Is History Siding With Obama’s Economic Plan?
|August 26, 2009||Posted by Jeffery J. Smith under Progress Report, The Progress Report|
Is History Siding With Obama’s Economic Plan?
Tax Me is what some rich Americans tell Obama
A petition is one sign that the idealistic wealthy are not a small minority. While I appreciate their charity, Id rather not need it. I wish theyd keep their money — but first earn every penny of it. And all the money that society earns — the commonwealth, all the money we spend on all the nature and privilege we use — that, in lieu of taxes and subsidies, wed share equitably. Meanwhile, we trim, blend, and append two articles, (1) one of 2009 from the Christian Science Monitor, Aug 11, on asking to be taxed by David R. Francis; and (2) one of 2008 from the New York Times, August 30, on inequality by Alan S. Blinder, professor at Princeton, former vice chairman of the Federal Reserve, and advisor to many Democratic politicians.
by David R. Francis and by Alan S. Blinder
- Tax me, some rich Americans tell Obama
Raise my taxes, says millionaire Chuck Collins. The scion of the Oscar Mayer family supports a House panels healthcare plan that would boost taxes for families earning more than $350,000 a year. He also advocates ending the Bush tax cuts for the rich right away, rather than when they expire at the start of 2011, and closing foreign tax havens to Americans.
Although the financial burden would be sizable, Collins is busy urging other wealthy Americans to sign a tax-me petition.
In 1955, the top 400 US taxpayers paid 51% of their average income of $12.3 million (adjusted to 2006 dollars). In 2006, the most recent data available, the top 400 paid 17.2% of their average income of $263 million in federal taxes.
The US economy grew both when taxes on the rich were high in the 1950s and 1960s and after the Bush tax cuts.
- Does History Side With Higher Taxes?
The book, Unequal Democracy by Larry M. Bartels, looks at US GDP. He shows the US economy has grown faster, on average, under Democratic presidents than under Republicans.
Note, however, presidents have limited leverage over the nations economy. The Federal Reserve policy and oil prices, to name just two influences, are far more powerful than fiscal policy. Still
Data for the period from 1948 to 2007, during which Republicans occupied the White House for 34 years and Democrats for 26, show average annual growth of real gross national product of 1.64% per capita under Republican presidents versus 2.78% under Democrats.
That 1.14-point difference, if maintained for eight years, would yield 9.33% more income per person, which is a lot more than almost anyone can expect from a tax cut.
Over the entire 60-year period, income inequality trended substantially upward under Republican presidents but slightly downward under Democrats, thus accounting for the widening income gaps over all.
When Democrats were in the White House, lower-income families experienced slightly faster income growth than higher-income families. When Republicans were in the White House, the better-off enjoyed much faster income growth.
The table also shows that families at the 95th percentile fared almost as well under Republican presidents as under Democrats (1.90% growth per year, versus 2.12%). (Note there is far more difference between families at the 95th and the 0 than between the 95th and 100th.)
Families at the 20th percentile fared much worse under Republicans than under Democrats (0.43% versus 2.64%). Eight years of growth at an annual rate of 0.43% increases a familys income by just 3.5%, while at 2.64% up 23.2%.
JJS: Lets have Dr. Fred Foldvary of Santa Clara University, our Senior Editor, give this Princeton guys data a closer look.
Blinder: The four periods of greatest economic growth in American history are:
World War II (1941-45): top tax rate varied from 88 to 94%.
Foldvary: This was of course a war economy, directed by government, with limited consumer goods.
Post-war under Truman and Eisenhower: top rate bounced around from 81 to 92%.
Foldvary: The shift to a civilian economy created a great demand. We need to look at the tax structure to see the effect, not just the top marginal tax rate. Were there tax deductions and credits that reduced the impact? The total amount of government spending (a big component of GDP, unfortunately) went down after the war.
Clinton years: Clinton raised Bush’s top rate of 31% to 37% and then to 39%
Foldvary: Recovery from recession, plus the technology boom. Growth perhaps could have been greater with lower top tax rates.
First two Roosevelt administrations (1933-40). When Roosevelt came into office, Hoover had already raised the tax rate in 1932 from 25% to 63%. Roosevelt raised it again in 1936 to 79%.
Foldvary: And the depression continued until US entry into WWII. We also have to look at the growth that followed tax reductions in the 1960s and 1980s. Growth depends on many variables, top tax rates being only one of them.
JJS: Plus, growth itself is an iffy indicator. Right now, GDP can indicate more debt, more speculation, more militarism, more waste, more expensive diseases, etc. More spending might be a sign of good, if it comes from more earning and goes to more useful goods and a higher quality of life. The best indicator should be leisure, proof of us getting more from less, which is what our economy is supposed to be for, and something that geonomics, by paying us a Citizens Dividend, could deliver.
Most fortunes accrue by privatizing social values and socializing private costs. For instance, a corporate charter, from society, is very valuable; it limits your liability, so you can do some unscrupulous things — like pollute or underpay workers — and not suffer the consequences. To make sure all income is earned, we must abolish corporate favors and welfare and other subsidies, such as investments in infrastructure that come out of taxes on sales and income so landowners dont have to pay for them.
On the other hand, we need to charge people for polluting, depleting, and exclusively using locations. With a healthy portion of the revenue, we should pay citizens a dividend so they can negotiate higher wages, even start their own company. Such shifting of taxes and subsidies is the geonomic solution.
Jeffery J. Smith runs the Forum on Geonomics.
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