Mad at the IRS

April 3, 2012

Fans of AMC’s Mad Men rejoiced last week when Don Draper and his colleagues at Sterling Cooper Draper Pryce returned after a 17-month absence. The year is 1966, and change is in the air. Protestors oppose the war in Vietnam, and riots break out in Los Angeles, Cleveland, and Atlanta. The “kids” are listening to Dusty Springfield and the Rolling Stones. And the “grownups” are struggling to make sense of it all.

Mad Men creator Matthew Weiner is famed for his obsessive attention to period detail. (One episode featured junior executive Pete Campbell displaying a spectacularly ugly “chip and dip” platter he received as a wedding present — the very same chip and dip that Weiner’s own parents received for their wedding back in 1959.) So, fashion mavens predictably ooh’ed and ahh’ed over the period costumes, which have inspired today’s Banana Republic to introduce an entire Mad Men collection. Interior design aficionados ooh’ed and ahh’ed over Don and his new bride Megan’s stylish Upper East Side penthouse, with its white carpeting, sunken living room, and broad terrace. But tax professionals cheered loudest of all when partner Roger Sterling bribed media buyer Harry Crane $1,100 to give up his office for rising star Campbell. “That’s more than you make in a month,” Sterling whee died, “after tax!”

And really, who cares about Don’s suits, Megan’s dresses, or Roger’s cocktails, when we can spy on their money and their taxes?

Prices from 1966 seem comically quaint today. A gallon of gas cost just 32 cents. A dozen eggs cost 60 cents. Postage stamps cost a nickel. But there was nothing comical or quaint about taxes. Rates in 1966 started at 14% on income over $1,000 (roughly $7,000 in today’s economy), and rose to 70% on income over $200,000. 70% is a lot compared to today’s 35% maximum — but 70% was actually a big step down from the 91% top rate that Don and his colleagues faced just three years earlier in 1963. One small consolation — Don’s Form 1040 was quite a bit simpler. However, the “Expense Account Information” section at the bottom of page two includes an intimidating box to check — and separate instructions to follow — “if you had an expense account or charged expenses to your employer.”

And what about those three-martini lunches that play such a central role in lubricating Mad Men’s ensemble? Well, for starters, they sure cost less back then. In one scene from Season One, Don flips a waitress at a beatnik bar $5 to cover three martinis, plus tip. Today, those same martinis cost $14 each at The Roosevelt Hotel, where Don stays after separating from first wife Betty. As for tax breaks, under today’s rules, meals and entertainment are 50% deductible. That means, if you’re in the top 35% bracket, a dollar’s worth of martini saves 17.5 cents in tax. But back in 1966 — when doctors appeared in cigarette commercials and seatbelts were still optional in most cars — meals and entertainment were 100% deductible. That means that same dollar’s worth of martini saved up to 70 cents in tax. No wonder the partners spent more time getting soused than they did talking business!

If we had been practicing back in 1966, we would have looked just as good wearing the silhouettes of 1960s style. But Don Draper would have appreciated us more for the way we cut his taxes. There’s no need to get mad at the IRS if you have a proactive plan. And there’s no pesky two-drink minimum, either!