What Was the Intent of Our Founding Fathers on Taxes for the Rich?

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By Richard E Walrath and Patricia L Johnson

The very first year the U.S. began taxing there were 7 tax rates beginning with the minimum tax rate of 1% and a maximum tax rate of 7%. It appears our founding fathers expected the rich to pay seven times more than the poor in taxes. By 1916 – only three years after the beginning of taxation, the rates were changed so there were 14 tax rates.  The minimum tax became 2%, while the maximum tax was increased to 15% or 7.5 times the minimum.

If those percentages were extrapolated across time, what do you think the multiplier would be in 2010?

The highest rate after 1913 occurred in 1918. Then the rates moved downward until 1925 when it reached 25% and stayed there until the market crashed in 1919. Since 1944, the trend has been downward for a period of 66 years.

Taxes were high during World War II and stayed that way until the Kennedy tax-cut which came just as the war in Vietnam was getting under way when taxes should have been raised to pay for the war. As huge as the deficit and national debt had become relative to GDP, both shrank very quickly after the war ended.

In 1964, the tax rate was reduced to 70% from 91%.  This was the famous Kennedy tax-cut proposed by President Kennedy who was assassinated in 1963.  Republicans have been talking about this tax-cut ever since. They liked it so well that they’ve cut it from 70% down to 35%!

What happened after 1964 was the war in Vietnam when the tax-cut was taking effect resulting in loss of revenue at the same time government spending dramatically increased because of the war.

Reagan’s Reign of tax-cuts for the Rich began.  If 7 to 1 was the intent of our founding fathers, we were doing just fine with President Eisenhower when the top rate was 90+%.  We need to follow in the footsteps of our founding fathers who wrote the constitution–7 to 1. 

Reagan’s Reign of Tax-cuts for the Rich was interrupted, briefly, during Clinton’s two terms of office.  Clinton raised them, but Bush more than made up for that.

By 2010 the minimum rate was reduced (through the 2001 and 2003 Tax Cuts put into place by the Bush administration) to 10%, while the maximum tax rate was reduced to 35%, in other words taxes were reduced from 7.5 times the minimum in 1916 to 3.5 times the minimum under the Bush administration. These are the tax-cuts set to expire on December 31, 2010.

The biggest tax-cuts and the fewest jobs created occurred during the years 2001-2008, followed by the worse recession since the great depression.

The chairmen of the deficit commission, the committee, and the media don’t want their taxes raised. That is what this whole thing about the deficit comes down to–the Republicans, the media; and the deficit commission don’t want their taxes raised.  They’ll do all they can to see that that doesn’t happen. So, they come out with all this garbage to make people think the deficit is the people’s fault.

Contrary to what most people think, the country has done better when tax-rates are high on the highest incomes, not when they are low. Low tax-rates for the rich are worse than kids’ playing with matches in the kitchen–lots of trouble is what you can expect and get.

The rich have had the use of hundreds and hundreds of billions of dollars free of charge for many years.  It’s time for them to pay it back – pay it all back.

© 2010 Richard E Walrath and Patricia L Johnson

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9 Responses to What Was the Intent of Our Founding Fathers on Taxes for the Rich?

  1. Paris says:

    It is easy to see your allegiance to the democratic party. I will list a few comments that you could easily find online if you had cared to research. I am not trying to protect the rich. They could easily pay more taxes. My point is the ploy enlisted by the party you appear to be defending is that our deficit will be solved by this tax. In reality the top 5%of the wage earners already pay 38% of the taxes collected and there are only 1210 billionaires with a net worth of 4.5 trillion. To ask the rich to cover the 15 trillion deficit would decimate their ranks. And why should they sacrifice what they have worked so hard for just so the politicians can blow it? Our government needs to get its house in order before asking for more money. Is that not a reasonable request?
    Now I question which one of us has been brain washed?
    It has been an interesting conversation. Thank you

  2. Paris says:

    In the real world when my boss cuts my salary, I adjust my spending accordingly. I readjust my budget to fit my income. This is what we all do if we keep the same job. We always have he option of finding a different higher paying job. What we can not do is keep spending and spending as if the day of reckoning will never come.
    Please explain to me why the government can’t do the same thing. I fully understand what the problem is and so do millions of others just like me.
    One other point. I am unaware of anyone in our country that has a trillion dollars. We have billionaires but no trillionaire. All of the billionaires lumped together could not come up with 15 trillion dollars to pay the deficit. They could cover about 14% of it. What other excuse will the democrats come up with when the “tax the rich” ploy doesn’t work?

    I look forward to your reply.

    • Administrator says:

      This is the real world Paris and it’s not that easy for folks to go out and get a job, but you’ve got the right idea. Find a higher paying job – in this case, it’s find more revenues by increasing the tax base to what it was during the Clinton years. Not a cloud in the sky during the Clinton years, when the taxes on the wealthy were 4 percent higher – but that’s not even the major problem.

      The major problem is the tax loopholes – when Warren Buffett pays a higher percentage in taxes than what his executive secretary pays you can bet your boots there is something seriously wrong with our tax system. BTW, Warren Buffett’s recent commentary on taxes is also posted to the site.

      What you believe Paris is what you have been brainwashed into believing, that the problem is caused by overspending. That’s simply not the root cause of our current economic situation. The policies of the Bush administration added more than $5 trillion dollars to the national debt during the eight years he was in office. His policies didn’t just vanish into thin air overnight, the damage continues.

      If you want to know the facts take a look at the following chart

      During the 28 years from 1980 through 2008 we had four Presidents, three were Republicans and one was a Democrat. In 19 of the 20 years that the Republicans were in office we had deficits. The only year a Republican President did not add to the deficit was in 2001 (an obvious carryover from the Clinton surplus). Charts depicting those totals can also be found on the website.

      Thank you for your comment.
      PJ

      • Paris says:

        I notice you did not answer my question. When the “tax the rich” ploy doesn’t work, what are you going to say? The spending spree that both parties share responsibility for cannot be paid for with a simple tax on the rich. You guys have gone crazy blowing our tax money and you want more. The bloated government, the give away programs have shown the american people that neither party is willing to make the right decision concerniing our economy. You mention the 5t deficit that Bush left but fail to mention that it is now 15t. You are trying to defend your party while the Republicans try to defend theirs. That leaves us in the middle paying the bill.

        I don’t think either party has the ability to exercise a simple economics 101 program. It is called balance the budget. The government needs to operate with a percentage of the GDP. NO more than 15%. The government needs to be pared down. The departments are way too big. The EPA, DOE, IRS, Presidential staff, DOD to name a few. If either party were serious, they would start with at least a 10-15% cut in these departments. That would send a signal that you were trying.
        It would help if you didn’t talk down to people. I am a retired school teached and I am perfectly capable of understanding the issues and not brainwashed. I can also recognize when I am being fed a line of BS.
        Looking forward to your reply.

        • Administrator says:

          Paris, you may be a retired school teacher, but your very first sentence tells me how little you actually know about the subject.

          If you were dealing with facts then you would know that increasing taxes on the very wealthy, those currently taxed at the 35 percent rate and reversing the extraordinary number of loopholes put into place by the Bush administration for the ultra-rich and big business would provide the U.S. Treasury with an incredible increase in revenues. Revamping the Medicare Part D pharmaceutical program so HHS is able to negotiate drug costs with manufacturers is another step. They are currently unable to negotiate drugs costs due to the bill put in place by Republicans. Getting our troops out of the two theaters of war that were started by Republicans is another step in the right direction. Actually, undoing everything that was put into place under the Bush administration would immediately solve all our economic problems.
          .
          I’m not sure who it is that you think you are referring to with your ‘you guys have gone crazy blowing our tax money’ comment, or your comment about trying to ‘defend your party’.

          You don’t know me from a fly on the wall; therefore you are totally out of line making assumptions about my political preferences.

          You suggest we cut the IRS by at least 10-15%, I suggest you spend some time on the IRS website reviewing data. Let me give you a little sample of what you will find. In 2000 if a couple earned $500,000 they would have paid $170,668 or 34.13 percent in taxes. That’s a straight tax, without deductions. In 2010 if the same couple earned $500,000 they would have paid $144,872 or 28.97 percent in taxes – again a straight tax without taking into consideration any deductions against gross income. That’s a difference of $25,796 in taxes that weren’t paid to the U.S. Treasury, just by this one couple – multiply that amount by the number of people in the U.S. that earn over $500,000.00 and then multiply it by the number of years the reduced tax schedule has been in effect. Any and all of this information is available on the Internal Revenue Service website.

          That sample only covers a straight tax, when you start researching the deductions the numbers are even more incredible.

          I don’t have time or the desire to correspond with people who are so set in their thinking that they have lost the desire to research the facts and learn the truth, but I do thank you for your comment.

          PJ

  3. Paris says:

    This is not about taxing the rich. Taxing the rich sounds good and is a ploy to make the masses believe the politicians really care about them. The current adminestration is in trouble and is using this issue to redirect the attention away from the Democrats problems. It will not work. The masses are hurting and pissed off. That spells trouble for the incumbents.

    • Administrator says:

      Paris,

      Thank you for your comment, but I have to disagree with you.

      Let’s say you have a job and you earn $1,000.00 a week, so you go out and you buy a house and a car and open a charge account or two. So far you’re living a good life and are able to put a little away in savings, go on vacations, go out to dinner, go to the theater, etc., etc., then your boss cuts your pay from $1,000.00 a week to $800.00 a week. All of a sudden life isn’t so good anymore because you can’t do all the things you wanted to do, you no longer have money for savings, or for dining out or for the theater, because suddenly your expenses exceed your income.

      The very same thing has happened to the United States, the amount of revenues going into the U.S. Treasury dropped tremendously after the Bush tax cuts of 2001 and 2003, which not only significantly decreased the taxes on the rich, it also provided tax loopholes for the ultra-rich and big business that were big enough to drive Mack trucks through. At the same time President Bush started two wars, Afghanistan and Iraq, and put through a pharmaceutical benefit for Medicare recipients that did nothing other than increase the profits of the pharmaceutical companies. The law, as it was passed by the Republicans, did not allow the Department of Health and Human services to negotiate the price of the Medicare drugs, we had to simply pay what the manufacturer stated. That was a huge drain on Medicare.

      The combination of these events decreased revenues significantly, while increasing expenditures dramatically. When President Bush took office we had a budget surplus, and we are now trillions of dollars more in debt all due to Republican policies.

      The Republicans have spent a considerable amount of time trying to brainwash folks into believing this is a ‘spending’ problem, rather than seeing what it actually is, which is a taxing problem. Following is an article we wrote on the subject.

      We have written numerous articles on the subject which you can access by typing deficit, taxes, President Bush, debt limit, or any number of key words into the search box on the Articles and Answers 2011 website.

      Perhaps if you read some of the material it will provide you with a better understanding of the problem.

      Pat Johnson

  4. sasoc says:

    Our “founding fathers”? You invoke them in a discussion of personal income taxes? There can only be two reasons for your doing this: either you are uneducated about the history of U.S. taxation, or you are being intentionally misleading and even dishonest in your essay.
    Either one is bad. There were NO personal income taxes for well over a hundred years in this country.

    Here’s just one of the million entries you could find on the web, this one from
    http://www.eoearth.org/article/History_of_taxation_in_the_United_States

    “The tax mechanisms used during first 150 years or so of U.S. tax history bears little resemblance to the current system of taxation. First, the U.S. Constitution restricted “direct” taxation by the federal government – meaning taxes directly on individuals. Instead, the federal government relied on indirect taxes including taxes on imports (tariffs) and excise taxes. Tariffs were the major source of U.S. government receipts from the beginning of the nation up to the early 1900s. For example, in 1800, custom duties comprised about 84% of government receipts. Internal federal revenue collections (which exclude tariffs on imports) as recently as the early 20th century were primarily derived from excise taxes on alcohol. In 1900 over 60% of internal revenue collections came from alcohol excise taxes with another 20% from tobacco excise taxes.”

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