Now that I have time to catch up on some blogging, I wanted to point out this interesting and well written article about F. Scott Fitzgerald’s income tax returns. Fitzgerald’s life was quite different than any modern American, wealthy or poor. He was recognized as an important American author almost immediately, which brought him fame and great wealth. He and his wife became famous for their luxurious lifestyle, but perhaps the reality was somewhat different:

What can be learned from Fitzgerald’s tax returns? To start with, his popular reputation as a careless spendthrift is untrue. Fitzgerald was always trying to follow conservative financial principles.

Another surprise from the article was that most of his income didn’t come from his major novels:

Most of his earnings came from the short stories and, later, the movies. His best novels, The Great Gatsby (1925) and Tender Is the Night (1934), did not produce much income. Royalties from The Great Gatsby totaled only $8,397 during Fitzgerald’s lifetime. Today Gatsby is read in nearly every high school and college and regularly produces $500,000 a year in Scottie’s trust for her children.

The Great Gatsby was one of the first books that came to mind when I started thinking about the Great American Novel Challenge. (You can read my review here.) It’s hard to imagine that Gatsby earned so little money compared to his other work.

Much of his wealth was devoted to caring for his wife, who was diagnosed as a schizophrenic and had large medical bills. For example, she spent 15 months in a sanatorium, which cost a total of about $13,000. When he died, his estate was rather small given how much money he had earned in his lifetime. The article notes that the copyrights to his novels, which now earn several hundred thousand dollars a year, were considered worthless.

I’m not sure I would take financial advice from Fitzgerald. He didn’t seem to have a particularly good grasp of money management. Although he did track his spending rather well, he thought that “money usually turns up somewhere in time of need, and that at the worst you can always borrow.” Clearly, this is not particularly good advice. Also, he seemed to miss some of the now-basic lessons of economics. For example:

Fitzgerald did not agree with Chicago School market theory, which is to say, he did not believe that more sellers means more competition, which means lower prices. Fitzgerald thought that if you had more sellers they simply raised prices to whatever they needed to survive.

The differences between the IRS system of Fitzgerald’s era and the modern era are fascinating. Consider the following (emphasis mine):

Before World War II, the government did not know what anyone made. Only the wealthy and upper-middle class filed returns—less than 10 percent of the population. The system was based on what the IRS called “self-assessment,” which meant that the taxpayer told the government what he or she earned the prior year and then sent a check on March 15.

Clearly, this was a very, very different era. There’s a lot more in the article.