Every morning I wake up and tab open all my go to news sites to find out what I missed in the 2.5 hours I was sleeping and, without fail, I continue to open up CNN. It’s like a train wreck but I can’t stop reading it even though my therapist assures me that the simple act of not reading CNN would reduce my rage threshold by 47%. And if CNN isn’t rage-inducing enough CNN Money is enough to make me completely lose my shit.
This morning I came across an “article” by Jeanne Sahadi titled “Tax the rich! OK, but then what, Mr. President?“.
Sahadi insinuates that Obama’s plan to tax the rich is a ploy to get him re-elected, which may well be true, but let’s not set aside the fact that taxing the rich at a fair rate, oh let’s say, more than at their current 26% rate would have a serious impact on helping the nation’s economy.
You don’t need to be an economist to look at the distribution of wealth in the chart above to see how much revenue could be generated from the top 1% of the people who control the wealth in this country.
And of course we don’t want to piss off the corporations by making them pay their fair share of taxes or they might just start dismantling the middle class and shipping our jobs elsewhere.
For Ms. Sahadi’s sake I’ve taken the time to give her a brief history lesson on income tax in America.
During World War I, the Democrats altered the tax by adopting highly progressive rates and structuring the base to consist of the incomes of corporations and upper-income individuals. Additionally, an excess profits tax was imposed. This was a progressive tax on above-normal profits, and it generated most of the new tax revenue raised during World War I. Together the income tax and excess profits tax became an explicit means for the redistribution of income. To administer these taxes, the Bureau of Internal Revenue reorganized along functional lines, expanded in size, and employed such experts as accountants, lawyers, and economists. In 1916, “reporting at the source” was adopted, which required corporations to report salaries, dividends, and wages to the Treasury Department.
When the Republicans took control of the presidency and Congress in 1921, taxes on corporations and upper-income taxpayers were reduced, the excess profits tax was repealed, and the tax rate structure was adjusted to be less progressive. Many preferences were incorporated into tax law in the form of deductions, and the preferential taxation of capital gains was adopted. A capital gain is a gain that results from the sale of a capital asset, such as shares of stock in a corporation. In 1932 under President Hoover and in 1935 and 1937 under President Roosevelt, tax rates increased and the tax base expanded. However, the income tax was not a dominant policy focus during the 1930s, partially because the federal government relied heavily on excise taxes and debt to obtain funds to support government activities.
World War II. The most significant impact of World War II on the individual income tax was to transform it to a mass tax that was broadly based and progressive. In 1941, changes were made to both rates and base. Higher tax rates were adopted and lower exemptions were allowed, thus expanding the base. Higher tax rates were adopted again in 1942. With the inclusion of a surtax, tax rates ranged from 13 percent on the first $2000 of taxable income to 82 percent on taxable income in excess of $200,000. The number of taxpayers increased from 3.9 million in 1939 to 42.6 million in 1945. At the end of the war, 60 percent of households paid the income tax. The efficiency of collection was enhanced by the adoption of payroll withholding in 1943. By 1944, the individual income tax generated about 40 percent of federal revenues.
From 1980 until 2000. The 1980s began with the adoption of the Economic Recovery Tax Act (ERTA) during President Reagan’s term. A key provision of this act was the indexing of tax rates for inflation to eliminate bracket creep. ERTA provided for significant reductions in tax rates and began to reduce the role of the income tax in the nation’s revenue system. During the 1980s, interest in tax reform grew, culminating in passage of the Tax Reform Act of 1986. The goal of this act was to be revenue-neutral, neither increasing nor decreasing revenues. It provided for a reduction in tax rates by expanding the tax base through the elimination of some tax expenditures.
Let’s see how much more we can take from that bottom 90% that somehow manages to survive on an average income up $31,000 a year. We don’t want to piss off the rich and have them stop letting all their wealth trickle down to us now would we?
image via Mother Jones