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The Only way to Save America is to save the middle class. [1]
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Date: 2023-03-11
The Smoking Gun to our Social Unrest
The Smoking Gun to our Social Unrest.
What most people don’t realize is the richest 1%, have doubled their share of the National income from around 12% during our boom years to almost 24% today (black line). This is a huge transfer of wealth from the middle class family to the 1%. That increased share to the 1% is your pay increases, Company Full healthcare and Company pensions—ALL disappearing into the private wealth of the Richest Americans starting in the mid 1980’s. This was only made possible with the “End of the Progressive Tax code” of the 1940’s thru the early 1980’s. I know, I know, that’s not what the Politicians said would happen but the data is the data.
Now I will explain how the High Marginal Tax rates on the Rich, including a 50% corporate tax rate gave us our best decades with Real GDP growth averaging over 4%, while today we are happy to get to 2%.
Say your Boss owns the private company you work for and ends the year with $5 million in profit. Let’s say it’s 1955 (Ike is President) and the Top tax rate is 91% for income dollars over $2 million. That means if he takes the last $3 million out as his personal income, he’ll only realize $.09 on every dollar, which is a terrible return and his accountants would advise against it.
Instead they would advise him to buy new Machines (capital) which would increase productivity and profits. So the Next year he has an even a bigger problem (tax liability) as profits hit $6 million. Again the accountant would advise him to spend on anything that could reduce his tax liability (91% on $4 million is a lot of money). Again he spends millions on a new machines but at some point it’s just not practical to buy new machines, so rather then pay the high marginal taxes he’ll give Christmas bonuses to all the employees and dumps a pile of cash into a NEW company funded pension plan, which is all deductible against taxes.
Now with all US business under this “Progressive tax code” the Economy was booming with new machines, greater productivity and workers with higher incomes. Mothers can afford to stay home and raise a big family, which created the “Baby Boom” and increased demand.
If you doubt me, go find a person who worked during the boom years of the 1940’s, 50’s, 60’s and 70’s. Ask them if they received Christmas bonuses, Regular pay increases, Full company healthcare and full company pensions.
In summary the only way to save our democracy is to close the loop holes and return those high marginal tax rates on the 1% (up to 91%) and the 50% corporate tax rate.
If you want to respond to my post please look up the Top tax rates and the REAL GDP growth rate by year before commenting. It will save a lot of time. O
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