After World War II, our nation had a top tax-rate of 94%. This meant that income above $200,000 ($2.5 million in today’s dollars) would be taxed at 94%.
Essentially, if you were a wealthy person, your initial $200,000 would be taxed at a normal, regular rate. However, any dollar above the $200,000 threshold would be taxed at a different, higher rate. Wealthy people would keep most of their initial $200,000, but would then pay a higher rate on the dollars above $200,000. This allowed our government to create the interstate highway system and other important, long lasting programs. No one called this “socialism.” Back then, they called this patriotism!
So why should the wealthy pay more tax on their upper income? Because they are the beneficiaries of most of the income gains. Until minimum wage is tied to inflation, the wealthy will make more money each year while the rest of us stagnate or plateau.
Many argue that if we increase the minimum wage the cost of goods will go up. However, the cost of goods goes up each year regardless of a minimum wage increase. Therefore, it is a false criticism. Furthermore, no one makes this argument when the wealthy increase their salaries and bonuses each year. At some point, in order to keep up with inflation, working people need a raise just like rich people.
Critics also say higher tax-rates halt incentives to grow the economy and create jobs. However, our top tax-rate remained at 70% or above for the 1950s, 1960s, and 1970s. Our economy remained strong for all three of those decades despite a high top tax-rate.
Unfortunately, under Ronald Reagan, the top tax-rate lowered to 28%, and the dismantling of unions occurred.
Luckily, during the 1990s, President Clinton upped the top tax-rate to 39%, and we ended his 8 years in office with a budget surplus (the only surplus in modern American history). In addition, incomes increased at all income levels during the Clinton Administration (minimum wage went up by around 30% under his leadership).
Since the year 2000, the top tax-rate has consistently lowered among Republican Presidents and risen among Democratic Presidents.
Once Ronald Reagan cut the top tax-rate by more than half, the top 1% of wealthiest Americans started to become richer and richer, while the rest of us became poorer and poorer. Most of the income gains have gone to the very richest of Americans. The top 1% controls more wealth than 90% of Americans.
Does that mean the wealthy work harder and are more deserving of money? No! It simply means that the system, since Ronald Reagan, has favored the wealthy and hurt working Americans.
When we had a 70% top tax-rate during the 1950s, 1960s, and 1970s — American wealth was more evenly distributed and greed was eliminated. When President Clinton raised the top tax-rate after Reagan, we ended up with a budget surplus and incomes rising at all income levels.
If wealthy people in all countries paid their fair share, average workers would see their incomes rise, and governments would have more revenue to help create ladders of opportunity for the most vulnerable among us to escape poverty.
Poverty should not be stigmatized. Instead of blaming the person with an EBT card, I’d rather look at the wealthy person paying a 0% tax-rate due to loopholes. We are losing far more money as a result of the wealthy cheating the system than any poor person cheating the system.
The top tax-rate needs to be raised to the levels we had during the 1950s, 1960s, and 1970s. We also need minimum wage to be tied to inflation. If the United States and other countries followed this model, wealth inequality and poverty would greatly decrease worldwide.
