Thought I'd start an off-topic thread with all the talk going on in D.C. about not increasing taxes, or notiminating some tax breaks that have been given to the rich and/ or corporations over the last 20 years or so.
I went to this web sight,
http://www.taxfoundation.org/publications/show/151.html , to find out what tax rates for the wealthist among us have been in the past when our deficits were extraordinarily high as they are today. Of course, those times were after the two world wars. We can argue that those wars were needed to preserve freedom, so the debt increased for the right reasons, and this dilema that we find ourselves in is based on greed and political stupidity over many decades. But that's not the point I'm trying to make. My point is, when this country found itself burdened with massive debt in the past, politicians some how were smart enough to know more revenue was needed (along with cuts). And that revenue was obtained by higher tax rates for the rich.
What my research tells me, since the 1980s, the rich have paid some of the losest tax rates in the last 100 years.
Here is a hodgepodge of tax rates on the wealthy from pre-WW1 through today that I got from this web site. These figures are based on joint family income:
prior to WW1: income tax rates peaked at 7% for those making $500k and up.
after WW1: maximum rates went to 77% to help pay off the deficit.
by 1924, rates on the rich were cut 24% for 100k and up.
rates stayed at 24% max until 1934 when they were progressively raised to 62%, $1m and up, during the depression.
from 1934 - 1941: maximum rates stayed high, between 62%-81% for the super rich $2m - $5m
in 1942, as we moved into the war, rates went to 88% for those making $200k and up. a huge tax hike. by 1946 the maximum peaked at 94% for those making $200k and up.
top rates stayed in the 90% plus range straight through 1963, when in 1964 top rates were 'cut' to 77%.
in 1982, some one came up with this "trickle down" theory. Rates were now topped at 50% for those making 85k and up. And by 1988, the top rate was only 28% for those making $29,750 and up.
Top rates for those filing join returns in 2011: 35% for those making $379,150 and up.
So, the argument against higher tax rates for the very wealthy doesn't hold mustered based on historical rates during high deficits. What we are faced now with is not new to our history.
Comments
Oh... I'm old enough.
I have no problem with cutting spending. It's an obvious choice. My point is this country has always increased taxes to reduce deficits. It's not new. It';s not un-American. The maximum fed tax rates from 1940 to 1984, over 40 years, were between 50% - 94%. I can easily argue that when tax rates were cut to a maximum of 28% for the wealthy during the Reagan years, that was the start of the spiral down for this country. The rich got richer and the middle class took the brunt of the burden.
My point again is about this crazy thought that we shouldn't raise taxes on the wealthy. Lets say it another way, not "raise taxes" but "bring tax rates back to historical averages".... and yes, cut spending too. The hole that many politicians have dug themselves into, politically, by signing a 'no new taxes' statement has handcuffed this country into not being able to fix a very critical problem.
The outlandish top rates cited above if re-instituted will have the super-rich seeking high-priced tax advice on how to re-characterize and time income as well as how to re-title and reposition assets in order to minimize the impact. A lot of taxable income at the top will go away, but politicians will be able to demonstrate to low-income constituents that they are sticking it to the man with extreme marginal rates.
As for the merely "rich" guys who are just earning a couple of million a year, many are small businessmen with S corporations that have 5-25 employees. If you want to raise their taxes by $100,000/year, you would have to believe that the government can spend/invest it more efficiently and effectively than the rich guy. I do not share that belief. This looming tax rate increase along with an increasingly anti-business regulatory environment is producing the uncertainty that is holding back the small business job creation we've all been hoping for.
To me, the most telling fact you cited in your original post is the increase in the top tax rate in 1934 from 24% to 62%, and which was followed by seven or so additional years of Great Depression. I do not dispute the current need for increased tax revenue, but I favor a complete overhaul and simplification of our 70,000 page tax code with a lowered top rate, say 25%, no deductions and a folding of the social security and medicare revenues into this single rate. Everybody would pay tax on all income at, say, 10% on first $100,000. I like the same two rates for LT cap gains, but with the break point at $1 million. That way, if you sell a business for a $20 million gain, you pay the 25% rate on 95% of the gain, but small investors pay 10% on most gains.
Hi BRBond. I couldn't agree more with your simplified tax proposal. Good stuff. Got to wonder why an over-haul of the tax codes doesn't fair as a higher priority. Special interests and lobbyists maybe? I don't know.