|Summary: Our view of money must constantly change. Scott Fitzgerald’s $29,000 salary in 1923 would be worth $390,000 today … that could finance some good parties.|
|Key take-out: Based on current US tax rates, including payroll taxes and New York state taxes, a dollar of earned income in 1923 went 20 times further than it does today.|
|Key beneficiaries: General investors. Category: Lifestyle.|
How much does it cost to be Jay Gatsby today? Or simply the literary scribe F. Scott Fitzgerald?
A lot more and a lot less than you think. In his ledger for 1923, Fitzgerald budgeted $100 a month for “wild parties” and another $80 a month for “house liquor.” That year he and his family were living in Great Neck on Long Island – the model for West Egg of The Great Gatsby – and he was just getting started on what would become his most famous book.
While it wasn’t exactly Gatsby money, $100 a month for wild parties was no small sum. Adjusted for inflation, that’s $1,360 in 2013 dollars, or more than $16,000 a year.
F. Scott Fitzgerald
But Fitzgerald could afford it at the time. According to his accounts, he earned $28,758.79 from his writing in 1923, including a $3,939 advance for Gatsby, enough to put him in the top 1% of taxpayers. The same detailed ledger suggests his effective tax rate was 8.3%. (For more on Fitzgerald’s high life and tax returns, see “Living on $500,000 a Year” in The American Scholar, a study by University of South Carolina law professor William J. Quirk.)
Today, that $29k in annual earnings would equal $390,000, and Jeffrey Pretsfelder, senior tax analyst at Thomson Reuters, calculates that the tax rate, including payroll taxes and New York State taxes, would be 37.5%. So a dollar of earned income in 1923 went 20 times further than it does today.
That income side of his ledger helps puts his outgoings in perspective. Furthermore, the cost of being rich has gone up considerably since then, which is why Gatsby’s over-the-top extravagance, much on display in Baz Luhrmann’s compelling and spectacular new film of the book, doesn’t seem implausible at all.
Jay Gatsby was a romantic with an “infinite capacity for hope,” but he was also a bootlegger and a bond swindler. And though Prohibition is only in its third year in 1922, when the book is set, enormous fortunes were already being made – and spent.
Consider George Remus, known as the “king of the bootleggers.” By some reports, Remus earned anywhere from $20 million to $40 million in just three years – as much as half a billion in today’s dollars. He spent it almost as fast. An indoor pool in his Cincinnati home, which included a Roman garden, cost $100,000 to build, and he gave parties that would have put Gatsby to shame. At a 1921 New Year’s Eve party attended by 100 couples, he is said to have given each of the men a diamond stick pin and each of the women a car.
Gatsby didn’t need anywhere near that much money to fund his lifestyle. His huge house, though expensive, hardly broke the bank. Early in the book, which begins shortly after Memorial Day in 1922, narrator Nick Carraway says the houses on either side of him in West Egg – one of them being Gatsby’s – rented for “twelve or fifteen thousand a season.” That’s about $200,000 in today’s dollars at the high end. A comparable house –18,000 square feet on 9.1 acres – in Southampton was recently on offer at HREO.com for $850,000, just for the season.
Nor were his parties, which attracted as many as 200 to 300 people every weekend, as costly as they now appear. He got his liquor wholesale, of course; food was relatively inexpensive; and staffing was downright cheap. Barron’s Economics Editor Gene Epstein estimates the cost of unskilled labour in 1922 was less than $2 a day. So even if he hired a hundred servants every weekend, the cost of his help per party was only around $5,000 in 2013 dollars.
Gatsby also brought out an orchestra and acts from Broadway, but it’s safe to say the price tag was not remotely close to the million dollars Blackstone founder Stephen Schwarzman reportedly paid rocker Rod Stewart for a 30-minute performance at his 60th birthday party in 2007.
Schwarzman’s birthday bash for around 350 was said to have cost him $3 million. A seat-of-the-pants estimate for the cost of a Gatsby party is more like $10,000 in nominal dollars, $12,000 at the outside. And he didn’t have that many of them. The parties, after all, were engineered entirely to attract the attention of Daisy Buchanan. Gatsby barely even made an appearance, and, like George Remus, he didn’t drink. After he succeeded at reuniting with Daisy, in mid-August, the parties ended abruptly. A dozen parties that season would have cost no more than $150,000 or $2 million, adjusted for inflation. That’s a third less than what Schwarzman reputedly paid.
Even Gatsby’s gaudy yellow Rolls Royce, which would have cost about $15,500 in 1922, was cheap by today’s standards. A fully loaded, top-of-the-line 2013 Rolls Royce Phantom lists for around $470,000, more than twice the inflation-adjusted cost of Gatsby’s car. Taxes? Gatsby’s illegal business suggests he is unlikely to have paid taxes at all, so his ill-gotten dollars went a very long way.
F. Scott Fitzgerald was obsessed with limning the behaviour of the idle rich. He knew everything about the rich except how to be rich himself, having constantly scrambled to keep up with his bills. The Great Gatsby, alas, didn’t help. The book’s initial 1925 print run of 20,870 sold out, but copies of the second printing of 3,000 were still in his publisher’s warehouse when he died in December 1940.
Had it not been for a $44,000 life insurance policy, Fitzgerald’s estate would have been broke. At the time, his copyrights were deemed worthless. Fitzgerald’s royalty statement for the first six months of 1940 showed that he sold just 40 books, including seven copies of Gatsby and nine of Tender is the Night; the royalty cheque was $13.13. By then, the only market for Fitzgerald books was Fitzgerald himself. His assistant later recalled that he’d purchased virtually all of those books himself, which he inscribed for friends.
His reputation only began to revive 11 years later, when The Far Side of Paradise, a biography by Arthur Mizener detailing Fitzgerald’s alcoholism and the schizophrenia of his wife, Zelda, was finally published.
But how the times have changed. The Great Gatsby now typically sells 500,000 copies a year in the US, according to his publisher, Scribner, the imprint of Simon & Schuster owned by CBS (CBS). Fitzgerald’s 1924 contract provides for a 20% royalty based on the retail price of the cloth edition of the book; paperbacks didn’t exist at the time. Even at half that rate, the paperback, which lists for $15, would generate $750,000 in royalties for Fitzgerald’s heirs in a typical year.
But this is no typical year. Publicity surrounding the movie, starring Leonardo DiCaprio and Carey Mulligan, has fed enormous demand for Gatsby, the book. Through late May, Scribner had already printed 1.15 million copies – and sold 250,000 e-books.
On the 35th anniversary of Gatsby‘s publication, in 1960, Mizener recalled that in Fitzgerald’s later years, after he’d drifted into obscurity, “whenever he was drunk, he would insist on telling people who he was and pressing them to recognise him – “I'm F. Scott Fitzgerald. You’ve read my books. You’ve read The Great Gatsby, haven’t you? Remember?”.
Today, the answer almost invariably would be, “Yes, we have.”
This article has been reproduced with permission from Barron's.