Don't get fooled. Republicans may mention other issues, they may chatter about morals, or bellow over defense. But there's only one thing that really concerns them --
taxes. And there's only one tax bracket in their sights,
the top one.
With Kerry asking the top 2% to give up their most recent tax cut in order to fund several problems, it's worth looking at where we've been, where we are, and where we should be going when it comes to taxes.
Here's a hint: it's not down. We better learn how to fight and win with that position.
During the period of what would now be considered astounding high top tax brackets (between 60% and 90%), the US economy not only grew at its fastest sustained rates ever, income grew across the board. Here are some tax numbers across the years [NOTE: I have some conflicting numbers from different sources, some definitive numbers would be appreciated.]
Personal income tax rate for top bracket
Years Percent
------------ --------
1945 91%
1946-63 88
1964-81 70
1981-86 50
1986-91 33
1991-96 31
1996-2001 39*
2001-2003 35
*affected 0.5% of filers, with less than 4% above 28.
So, since the 1960's, income taxes have dropped by 50%+ for the top 4% of filers. Even since the 1980's, they've dropped 15%. Over the same period, most people in the 15% to 20% brackets (the lower 40% of filers) saw no decrease in tax rates.
But if Bush can argue that a 2% cut is a stimulous, this kind of cut should have lit a rocket under the nation, right? Well, more like a wet firecracker.
When the top rates were truly high from 1950 to 1978, American income at all levels grew at about the same pace. But when top rates declined in the 80s, the income of the poor began falling, while that of the rich continued growing.
Income Growth by Quintile
Quintile 1950-1978 1979-1993
--------- --------- ---------
Lowest 20% 138% -15%
2nd 20% 98 -7
3rd 20% 106 -3
4th 20% 111 5
Highest 20% 99 18
There are some amazing numbers here. Not only did the average income grow much more quickly when the top bracket was at its highest, but that growth was distributed across all brackets. The very poorest benefited the most, but the top quintile also grow at a extemely healthy rate.
Now look at the numbers from the second period. Not only did the lower brackets fall, but even the top brackets failed to grow as quickly. A higher top bracket was good for everyone -- including the people in that higher bracket.
By grabbing for more money at the top, they've turned off the engine at the bottom.
Is the current tax structure just? Is it economically smart for the nation? It would seem to fail on both counts.
In 2001 (the last year for which I have numbers) incomes rose for the top quintile, and rose especially for the top 5% (individuals averaging over $264,000). For every other group, real income declined. For incomes over $1,000,000, the average increase over the 1979-1993 period was 2,184%.
The tax cuts have been part of a pattern that concentrates wealth into fewer and fewer hands and does so at a cost to everyone. We need to raise taxes, and we probably need to raise them a good deal more than Kerry plans. Not just to staunch the bleeding deficit, and not just to pay for health care. We need to raise the taxes at the higher end, because it's good for the nation and the economy.