Taxes and the Man

On the mat­ter of Churchill’s tax­es, a friend quotes a very good his­to­ri­an we both respect: “His rela­tion­ship with the tax­man was scan­dalous. As Chan­cel­lor of the Exche­quer, Churchill exploit­ed tax loop­holes and he retired as an author on more than one occa­sion to avoid pay­ing tax.”

My friend writes: “Sure­ly what Churchill did was just on the bor­der­line of tax-opti­miza­tion? It would only be scan­dalous if it was tax eva­sion. But it was in fact legal.”

I am not an expert on Churchill’s tax­es. I accept that he took what­ev­er mea­sures that were open and legal to min­i­mize the bite. It is true that he “retired” as a writer for tax pur­pos­es from time to time. Read­ers should refer to David Lough’s com­pre­hen­sive No More Cham­pagne: Churchill and His Mon­ey. With regard to his World War II mem­oirs, see also David Reynolds, In Com­mand of His­to­ry: Churchill Fight­ing and Writ­ing the Sec­ond World War.

Paintings not Articles

Of inter­est is a note by Wal­ter Graeb­n­er, Churchill’s edi­tor for Life magazine’s seri­al­iza­tion of his war mem­oirs. In his delight­ful 1965 mem­oir, My Dear Mis­ter Churchill, Graeb­n­er recalls a vis­it to WSC in the autumn of 1945. Hav­ing left Down­ing Street fol­low­ing the July gen­er­al elec­tion, the Churchills were stay­ing at Clar­idges, before acquir­ing and mov­ing into 28 Hyde Park Gate.

Five dol­lars a word! That’s what Life offered for his arti­cles. This is $67 a word in today’s money—a fig­ure that makes the heads of us writ­ers swim. Graebner’s com­ments also bear on the tax issue, and Churchill’s tac­tic of “retir­ing” from writ­ing dur­ing peri­ods of high tax vulnerability:

***

Miss Hill [WSC’s sec­re­tary] opened the door and asked me to take a seat in the draw­ing-room to the left, adding, “Mr. Churchill will be here in a moment.” I looked for a chair, but none was emp­ty. Every chair and sofa in the room had a paint­ing on it, so there was noth­ing for me to do but wan­der around and exam­ine the col­lec­tion.​ ​Here was show­man­ship at its best. Churchill had care­ful­ly set up a pri­vate exhi­bi­tion, and I was his audience.

Just as I had fin­ished inspect­ing the last of about a dozen pic­tures, Churchill walked in wear­ing his blue zip suit, his face pink and pow­dery after a shave, his pale blue eyes smil­ing. “I’ve been on hol­i­day in Italy and the South of France as you may know,” he began, “and while there I made these paint­ings which you see—er—in this gallery—on pri­vate view. You wrote to me a short time ago about writ­ing some articles….”

March­ing up and down the room he con­tin­ued: “That was a very good offer you made me—very flat­ter­ing. I wish I could have accept­ed it. It’s the best offer I’ve ever had. Five dol­lars a word I think it works out at. That’s very good. But I am not in a posi­tion to write any­thing now—perhaps later—but not now. I have gone into the whole thing very care­ful­ly with my advis­ers and they tell, me that if I come out of retirement—you see I’ve been in retire­ment ever since the elec­tion when the peo­ple turned me out—and write any­thing now, I would have to pay tax­es of nine­teen and six in the pound, so what’s the use?”

“Genius has many outlets”

The pound was then worth $4; 19 shillings six­pence or $3.90 rep­re­sents 97.5% of it. Of course those were wartime rates, and the high­est brack­et. Still, Churchill’s remark is a stun­ning illus­tra­tion of the long-run­ning claim of “sup­ply siders” that high tax­es actu­al­ly dimin­ish gov­ern­ment rev­enue by dis­cour­ag­ing the pro­duc­tive from work­ing hard­er. But I digress. Graeb­n­er continues:

Then, ges­tur­ing towards the paint­ings, he con­clud­ed: “But these are some­thing else again. Do you think your peo­ple might like to pub­lish them—that is, to take them in place of one of the arti­cles? I would like such an arrange­ment bet­ter for the time being, as the income, I am advised, would be con­sid­ered as a cap­i­tal gain and there­fore non-taxable.”

The point was clear. Churchill was offer­ing for $25,000 the repro­duc­tion rights to the paint­ings he had made on hol­i­day. It was agreed that I would com­mu­ni­cate with my edi­tors. Before leav­ing I con­grat­u­lat­ed him on the excel­lence of his pic­tures, express­ing sur­prise that he could find the time to take up paint­ing on top of all his oth­er work. Behind an enor­mous grin he mur­mured: “Genius has many outlets.”

Evi­dent­ly they hadn’t thought of tax­ing cap­i­tal gains in Britain then. And for the record, $25,000 in 1945 is equal to $338,000 in today’s money.

Do not take Churchill’s wise­crack out of con­text as the expres­sion of a brag­gart. Many such quips are in Graebner’s book. He smiled when he said those things. Win­ston Churchill was not a brag­gart. But he could not resist his lit­tle joke.