Vail Daily letter: Historically low taxes
July 22, 2010
A key platform issue for neoconservatives approaching the November midterms is excessive federal income taxation. The Internet and cable TV networks are filled with images of tea bagger assemblies waving signs that they are being taxed too much (aren’t we all?!). GOP politicians are promising to keep Bush’s tax cuts in place and even to lower them further under the guise that lower taxes will create jobs. You do believe in the tooth fairy, don’t you?
Let’s take a look at taxes historically to see if the neoconservatives’ whining has any basis in fact. Our current federal income tax rates have six income brackets ranging from 10 percent to 35 percent (for those making $373,000 or more). Barring any action by Congress, rates will return to those of the 1990s, with the 10 percent bracket disappearing and the top rate rising back to 39.6 percent. Sounds pretty bad, doesn’t it?
Well, these rates represent some of the lowest tax rates of the last century! Shortly after federal income tax was brought to being (1913) tax rates jumped from 1 percent to 7 percent all the way to a top rate of 67 percent leading up to World War I. During World War II, FDR funded the war with income taxes ranging from 19 percent for the poorest up to 88 percent for the wealthiest. Historically, income taxes rise during times of war and drop during times of peace. George W Bush managed to cut taxes and start not one, but two wars with a totally predictable impact on national debt.
Brian Murphy of Fidelity Investments notes that “during the early 1980s, there were 16 brackets that spanned 0 percent to 50 percent. And that was instituted to simplify a system of 29 brackets that topped out at 70 percent in the 1970s. If that is extreme, remember that before 1963, the top rate was 91 percent.”
During George W. Bush’s eight years in office the federal deficit exploded. No surprise. You can’t start two wars, cut taxes and expect anything else. Bush left Obama an economy on the brink of failure, and neoconservatives are howling that the efforts to rescue the economy, both by Bush in his last days in office and particularly Obama, have failed.
Failed compared to what? The rest of the question is never asked. The correct question “compared to doing nothing.” Ask economists that question and they go into catatonic lockup.
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As a country, we have worked long and hard to build the national deficit we have. Many administrations played roles and particularly from Reagan to George W. Bush. And yet it is Obama’s first 18 months in office that is drawing all of the wrath of the neoconservatives.
I have two questions for the tea baggers, 9.12ers and all the other groups that have suddenly and vocally found fiscal religion. Where we you during the eight years of Bush’s fiscal irresponsibility? Where were your voices then? You were as silent as lambs!
And don’t sidestep the question by blathering about Obama’s attack on the Constitution and destroying our government, blah, blah, blah. Just answer the freakin question! And if you have an answer for that one, then tell me why you want to go back to that same horror story?