Bush Tax Cuts Increased Wealthy’s Burden

This is something the Leftist Revisionists don’t want people to know. The share of taxes paid by the wealthy grew after the Bush tax cuts. The poor’s share fell. It’s a histo-fact that only liars and their sheeple can deny. The Leftist Revisionists want people to think the “rich” had a heavier burden under Clinton due to higher tax rates than under Bush. The facts show otherwise. Phillip Klein at the Washington Examiner has those pesky facts.

How could this happen after the Bush administration spent a decade heaping benefits on the rich while squeezing the middle class? Mark Robyn, who co-authored the analysis for the Tax Foundation, noted that the Bush tax cuts were across the board. So when Democrats speak in aggregate dollar terms, they can make it seem as though wealthier Americans are getting a better deal. But that’s only because they pay a lot more in taxes, so cutting taxes for all is going to result in a larger dollar figure for them. But if you analyze it as a share of taxes paid, the Bush tax cuts didn’t change the distribution.

Of course, this doesn’t tell the whole story. It doesn’t account for payroll taxes, for instance, which do hit middle and lower income levels. But much of the current debate has focused on the need to raise marginal income tax rates on higher earners while keeping them the same for everybody else. The question is, though, if a society in which the top 1 percent already pay nearly 40 percent of the nation’s income taxes (and when combined, the top 10 percent pay nearly 70 percent), then what would it take for liberals to be satisfied that the rich are paying their fair share? Should the top 10 percent pay 90 percent of the taxes? Should the bottom 50 percent pay zero income taxes? President Obama’s vision to subsidize the ballooning social safety net by shifting even more of the tax burden on the wealthy – while increasing the percentage of people who are net takers in society – is simply unsustainable.

“But if you analyze it as a share of taxes paid, the Bush tax cuts didn’t change the distribution.” Actually, the distribution was changed slightly. The top 1 percent, the 1-5 percent, and the 5-10 percent all have a heavier burden under Bush’s tax rates than under Clinton’s rates while the 10-25 percent, 25-50 percent, and bottom 50 percent all have a lighter burden under Bush’s tax rates than under Clinton’s rates. Them’s the facts. And the reason should be clear: If you lower the tax on an activity (such as income generation), you will encourage more of that activity. And since business owners and investors are in those top three brackets, their income generation would consist of a lot of business taking place — meaning more people being hired, more hours being worked, more product going out to market, more people having money to buy the product, a larger market for the product. In other words, a dynamic economic environment as opposed to the static economic environment which doesn’t exist except in the minds of the Left.

“The question is, though, if a society in which the top 1 percent already pay nearly 40 percent of the nation’s income taxes (and when combined, the top 10 percent pay nearly 70 percent), then what would it take for liberals to be satisfied that the rich are paying their fair share?” Agreed, that should be the question, but that’s never the question the Left asks. What the Left wants is to bring down the “rich” to the levels of the “poor” as if that would make the “poor” somehow not-poor. It doesn’t work that way. Warsaw Pact nations. Cuba. North Korea. It’s pure class-envy (which is a sin) that drives the Left, not actual economic growth. If someone has more than them, that someone needs the government to take it away and redistribute it, regardless of the actual harm it does to the economy and to the working poor themselves. (Some Leftists are even revisionist enough to redefine the term “redistribution” to mean its exact opposite, as has been seen multiple times on this site and likely will in the comments below.)

Let’s look at the burden as a share of GDP, shall we? And let’s look at a much wider spectrum. It’s something I already covered, something on which the Left has to use its revision because histo-facts don’t bear out the Left’s meme. As I wrote in August, 2010:

Art Laffer provides the history that the left don’t want to admit.

Since 1978, the U.S. has cut the highest marginal earned-income tax rate to 35% from 50%, the highest capital gains tax rate to 15% from about 50%, and the highest dividend tax rate to 15% from 70%. President Clinton cut the highest marginal tax rate on long-term capital gains from the sale of owner-occupied homes to 0% for almost all home owners. We’ve also cut just about every other income tax rate as well.

During this era of ubiquitous tax cuts, income tax receipts from the top 1% of income earners rose to 3.3% of GDP in 2007 (the latest year for which we have data) from 1.5% of GDP in 1978. Income tax receipts from the bottom 95% of income earners fell to 3.2% of GDP from 5.4% of GDP over the same time period. (See the nearby chart).

Even when Presidents Harding and Coolidge cut tax rates in the 1920s, tax receipts from the rich rose. Between 1921 and 1928 the highest marginal personal income tax rate was lowered to 25% from 73% and tax receipts from the top 1% of income earners went to 1.1% of GDP from 0.6% of GDP.

Clearly, the history of tax cuts for the wealthy has shown an increase in tax revenue from that very group. To deny such is to deny fact. And what of the tax increases on the wealthy?

President Roosevelt then debauched the dollar with the 1933 Bank Holiday Act and his soak-the-rich tax increase on Jan. 1, 1936. He raised the highest personal income tax rate to 79% from 63% along with a whole host of other corporate and personal tax rates as well. The U.S. economy went into a double dip depression, with unemployment rates rising again to 20% in 1938. Over the course of the Great Depression, the government raised the top marginal personal income tax rate to 83% from 24%.

Is it any wonder that the Great Depression was as long and deep as it was? Whoever heard of a country taxing itself into prosperity? Not only did taxes as a share of GDP fall, but GDP fell as well. It was a double whammy. Tax receipts from the top 1% of income earners stayed flat as a share of GDP, going to 1% in 1940 from 1.1% in 1928, but at what cost?


US historical record shows Keynesian statist economics to be the dismal failure it is, but Hayekian economics actually works.

Harding pulled us out of the Depression of 1920 by drastically cutting taxes. Coolidge continued that process, and the 1920s were boom years. All the while, the “rich” paid a higher percentage of the quickly growing GDP under the lower tax rates than under the higher tax rates of the Progressive Woodrow Wilson. The proof is in the numbers. You cannot get around the proof without lying or being a sheeple.

Then Herbert Hoover came in and pulled some bone-headed responses to the stock market crash of 1929, and sent the US into the Great Depression. David Weinberger over at the Foundry wrote a very strong article back in October, 2010, which should be required reading, because it covers a lot of territory, including how the US economy soared after WWII. (WWII did not end the Great Depression; it was ended by Truman’s fiscal policy.)

After the 1929 stock market crash, the Smoot-Hawley tariff of 1930 raised import prices and more importantly threw a bucket of cold water on global trade flows, helping send the economy into deep depression. The economy had very little chance to recover. Along with gross and ongoing monetary policy mismanagement, President Hoover raised taxes in 1932. The consequences were devastating. As Alan Reynolds points out:

President Herbert Hoover asked for a temporary tax increase…in June 1932, raising the top income tax rate from 25% to 63% and quadrupling the lowest tax rate from 1.1% to 4%. That didn’t help confidence or the Treasury. Revenue from the individual income tax dropped from $834 million in 1931 to $427 million in 1932 and $353 million in 1933.

Smoot-Hawley devastated the US economy. Hoover’s huge tax increases continued the devastation and caused tax revenues to decrease. Traumatically.

Unfortunately, President Roosevelt made the same crucial mistake President Hoover made 5 years earlier, so the recovery didn’t last. FDR raised taxes sharply in 1937 in an attempt to balance the budget. Once tax increases took effect, the economy collapsed into another recession – the second stage of the double-dip which lasted into WWII.

“Over the course of the Great Depression, the government raised the top marginal personal income tax rate to 83% from 24%.” And what was the result? “Not only did taxes as a share of GDP fall, but GDP fell as well. It was a double whammy. Tax receipts from the top 1% of income earners stayed flat as a share of GDP, going to 1% in 1940 from 1.1% in 1928.” So, increasing the tax RATE on the “rich” reduced their SHARE of GDP while simultaneously reducing GDP. Pure Keynesian fail.

Like Weinberger said, “Late in 1945 under President Truman’s leadership, Congress cut marginal tax rates and rather than sliding back into recession as many had feared, the economy soared toward full-employment.” World War II did not break the Great Depression; it only paused it. Truman’s tax cuts broke the back of the Great Depression. What better way to conclude than with Weinberger’s conclusion? Take it away, Mr Weinberger.

The evidence is in: tax increases are damaging to economic growth and job creation no matter what point of the business cycle. In a weak economy, like ours today, tax increases are especially ill advised, as Presidents Hoover and Roosevelt discovered. But even in a bustling economy tax hikes hurt growth and prosperity, as they did in the 1990s under President Clinton. That we’re having a national debate about this from an economic standpoint at a time of instability and weakness is a sign of deliberate disregard of historical precedence and favor of ideological righteousness over economic concern.

33 Comments

  1. I have no problem admitting this is true. It’s because they have most of the country’s wealth now. Tax rates are a percentage, get it? They should pay the largest burden. In fact, it’s not enough. Their burden is unfairly low. They are still rich. In fact, the rich have much more of a percentage of the country’s wealth than they did since the 20′s.

    Don’t believe me? Think those poor suffering billionaires need relief? Then, by your logic, we should double the tax rate on the rich! To, you know, reduce their burden! Tax ‘em until they bleed! It’s the only way to be properly reverent to your masters.

  2. Oh, jeez, the way I assembled my words there makes me look like a communist. I don’t mean that the rich should be taxed until they’re not rich. I just mean the tax rates on them should be returned to those of a more prosperous time in our nation’s history… when there were still rich people.

  3. You don’t get it, Nang. – PB wants to be a serf. That’s why he ignores the facts showing the US shooting past Argentina during its bad old days.

  4. Every resident of the USA should pay taxes, equally. There is no justification for taxing any one American more than another. All citizens are guaranteed equal protection under the law, which means that inflicting a high tax rate on some individuals while allowing others to escape responsibility for paying their fair share of the cost of government is not only illegal, it’s morally and ethically wrong.

    Equal justice is equal taxation!

  5. It’s because they have most of the country’s wealth now.”

    Exactly, Nangleator. Right wing apologists/defenders of the wealthy/revisionists/propagandists drag out this narrative all the time. It is not convincing to me.

    If one wishes to examine the distribution of the tax burder over time, it is necessary to examine the distribution of wealth over time.

    According to the UFE, “Today, the wealthiest one percent of Americans possesses 24 percent of our nation’s wealth. This is the most intense concentration of wealth at the top of the income ladder since 1929.”

    These graphs and charts vividly demonstrate the impact on this nation due to the shifting of wealth to the already wealthy: http://motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph

    If you follow this link, you will see the falsehood in the title statement: “Bush Tax Cuts Increased Wealthy’s Burden”. The actual fact states that before the Bush Tax Cuts, the “Millionaire’s Tax Rate was 36.4%; after the Bush Tax Cuts, it was 32.4%.

    How could it be anything else when we know that top marginal rate was reduced from 38.6% to 35.0%, the tax on dividends was reduced from being taxed as income (38.6%) to 15.0%, the long term capital gains tax was reduced to 15% from 20%.

    Isn’t if obvious that the Bush Tax Cuts favor the wealthy? Of course it is.

    No amount of spinning by Philip Klein or David Weinberger, or now amount of selective propaganda by John Hitchcock, changes the basic facts documented here. The bottom line is that the tax burden on the highest earning tax payers has been reduced; they pay more taxes, because they have acquired more wealth, due to tax policy favoring them, and due to their various methods of acquiring more wealth for themselves, at the expense of the lower 98% or so of Americans.

    Shall we now talk about the methods used to acquire more wealth? Is it because these people work harder, produce more, take risks? Or do tax loopholes, offshore banking, Wall Street manipulations, creation and marketing of worthless paper have something to do with it? Is it because of bribing our influential political leaders? These are the issues, and more, that we should be discussing, issues which the Rightie ideologues would just as soon we didn’t, because most of them have been brainwashed, in my view!!!

  6. “Every resident of the USA should pay taxes, equally. There is no justification for taxing any one American more than another. All citizens are guaranteed equal protection under the law, which means that inflicting a high tax rate on some individuals while allowing others to escape responsibility for paying their fair share of the cost of government is not only illegal, it’s morally and ethically wrong.

    Equal justice is equal taxation!”

    Of course you would think that, ropelight. You would be happy for the median family income of a traditional family of four to have the same tax burden as someone very wealthy like yourself. It would never occur to you that when the total taxes paid by this family, income taxes plus property taxes plus sales taxes plus gasoline taxes, is this family then able to pay for the necessities of life, including putting away for the college education of their children and paying for health insurance. On top of that, they have employment security issues. You don’t think very much about these Americans, do you ropelight? With a comment like this, it does not seem so!

  7. I suggest Perry and other redistributionists watch this video.

    Would you want your straight-A GPA points “spread around” to the “less fortunate” in high school and/or college?

  8. Seems like nearly every time Perry makes an absurd statement he includes the shabby rhetorical dodge, “in my view.” This latest example with 3 exclamation points!!!

    Perry, if you’re not quoting or paraphrasing someone, pretty much every thing else represents you views, as silly and uninformed as they usually are.

  9. Perry, everyone should share the cost of government equally. Either we’re all in this together, or we’re not and it’s every man for himself. That family of 4 you mentioned is just as responsible for their fair share as a family of 3, a new married couple, or me.

    One man, one vote, one tax. It’s the only fair way to share the cost of government.

  10. Perry proves yet again he’s iggerunt with his illusionary “poor family” emotionalism. It doesn’t even rise to the level of the Democrats’ standard anecdotal “poor family” emotionalism. “Those evil Republicans hate poor people!” “Those evil Republicans want Grandma to die!” blah blah blah. And the facts get in the way, yet again. Liberals: generous with Other People’s Money. Conservatives: generous with their own money.

  11. “I suggest Perry and other redistributionists watch this video.

    Would you want your straight-A GPA points “spread around” to the “less fortunate” in high school and/or college?”

    Hube, this is another example of your usual equivalency counter arguments.

    Although an interesting question, there is not an equivalency here. The question assumes that high GPA students would give some to those with lower GPA’s. In the case of wealth redistribution, the reality is the opposite, as the higher income people are getting more, the lower income people are getting less. The story is right here: http://motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph

  12. Perry ropelight, if you’re not quoting or paraphrasing someone, pretty much every thing else represents you views, as silly and uninformed as they usually are.”

  13. “Perry, everyone should share the cost of government equally. Either we’re all in this together, or we’re not and it’s every man for himself. That family of 4 you mentioned is just as responsible for their fair share as a family of 3, a new married couple, or me.

    One man, one vote, one tax. It’s the only fair way to share the cost of government.”

    If we had equal educational opportunities, K-12 & college, and job opportunities, and pay for performance, I might agree with you, roper. We don’t! I don’t agree with you. Moreover, on a percentage basis, I would venture to say that this average family of four is paying more in taxes than you are. What percent of your income do you pay in taxes, roper?

  14. “Liberals: generous with Other People’s Money. Conservatives: generous with their own money.”

    That’s a slogan that does not comport with the facts, as I already pointed out that the nation’s privately held wealth is moving upward. Where do you think that money is coming from in our zero sum game?

  15. In the case of wealth redistribution, the reality is the opposite, as the higher income people are getting more, the lower income people are getting less.

    Your statement assumes that the wealthy are taking from everyone else. If that is so (and since you like charts), what accounts for this, then? On the contrary, the top 50% of wage earners pay over 97% of the taxes. How is that “redistibuting” wealth … to the wealthy?

    You don’t like the GPA analogy, much like those in the video, because it makes you uncomfortable. IOW, because it’s true. The only real argument against the analogy is by pointing out the wealthy who didn’t actually earn their wealth, i.e. like trust fund kids. That’s a legitimate point. Even trust fund kids, if they go to college, have to earn their GPA.

  16. In the case of wealth redistribution, the reality is the opposite, as the higher income people are getting more, the lower income people are getting less.

    And my predictive powers have been shown accurate yet again. Perry is once again using his revisionist propaganda to redefine “redistribution” to mean the exact opposite of what it means. Tell me, propagandist Perry, how are the working poor doing today compared to 1937? You won’t tackle that question with any semblance of honesty. How are the working poor doing in the US compared to the rest of the world? You won’t tackle that question with any semblance of honesty, either. Because you’re stuck in your socialist propaganda mindset and you refuse to get out of it to see reality.

    REALITY:
    (“rich” taxes)/(all taxes) under Bush is greater than (“rich” taxes)/(all taxes) under Clinton.
    (“rich” taxes)/GDP under Bush is triple (“rich” taxes)/GDP under Carter.

    (“rich” taxes)/GDP under Harding/Coolidge was greater than (“rich” taxes)/GDP under Wilson.
    (“rich” taxes)/GDP under Harding/Coolidge was greater than (“rich” taxes)/GDP under Roosevelt.
    GDP under Harding/Coolidge was greater than GDP under Wilson.
    GDP under Harding/Coolidge was greater than GDP under Roosevelt.

    In other words, the economy always does better under lower tax requirements than under your dream requirements. Always. And the “rich” pay a greater share under lower tax requirements than under your dream requirements. Those are facts you cannot get around unless you’re a liar or a sheeple. History bears it out.

    And, far from being heartless, Conservatives are more generous and charitable than Liberals.

  17. Where do you think that money is coming from in our zero sum game?

    Proof positive Perry’s socialist mentality does not understand economics, since it is decidedly not a zero sum game.

  18. “Liberals: generous with Other People’s Money. Conservatives: generous with their own money.”

    That’s a slogan that does not comport with the facts, as I already pointed out that the nation’s privately held wealth is moving upward.

    Notice the not-so-deft switch in terms? Perry goes from Liberals and Conservatives to Rich and Poor as if they were interchangeable. They are not. Perry’s whole counter-point is, thus, null.

  19. Where do you think that money is coming from in our zero sum game?

    Proof positive Perry’s socialist mentality does not understand economics, since it is decidedly not a zero sum game.

    At any particular point in time, the total wealth owned by Americans is some number. If a portion of the number changes hands, some have gained wealth at the expense of those who have lost an equivalent amount. That is zero sum in the sense that I meant it.

  20. At any particular point in time, the total wealth owned by Americans is some number. If a portion of the number changes hands, some have gained wealth at the expense of those who have lost an equivalent amount. That is zero sum in the sense that I meant it.

    Once again, proof positive Perry does not understand economics. Wealth is generated. It does not necessarily come at the expense of anyone else. There is no “zero sum game”. Wealth is not static. Economies are not static. Thus your argument is one massive FAIL.

    The pie grows. It doesn’t stay the same size.

  21. “The pie grows. It doesn’t stay the same size.”

    True. That is why I put a condition on my statement: “at any point in time”

  22. Perry, if my aunt had balls she’d be my uncle. If everyone paid their fair share of the cost of government we wouldn’t be going back and forth on an issue on which the Constitution is crystal clear. Equal protection is the law of the land. There’s no justification for expecting one citizen to pay more in taxes than another. It’s wrong, it’s unconstitutional, and it reduces some citizens to the level of involuntary servants forced to pay more than their share so parasites who pay little or nothing can continue to enjoy all the benefits of living in America without having to pay their own tab.

  23. “Your statement assumes that the wealthy are taking from everyone else. If that is so (and since you like charts), what accounts for this, then? On the contrary, the top 50% of wage earners pay over 97% of the taxes. How is that “redistibuting” wealth … to the wealthy?”

    Hube, look at my Mother Jones cite: The top 20% own 85% of the nations wealth. Of course they will be paying the majority of the taxes. Moreover, the average income of the bottom 90% is $31k.

    This is not healthy!

  24. “Perry, if my aunt had balls she’d be my uncle. If everyone paid their fair share of the cost of government we wouldn’t be going back and forth on an issue on which the Constitution is crystal clear. Equal protection is the law of the land. There’s no justification for expecting one citizen to pay more in taxes than another. It’s wrong, it’s unconstitutional, and it reduces some citizens to the level of involuntary servants forced to pay more than their share so parasites who pay little or nothing can continue to enjoy all the benefits of living in America without having to pay their own tab.”

    Ropelight, I believe it was Teddy Roosevelt who started the progressive tax system. After all these years, you have the gall to call them unconstitutional?

    Progressive taxes are a practical solution to the income distribution favoring the wealthy that we have had for centuries.

  25. Moreover, the average income of the bottom 90% is $31k.

    This is not healthy!

    Irrelevant hogwash. I lived comfortably under 35k, traveling from Ohio to Hawaii 5 times (twice with my daughter), to Fort Leonard Woods 2 times, to Fort Hood 2 times, all within a 36-month window.

    REALITY:
    (“rich” taxes)/(all taxes) under Bush is greater than (“rich” taxes)/(all taxes) under Clinton.
    (“rich” taxes)/GDP under Bush is triple (“rich” taxes)/GDP under Carter.

    (“rich” taxes)/GDP under Harding/Coolidge was greater than (“rich” taxes)/GDP under Wilson.
    (“rich” taxes)/GDP under Harding/Coolidge was greater than (“rich” taxes)/GDP under Roosevelt.
    GDP under Harding/Coolidge was greater than GDP under Wilson.
    GDP under Harding/Coolidge was greater than GDP under Roosevelt.

    In other words, the economy always does better under lower tax requirements than under your dream requirements. Always. And the “rich” pay a greater share under lower tax requirements than under your dream requirements. Those are facts you cannot get around unless you’re a liar or a sheeple. History bears it out.

    But it’s not the economic health of the US that drives the redistributionist mindset, it’s class-warfare (class envy, which is a sin), because the economic health of the US would be much greater — including the economic health of the working poor and middle-class — without any redistributionist input. As the histo-facts prove out.

  26. Perry, your socialist dream almost destroyed the US before it even had a chance to get started. The Free Market made the US the world’s wealthiest nation; not “from each to each” as you preach. “From each to each” and any of its derivatives is the path to destruction.

  27. Every resident of the USA should pay taxes, equally. There is no justification for taxing any one American more than another.

    “Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise.” –Thomas Jefferson to James Madison, 1785. ME 19:18, Papers 8:682

  28. Once again, proof positive Perry does not understand economics. Wealth is generated. It does not necessarily come at the expense of anyone else. There is no “zero sum game”. Wealth is not static. Economies are not static. Thus your argument is one massive FAIL.

    Save in a rentier economy, dickhead.

    Have you read “Cornered” yet?

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