James Couzens, Andrew Mellon, the 'Greatest Tax Suit in the History of the World,' and Creation of the Joint Committee on Taxation and Its Staff
George K. Yin
University of Virginia School of Law
January 15, 2013
66 Tax L. Rev. 787 (2013)
Virginia Law and Economics Research Paper No. 2012-10
Virginia Public Law and Legal Theory Research Paper No. 2012-61
In early 1924, James Couzens was a Republican Senator from Michigan and reportedly the richest member of Congress. Andrew Mellon was beginning his fourth year as Secretary of the Treasury — a service that would eventually span 11 years under three Republican Administrations — and one of the wealthiest persons in the entire country. This article describes how a feud between these two men, an ensuing investigation led by Couzens of the Bureau of Internal Revenue (BIR) (predecessor to the modern-day IRS), and a tax case against Couzens that was described as the “greatest tax suit in the history of the world,” helped lead to creation of the U.S. Joint Committee on Taxation (JCT) and its staff. The events — filled with political intrigue, backstabbing (real or imagined), and unintended consequences — antagonized Congress’s relationship with the executive branch, but improved cooperation between the House and Senate, and both were instrumental in the JCT’s creation. The story also helps to explain certain of the unique characteristics of the JCT and its staff since their formation. Finally, the article describes how creation of the JCT became entangled with two of the most contentious tax issues of the day — the publicity of tax return information and the depletion allowance for oil and gas production — and played a role in changing the law in both areas.
Although the feud and its aftermath were direct factors in the JCT’s creation, the development of the modern income tax during roughly its first decade was an essential ingredient. The decisions made by Congress, the Treasury, and the BIR during that period, and their later understanding (or misunderstanding) of the law and its effects, set the stage for the feud and subsequent events. Thus, in addition to detailing the largely untold story of the origins of an important Congressional committee and its staff, this article explains and analyzes key, early portions of our nation’s 100-year-old law as well as the sometimes flawed decision-making process — involving an intriguing mix of policy, politics, and personality — that helped produce this new institution of government.
Number of Pages in PDF File: 93
Keywords: Joint Committee on Taxation, Congressional staff, legislative process, legislative history, legislative branch, tax policy, tax legislation, tax return publicity, James Couzens, Andrew Mellon, depletion, excess-profits tax
JEL Classification: B10, H00, H20, H24, H25, H26, K00, K34, N00, N40, N42Accepted Paper Series
Date posted: September 24, 2012 ; Last revised: June 27, 2014
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