By now, though, it should be completely clear that it isn’t true. After all, if conservative policies are so good for the economy, where are our jobs? We’ve had eight years of lowering taxes for the wealthiest, and what have we had to show for it? Two recessions and a “jobless recovery.”
The Director of the Office of Management and Budget, Peter Orszag, had some great comments on this yesterday on CNBC:
I don’t think capitalism is founded on the theory that the only thing that drives economic performance is the top marginal tax rate or the right way of promoting competition is to funnel billions and billions of dollars to corporations…. We’ve tried the other way, it didn’t work very well.
Does the top marginal tax rate really effect the economy? Below the break, a bit of by own research.
I’ve decided to illustrate this in very simple terms. For every quarter over the past 60 years, these charts have a point representing the top tax rate and the unemployment rate or change in GDP during that period. The results are all over the map. Sometimes high taxes coincide with a bad economic situation, sometimes they mean a good economic situation; the same is true for low taxes. The explanation seems pretty clear: The health of the economy has little to do with the top marginal tax rate.
Facts cannot be allowed to get in the way of criticizing that commie Obama. He isn’t even a US citizen for cripes sake! You do know he eats babies for breakfast don’t you?
From mid 1930 until 1970’s ish the top rate was 70-90%. So, we reached our Zenith of strength and power with a top rate like that. the idea that raising taxes on the rich is “unAmerican” shows a complete and utter lack of understanding of American history. A highly progressive tax system is what built America and made us the strongest country in the world with a strong middle class. Regan cut the top rate in half, and since then we have become a debtor nation. Raising taxes on the wealthy to a fairer standard is precisely the American way.
As a capitalist I believe in treating each individual equally. I have a moral problem putting such a large chunk of the financial burden on a small group of individuals. I think the word “responsible” is completely inappropriate.
I have 2 problems with your argument.
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1. This needs to be seen on a timeline. The rate changes take a while affect things; or so I’m told
2. This isn’t just about the TOP tax rate. It is a very complicated puzzle. No conclusions can be drawn from your limited data.
I also don’t believe we should attempt to engineer the economy this much. Let the market do it’s thing. Let the losers go out of business, let the winner make money. Stay the hell out of their business. But I don’t think most of these people really will go out of business. If forced to survive on their own, I think the companies will adapt.
“Ideally, we would have a system in which those who gained the most from our common wealth — the rich — would make an equal contribution back to the common wealth in the form of taxes.”
I actually think most people agree with that statement. But we’re far from equality of contribution. Republicans look at a tax rate that is steeply progressive and say it isn’t fair. Democrats look at tax breaks that the rich can take advantage of to a greater extent than the poor and say it isn’t fair.
If there was a flat tax of, say, 30%, whether you made $10,000 or $2 million, we could save a bunch of money on the IRS and tax preparers, and life would be simpler.
Oh, and Alec, in 1950, there was indeed a 90% tax rate on dollars made over $200,000. In todays dollars, that would be about $1.8M. Taxing the heck out of dollars made above the $1.8M threshold is a lot different than current Democratic tax increase ideas which would affect many who are not “the rich” and are simply trying to live in a metro area on two incomes.
“Let the losers go out of business, let the winner make money.”
All well and good, but what happens to the non-losers who depend on the losers? There is always a ripple effect — if Loser Corp. goes out of business, its employees are on the street, and the businesses that sold to Loser Corp. are out a customer (possibly leading them to show employees the door).
In the fantasy land of theoretical free-market economics, there is always another job, or another customer to sell to. Here on earth, bitter experience teaches that is not always the case.
Incidentally, I am not saying that we should never allow anyone to fail. All I am saying is that we shouldn’t be so cavalier about the consequences of that failure, especially when it starts happening on a mass basis. When times are good, we pick ourselves up, dust ourselves off, and start all over again. In hard times, that isn’t the tune.
Dan,
I don’t think there has been 900% inflation since 1950. 200k=1.8mill, but I get your point in general.
JT-
Your philosophy was followed in the lead up to the first Republican great depression. That was the last time our wealth gap was this outrageous. Then your philosophy was followed again over the last 30 years with a quasi break for Clinton and it has lead to the second Republican great depression.
We have seen over today how letting the markets regulate themselves has worked. I believe in a well regulated Democracy. Your ideas, on the other hand, would lead directly to an oligarchy or plutocracy. The goal of an unregulated capitalist, the ultimate goal, is to drive everyone else out of business. We have seen that over the last 30 years. We have 3 or 4 super banks to choose from, no longer the local community bank. We have 2 or 3 chain stores telling us what goods to buy. Soon we will have only one or two car companies. Unregulated capitalism will lead to the end result of less choice. WalMart will be telling you what to buy and where to buy it, and you will do everything at WalMart from buying groceries to your family car. I really don’t want corporations controlling my America.
Alec,
Dan obviously fudged the numbers. The actual number is $1.7M. Not much of a difference.
http://www.westegg.com/inflation/infl.cgi
(plug in 200,000, 1950 and 2007)