LEFT OF THE RIGHT: History Proves Republicans Are Wrong On Taxes

Anyone who hasn’t spent the last couple of years on Mars knows how bad a situation our economy is in. And there has been no shortage of discussions about how we got here. Most of the talk is about the financial institutions and how they were regulated. Republicans of course are again calling for lower taxes as a way to correct the problems with the economy. “Lower taxes will increase investment which will help create more jobs.” But if you look at the history of income tax rates in the United States and their effect on the economy, you find that the Republicans could not be more wrong.

On the Tax Foundation web site they have a page that charts the history of income tax rates in the United States from 1913 to the present. In 1913 the top income tax rate was a tiny 7% for incomes over a half million. Then in 1916 the rate structure was changed making the maximum rate 15% for incomes over 2 million. And in 1917 the maximum rate was raised to 67% for incomes over 2 million. Then in 1918 they were raised to 77%. Taxes remained at this level until 1922 resulting in the Roaring Twenties. But the good times were short lived.

In 1922 the maximum rate was lowered to 58% and by 1925 they had been dropped to just 25% and remained there until 1932 when they were raised to 63%. But by 1929 the Roaring Twenties had come to a crashing halt. The problem was that the lower tax rates allowed too much money to accumulate at the top causing a bottle neck in the economy. The result is known as the Great Depression. It took 16 years and a world war before we crawled out of that hole. By then the maximum rates were around 90%.

It was the late 1940’s and the 90% rate had been around 2 or 3 years. And not only had our economy recovered, but it was on the verge of an era that saw middle incomes soar and a standard of living unprecedented in human history. The early 1960’s saw maximum rates lowered to around 70% but by 1970 even my parents, a union truck driver and a nurses aid earned a very comfortable living and they had 7 kids. To give it perspective… In 1970 my folks brought home about $1,500 a month and our house payment was $70 a month. Today my wife and I take in about $3,000 a month and our house payment is $850 a month. My folks paid 4% of their income for housing whereas my wife and I, 39 years later are paying 28% of our income. That’s how diminished the middle class has become.

In 1982 under Reagan the maximum rate was dropped to 50% and in 1987 it was lowered to 39% and then to 28%. Today the maximum rate is 35%. But 5 decades of sustained high income tax rates for the wealthy had created the largest and most robust economy the world had ever seen. So it should be no surprise that it took 30 years for low tax rates on the wealthy to bring it down. And that is exactly what low tax rates on the wealthy has done.

Now I know there are a lot of factors relating to how our economy behaves. And there is no denying that within the decades long trends I speak of there have been many ups and downs in the economy. But these are minor compared to the overall effects of taxation over the last century.

Higher tax rates on the wealthy between 1913 and 1922 resulted in good economic times for middle class Americans. But just as those good times were underway tax cut fever hit D.C. and they were lowered in 1922. The negative effect was so profound it caused the stock market to crash in 1929 followed by the Great Depression of the 1930‘s. I suppose the memory of the pain of those days is responsible, but it took nearly 50 years for America to forget that lesson because high tax rates for the wealthy lasted that long. And that half century of high tax rates for the wealthy also saw the largest expansion of middle class incomes and the single biggest leap forward in the standard of living for common folk in the history of humanity.

But we did forget the lesson and allowed the Republicans to lower taxes on the wealthy in the 1980’s and look at what it got us. And considering it took 30 years for tax cut fever to undo what 50 years of responsible taxation had created, I’m terrified at the prospect of how long it may take to undo the undoing. Especially considering how hesitant the folks in D.C. seem to be about raising taxes on the wealthy.

The best economic times the working class of this country ever saw was when the maximum tax rate was 90%. And now the Republicans would have us believe that if we raise the rate from 35% to 36% it would mean economic Armageddon? Puhlease!!!

The bottom line here folks is that tax rates on the wealthy are too low and anyone who thinks we will ever see a real recovery without raising those taxes is fooling themselves. Ain’t gonna happen.

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Devin Barber, Politics Correspondent

Devin’s column, “Left Of The Right” published weekly or more to Gather Essentials: Politics is a Blue Collar Democrats take on current political news.

Devin was raised by proud Roosevelt Democrats. Being the son of parents counted among the throng of Americans displaced by the Great Depression has given Devin a deep rooted passion for causes dealing with the poor and the working class.

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