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.