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Treasury Secretary Andrew Mellon, the IRS and karma

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Politics,Beltway Confidential,Sean Higgins,Treasury,IRS

Andrew Mellon, treasury secretary under President Calvin Coolidge, was apparently the first major Washington political insider to use the Internal Revenue Service against his foes. He may have set a precedent he subsequently regretted though as a few years later he himself became the victim of IRS harassment.

That’s according to an informative Christian Science Monitor story “Playing the IRS card: Six presidents who used the IRS to bash political foes.” The earliest entry is Coolidge, though the Monitor concedes this was apparently a case where Mellon was acting on his own:

There’s no evidence that President Coolidge personally directed the IRS to punish political enemies. But his Treasury secretary – banker and industrialist Andrew Mellon – had no such scruples. Secretary Mellon’s target was Sen. James Couzens (R) of Michigan, a former general manager of the Ford Motor Co. and a fellow millionaire who launched a congressional probe of tax rebates given to Mellon companies during World War I. The investigation revealed that Mellon had misrepresented the extent to which he was still involved in the management of his own companies, such as Alcoa, prompting calls for his resignation on the eve of the 1924 presidential vote.

After Coolidge was reelected, the Treasury under Mellon reopened the senator’s 1919 tax return and ordered Couzens to pay $11 million in back taxes. But that wasn’t the end of it. An appeals board eventually reversed that outcome and concluded that, in fact, Couzens was entitled to a refund. “This decision was the greatest humiliation Mellon had yet suffered at the Treasury,” wrote biographer David Cannadine.

The tables were turned in the 1930s when Mellon had returned to the private sector and Franklin D. Roosevelt took over at the White House. Mellon then got a taste of what it was like being at the receiving end:

The Roosevelt administration focused the IRS and an army of tax inspectors and prosecutors on Mellon’s financial records, especially whether deductions for his vast philanthropic activities amounted to tax evasion. Even after IRS agents found nothing irregular, the Justice Department pursued the investigation. Historians have found no documents explaining the Roosevelt administration’s focus on Mellon, but a comment Roosevelt made about him in 1926 may offer a clue: Roosevelt dubbed him “the master mind among the malefactors of great wealth.”

A federal grand jury declined to indict Mellon for tax fraud in 1934. But the IRS was still pursuing claims against Mellon for at least $3 million in back taxes. Mellon’s storied “tax trial” before the Board of Tax Appeals in Pittsburgh and Washington lasted 14 months. At a private meeting with Roosevelt during the trial in 1936, Mellon offered to build the National Gallery and endow it with his own collection. Roosevelt accepted the offer, but instructed federal prosecutors to make “no change whatsoever” in the government’s position on the Mellon tax case, according to Mellon biographer David Cannadine. Mellon died the next year, and the suits, including any against his estate, died with him.

Note that in both cases, the IRS’s probes amounted to nothing as no actual wrong-doing was found. These results only came after a long, drawn-out investigations though.

Public figures tempted to use the IRS for their own ends might want to consider Mellon’s example. If you can manipulate the IRS against your foes, they may decide to do the same thing if they ever get the upper hand.

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