Are high taxes on the wealthiest Americans a recipe for economic decline? Not if you look at the history books – and fiscally successful conservative administrations
By Jim Kempton
Ever since revealing his approximate tax rate last week, Republican presidential candidate Mitt Romney has taken heat from rivals and critics over income derived mostly from capital gains. While castigating those who pay payroll taxes of nearly 30 percent (but no income tax) Romney showed that he paid about half that rate – 14 percent in 2011.
Historically, tax rates on capital gains have not been so low since the Great Depression. Under President George W. Bush, the maximum capital gains tax rate was 15.35 percent
The highest capital gains tax rate in U.S. history was put in place under Woodrow Wilson’s presidency during World War I, when it was as high as 73 percent, according to Roberton Williams, a senior fellow at the Tax Policy Center. One of the biggest booms in US history started during the Wilson administration.
But here is the interesting thing: in our glory days of morning in America, when the magnificent USA was the envy of the world – all taxes were higher. MUCH higher. Take a look at tax rates set by these stalwart icons of free enterprise.
Marginal Tax Rate on Regular Income over $400,000: 91 percent
Maximum Tax Rate on Long-Term Capital Gains: 25 percent
During the administration of conservative Republican President Dwight D. Eisenhower, the marginal income tax rate for top earners in the United States was 91 percent. The maximum tax on long-term capital gains was 25 percent — a rate that remained in place for a decade.
Marginal Tax Rate on Regular Income over $200,000: 77 percent – 70 percent
Maximum Tax Rate on Long-Term Capital Gains: 27.5 percent – 36.5 percent
During the Nixon years, the regular tax rate for the highest income bracket decreased, but the capital gains rate rose by nine percentage points.
Mitt Romney’s father, George W. Romney, campaigned for the Republican presidential nomination in 1967 and released 12 years of tax returns, “in a move believed without precedent in American politics,” according to an article that year in the St. Joseph Gazette, a newspaper in St. Joseph, Missouri.
Romney Sr.’s tax returns showed that he made $2,972,923 over the previous year, and the total taxes he paid were $1,099,555.
So will low taxes help jump start the economy – or even repair it? Here is the strange but true fact: during two of the most conservative administrations in the last half century (when the economy was rocking for both labor AND corporations) the rates for top income earners and capital gains were FAR higher than today. Let’s be real since none of the politicians will: to get back to reality we need to cut some and pay some. Ike did it. GM did it. All Americans used to get a little less and pay a little more. When we were great that is. It makes you wonder what all the one percent fuss is about.
Jim Kempton has been an entrepreneurial business owner, corporate executive and non-profit CEO bleeding heart. He believes free enterprise and good government can exist in partnership – and that America thrives when they do.