The U.S. 1 percent has had it good for too long.
Author: Benjamin Woolhead
President Barack Obama’s points on increasing taxation for the rich and the big corporations in his State of the Union Address were met with noticeably less enthusiasm than his comments about continuing the War on Terror. The many more members of Congress who remained in their seats contrasted with the small group of enthusiastic Democratic Party members applauding in the front row. There’s just something about tax increases on the rich that seems to make people who live in the stronghold of cutthroat capitalism uncomfortable.
Whenever the discussion begins to turn to increasing taxes on the rich, some people begin to get nervous. The objections to a tax system that does more than level the playing field usually takes one of three forms. First, people will argue that if we tax the rich and the corporations too much, they’ll just move their wealth elsewhere. While that may be true of some, there are many more that would remain at home, willing to give more for the benefit of the country that has given them all they have. Besides, lower taxes certainly haven’t stopped corporations from moving their jobs abroad anyway, so why do we keep pretending they keep jobs at home?
The argument might then move to one of innovation and motivation. People won’t work as hard, they say, and won’t have the drive to innovate if they know they can’t make as much money. Frankly, that’s just ignorant. Do we really think that true progress and innovation has been driven by greed? Alexander Graham Bell, Thomas Edison, Bill Gates, Steve Jobs; all of these people were driven more by their passion for what they did than their desire for money. The greatest innovations of our time have been driven by humanity’s desire to discover, not by greed. Greed gives us cheaply made consumables, not innovation.
Finally, if the other avenues of argument fail, the anti-taxation-of-the-rich crowd often resorts to calling you a ‘communist’. Their voices drip with accusation, as if we are back in 1957 and you are some Soviet spy trying to destroy freedom and blow up Lady Liberty.
A look at historical tax rates should shed some light on the actual facts of higher taxation. For comparison, keep in mind that today the highest tax bracket for individuals has been sitting around 35 per cent from 2003-13, according to the Tax Foundation. Few people would argue that the 1950s and 60s were the golden age of the American economy, and of the American dream. It may surprise you to learn that those were the years when taxes were at their highest. From 1944 until 1963, the highest tax brackets in the U.S. were over 90 per cent. Yet those years showed unrivaled prosperity for the common man and incredible innovation. The nation as a whole was prosperous and the economy was booming.
Looking at the other side of the tax story brings us to the Great Depression, which began in 1930. It was preceded by a period of massive cuts in taxes on the rich. In 1921, the highest tax bracket was 73 per cent. It was then progressively changed until, in 1925, it was down to 25 per cent. It remained at this level until after the collapse of 1930.
There are always other factors involved, but instead of denying the connections between taxes and true national prosperity, we need to realize that inequality is an amplifier of other conditions that create hardship and make the world a worse place to live for the majority. We need to get past the propaganda and look at the facts: higher taxes on the wealthy and on big corporations create a better society and lead to national prosperity. Let’s not let the greedy lie to us so that they can save their own skin.