Rock and Taxes

Rock and Taxes

A”s Quiz [Oakland (1968-99), Kansas City (1955-67),

Philadelphia (1901-54): 1) Who is the all-time leader in hits

while in an Athletics uniform? [Hint: “Modern day” fans will

recognize the name but it will surprise you] 2) Who has the most

career wins? 3) Most hits in a single season? 4) Last A”s pitcher

to throw a no-hitter? Answers below.

Alan Freed

While some of the other claims of responsibility are exaggerated,

Alan Freed is the one who coined the musical tag phrase, “rock”

n” roll.” And clearly, as a disc jockey and concert promoter, he

made some important contributions to the rise of rock.

In 1951, Freed started his d.j. career in Akron, OH where he

quickly developed a reputation as a top rhythm & blues

spinmeister, introducing white America to the genre. He struck

up friendships with the likes of Chuck Berry and Bo Diddley and

his close ties with other R&B artists enabled him, later on, to put

together terrific shows.

Author Irwin Stambler writes of Freed”s style. “He not only

played the latest R&B records, he also often sung with them,

keeping time by slamming his hand down on a telephone book

near his microphone.”

The words rock and roll were often used in the lyrics of R&B

tunes and they carried a sexual connotation. As his own fame

spread, Freed decided “rock” n” roll” aptly described the new

music popping up all over the country. He began using it in all

of his broadcasts and later, successfully filed a copyright

application for the phrase.

In 1954, the New York radio station WINS decided to feature

rock and it signed Freed to be the centerpiece of their

programming. Until the end of the decade, he was the Big

Kahuna.

In 1955, Freed began to put together interracial shows at the

Brooklyn Paramount. The audiences were huge, rowdy, and

totally swept away by the new format. The color bar started to

be put aside in pop music.

Of course, parents and officials weren”t too thrilled about the

horrible influence of the music. Others thought it was just a fad.

Freed”s reply was, “Anyone who says rock and roll is a passing

fad or a flash in the pan has rocks in his head, dad!”

Freed ended up co-writing several rock standards, like Chuck

Berry”s “Maybelline.” He offered artists suggestions all of the

time which were normally gladly accepted.

But in 1960, Freed got caught up in the “payola” hearings being

conducted by the House Subcommittee on Legislative Oversight,

chaired by Rep. Oren Harris (D-Ark.). He was indicted for

accepting $30,000 from six record companies to plug their

product.

Payola was not new to the music industry. Many of the hit songs

of earlier eras got there by way of payments to band leaders,

vocalists, and even lead musicians. Unfortunately for Freed, as

the leading figure in the biz, he was singled out for blame.

Eventually, he pled guilty to two counts of commercial bribery in

late 1962.

While payola didn”t ruin rock, Freed lost his influence. Dick

Clark took over as the leading rock broadcaster. Some day we”ll

cover Clark”s story. In the meantime, suffice it to say that Clark

appeared before the same congressional committee and everyone

just loved him.

Rep. William Steiger

[The following could easily be part of my Wall Street History

link but, since I could find only one source, it”s more suitable for

Bar Chat. Thanks for indulging me.]

Al Gore claimed to have invented the Internet. Market historian

John Steele Gordon, for one, begs to differ. In fact, he says that

Congressman William Steiger is as responsible as anyone. If you

didn”t know who Steiger was, you”re not alone.

Writing in the April issue of American Heritage magazine,

Gordon (who recently authored a book I refer to from time to

time, “The Great Game”) discusses the role of the capital gain

tax in this country and the role that has played in the growth of

many an American enterprise.

When the first modern tax was passed in 1913, capital gains were

treated no differently than other income, like salary or dividends.

Back then, investors could simply deduct these capital losses

against all income. Gordon describes what happened, however,

after the Crash of 1929:

“The wealthy often found themselves holding stock on which

they had large losses. By selling that stock, establishing the loss,

and then buying it back immediately, these people could avoid

taxes on their regular incomes without altering their control of

the corporations involved. In 1930, 1931, and 1932, J.P.

Morgan, Jr., the nation”s most famous and powerful banker, used

this technique and paid no income taxes at all.”

Congress changed the law. Half of all capital gains would be

excluded from taxation but, in exchange, capital losses could be

deducted only against capital gains, not regular income (except

for one thousand dollars a year, later raised to the current three

thousand).

But by 1967, 155 tax returns showed income in excess of

$200,000 but no tax liabilities. 21 had income of $1,000,000 but

no income taxes. The reason was the complexity of the tax code.

Congress thus set about pursuing the 21 millionaires who, as

Gordon puts it, “had accountants clever enough to help them

escape taxes.” The capital gains tax was pushed to 50 percent.

In 1968, when the tax rate on cap gains had been no higher than

25%, the government had collected $33 billion in cap gains

taxes. In 1977, when it ranged as high as 50%, receipts were

down to $24 billion, adjusted for inflation. And get this, in 1968

there were 300 hundred high tech start-ups. In 1976, there were

none at all. Gordon:

“The reason was simple enough. Starting a company utilizing

new technology is a very high-risk affair. And one of the iron

laws of economics is that the higher the risk, the higher must be

the potential reward for investors or the risk won”t be taken. But

the capital gains tax now took 50 percent of the reward in the

case of success, while the losses in case of failure could only be

offset against possible future gains.”

Enter William Steiger. Born in Oshkosh, WI, in 1938, he won

election to Congress as a Republican in 1966. Yes, he was just

28. Over the course of the early 1970s, the Republican Party

suffered severely due to Watergate. As a result of the 1976

election, the Democrats had a 112-seat majority.

Undaunted, Steiger resolved to make capital gains taxes part of

the Tax Reform Act of 1978. President Carter was after the 3-

martini lunch crowd and other business deductions. At the same

time, the battle to reduce marginal rates across the board would

still have to wait for the election of Ronald Reagan.

Steiger, though, lined up his fellow Republicans on the Ways and

Means Committee, as well as 13 Democrats (giving him a 2-1

majority) to press for his reform plan. He proposed a top tax rate

of 25% for cap gains. The President and the media were all over

him. Carter threatened a veto. Eventually, Steiger won a 28%

top rate and Carter signed the bill into law in November 6, 1978.

The effect was immediate. In 1977, only $39 million had been

raised by the venture capital industry. By 1981 it was $1.3

billion. Initial public offerings surged from the mid-70s average

of 28 a year to 953 by 1986. Gordon writes, “The great boom of

the last two decades owes much of its strength to William

Steiger.”

With this success under his belt, Steiger was viewed as a rising

star in the Republican Party. On December 4, 1978, he died of a

heart attack. As Gordon concludes, “Life, like taxes, sometimes

just isn”t fair.” So tonight, if you have prospered in any way

shape or form over this spectacular bull market, quaff an ale to

William Steiger. I will. Actually, make that two.

Top 3 songs for the week of 3/30/63: #1 “He”s So Fine” (The

Chiffons) #2 “Our Day Will Come” (Ruby & The Romantics)

#3 “The End Of The World” (Skeeter Davis…the theme song

here at StocksandNews]

Quiz Answers: 1) Bert Campaneris! 1,882. Al Simmons had

1,829 while playing for the A”s (he also played elsewhere).

2) Eddie Plank, 284 (pitched for Philly from 1901-14; finished

his career with a 325-193 mark) 3) Al Simmons, 253, 1925

(hit .384 that season with 129 RBI) 4) Dave Stewart, 1990.