This morning, the quote below began circulating on many popular progressive sites. The claim is based on a New York Times column by David Leonhardt and uses information culled from the Forbes 400. And it is accurate.
In 1950, the richest 400 households paid an overall tax rate of 70%. By 1980, that had plunged to 47%. Sure, those on the progressive left like to blame Reagan and the Bushes (and maybe, Trump) for the tax rate inequity, but from 1950 to 1980 there were more Democratic presidents (4) than Republican (3) and Democrats controlled the House AND Senate every term except one (1953-1955). Since 1980, there have been more Republican presidents (4) than Democrat (2) and Republicans have controlled the House (10 terms) and the Senate (11 terms) slightly more often than Democrats. The overall tax rate fell to 23% for the richest 400 households in 2018.
It is also worth noting that the tax cuts implemented by President Trump and Republicans in 2017 were only the 5th largest in history as a % of GDP. The Obama tax cuts of 2010 and 2013 were the 4th and 2nd largest respectively, with the Kennedy tax cuts of 1964 placing 3rd. The Reagan tax cuts of 1981 remain the largest in history, 2.9% of GDP.
One comment on the quote stood out, on an Occupy Democrats Facebook page. It was a defense of the continued slashing of capital gains taxes on the wealthy, and an attack on those who can’t “get over this Obama legacy of hating on the wealthy” and which slammed progressives like Bernie Sanders and Elizabeth Warren calling for a wealth tax on the presidential campaign trail.
The best line of all was that the commenter claimed the New York Times “doesn’t actually look at the data since they have a political agenda.” This is a convenient whine, but the data is all there in black and white. It is explained in detail in the column, with proper sourcing. This is such a common Trumper tactic: denigrate the validity of any fact that proves inconvenient or which contradicts a Trump/Republican lie.
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Look, there are three justifications thrown around by those advocating continuously lower taxes on capital gains, groups like the Tax Foundation, Club for Growth, and seemingly, all Republican politicians anytime the budget gets close to balanced and they control the agenda:
- the capital gains tax is not indexed for inflation;
- it is a double tax;
- it encourages present consumption over future consumption.
Politicians and economists (and voters) can argue all day over whether those are true of false, or whether (as a matter of policy) it should matter anyway, as seemingly only when considering the ultra wealthy is our tax policy based on what is BEST for the taxpayer.
The Federal Reserve has done an amazing job of keeping inflation at bay. Back in the late 1970’s and early 1980’s, the inflation rate routinely reached double-digits. Many years, an investment needed to generate 12% or 13% returns just to break even. The last time inflation even reached 4% annually was in 1991, the 3rd year of George H.W. Bush’s presidency. As the annual inflation rate will be under 2% again this year (for the 5th time in the last 7 years), is inflation the reason another capital gains tax cut was necessary?
And no, the double-tax excuse does not stand up either. Do you know how many times some of YOUR money is taxed? You pay sales tax, personal property tax, occupational privilege tax, income tax, and so on. And even those of the right (in light of those other double and triple taxes) often don’t even bother to try to make an argument the capital gains rate should be 0%. They are always sure, however, that it should be lower than it is.
Taxes like sales taxes are among the most regressive taxes imposed, and one of the most egregious examples of a double-tax. Yet the argument is that the one group who should not be double-taxed, or should be double-taxed less, are the wealthy? Finally, it is a critical difference that the GAIN in capital gains has not be taxed before. Yes, the money used to purchase the stock MAY have been taxed. But not in all cases.
Finally, the lame “stimulus now” argument?
Funny how a trillion-dollar tax cut (financed exclusively by adding to the debt) is the Republican solution to kick-start the economy, even when the economy was performing well? Yet a trillion-dollar stimulus bill (also financed exclusively by adding to the debt) when the economy is mired deep in recession is a pointless waste of taxpayer money?
The real issue is that trickle-down economics only works in a vacuum, under the most perfect conditions, with no outside factors to mess it up. Yes, there MAY have been a time it came closer to working in the real world, but no more.
Look at the 2017 tax cuts.
Did corporations use their newfound savings to expand, to add jobs, to modernize manufacturing, or to do anything else that would be considered “present consumption?”
Did they bring money back from overseas they had stashed there to avoid taxes?
Nope. They paid huge bonuses to executives. They, in some cases, paid small bonuses to employees, but a bonus is not as good as a raise since it does not compound over time.
They bought back $806 billion in stock in 2018, which was basically another bonus to executives and a bonus to shareholders. It is expected that number could hit $1 trillion in 2019. That nearly $2 trillion in buybacks since the 2017 tax cuts passed have boosted the stock market 10% over where it would likely have been without the buybacks.
What about individuals in the 1% or higher who received another huge tax cut in 2017 AND received a significant boost to their stock portfolio?
If you make $75,000 per year, you received a tax cut of $870.
Who do you think made out better under the tax cuts, you or corporations and the wealthy?
Newsweek did a profile of Education Secretary Betsy DeVos in November 2017. This would have been before the most recent round of tax cuts. She and her husband own a fleet of 10 boats, some as long as 200 feet. Any bigger and it might as well say Carnival or Royal Caribbean on the side. They actually employ staff tasked with scheduling and shipping their boats based on where the family is going to be at any given time and what the needs will be. After all, no point in having all those boats docked in Michigan (where she resides) when she and her husband also own a fleet of four airplanes and 2 helicopters that can get them to any body of water in the United States within hours, right?
Are we to believe that getting a capital gains tax or not would be the determining factor in their adding an 11th boat or 5th airplane to their fleets?
Basically, lower capital gains taxes allow rich people to compound their wealth more quickly, but their spending is based on their wants and needs and is not slowed-down or sped-up by a tax cut. In the past, it may have been true, when being a millionaire was an achievement. But once household wealth tops $5 billion, as is the case with Betsy DeVos and her husband, with so much of the wealth likely in tax havens and shelters anyway, do they really consult their financial planner first if they see something they want?
Perhaps someone on the right (if any are reading this) can explain the logic?
If Congress does a $1 trillion stimulus package (as was done at the end of the George W Bush presidency and beginning of the Barack Obama presidency), that money is guaranteed to go to work immediately with the full $1 trillion entering the economy through what are called shovel-ready projects.
If Congress does a $1 trillion tax cut for the wealthy and for corporations, we the taxpayers are still going to see $1 trillion less money in the federal coffers, yet we must hope and trust the money will be spent in beneficial ways?
Why not make it a deduction? If a corporation invests the money they way they are telling Congress they will, they get to take a deduction and thus reduce their corporate tax rate. They can take all the deductions they earn, so long as it keeps their tax rate at or above the new 21% rate (down from 35%). Sure, companies like Amazon wind up paying no federal taxes. But at least they are building warehouse and corporate headquarters and are actually pumping hundreds of billions of dollars into the economy. But a company like General Electric that is shrinking and now froze their employee pension fund? They should get a windfall too?
Nope, Congress would not dare tie the corporate tax cuts to actual reinvestment in the business because they KNOW it is a scam. And because so many in the House and Senate are millionaires themselves, and as members of Congress are not bound by insider trading rules like the rest of the citizenry, playing with corporate tax rates and knowing ahead of time where to invest is the fastest road-map to riches in Washington.
One last thing, where did Betsy DeVos get her billions?
She inherited it from her rich father.
Where did Betsy DeVos’ husband get his billions?
He inherited it from his rich father.
All those taxes over all those years, even death taxes and much higher capital gains taxes, and yet Betsy and her husband have amassed a fortune valued at $5.1 billion between them?
Try this, and maybe you will understand how wealth inequality is destroying America:
Let’s say Christopher Columbus had been offered a $25,000 bonus by Queen Isabella I for discovering America.
And let’s say there was a paperwork error in his deal with the Queen.
Oops. Instead of a one-time bonus for discovering America (yes, I know, he couldn’t discover what was already inhabited), the paperwork stated that Christopher Columbus was to receive a bonus of $25,000 EVERY DAY in perpetuity, from the day he first left port in 1492 and continuing through today. And let’s say he beat Ponce de Leon to the Fountain of Youth and is still sailing all these centuries later?
Got that, $25,0000 (tax free) EVERY DAY for 527 years and 66 days (August 3, 1492-October 8, 2019). Maybe I missed a leap day or so, but that works out to around 192,552 days.
Columbus STILL would not have the amassed $5.1 billion Betsy DeVos and her husband have amassed primarily by being BORN wealthy and by being wealthy in a system designed to BUILD existing wealth into almost unimaginable wealth at the expense of those struggling simply to survive.
Columbus’ net worth after earning $25,000 every day for more the 527 years would be roughly $4.81 billion. That would barely get him into the Top-150 on the most recent Forbes 400 list.
Considering that the federal poverty line for 2019 is $25,750, if a worker at the federal poverty level earned their entire annual salary every day AND did not have to pay any taxes on those earnings, and never spent any of it, that worker would still not have $5 billion if they worked every day for 500 years.
So no, there is no argument that will ever convince people living outside the wealthiest 400 families in America that the best thing we as citizens and taxpayers can do with OUR tax dollars, the thing most beneficial to ALL Americans, is to give the ultra-wealthy like Betsy DeVos and her husband another tax cut.