The repeated narrative from liberals in general and Democrats in particular related to taxing the rich as the answer to all our ills has been recently augmented with a silly video from the California Federation of Teachers. Narrated by Ed Asner, this braindead reinvention of history, which borrows on every ancient stereotype of rich and poor, is a must see for anyone who wants a good laugh.
But what of some of the central assertions of the video? Were we a more prosperous nation when tax rates on the wealthy were at the 90% rate and there were fewer wealthy who payed much more while the middle class was much larger?
The fact is, no one in this country every paid 90% of their income in taxes. One of the principal problems of the pre-Reagan-era tax system was it’s huge complexity. And, despite what this socialist fairytale would lead you to believe, the wealthy paid less of the total tax burden than they do today. Our tax code in the 50s and 60s was less progressive than it is today, thanks in many ways to President Bush, whose tax cuts removed at least 10 million of those at the lowest income levels from the tax rolls.
Yet it’s undeniable the nation did well from an economic perspective. How?
First, let’s remember that post-WWII, the US was at a military and industrial peak. At the same time, most of the rest of the industrialized world lay in ruins. France, Great Britain, Italy, Spain, the Soviet Union, Japan, and many other industrialized nations lay in devastation at the end of the war. For the next 20 years or so, those nations were hard at work rebuilding their economies.
During that time, the US had very little competition globally. So the US enjoyed a period of prosperity while other nations were rebuilding. Now, however, we are experiencing a period of intensifying competition globally. High tax rates in such a time makes the US less competitive.
The other challenge the federal government has today that it did not have in that era of ultra-high taxes is the fact that it did not have as many social programs as today. Lets take as an example the last couple years of the Truman Administration. At that time, the highest tax rate was 92%, but the federal government spending, even in the midst of the Korean War, only amounted to 14% of GDP.
How could that be? At the time, there was no Medicare or Medicaid. Federal spending on welfare-related programs was far lower. Today, two-thirds of all federal expenditures are for welfare-related programs.
So this liberal fairytale of past prosperity based on the idea of the wealthy paying their “fair share,” is just that, a fairytale, with no basis in reality. What is undeniably true today is that a far higher proportion of federal revenues come from the wealthy than ever before in the nation’s history. And government spending on education is roughly double what is was in the “fairytale” days of this video.
And what do liberals mean when they say the wealthy should pay their “fair share”? Notice they never tell you specifically. Ask Ed Asner and many Democrats and they’ll tell you taxes should go back to being 90%. The problem with that is, of course, that combined with most state and local taxes, it would force the wealthy to pay 100% of all their income.
Liberals think a government which grabs nearly every penny you earn above a certain level is “fair.” It’s neither fair nor sane.