Movies and the dreaded taxman.
In his autobiography, Mack Sennett had this to say about the economics of the movie industry, “It was difficult to find out if any money had been made, and who had made it, and who had it.” He goes on to say the industry was disorganized. How confusing, and how convenient! Producers may not know if their partners were creaming off the top, but, if this was so, then the tax authorities also could not fathom out what was going on. Yes, the federal taxman began to rampage over the entire continent by 1913, following the Revenue Act. At first, there was a 1% tax on personal income above $3,000 per year, with a top rate of 7% on income over $500,000. This shocked some of the newly rich, but did not really hurt them. However, World War I changed all that, and rates soon hit 77%, on income above $1,000,000. On average, however, wealthy Americans paid 15% – still a tidy sum.
D.W. Griffith’s The Birth of a Nation was released on 21st March 1915, but profits were still being made through into the war years, and the ‘influenza outbreak’. Total takings are estimated to have been $15,000,000, so someone, somewhere, made a lot of money. However, with the complicated state of the movie industry, with its complex mix of companies, distributors and cinemas, it was virtually impossible for the tax authorities to work out where the money had been made, and who had it. With Mabel’s 1918 film Mickey, said to have grossed $18,000,000, we are really on sticky ground. Mack Sennett’s private papers contain nothing relating to the film, or the Mabel Normand Feature Film Company. Of course, the film and the MNFFC were owned by New York Motion Pictures and Triangle, while Mack Sennett (not Keystone) owned the studio on Fountain Avenue. Exactly how much did NYMP make, how much did Triangle make, and how much did Adam Kessell, Charles Baumann, and Harry Aitken make – no-one knows. Sennett made money by renting the studio, and grabbed a sackful of cash by selling the worthless goodwill of Keystone to Harry Aitken, just as Triangle began to fall apart. Strictly speaking, Sennett should have only received the rental money for the Mickey studio, plus a payment for work he carried out for the MNFFC, including supplying the director, F. Richard Jones (Sennett tried to use lesser and cheaper directors before Jones). As shooting came to an end someone ‘kidnapped’ the film negative. Sennett said that Jones, who had not been paid, was responsible. However, it could have been Sennett who took the film, in lieu of unpaid bills (if Sennett went unpaid, then Jones also took a knock).
It seems then, considering the length of time that has elapsed since 1917 that the shenanigans surrounding the MNFFC, are now impossible to untangle. What then of Mabel? It is not known how much Mabel was paid for acting in Mickey, but we might suppose it was in the order of $1,500 per week. We may say this as, when Mabel left for Goldwyns on the completion of Mickey, Sennett argued the Goldwyn contract salary of $1,000 was not enough, and sent lawyers to get the salary increased. They got Mabel’s salary raised to $1,500 per week. In all probability, then, this was the figure Mabel had received for Mickey. From Sennett’s private papers we can see that Mabel was the top earner at Keystone, receiving, it seems, $500 per week pre-Mickey. Mabel and Charlie Chaplin were already running safe-deposit boxes at this time, as well as several bank accounts. Why they required safe-deposit boxes is a mystery. Mabel later said she kept old check books in her box, but these could have been stored easily at home. There is also evidence that she kept costume jewelry there, and occasionally removed this to wear at various functions. Of course, there might have been no small amount of loose gems in the boxes. Like Chaplin we know she also kept cash in the boxes, although whether she kept large amounts, like the Tramp, we do not know.
The continuation of high-rate income tax after 1918 spelt trouble for movie moguls, as well as screen stars, who were now earning enormous salaries. Roscoe Arbuckle had been the first movie star to hit a million a year, while Mabel, at Goldwyns, was now commanding $4,000 a week. The top tax rate was reduced to 58% in 1922, to 25% in 1925 and finally to 24% in 1929. These tax rates still dented the income of the stars, and so much so, that Chaplin is suspected of secreting his wealth in Mexico, and Mabel adherents will know that she also made regular trips to that country. Others, like Mack Sennett, moved as shadows crossing and re-crossing the border. It has been long suspected that stars earned considerably more than they had contracted for. They seemed to have much more spending power than their several thousand dollars a week, followed by months of inactivity, allowed for. These people seemed to have the ability to buy numerous monstrous-sized houses and ranches, while running multiple $10,000 cars, even more expensive yachts, and partying like it was 1999. The inference was that part of their pay came in untraceable cash. If we think that the film companies would not do such a thing, we should recall that Mabel had no trouble in having her first week’s pay at Goldwyn ($1,500) paid to her in cash, so she could distribute the money among the studio workers.
Producers were among the top earners in the industry, and, in the time of low tax rates in 1915, Thomas Ince paid income tax to the tune of $20,222. He received a salary of $35,200 from Triangle, was paid $1,100 for each scenario he submitted, received $325,000 dividend from Triangle shares, $22,848 dividend from Keystone, $12,600 from Broncho, $800 from Kay-Bee, $2,000 from Empire, and $15,200 from Domino. Gross income was $436,550, equating to $8,395 per week (or 7 times the salary Chaplin was getting at that time). It will be noticed that Ince’s tax payment was 5% of income, and that by stating his income at under $500,000 he avoided the top rate of tax. The I.R.S undoubtedly noticed this, but the authorities were not keen on pursuing taxpayers at this time.
Post – 1920
By the late 1920s, the taxman was baring his teeth, preparing to bite recalcitrant movie people. In January 1927, he turned on Charlie Chaplin, demanding back taxes of $1,000,000, dating back to 1915. The easy days were over, and a public fed up with the antics of a Tramp, and the Normands and Arbuckles of movie-land, gleefully watched the sinner squirm. United Artists settled the tax claim for an undisclosed sum.
On October 17, 1931, a certain Alphonse Capone was convicted of tax evasion and jailed, while actress Marion Davies received a tax bill for around $1,000,000 in unpaid taxes. The agency claimed that Davies, the owner of several buildings in Manhattan, failed to report income from her real estate. She eventually settled with the agency for $825,000. In 1936, the I.R.S. were back, and Davies was forced to pay out another $30,000. During the 1930s, several other actresses were pursued by the I.R.S. The reason? They’d listed clothing as part of their expenses. Of course, top actresses, like Mabel Normand, commanded a clothing allowance from their producers, although Mabel does not appear to have availed herself of this perk, at least at Goldwyn. We might, however, guess that such payments were made in unrecorded cash.
Mabel Normand died in early 1930, and left property and possessions to the value of $73,835. This was made up as follows:
$20,000 Beverley Hills House
$35,702 Jewelry and silver
$18, 133 Notes and Real Estate
There was, furthermore, a trust fund to the value of $50,000, which the Normand family claimed over Mabel’s husband, Lew Cody. It is not known what the outcome of the case was, and there is no record, as to who took the trust income, or the final fate of the fund’s assets. The trust fund is not the only mystery about the Mabel Normand estate. It seems the family thought that much was missing. This suspicion is not surprising, as actresses who’d died much younger had left estates almost as large. Olive Thomas, who died aged 24 in 1920, left $30,000 dollars,following an extremely brief career.
The 1930s, when taxation rates again rose, as a result of the Great Depression, saw the beginning of the major crackdown on tax evasion in the U.S. Mack Sennett always appears to have been under suspicion from 1918 until he was declared bankrupt in 1933. The question was, at the time of his bankruptcy, was whether Mack was truly ‘broke’. The doubt never went away, and, after Mack published his autobiography in 1954, the I.R.S. renewed investigations on the ex-producer. He must have made money from the book, but the contents themselves made interesting reading. Firstly, Mack claimed he was worth $18,000,000 in the late 1920s. Ears pricked up! He also claimed claimed Chaplin kept his money in safe-deposit boxes. Well, if Chaplin did this, then, so did Sennett. More ears pricked up! Even W.C. Fields was outed. According to Mack he deposited his money in banks spread right across the States, and, although some vanished in the Depression, much remained in bankers’ hands after Field’s demise. Could Sennett’s money have been deposited in a similar way? In 1955, the I.R.S.began an investigation into Sennett’s affairs. In spite of money made from his book, Sennett was found to be truly broke, and living off funds distributed by a movie-industry charity. However, Sennett still had friends around him, suggesting he was not penniless. Those friends later moved him, kicking and screaming, into a geriatric home. If Mack did have any residual funds, then these must have ‘disappeared’ at around this time. Only one personal tax return survives in Sennett’s personal papers.
In the next post, we endeavor to discover where the money went.