America in 1929

When America was like Colombia

I’m still thinking about the question of what I learned reading the newspapers from the interwar period. Some of what I picked up was inferred by reading between the lines, picking up the hidden biases in the way reporters talked about various topics. In this post I’ll slightly exaggerate for effect, to give you a sense of how the country seemed to the typical upper class New Yorker in 1929. Yes, it will be a bit like the famous New Yorker magazine cover, but in this case with greater justification.

At times, New York reporting on events out in the heartland reminded me of attitudes that you observe in the capital of a Latin American country—somewhere like Colombia. If there was a flood in Mississippi, there was sense that “Maybe we should donate some money to aid those poor peasants that are hungry and destitute”. (My words.) If there was violent political agitation on the Great Plains, reporters would suggest, “Or dear, the farmers are so desperate there is a whiff of revolution in the air.” It was almost as if they spoke of those regions as being like a separate country.

I’m pretty sure I know what you are all thinking—but you’re wrong. Yes, I know, it’s still a little bit like that today, but I’m about to show you that things really were different back in 1929, vastly different.

Below is data on federal income tax revenue in 1929:

One billion dollars in total. Heck, Elon Musk could leave that as a tip. :)

Notice that New Yorkers paid almost 40% of the total federal income tax revenue despite having barely 10% of our population, and (as I’ll explain in a moment) that was almost all paid by residents of New York City and perhaps the “Great Gatsby suburbs". New York City had less than 6% of America’s population.

Given that New York State had a bit more than 6 times Mississippi’s population, and paid 660 times more in income taxes, we can infer that the average New York resident paid more than 100 times more federal income taxes than the average Mississippi resident. Isn’t that still true today? Not even close, in 2022 the figure was more like 2.3 times more per capita. And Mississippi wasn’t even the bottom of the barrel. North Dakota had 1/3 Mississippi’s population, but paid 1/6th as much income taxes. Per capita, that’s 1/200th as much as the average New Yorker, and probably less than 1/300th as much as the average New York City resident.

How do I know that most of the New York taxes were paid by residents of the Big Apple? Look at Illinois and Indiana. Downstate Illinois is pretty much like Indiana. The fact that Illinois paid 8.67% of federal income taxes and Indiana paid 0.82% suggests that the Chicago metro area probably paid about 8% of the total US income tax bill. Basically, metro New York, Philadelphia and Chicago paid most of our income taxes, and most of the rest were paid by urban areas in places like Massachusetts, New Jersey, Connecticut, Michigan and Ohio.

Texas had just under 5% of our population, and paid less than 1.3% of income taxes. Florida paid less than half of that. As far as finance types in New York City were concerned, it was as if most of America did not exist. Today, Texas pays more total income tax than New York, although on a per capita basis it’s still modestly lower.

This is the same impression I get when I read about many developing countries. The rich live in a major capital city like Lima or Guatemala City or Bangkok or Manila, and the peasants live out in the hinterlands. Their economies show extreme regional inequality.

At the beginning of the post I said I would slightly exaggerate for effect. To be fair, the federal income tax data overstates the degree of regional inequality. In 1929, the income tax was far more progressive than today, despite the top rate being much lower. Most people paid no income tax at all. Thus income inequality between states was nowhere near as great as these figures would suggest. It was probably not at Latin American levels. Nonetheless, it really was true that the concentration of wealth in New York was much greater than today, when we have other centers of wealth like Silicon Valley, LA, Boston, DC, Seattle, Texas and Florida’s Gold Coast.

This source suggests that in 2022, Connecticut residents paid the most federal income tax per capita (154% of average, and Mississippi the least (58% of average)—a far narrower range.

In some of the wonderful screwball comedies from the 1930s, you really see the class divide in America. A country bumpkin from the middle of America arrives in New York City, and there’s a scene of culture clash in an elegant art deco apartment, where the women wear those slender gold lame gowns.

Today, Americans wear pretty much the same clothing all over the country, and drive pretty similar cars (more likely SUVs.) I’m not sure the Gini coefficient numbers pick up this regional leveling of living standards, but if they don’t it may be due to the fact that the richest areas have seen explosive rises in housing prices, so today’s nominal inequality greatly overstates the degree of real inequality. In 2025, I doubt there’s much meaningful difference in living standards between the typical resident of New York City and the typical resident of Oklahoma City. (Admittedly, there remain smaller pockets of poverty like West Virginia and the Mississippi delta.)

It’s not easy to describe the feeling I got from reading those old New York Times microfilms. It seemed more like a sort of gentle paternalism toward the rest of the country, not the scornful anger that elite New Yorkers now have for the more culturally conservative parts of Middle America. Indeed there wasn’t much of a sense that Middle America was more conservative. Farmers really were in a revolutionary mood during the early 1930s.

PS. The subtitle “When America was like Colombia” has a second meaning. In the 19th century, America did not have a clearly specified name. Yes, it was ”The United States of America”, but the original connotation was sort of a group of states located in the Americas. We were occasionally nicknamed Columbia, hence the “District of Columbia”. Over time, we became seen as a single country, not a collection of states, and “America” became our unofficial name (to the annoyance of Latin Americans.)

I suppose you could argue that President elect Trump is now engaged in what Scott Alexander likes to call nominal determinism. Canada is America. Greenland is America. The Gulf of Mexico is the Gulf of America, etc. I suspect that Argentina will be next on the list, if and when Milei fixes that country. (Trump likes temperate and arctic areas, not the tropical parts of America.)