the Baltimore convention, the New York delegation quickly split over the selection of Cass for president, accompanied by a party platform that declined to take a firm stand on the extension of slavery. They simply walked out and, along with other anti-slavery people, organized the Free Soil Party, which was firmly dedicated to preventing slavery in all federal territories. They chose the hapless ex-President Martin Van Buren and Charles Francis Adams (son of the sixth president) with an unequivocal slogan: “Free Soil, Free Speech, Free Labor and Free Men.”

With the Democrats now divided, the Whigs made their choice at a convention in June in Philadelphia. Sticking to a “War Hero General” formula that proved to be successful, they confidently chose General Zachary Taylor of Louisiana, “Old Rough and Ready,” the hero of the recent war with Mexico. Many Whigs (including a young Abraham Lincoln) were appalled by the choice. Not only was he too old (64), but he had never been involved in politics! In fact, he had never even voted and admitted he knew little about national domestic issues.

Daniel Webster called him “an illiterate frontier colonel” and warned that many thousands of Whigs “will not vote for a candidate … simply because of a war record.”

Webster turned out to be terribly wrong and the party backed “Old Zach” just as they had selected “Old Tippecanoe” (William Henry Harrison) in 1840. Taylor easily beat Lewis Cass on Nov. 7, 1848 – the first presidential election that took place on the same day in every state and the first Election Day statutorily on a Tuesday.

Taylor died on July 9 two years later and was the last president elected who was not a Republican or a Democrat … a period of 198 years (yes, I know that Lincoln ran in 1864 for the Union Party after becoming the first Republican president in 1860). Third-party candidates do not do well … just ask Teddy Roosevelt.

Cass remains a good candidate for the most important yet least known of any politician in 19th century America.

Intelligent Collector blogger JIM O’NEAL is an avid collector and history buff. He is president and CEO of Frito-Lay International [retired] and earlier served as chair and CEO of PepsiCo Restaurants International [KFC Pizza Hut and Taco Bell].

Civil War question: What were these men thinking?

This albumen print of a Union encampment, most likely of the 110th Pennsylvania Volunteer Infantry, sold for $2,868 at a November 2008 Heritage auction.

By Jim O’Neal

The last truly great Civil War book I read was Doris Kearns Goodwin’s Team of Rivals: The Political Genius of Abraham Lincoln (2005). The award-winning book focuses on the 1860 presidential election and how underdog Lincoln was able to secure the Republican nomination against three formidable opponents, and then win the presidency without a single Southern vote (he was not on any Southern ballot).

Then, it deftly explains how President Lincoln was able to recruit all three Republican opponents to serve as key members of his Cabinet: New York Senator William H. Seward (Secretary of State), Ohio Governor Salmon P. Chase (Treasury Secretary), and Missouri’s favorite son Edward Bates (Attorney General). Next was the brilliant way he managed to leverage each man’s strength and weakness into a form of political-enemy synergy.

Steven Spielberg secured the film rights before the book was written and his 2012 movie Lincoln was highly acclaimed. Out of 14 Oscar nominations, Daniel-Day Lewis won for Best Actor. But the movie was really only about the last four months of Lincoln’s life when he maneuvered to get the 14th Amendment approved. Neither the book nor film spends much time on the Confederacy or the underlying circumstances that made the Civil War inevitable.

This is not unusual, since books about Lincoln, his Cabinet and the generals of the war pop up with regularity. Relatively little has been written about the Confederacy per se (i.e. the formal government of the South). The primary focus seems confined to biographies of Robert E. Lee, Thomas “Stonewall” Jackson or the famous battles between the North and South (such as Gettysburg).

Sure, people might know that Jefferson Davis was president of the CSA or that Alexander H. Stephens was vice president. But these two men were in office the entire war, from April 1861 to May 1865. Perhaps interest in individuals is limited because, as some historians argue, the Confederate States of America represented an entire people’s effort to cling to their past. They feared after the 1860 election that Lincoln and the now-dominant Republicans would simply force them to abandon the practice of slavery. So they naively decided to secede from the Union and start their own country.

They started with seven secessionist slave-holding states and in February 1861 established a new Confederacy in Montgomery, Ala., before Lincoln even took office. After Confederates fired on Fort Sumter in April, four more states seceded and joined the Confederacy (now based in Richmond, Va.). Missouri and Kentucky were later accepted but did not secede. Two seats in the Confederate Congress were given to Southern California.

Organizationally, the Southern government was much like the North. They had a Constitution and a Cabinet with six departments that composed the executive branch. With few exceptions, they replicated their counterparts in the Union. A prominent exception: the Attorney General was elevated to Cabinet status. It grew in importance since the Confederacy had no Supreme Court; the Department of Justice arbitrated any legislation or constitutional disputes.

However, most departments discovered their limitations once the War started. The Navy began the war without a single major vessel and soon lost easy access to international sea-lanes from Southern ports. The Treasury and War departments did not have the resources of their Union counterparts, little things like enough money or an army and a non-industrial economy. Here, one must ask: Who were these men and what were they thinking?

Some deep thinkers sincerely believe it was an honest attempt to build a New South with 11 individual states forging a future based on prosperity from land and slaves. After all, only 4 percent to 5 percent had direct involvement with the institution of slavery. The majority considered their way of life inviolate enough to defend it by force of arms. However, despite obvious mismatches from virtually every aspect, that did not deter its political leaders. They assured the Southern people that courage and determination could substitute for limited resources, limited manpower and lack of foreign aid.

The South’s goal of independence was as absolute as the North’s determination to maintain the Union. Hence, the objectives of the opposing governments could be neither compromised nor harmonized. The Civil War would have to be a fight to the finish.

For four long years, against impossible odds, the South persevered and suffered. It accepted honorable defeat and then wrapped itself in nostalgia. The South’s postwar vision of “The Lost Cause” – fighting and surrendering with honor – became a soothing balm for the sores of war.

However, President Jefferson Davis would admit much later, “The simple fact was the people had gone to war without considering the cost.”

Case closed.

Intelligent Collector blogger JIM O’NEAL is an avid collector and history buff. He is president and CEO of Frito-Lay International [retired] and earlier served as chair and CEO of PepsiCo Restaurants International [KFC Pizza Hut and Taco Bell].

The New Yorker is perhaps the best magazine America has ever produced

Charles Samuel Addams’ original cartoon art for Sad Movie, which appeared in The New Yorker in 1946, sold for $40,625 at a March 2012 Heritage auction.

By Jim O’Neal

Conventional wisdom suggests that greatness did not come easily or immediately to the venerable New Yorker magazine. Founded in February 1925, its primary strengths were zeal and enthusiasm, derived primarily from editor Harold Ross. He had journalism in his blood and would be editor for every copy (1,339 issues) until his death in 1951.

Then there was the critical financial indulgence of principal backer Raoul H. Fleischmann, who founded the General Baking Company. Ross and Fleischmann formed F-R Publishing Company to publish the new magazine. Fleischmann was widely quoted as saying, “The very best thing about the first issue was the cover” – a Knickerbocker dandy (by Rea Irvin) peering through a monocle at a butterfly. Later named Eustace Tilley, the New Yorker dandy became a well-known icon.

The magazine “stank,” Fleischmann pronounced. That first year was dangerously precarious. By the fourth month of publication, circulation had plummeted from a robust 15,000 to a mere 4,000 … with a measly three to four pages of ads. Fleischmann reluctantly agreed to prop it up financially through the summer, and by the fall, it had stabilized … barely.

The 1925 cover of The New Yorker’s first issue, created by Rea Irvin.

But timing was favorable since New York – at least during Prohibition years – was at the peak of its gaudiest best. American writing, graphic art and musical comedy were especially lively. Soon, a host of bright, talented writers were attracted to this unconventional weekly publication. Some were already established names, like Robert Benchley and Ralph Barton, while others made the risky leap from ad agencies in the hope it was something more exciting than writing ad copy.

Gradually, the magazine morphed into a curious, almost schizophrenic publication, with parts of The New Yorker getting lighter and funnier, while its fiction, reporting and poetry got more serious. Ross banished sex in any form and scrutinized every sentence for off-color jokes and double entendres. He scrubbed the advertising to ensure it was suitable and disliked fatalistic or socially conscious pieces since they were inevitably too grim.

He was the quintessential editor who kept the copy clear and concise. In his opinion, Harry Houdini and Sherlock Holmes were the only two people in the English-speaking world everyone knew. Any lesser-known, marginal characters were quickly dispatched with a red line. Come back when they’re famous!

Well known for his extreme use of commas, one saving grace was that Ross was a true original member of the Algonquin Round Table, a group of writers, critics and actors who gathered daily for lunch to amuse each other with razor-sharp wisecracks and witticisms. Ross used his contacts with this group to help leverage the magazine since many had national newspaper columns. Also known as “The Vicious Circle,” especially after a few rounds of martinis, they delighted in sharpening their tongues. For example, someone would say “Calvin Coolidge died” and poet/satirist Dorothy Parker would respond, “How could they tell?” Or the comment about a famous actress’ theatrical performance: “Her emotions ran the full gamut from A to B.”

The group was a perfect complement to the magazine and New York’s classic elitism and charming sarcasm. In fact, a prospectus brochure announced (proudly) that it was not edited for old ladies in Dubuque. It was New York snobbery at its best (worst?).

Cartoonists Peter Arno and Helen Hokinson became regulars that first season and added to its reputation of “cosmopolitan sophistication.” One 1928 cartoon shows a mother telling her daughter, “It’s broccoli, dear” and the daughter responds, “I say it’s spinach and I say the hell with it!” (“I say the hell with it” became a common catchphrase and inspired a Broadway song by Irving Berlin). But perhaps the most reprinted cartoon in history is Peter Steiner’s 1993 gag: a drawing of two dogs at a computer with one saying, “On the Internet, nobody knows you’re a dog.”

On the serious side, after WWII, John Hershey penned a 31,000-word article in 1946 titled “Hiroshima.” It deftly conveyed the cataclysmic narrative of the 130,000 people killed through the stories of six survivors coping with the bomb’s aftermath. It was a publishing sensation and the questions it raised about humanity languish yet today. It has been called the most celebrated piece of journalism to come out of the war. This is exactly what Ross wanted. He dedicated nearly the entire issue to the article – a first for the magazine.

Another highly controversial coup was “The Lottery” by Shirley Jackson on June 6, 1948, which told a morbid, dark tale of a small town that conducts a bizarre ritual each year. It is often ranked as the most famous short story in the history of American literature (you’ll have to Google it).

Now, David Remnick, the fifth editor (starting in 1998), calmly leads the magazine to an uncertain future. The New Yorker has become the nation’s most honored magazine, with numerous National Magazine Awards and Pulitzer Prizes. Remnick’s personal awards are impressive and he has authored six important books. The New Yorker is not only the best general magazine, but perhaps the best magazine America has ever produced. At age 94, some say without it, everyone’s sights would be lower.

You decide.

Intelligent Collector blogger JIM O’NEAL is an avid collector and history buff. He is president and CEO of Frito-Lay International [retired] and earlier served as chair and CEO of PepsiCo Restaurants International [KFC Pizza Hut and Taco Bell].

Department stores once played a vital role in American life

Wanamaker’s Toy World Funnies was produced in 1933 as a promotional item for the department store’s New York location. This sample went to auction in May 2016.

By Jim O’Neal

In the complicated hierarchy of Greek mythology, the Titans were the first 12 children of Gaia (Mother Earth) and Uranus (Father Sky). They ruled during the mythical period of the Golden Age of Greek deities. In astronomy, Titan is the largest moon of Saturn, the second-largest natural satellite in our solar system.

In modern times, the adjective “titanic” derives from Titan. The famous ship Titanic was one of three RMS Olympic-class ocean liners built in the early 20th century. The other two were christened Olympic and Britannic. The Titanic sank in 1912 after hitting an iceberg on its maiden voyage. Britannic went down to a watery grave in 1916 after hitting a mine laid by a German U-boat during World War I.

Titanic was on its way from Southampton (UK) to NYC after calls in Cherbourg in France and Cobh, Ireland. On board were an estimated 2,224 passengers and crew. It is believed that about 1,500 people perished. Writer/director James Cameron’s 1997 award-winning film of the same name was a blockbuster at the box office. It received 14 Oscar nominations, snagging 11. It is in second place in box-office revenues, right behind Cameron’s other big hit, Avatar.

Titanic was the largest ship in the world and built at a cost of $7.5 million. It was also equipped with the latest in wireless technology. The crew immediately sent out a distress signal that was received in Newfoundland and retransmitted to all ships in the area. Full speed ahead! Unfortunately, none was near enough to reach Titanic before it sank.

Meanwhile, in New York City, the venerable Philadelphia Wanamaker’s Department Store had set up a unique floor exhibit (with wireless) to simply attract shoppers in the highly competitive New York market. A young employee of inventor/electrical engineer Guglielmo Marconi in NYC was routinely responsible for relaying wireless messages in Morse code to anyone in Philadelphia. His name was David Sarnoff and he would become well known for becoming the head of Radio Corporation of America (RCA) and starting the National Broadcast Company (NBC).

John Wanamaker

By chance, Sarnoff had taken a position at Wanamaker’s running the wireless communication operations, which included messages, ordering material and whatever else came along. What came along was the distress message from the Titanic that the ship was sinking and then that it had actually sank! All the newspapers had quit for the night, just after the first distress message came through. Starting early the next morning, Sarnoff was receiving names of both passengers who were rescued and those confirmed dead. The fact that Wanamaker’s was receiving real-time updates from the middle of the Atlantic was a big story by itself.

Eager crowds, not wanting to wait for newspapers with old stories, rushed to Wanamaker’s. Others went to Times Square, where a flashing billboard displayed the latest news. Names kept trickling in for three days and even set off a mini-financial panic involving the insurer Lloyd’s of London and other insurance companies. This obvious coup for Wanamaker’s was not just a lucky accident

John Wanamaker had started a small men’s clothing store in 1861 and was probably the most innovative marketing genius for the next 50-plus years. As the current crop of retail gurus bemoan the decline of retail due to e-commerce and pundits predict the slow death of shopping malls, they would be better served by studying Wanamaker the Retailer and Wanamaker the Employer.

On the retail side, consider that he opened the first retail store in Philadelphia … adjacent to George Washington’s President’s House (location, location, location). He played fine background music in the stores. He introduced orchestral concerts and circular rows of counters that guided shoppers through new merchandise. Even today, the 12-story granite-walled structure known as the Wanamaker Building houses the world’s largest Grand Court Organ with six keyboards and 28,000 pipes that transformed the shopping experience. At a cost of $105,000, it required 13 freight trains to convey it for installation.

Less grandiose was the customary practice to go into a shop and haggle until you got a good price (good luck with that today). John Wanamaker started the custom of putting price tags on every single item in the store … and then boldly advertising with big signs: ONE PRICE AND GOODS RETURNABLE.

For employees, he provided everyone with free medical care, recreational facilities, profit sharing and real pension plans … benefits that simply didn’t exist anywhere! I would love to see John Wanamaker and Jeff Bezos trading philosophies on growing a successful business. It would fascinating, despite the passage of two centuries.

Intelligent Collector blogger JIM O’NEAL is an avid collector and history buff. He is president and CEO of Frito-Lay International [retired] and earlier served as chair and CEO of PepsiCo Restaurants International [KFC Pizza Hut and Taco Bell].