Sunday, September 25, 2011

America Prospered in the 1950s With a 91-percent High-End Tax Rate


I must admit, listening to the current debate over President Obama's tax hike proposal is a surreal experience. It just goes to show you that in the modern era, Americans have memories that stretch back no more than 15 minutes.

During the 1950s, America had a 91 percent high-end tax rate. If the 50s had been a dismal economic decade, then it could stand as "Exhibit A" for the GOP to use in attacking high tax rates today.

But in reality, it was an extremely prosperous decade for America. In fact, it was a prosperous decade for the great majority of Americans (in contrast to the past three decades, which have seen only the Top One Percent prosper). In fact, in many ways, the 1950s was a truly golden decade. While it wasn't, of course, perfect, the 1950s seems like a million miles away from today's Third World-like America.

In the 1950s, American workers made the highest wages in the world. We also enjoyed the best workers' benefits and the longest vacations. Most high-tech products were made in America. I'm not sure what the world's top 10 corporations and top 10 banks were in the 50s. But I'd bet they were all American.

American had a trade SURPLUS in the 50s. The dollar was strong. The U.S. middle class was the envy of the world. The U.S. made the best cars in the world. America's manufacturing base and infrastructure were second to none. U.S. public schools trounced their counterparts worldwide. Nations around the world regularly sent representatives here to study how we did it.

The 1950s was the decade that America became AMERICA, the superpower. We really were No. 1 back in the 50s. Today, we're only No. 1 in the minds of the "Rah Rah U.S.A.!" jingoistic retards of the Tea Party.

And all of this with a high-end 91 percent income tax rate.

Today's Republicans condemn Obama's attempts to raise the tax rate even modestly. They'd have us believe that even a small increase in taxes on billionaires would be disastrous for the U.S. economy.

The GOP, as usual, relies on the ignorance of the American public. I mean, how many people even know that the high-end tax rate was ever as high as 91 percent in the U.S.? I talk to Republicans all the time who're convinced that tax rates today are the highest they've ever been in U.S. history. Credit the Great GOP Noise Network of Fox/Drudge/Rush for dumbing down tens of millions of Americans.

Today's Republicans are always babbling on about "What Would Reagan Do?" (In fact, Reagan himself raised taxes on 11 occasions).

I find it interesting, though, how the Republicans never consider "What Would Eisenhower Do?" I find it interesting how they ignore the wisdom of Eisenhower, a true American hero who won World War II for America and then presided over the booming, prosperous 1950s.

Today's Republicans completely ignore Ike. Instead they worship at the altar of Reagan, a mediocre president, a lousy B-movie actor, and a coward who never set foot outside of Hollywood during World War II.

The GOP worships at the altar of a man who had contempt for international law, who presided over a White House that illegally sold arms to terrorists in Iran and then used the money to fund terrorists in Central America. Oh, and Reagan more than tripled the national deficit, leaving America with the ever-growing multi-trillion dollar deficits that plague the U.S. to this day.

One wonders what Eisenhower would have made of today's GOP. I'd suspect he would be sickened by today's Republicans, who want to roll back the New Deal. In fact, he called those who would abolish Social Security "stupid."

"Should any political party attempt to abolish Social Security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes you can do these things. Among them are H. L. Hunt (you possibly know his background), a few other Texas oil millionaires, and an occasional politician or business man from other areas. Their number is negligible and they are stupid."
---President Dwight D. Eisenhower, 1954


Jack Jodell said...

Excellent job, Marc. This shows how incredibly ignorant and SELF-CENTERED today's sonservative Republicans and Tea Partiers are. Dwight Eisenhower is spinning in his grave out of horror and disbelief at their lack of character!

Sparky said...

The only problem with using the 50's as a baseline for studying tax rates is that at that time America was the only intact producer after WWII. It took the world thirty years to rebuild and challenge us economically. A better comparison would be the Clinton era, although the 90's also had unique factors that favored economic growth.

Anonymous said...

Gil Scott Heron - "B" Movie (FULL VERSION)

Nostalgia, that's what we want...the good ol' days...when we gave'em hell. When the buck stopped somewhere and you could still buy something with it. To a time when movies were in black and white – and so was everything else. Even if we go back to the campaign trail, before six-gun Ron shot off his face and developed hoof-in-mouth. Before the free press went down before full-court press. And were reluctant to review the menu because they knew the only thing available was – Crow.

Marc McDonald said...

Hi Sparky, thanks for your comment.
When the Marshall Plan ended in 1952, the economies of the participating states had already surpassed pre-war levels.
Europe had rebuilt, of course, by that time.

>>It took the world thirty years
>>to rebuild and challenge us

It certainly didn't take Europe or Japan 30 years to rebuild.
And what's ironic about your argument is that Europe itself is certainly no stranger to high taxes. In fact, if you listen to the same wingnuts who would blast any supporters of a highly progressive tax code, they'd be the same people who would claim that "old, backwards, socialist" Europe doesn't even pose an economic challenge to the "mighty" U.S. economy.

>>A better comparison would be the
>>Clinton era

The problem with the Clinton era is that it was simply "Reagan Lite." America did indeed see a lot of wealthy creation, despite Clinton's modest tax increase. But (as has been the case with every president since Reagan), the benefits of that wealth creation mostly went to the Top One Percent.
This wasn't the case in the 1950s, when that decade's Great American Middle Class shared in the gains, thanks to stronger unions.

Marc McDonald said...

Hi Anonymous, thanks for your comment.

I certainly never said that the 1950s was a utopia. I simply said that, contrary to all of today's "expert" economic opinion, the nation prospered despite a high-end 91-percent income tax rate.

And a lot of working Americans shared in that prosperity, (unlike any "prosperity" America has seen since the late 1970s).

The only people who've seen any real gains in the past 3 decades in income have been the Top One Percent (an exclusive club closed to those of us who aren't white, male, and born into wealth).

Incidentally, I don't think we should be so smug in assuming that America has really progressed all that much since the 1950s on many racial issues.

Sure, many white Americans have learned not to use the "N" word---at least in public.

But most African-Americans still have a pretty sh*tty deal today in our nation, if you look at poverty rates, incarceration rates, and levels of health care and education. Hell, innocent black people are still being executed today.

I'd bet that a bigger percentage of African-Americans are behind bars today than they were in the 1950s.

Jim Crow is still with us today. It's just more low-key (and in some ways, even worse).

Jack Jodell said...

The marginal tax rate was far in excess of what it is today well before the Risenhower-era even started. Even in the midst of the Great Depression it was higher than today. The plain and simple fact oif the matter is that today's well-to-do are self-centered, uncaring, and ignorant of the needy all around them. They reject any notion of social responsibility because they refuse to see anything beyond the end of their own ever-increasing WANTS.

Anonymous said...

Another little factoid I heard on NPR is that back in the "good old days" of the 50's, for every dollar the feds collected from individuals, they collected $1.50 from corporations. Now that figure is a mere $.25. No wonder this country is going to HIAHB!

Marc McDonald said...

Hi Anon,
Thanks for stopping by and for that interesting factoid.
Another interesting tidbit: I read that, back in the 1950s, there were a grand total of around 100 lobbyists roaming the halls of Congress.
Today, that figure is an astonishing 33,000.

Anonymous said...

Why should anyone have 90% of their wealth stolen by force and given to you whiners?

Marc McDonald said...

Hi Anon,
>>Why should anyone have 90% of
>>their wealth stolen by force and
>>given to you whiners?

First of all, a 90-percent tax rate does NOT mean the government gets 90 percent of your wealth: a simple point that is lost on you Rush-listening morons.
Another point, this is pretty rich coming from the supporter of a party (the GOP) that shoved a gun into my face and forced me to cough up many thousands of dollars to pay for your stupid, illegal, immoral trillion-dollar war in Iraq.
And speaking of "whiners": talk about the pot calling the kettle black. Since Obama was elected, I've never heard so much bitching and moaning from the NeoNazi right. Between Fox "News" and talk radio, it's pretty much just a 24-hour whine-fest.

Anonymous said...

Marc, first off why would you attempt to be-little people who write on your blog. Second, the 50's is completely different than today. We have computers, high-speed internet, things that make the world smaller. Using the 1950's as a backdrop for any argument is foolish. The reason why the corporate tax rate is so low is to keep companies in America. Think how many business would stay here if the tax rates were higher than they are today. Additionally, back in 1950 there were more loopholes for people to hid money, and money was harder to track than today's computer based world. Many republicans are self-centered, but so are the actors who represent the democrats. I don't like my money being thrown away to provide to people who chose not to work. Both my Aunts could work, but they chose to live off welfare. In the 50's people were ashamed to take money, now people expect it. Times have changed along with peoples ideals, and I find it amusing that you would belittle people, when some of your arguments make little sense.

Marc McDonald said...

>>first off why would you attempt
>>to be-little people who write on
>>your blog.

If people are going to insult me, then they will get insults in return. You may have mistaken me for the typical U.S. Democrat these days, a wimpy type who is happy to bend over and take it up the ass and who refuses to fight fire with fire when attacked by the GOP.

>>>The reason why the corporate
>>>tax rate is so low is to keep
>>>companies in America.

I hear this argument a lot and frankly, I don't buy it. If corporations don't want to pay tax in the U.S., where, exactly are they going to move to? Europe? Japan? (In both these places, taxes are much higher and regulations much, much more stronger and unions are vastly more powerful than in the U.S.) Some Third World nation? (I doubt many U.S. corporations are going to want to take the risk of moving to a Third World nation, where politics can be unstable and a coup could happen at any time and result in their assets being seized).

>>>Both my Aunts could work, but
>>>they chose to live off

If that's the case, then they were lazy welfare cheats. You should have turned them in to the authorities. On the other hand, in America, there are millions of poor people who, for one reason or another, never qualified for a penny of ANY type of assistance from the government. (I should know, I was one of them).

Anonymous said...

Nasty lil fact about the 91% tax rate that the Leftists don't like (or don't know) about that part of American history. No one -- NO ONE -- payed that rate. There were SO many loopholes (and there were even MORE deductions than there were loopholes) that when push came to shove, no one but no one every payed that rate.
Yes, the 50s were a prosperous period (brought about by the end of WWII), but the prosperity had absolutely nothing to do with a 91% tax rate that literally NO ONE ever payed.

Marc McDonald said...

Hi Jared,
>>No one -- NO ONE -- payed that
Do you happen to have proof of this, by any chance, or are you just pulling this out of your ass?
>>There were SO many loopholes
>>(and there were even MORE

No doubt there were. However, you do know that today's tax code has thousands of pages of loopholes for the wealthy, don't you?

The fact is, America was a vastly less economically polarized society in the 1950s than it is today. The gap between rich and poor was vastly smaller than today. I realize you wingnuts don't give a sh*t about that. But my concern is that, with a vanishing middle class and a Top .1 Percent that owns a greater and greater share of everything, today's America could well be in trouble. We're sitting on a ticking time bomb and social unrest WILL eventually explode across this nation. It's only a matter of time.

Anonymous said...

I resort to name calling when close-minded conservatives don’t see it exactly how I do…

Marc McDonald said...

>>I resort to name calling when
>>close-minded conservatives don’t
>>see it exactly how I do…

Name-calling. This brings up an interesting point. Every time I've tried to have a civil, intelligent discussion with a Conservative they immediately resort to name calling. They call Obama all the usual names: "Socialist" "Communist" "Kenyan" "Muslim."

Bobbie said...

This makes so much sense! I know several(white)middle-aged+ men who are continually longing for the good old days. And they're angry at the groups who the perceive to have stollen those days. i.e. liberals, women's libers, civil rights activists, etc. But I think our country has sufferd so much more and lost so much more as a result of these financial choices. And once again the American people are fed lines of BS to pit us against each other and keep us from seeing the real problem. Shame on us for for being so easily suckered!

Anonymous said...

So, since you've blogged that Americans paid a 91% top tax bracket in the 50s, why don't you furnish us the information on how many taxpayers actually paid taxes at that rate?
As far as companies moving overseas, you say that won't happen, but it's exactly what has happened with the manufacturing jobs moving overseas, and the revenue generated there being kept there instead of being returned to the states so it can be taxed. You can't claim it will never happen, and then complain about the fact that it already has...

Marc McDonald said...

>>>why don't you furnish us the
>>information on how many
>>taxpayers actually paid taxes at
>>that rate?

Paul Krugman recently cited studies indicating that wealthy tax payers back then paid an effective tax rate of 70 percent, after loopholes. That, incidentally, is vastly higher than what the wealthy pay today. The IRS itself has noted that thousands of millionaires pay zero tax these days.

>>>As far as companies moving
>>>overseas, you say that won't
>>>happen, but it's exactly what
>>>has happened with the
>>>manufacturing jobs moving
Read this month's "Atlantic" magazine. It writes about a major shift going on now where companies are "in-sourcing" manufacturing jobs back to the U.S. from places like China.
True, the really sophisticated manufacturing jobs are still in places like Germany and Japan. But I'd like to note that those nations both have higher taxes than does the U.S. They also have vastly more powerful unions and pro-worker labor laws than does the U.S. So much for the idea that unions supposedly hurt competitiveness. In fact, as I've argued previously on this blog, I believe strong unions boost competitiveness, because they force companies to take a long-term view. The big flaw of U.S. corporations in recent decades has been that they don't take a long term view and they only plan for the next fiscal quarter.

Anonymous said...

Great post, I would like to add that JFK and LBJ fixed the loophole/deductions problem when they lowered the bracket to 70%. Like what Marc stated before, very few people paid that, but it was there so rich people didn't just sit on their money. It gave them a reason to invest in their business or donate it so they could pay less. Nowadays the rich can just sit on their money.

Brad said...

"They'd have us believe that even a small increase in taxes on billionaires would be disastrous for the U.S. economy."

In fact an increase at the high end would benefit the economy - particularly if matched, dollar for dollar, with a reduction at the middle.

Please remember that in all cases we are discussing taxes levied on the wealth created by the effort of those actually doing the work. Some apologists on the right will engage in quaint word games to establish that those creating the wealth deserve little of it, but word games are just word games.

An economic system set up to benefit the very wealthy is going to benefit the very wealthy. That's the right-wing goal, that's the reality underneath the "trickle-down" absurdity. The right doesn't spout principle, it spouts propaganda.

Marc McDonald said...

Hi Brad, thanks for your comment and wise words. I totally agree.

Anonymous said...

A 91% tax rate gave CEOs back then a choice, should I pay myself 500 times what my average shop floor employee makes and give 91 cents out of every dollar to the government? Most of them said no. So they would invest in their company's infrastructure, research and development and their employees in pay and benefits. these "loopholes" are what made America great back then. Companies were more innovative, workers have more buying power to buy goods and services. Corporations only pay taxes on profits not gross income.

Most of them paid 70% and they still lived like Casablanca.

This might be a coincidence, but the pay inequality between the employees and the CEOs started to really increase around the same time that Forbes Magazine started to publish it's "The top 400 wealthiest americans" in 1982.

It has turned the country into a giant "pissing contest". Is that why St. Reagan called it the "Trickle Down Economy"

Unknown said...

to participate in this discussion, one has to agree that the right = the rich and everybody else is the working people that do all the work, or, in political party terms: Republicans = rich; Democrats = working americans (oppressed by the rich). Is it honest to deny that there are no rich Democrats, or rich 'Left'? there are, quite a few. And another thing one has to agree on to participate in this discussion is that anything put out by the Republican Party, or a Conservative, is propaganda. The only truth is published by the Democrats and Left, right? And thirdly, the only way to get agreement in this discussion is to agree with you. I can't speak to the 1950s - I wasn't around yet. I'll take your word for it. But we do have a far different global economy today than then. And yes, the Government has learned well by now that it has no accountability in spending because it can create money out of thin air with fractional banking. Look at the total national debt today accummulated over the years across many administrations and all the unfunder liabilities predicted out to perpetuity. It can never be paid on income taxes even at 1950s rates. You could tax the rich to oblivion and not solve the fiscal financial problem that plagues this country - forever. It's bigger than just raise taxes on the rich like we did in the 50s. And I am an unaffiliated voter - I don't subscribe to either party.

Marc McDonald said...

Hi Thaman,
Thanks for your comment. You make some good points. But you're also making a number of straw-man type claims that most progressives (certainly not I) have made.
>>"The only truth is published by the Democrats and Left, right?"
I don't agree with this and I think most progressives would disagree. But let's face it, progressives tend to be better informed on the issues than the TeaBaggers who get all their news and views from Rush.
Polls have consistently shown that most Americans believe (correctly) that the rich don't pay their fair share of tax and that middle-class and working-class people pay too much tax. And at the end of the day, it doesn't really even matter if this is really the case. The fact is, most Americans believe it (and in this case, they're certainly right). The Powers That Be in the U.S. really need to address this situation or there will eventually be social upheaval in this country.

john ray said...

You mean when he had the banks give crap loans to people that couldn't begin to pay them back? Or do you mean when he gutted the military to wave money around and say look at me I am the greatest. Or do you mean when they made off with the Lincoln bedroom and china? Those times es?

Marc McDonald said...

Hi John Ray, I'm not sure what you're talking about here. Are you trying to blame Obama for the crash of the Wall Street banks? I don't know what Rush told you about this, but this happened under Bush.
And who, exactly, "gutted" the military? Both Democrats and GOP presidents in the modern era have thrown trillions of dollars into the Military Industrial Complex (which is not to be confused with the men and women who serve in the armed forced (and who are, for the most part, vastly underpaid for what they do).
By the way, Obama is now embarking on a gigantic trillion-dollar upgrade of U.S. nuclear missile systems (although this has gotten little attention in the corporate media). One could argue whether this upgrade is necessary. But one thing I know is that it isn't going to protect the homeland from boxcutter-wielding terrorists who want to hijack our airliners.
By the way, I'm just a nobody who worked his way up from dirt poverty with zero help from anyone (least of all, the government).
But where I come from, a trillion bucks is a lot of money.