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Monday, January 7, 2019

Perspective on Suggestions of 70% Income Tax

Around the latter part of last week, there was a news story that newly sworn in Democrat Congresswoman Alexandria Ocasio-Cortez stated she believed the tax rate for the wealthiest people should be at 70% instead of where it is now - 37% which is what those who make $500,000.01 or more make

All the fiscal conservatives howled at the moon and conservative media had a field day attacking her for daring to even suggest the wealthy pay that much - just another insane socialist was the response

Bear in mind we overall can not stand this woman but it doesn't mean she's repulsive in every single thought and belief
On the surface, demanding those making the most pay 70% in income tax seems everything from nutty to absolute draconian but those who make the most actually have gotten quite spoiled

Historically speaking, 70% is actually low compared to what the wealthy paid during previous administrations.

We will start with FDR and go down the list..

The highest rate for regular marginal income tax in the twentieth century was instated under Franklin D. Roosevelt toward the end of World War II at 94%
A marginal income tax of over 90% for top earners lasted well beyond the end of the war

During the Eisenhower administration, a 92% marginal income tax rate for top earners in the United States remained from the previous administration of Harry S. Truman. At the time, the highest tax bracket was for income over $400,000.

Back then, $400k would be equal to $4.16 million now so basically in today's taxes, the super wealthy tax bracket is purposely gone so they pay the same rate as someone making half a million which is a lot but in the grand scheme, not capital-W wealthy
Some people may be surprised to know that under JFK, the tax rate remained unchanged at 92% for highest earners but dropped down to 77% for those making $400k or more during LBJ's administration

During Nixon's terms in office, the top tax rate dropped to 70% and remained that way under President Ford as well but the threshold was now earners making $200k or more which back then was equivalent of $933k today

Under Carter the tax rate stayed at 70% but applied to earners making $215k instead of $200k

So in summary, from at least World War II up until 1981, the tax rate for the highest income earners was never lower than the 70% that 'socialist' Cortez advocated
So why are we as a nation, especially top earners so spoiled and flabbergasted at the idea of 70% income tax?

It all starts for better or worse with Reagan

During his administration, the top rate dropped dramatically from 70% to an insane 28%!

This is why whether one agrees or not with the label, you saw the mantra of 'greed is good' explode in the financial, banking communities and popular zeitgeist
Also it is why for the first time in our nation's history, the national debt rose over $1 Trillion which seems so paltry today (when Reagan left office in 1989, it was just over $2 Trillion)

Under Bush 41, the guy who got all that needless fanfare at his passing which far better everyday men and women of quality will never get, the tax rate went up to 31% which was when fiscal conservatives were so mad that he went back on his 'read my lips - no new taxes' pledge

Funny how people used to paying 70% or more for decades were so pissed off to have to pay 31% in 1991
Under Bill Clinton, the top tax rate rose to 38.6% for those making $288k or more which is the equivalent of $474k today and under Bush 43, the top rate was lowered down to 35% even though we were fighting two wars..  That rate applied to people making $375k or more

Under Obama, the top tax rate when he left office was 39.6% and for those who made $415k or higher and once again, the top tax rate currently under Trump is 37%

We know we've thrown a lot of numbers at you the reader so hope we didn't make you lose interest but the bigger point than percentages is that of perspective
Overall we think Cortez is an idiot who only got elected because she represents the poorest, most deeply ignorant people in our society (she represents many of those who live in the Bronx) and of course will vote for anyone attractive, energetic and who will promise lots of free handouts

But like the saying that even a broken watch is correct twice a day, it doesn't mean Cortez is 100% foolish on every thing she expresses

We at A&G pretty much lean conservative and overall support Trump but it does not mean we are fiscal conservatives which to us are the barnacles and carbuncles of the party

We have felt for many many years the top tax rate is too low, that there needs to be a new rate that is dramatically higher and 'trickle down' is total fantasy
Ideally there's be three additional tax brackets set up beyond the current 37% for those making $500k or more -- in a perfect world, those making between $1 million to $5 million would pay 50% and those making more would pay the 70%

The 3rd bracket would be those who make $21k or less pay Zero.

Our nation currently spends over $1 Trillion more annually than we take in tax revenue..

Can't keep lowering rates and expecting this great country to survive & thrive when those who have, don't have to pay while the have some and have nots keep paying more than they should.