It is time to start talking about the fact we must tax the rich as a considerably higher level than we are now, if we are to get out of the mess we are in financially. It is not like we have not seen this kind of situation before and have not taken exactly that step. First a little history; during World War II our deficit was 30% of GDP, even given the differential between 1940’s dollars and today’s dollars that is a hell of a lot of money.
This is in a nation coming off the Great Depression as well, so there is a lot of money the Untied States had barrowed which had to be paid back. In order to do that, starting in 1951 all income over $300,000 was taxed at 90%. To be clear the income below that level was taxed at lower levels, based on our graduated income tax, so it was not like you were in a 25% tax rate up to that number and then bang, you are paying 90%. For each of the graduations you pay the rate up to a max, and then you pay a higher rate on income above that level and up to the next level.
In the 50’s we had 24 graduated brackets. This allowed a higher and higher level of tax up to the 90% at $300,000 and above. Which makes plenty of sense, when you think about the fact the lowest bracket when from $0 to only $2000 and was at 22.2%. Everyone in the nation was paying to fund the cost of our war and our debt, as a nation should do, but everyone was paying according the amount of money they earned. Just to give you a little idea of how much $300,000 was in the ‘50’s it would be equivalent to $6,390,000 (using a nominal GDP per capita calculation, you can find it here).The Dog has to ask is there anyone out there who does not think people who make 6.3 million a year of more should not pay something above 50% on the money over that level?
Today we have only five tax brackets and they top out at 35% at 372,000. This is due to the Republicans for years claiming the tax code is too complex and when they go to reduce complexity, they do it not by eliminating tax credits or loopholes, but by cutting the number of brackets and bringing the brackets down. This has been going on for decades. As late as 1980 we had a 70% top rate at $215,000. During this same period of time we have seen money, private money, become a major factor in our political discussion with the founding of the Wingnut Welfare think tanks like the American Enterprise Institute and the Heritage Foundation. These combined with the self-funding candidates on the Right and Astroturf "public interest" groups have helped to keep the Conservative agenda sailing forward for far longer than it should have been able to.
So, we come to the place we are today, a nation with massive debt and a strong need to spend more money in order to provide what every industrial nation in the world but the United States provides, national health care for all its citizens. At the same time we have decades (since 1987 when the top tax rate fell to 28%) where the rich have been getting richer just because the nation no longer taxed at 50% in the top tax rate. This is no longer an acceptable state of affairs. We need to have the wealthiest Americans, who, lets face it get a disproportional amount of the benefit of being American, pay their fair share!
Lest anyone think we would be soaking these ultra wealthy, remember that if you had 5 million dollars in one place at one time, at 3% earnings in bonds it would return $150,000 a year. This is twice the median income in the nation at this time, so the Dog is pretty sure they could get by when they are earning 5 million every single year!
We have to be rational about our tax policy. Many people earning way above the cap the President has set for new taxes ($250,000 annually) will tell you they are paying too little. There are, of course many who will tell you they pay too much, but the reality is they do not, not even close to too much. We need go back to a tax system that does not have so many ways of cheating it. We need to reintroduce higher brackets above the ones that will come back into existence in 2010 and 2011. It is clear that cutting taxes and cutting taxes and cutting taxes is part of the reason we are in the hole we are in. This means we must recoup those taxes and do it for some time if we are to pay down our debt and get on firm financial footing.
That the ultra wealthy pay more for this is only fair, after all they got us in to this mess with policies they favored, and they got massively more wealthy doing it. The bill is due and they are the ones who should shoulder the load, just like the rest of their fellow citizens.
The floor is yours.
One house keeping note; all the tax rates for every year can be found at the Tax Foundation. Sure they are a conservative group, but they do provide good accurate date on the historical tax rates. They just draw the wrong conclusions form the data. You can find the tables for this article here.