Today the wealthiest among us are complaining about Obama’s plan to let the Bush tax cuts expire in 2011, putting the top tax rate back where it was under Clinton at 39.6%. The rich and all their blowhard mouthpieces are screaming about how Obama’s plans to use the increased revenue to pay for much needed infrastructure rebuilding, school buildings, education, and the expansion of healthcare coverage is “socialism” and a “war on the wealthy.”
What they’re not saying or admitting to is that there hasn’t been a better time to be rich in this country than since just prior to the Great Depression when the top marginal income tax rate was 25%. Since then the top rate has been as high as 94% and as low as 28% for a three-year stretch during the Reagan era. It was above the current rate of 35% for seventy-two of the previous seventy-seven years. Remember that “Socialist” Eisenhower era of the fifties? The top marginal rate during his presidency was 91%.
The rich are now entering their tenth year of Bush’s Low-Tax Party for his “base.” They’ve been given hundreds of billions of dollars in the form of a 4.6% tax reduction on their earned income and a 5% tax reduction on their income from capital gains. The money the rich received from these enormous tax breaks was supposed to somehow trickle down to the other 95% of us. Wealthy entrepreneurs were ideally supposed to use those tax savings to provide increased benefits for the working class in the form of salaries and other benefits like healthcare and retirement plans.
Well let’s take a look at how that “trickle down” action worked. Here’s a bar chart from The American Progress Report publication titled Understanding Bushonomics – How We Got Into this Mess in the First Place. The dark bars indicate 2002 levels of income and the light bars indicate 2006 levels of income.
The text on the chart reads: “Between 2002 and 2006, real household income in the U.S. grew by 836 billion. Fewer than 15,000 families got 25% of that Growth. … The 133 million households that make up the bottom 90% of American families divided only 4% of the nation’s income growth raising their average income from $30,354 to $30,659.”
Want another view of “trickle down” economics? Take a look at this pie chart from the same publication.
The top 1% decided to keep 73% of our increased income for themselves. The top 10% kept 95% of the income. The bottom 90% got to share the remaining 5% of the increase.
This is how Reagan’s economic model, embraced by Bush, works. Now might be a good time to point out that Reagan at least showed some restraint. When he lowered the top rate to 28% he raised the capital gains rate from 20% to 28%. His thinking was that because the rich were getting such a huge cut in income taxes – from 50% to 28% – their capital gains should no longer be taxed at a lower rate than their earned income. Bush, on the other hand, was so beholden to his base that he cut their income taxes and lowered the capital gains tax to 15%. And the rich got way richer and the rest of us fell behind. This system combined with the rapacious greed exhibited by “the haves” has led to our nation’s greatest gap of income inequality since before the crash of 1929.
So when you hear some extremely wealthy person or one of their gasbag media mouthpieces whining about paying 4.6% more of their grossly inflated incomes to the U.S. government, remember these charts. The rich took nearly all of the income. They should be paying way more income taxes.
Froma Harrop pointed out in her latest column that Republicans often remind us that even John F. Kennedy cut taxes. But they fail to mention that he lowered the rate to 70%, which is 30 points higher than where it will be when the Bush tax cuts expire. You think you’re hearing cries of socialism now? What would you hear if Obama raised the top marginal rate to 70% again? Or 91% as it was during Eisenhower’s time?
I’ll tell you what you’d hear. Socialism! Job killer! Communist! War on the Wealthy! Class War!
Well screw them. Even with those extremely high top-tier tax rates, the American economy prospered, and everybody’s incomes went up dramatically, not just for the top 1%.
Did I mention that all that economic growth and leveling of incomes took place during times of war? That’s right… During WWII the top tax rate was within the range of 81% to 94%. During the Vietnam War the top rate ranged from 70% to 77%. Over the entire Cold War, the rate started at 86.45%, went up to 92% and down to 28% right before it ended. Presidents used to ask Congress to collect money to pay for the costs of waging wars. Each generation was taxed to pay for the wars so that the next generation wouldn’t be overburdened with a previous generation’s war debt.
And what did our last “War President” do with tax rates while he waged his “War on Terror?” His administration gave us the biggest tax cut in our nation’s history. The tax cuts resulted in somewhere around 1.9 trillion dollars in lost tax revenue, and the lion’s share of those tax savings went to the wealthiest among us.
So you see, it has been an extremely good time in our history to be very wealthy. If you were a wealthy person during the last decade, you saw your income double and your taxes go down. What a deal!
Well all parties have to come to an end, and now it’s time for the greedy people at the top to start giving back some of what they kept from the rest of us. Don’t feel sorry for them. They don’t need your pity.
We need their money. We need it to repair our crumbling infrastructure. We need it for new schools and better education systems. We need it to build new energy-efficient transit systems. We need it to make our population healthier. We need it to invest in research to develop clean energy sources. We need it for our country’s future.
Investing this money now will help us recover from the current financial crisis, and spending it in ways that leads to lower energy use, and in ways that make all of us healthier and smarter will grow our economy and make us competitive again. That’s how everybody wins.