Harry Truman's tax returns have a story to tell. More than one, really. The returns, which were made available recently by the Truman Presidential Library in Independence, Mo., certainly tell us something about the revenue revolution of the mid-20th century. In Truman's filings between 1935 and 1959, we can see the radical transformation of the income tax that took place. Rates rose, brackets compressed, and people started paying a lot more money to Uncle Sam -- especially if they were wealthy.

But Truman's returns tell a different, more personal story. They describe the difficulty of being a poor man in a rich man's job. Of course, Truman was not actually poor, in the sense of real destitution. But he was poor by the standards of American ex-presidents. His tax returns from the years following his retirement provide an interesting window into the evolving nature -- and commercialization -- of the modern presidency.

Man of Many Incomes



The first return we have available dates from 1935, when Truman was elected to the Senate. His $10,000 official salary ($128,000 in current dollars) made him comfortable and quite fortunate, considering the country was suffering through the Great Depression. It was good money for a failed haberdasher.

Throughout the late 1930s, Truman's returns show relatively little change in his personal finances. His income hovered in a narrow range around his Senate salary, diminished for tax purposes by deductions for charitable contributions, loan interest, and state taxes. He deducted significant travel expenses associated with his official duties. In 1938, for instance, he deducted $1,200 for the operation of his automobile on official business (apparently he drove 30,000 miles on the job). That same year, he claimed a $403.50 casualty loss for the wreck (and total loss) of his one-year-old car.

During his early Senate career, Truman paid very low average tax rates, generally in the range of 2 to 3 percent.1 These low rates reflected the steep gradation of the income tax in the late 1930s. While the top rate reached 79 percent in those years, it applied only to the extremely wealthy (those making more than $5 million annually, or roughly $64 million in 2014 dollars). The merely well-off -- including senators living solely on their official salaries -- barely reached double digits in their marginal tax rate.

That began to change once the country began preparing for World War II. Truman, like most other income tax payers, found his average rate climbing quickly. In 1942 he paid an average rate of 19.75 percent; in 1943, 27.53 percent; and in 1944, 28.65 percent. The averages reflect higher rates in every income bracket, but also the reduction in threshold income levels for each bracket.

Taxpayer in Chief



Truman was elected vice president in 1944, for which he would have been paid $15,000 annually. But he held the office for only about 2 1/2 months before assuming the presidency in April 1945. Presidents at the time were paid $75,000, and his total income reported for 1945 was $56,992.03. On that income, he paid a tax of $31,889.24, for an average rate of 55.95 percent.

We see here the operation of the wartime tax regime in all its high-rate glory/horror: Higher rates across the board combined with Truman's newly enlarged income to produce a genuinely impressive tax bill. Indeed, Truman's average rate was within shouting distance of the nation's economic elite. By most estimates, tax rates for the nation's top 1 percent of earners reached something like 59 percent during the war.

Truman's proximity to the pinnacle reflected a compression of the rate structure. Top marginal rates kicked in at much lower levels in the 1940s than they had in the 1930s. In 1944, for instance, the top marginal rate of 94 percent applied to income over $200,000 -- a long way down from the $5 million threshold of just a few years earlier.

Farmer Taxpayer



When Truman took the train home to Independence in January 1953, he took few of the trappings of office with him. In those days, former presidents received nothing in the way of retirement benefits: no Secret Service protection, no administrative support, and certainly no money. Presidential pensions did not exist.

But if President Truman was left to sink or swim, Colonel Truman was entitled to a regular check from the government. In return for his military service during World War I (and subsequent years in the Army Reserve), Truman was guaranteed a pension of $112.56 a month.2

It was something, but not much. The former president experienced a couple of lean years immediately after leaving the White House. In his last full year as president, he had earned $100,539.06, according to his 1952 tax return. (Congress raised the president's salary in 1949 to $100,000.) The following year, ex-President Truman reported just $34,176.70 in income. In 1954 he earned $13,564.74.

Of course, Truman could have cashed in on his Oval Office experience. "If President Truman is unemployed after he leaves the White House, it won't be for lack of job offers," reported the Los Angeles Times in November 1952. Rumors swirled that numerous companies had offered to pay him more than $100,000 to sit on corporate boards, serve in no-show, symbolic positions, or otherwise lend his name to various enterprises.

But Truman considered those options unseemly. "I could never lend myself to any transaction, however respectable, that would commercialize on the prestige and dignity of the office of the presidency,"3 he later wrote.

Initially, at least, Truman turned down offers to appear on the lecture circuit, as well as on several radio and television shows. In particular, he refused a $10,000 offer to appear on TV with his daughter, Margaret Truman, providing piano accompaniment for her well-publicized singing career. "Some screwball made that offer," the ex-president told reporters.4

Truman's straight-laced attitude left him in straitened circumstances. His plight, like that of other former presidents, was unknown to lawmakers on Capitol Hill. As early as 1912, Andrew Carnegie offered to fund a $25,000 pension for Oval Office retirees. By the 1920s, Congress was considering the possibility of providing a pension to former chief executives.

But nothing had materialized by the time Truman left office. When he made his way back to Missouri, the only other living ex-president was Herbert Hoover, a self-made millionaire who neither needed nor wanted help from Washington. Congress, with a new Republican majority, was not inclined to lend a hand to a struggling, out-of-office Democrat.

So for that time being, Truman adapted stoically to his diminished income. He moved back into his old house in Independence, declining suggestions that he consider grander quarters (probably because he had no choice). He began casting about for a respectable way to earn a living.

Truman's tax returns reveal his solution. After leaving office, he routinely listed his occupation as "writer-lecturer-farmer." The last role continued to be more hobby than enterprise. Since the late 1940s, he had been claiming annual losses on his farm operations, usually in the range of $1,000 to $1,500 a year.

But his time spent writing and lecturing was considerably more lucrative. In 1953 Truman sold his memoirs to Life magazine for a reported $600,000 (roughly $4.2 million in 2014 dollars). According to press reports, the money was to be paid over five or six years, giving the president a comfortable and regular source of income.5

Truman's publishing advance showed up on his tax returns indirectly (because we don't have access to his detailed appendixes listing the source of his self-employment income, we can't clearly identify the nature of some payments). In 1953 an initial payment from Life seems to have provided the bulk of his $34,176.70 in total income. And while he doesn't seem to have received a similar payment in 1954, by 1955 his income had jumped back into its presidential range, totaling $112,195.99.

Truman was paying higher taxes again. Which is no surprise, because both his income and the tax system looked much the same in this period as they did in the late 1940s and early 1950s. During his leanest year, in 1954, Truman paid an average rate of just 7.47 percent on his much diminished income. But in 1955, he paid 45.04 percent, and from then through the end of the decade, his average rate ranged from a low of 37.45 percent to a high of 50.06 percent.

Taxing Books



Some of Truman's relatively heavy tax burden came from the treatment of his book advance. His lawyers petitioned the IRS to allow him to spread the income over six or seven years, in much the same way that his contract with Life was structured. According to tax experts of the time, Truman stood to save as much as $170,000 if the IRS signed off on the plan.6

But the agency initially declined, arguing that his initial payments were too large to qualify for installment treatment.7 The refusal struck Truman as particularly unfair, because Dwight Eisenhower, before his election to the White House, had successfully argued that the $635,000 he earned from his own memoir, Crusade in Europe, should be treated as a capital gain rather than as ordinary income. At the time, the law allowed that sort of preferential treatment to nonprofessional writers who just happened to be putting pen to paper for profit. As a result, Eisenhower paid a rate of just 25 percent on his book income -- much less than he would have under the graduated rate structure for ordinary income; some estimates of his savings ran as high as $400,000.

Bad publicity for the Eisenhower decision prompted Congress to slam the door shut after Ike's horse left the barn; henceforth, amateur writers were to get the same treatment as their more professional counterparts. The most Truman could hope for, then, was installment treatment for his book income. And eventually, after some rejiggering of the book contract with Life, the IRS agreed to allow it.8

Presidential Pensioner



Truman's difficulty in making ends meet was common knowledge in Washington. The ex-president himself was tight-lipped about his financial problems, but he did acknowledge that he could use a secretary to help answer mail. Eventually, Congress agreed to provide some sort of regular pension when it approved the Former Presidents Act in 1958.9 The law, which passed despite some Republican foot-dragging, established a $25,000 annual pension for ex-presidents. It also provided funds for administrative support of their post-presidential offices and a regular annuity for former first ladies.

Both Truman and Hoover accepted the pension. Although Hoover didn't need it, he was loath to embarrass his friend and fellow ex-president. "My situation differs from other, and probably future, former Presidents," he said delicately in a statement issued from his home at New York's Waldorf Astoria hotel.10

Truman, the only other former president still alive, declined to comment.11



FOOTNOTES



In this article, I have calculated average tax rates through the early 1950s by dividing taxes owed by total income; after 1954, adjusted gross income replaced the total income line on tax returns, so I have used that figure for calculations.

2 David McCullough, Truman (New York: Simon and Schuster, 1992), p. 928.

3 Quoted in Jeff Jacoby, "Ex-presidents' Big Payday," The Boston Globe, Feb. 28, 2007.

4 "Truman on TV to Get $8,000," The Chicago Daily Tribune, Sept. 3, 1953.

5 "Truman Tells of His Plan to Write Memoirs," The Chicago Daily Tribune, Feb. 22, 1953.

6 Russell Porter, "Eased Memoir Tax Asked by Truman," The New York Times, July 29, 1953.

7 Walter Trohan, "Deny Truman a Tax Fortune on Memoirs," The Chicago Daily Tribune, July 28, 1953.

8 "Tax Saving for Truman on His Memoirs Is Confirmed by Ex-President's Lawyer," The New York Times, Sept. 15, 1953.

9 Stephanie Smith, "Former Presidents: Federal Pension and Retirement Benefits," Congressional Research Service Report for Congress, 98-249 GOV, Mar. 18, 2008.

10 "Pension Accepted by Hoover, Truman," The New York Times, Sept. 17, 1958.

11 "President Pension Hailed by Hoover," The New York Times, Aug. 28, 1958.



END OF FOOTNOTES

