Friday, November 8, 2013

90 Percent Taxes on the Rich Is What Built the Middle-Class Economy

And the virtually tax-free-for-the-rich regime repugs have established is what destroyed it.

Here, from Down with Tyranny, is the history the rich parasites and their minions in Congress are trying to stuff down the memory hole.

When Eisenhower, the last mainstream Republican president, was in office, the marginal tax rate on incomes over $400,000 was 92% and capital gains was taxed at 25%. In 1954 Eisenhower reduced the marginal rate to something Republicans felt was more fair… 91%. His greatest accomplishment-- aside from keeping the U.S. out of wars-- was the building of the Interstate Highway System, judged so not just by historians but by Eisenhower himself. Although his 1952 landslide gave Republicans control of both houses of Congress, they made no moves to reduce taxes beyond the modest 1% reduction for top payers. While Ike was in the White House the economy expanded and the Dow more than doubled.

JFK kept the top rate but LBJ made the effective top tax rate 75.25%, a gigantic tax cut for the very wealthy and Nixon kept that rate, while raising the capital gains rate to 36.5%. At that time Mitt's father, George Romney, ran for president and released his tax returns, showing a $2,972,923.58 income during 1966 and a total of $1,099,555.18, a very different story than the one his son's taxes told.

Ford's brief presidency saw no changes in the marginal rates but did see capital gains go up to 39.875%, the peak, as it turned out, which helps explain why the rich have gotten much much richer since the end of the Ford presidency. The decrease in capital gains taxes began under Jimmy Carter, decreasing by over 10 points to 28%. This just whetted the appetites and the greed of the very rich for more and bigger cuts. Reagan was glad to oblige. He slashed the top marginal rates from around 70% to just 28%, the seed for economic catastrophe and endlessly unbalanced budgets. George H.W. Bush tried to undo some of the damage Reagan's tax cutting had done and rates increased slightly. Clinton kept the marginal rate for top earners basically the same as Reagan and decreased the capital gains tax by 8 points.

Then came George W. Bush (or, more to the point, Dick Cheney, who was in charge of the economy). The rate for top earners sunk to 15.35% and the capital gains tax was pushed down to 15%, exploding the deficit and sending the U.S. economy careening towards the disaster that ended the 8 catastrophic Bush-Cheney years. Obama kept the unsustainable Bush tax cuts for the rich. according to James Stewart's widely discussed NY Times piece over the weekend, High Income, Low Taxes And Never A Bad Year, the rich just keep on getting richer and richer under the tax policies they pay for with their campaign contributions. "The fortunate 400 people with the highest adjusted gross incomes," he wrote, "still made, on average, $202 million each in 2009, according to Internal Revenue Service data. And this doesn’t even count income that doesn’t show up as adjusted gross income, such as tax-exempt interest." And for many rich people that tax-exempt interest is over half their income.

Yet the top 400 paid an average federal income tax rate of less than 20 percent, far lower than the top rate of 35 percent then in effect.

They also paid a lower rate than the top 1 percent, which were people with adjusted gross incomes in 2009 of at least $344,000. These affluent but hardly superrich taxpayers paid on average just over 24 percent of their adjusted gross income in federal income tax. Even the top 0.01 percent, people earning at least $1.4 million, paid 24 percent.

“The top 400 have enormously high incomes even after the dip,” said Leonard E. Burman, director of the nonpartisan Tax Policy Center and a professor of public policy at the Maxwell School at Syracuse University. “It’s still over $200 million each. And yet they’re still paying at a lower rate.”

Even in a bad year like 2009, the federal tax code at the very top is regressive, not progressive.


“They’re still paying much lower rates because their income is dominated by capital gains and dividends,” said Edward Kleinbard, a professor at the University of Southern California School of Law and a former chief of staff for Congress’s Joint Committee on Taxation. “As long as those forms of income are taxed at a preferential rate, the rich are going to benefit the most.”

It remains a pillar of Republican orthodoxy that taxes on unearned income, especially capital gains, should be low, or even eliminated. But it was Ronald Reagan who as president championed taxing capital gains at the same rate as earned income. This was a crucial part of his 1986 tax reform, which lowered overall rates by broadening the tax base.

“Capital gains have taken on a totemic significance to the Republicans,” said Professor Kleinbard. “But they’re just another way that you earn a return by investing capital in productive activity. There’s nothing magical about capital gains from an economic point of view.”

…Representative Dave Camp, Republican of Michigan, and Senator Max Baucus, Democrat of Montana, have been working on a much-anticipated bipartisan approach to tax reform, and the House Budget Committee chairman Paul Ryan has said, “They agree on the fundamental principles: Broaden the base, lower the rates and simplify the code.”
The rich are a clear and present danger to the nation. Their stolen wealth must be returned to the workers who created it.

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