And most Americans have been convinced this is a bad thing. To the extent that taxes are levied unfairly and spent wastefully and foolishly, it is a bad thing. By these criteria, we have had seven consecutive years of increasingly bad tax days. But Oliver Wendell Holmes, Jr., famed jurist, put another face on taxes, saying "Taxes are the price of civilization."
As far as I know, he didn’t say the more taxes we pay the more civilized we are, but reading Paul Krugman’s "The Conscience of a Liberal," I realized our country’s very best years, 1947 to 1972, were the years of high marginal income taxes, a fact that destroys today’s prevalent myth, "supply-side economics" that holds the less we tax the immensely rich, the better off we all are.
We have lower taxes than any other industrialized democracy, particularly our federal tax take of 19-21% is lower than that of most central governments in similar nations. But this is because we do not have universal health insurance, which routes about 10% more of the gross national product through government. And not having universal health insurance is indeed uncivilized because a minimum of 18,000 Americans die each year because they do not have financial access to medical care. But that’s another sad story, not unlike the tax inequities quantified in Krugman’s book.
After a horrendous world war following the Great Depression, this nation found itself flat on its back with a deteriorating infrastructure, a war-oriented industrial base and a not very well educated populace. Conversely, world-wide we were the king of the hill, albeit a very low hill, because other nations were worse off than we. Nevertheless, after a hesitation during two years of Republican congressional majorities, this nation launched a program to rebuild our nation, reduce our war-time debt, and to assist rebuilding Europe in order to stem communist infiltration and discourage Soviet aggression.
These were the tasks for the Greatest Generation which came marching home from a war that placed in uniform 14 million of 120 million Americans. They again performed well, supporting a two-party consensus to distribute fairly the fruits of a rapidly growing economy. Further, we paid as we went with high marginal income taxes, high taxes on income from capital, and high estate taxes, the kind of taxes which today we are told would ruin the nation.
Marginal income taxes reached 91% by the mid-fifties, the Eisenhower years, when Krugman tells us "the United States faced the expenses of the Cold War." What a unique idea to pay as we went!
Marginal income taxes were still 70% when Reagan became president. Today they are 35%, not enough to finance our government and forcing us to borrow money from oil-producing countries and China to pay our bills.
As a result, the national debt is $30,000 for each American ($90,000 for each household), and interest on the debt is the federal government’s third largest expenditure. In our best days, capital income was decreased by a 55% corporate income tax (McCain wants to cut it from 35% to 25%), and estate taxes that reached a maximum of 77%. By the mid-fifties the wealthy 0.1% of Americans owned only about 10% of the nation’s wealth compared with 20% in 1929, and again today.
Heavy taxes on high income Americans propelled our nation into its greatest period of growth, and a more equitable distribution of income and wealth than at any other time in modern history. Median income doubled from 1947-1973.
Adam Smith, Scot economist, who published "Wealth of Nations" in 1776, is often cited for his support of the economic efficiencies of free markets. But Smith also wrote, "The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state."
By refusing to fairly tax the rich, Republicans are destroying America’s middle class, destroying the value of our currency and threatening us with financial chaos.
Dr. Roy can be reached at email@example.com