Tax the Wealthy 75% and Do It Now
Every January, the deep pockets of our world who see themselves as deep thinkers gather high up in the Alps to contemplate the world’s most pressing problems at the annual Davos World Economic Forum.
Every January, analysts at Oxfam, the global group that champions economic justice, take this annual Davos moment to report out just how much our world’s richest contribute to those problems – and just how many of those problems they outright create.
This year’s Oxfam Davos-time report, Survival of the Richest: How we must tax the super-rich now to fight inequality, adds to this pattern a fascinating new twist. Just what do we have to do, this Oxfam paper essentially asks, to keep our super-rich from being super?
Central to Oxfam’s answer: a call for a tax rate “of at least 75 percent on all personal income” of those making over $5 million a year, basically those who sit in our world’s wealthiest 0.1 percent.
The billionaires and their invited guests at Davos will pay this Oxfam call no mind. The awesomely affluent at Davos and the journalists who cover their exploits like to see themselves, after all, as practical souls who seek workable responses to our most troubling ills. They see calls for a 75 percent top-rate as foolish and totally impractical prattle. No nation on Earth currently comes anywhere close to taxing at that rate.
The current top-bracket tax rate in the United States, for instance, sits at a modest 37 percent, and Americans of much more than ample means actually end up paying taxes at not much more than half that rate.
So no need, team Davos would have us believe, to pay Oxfam any heed. Our tax rates need to be realistic, not ruthless.
Back over a century ago, America’s richest — and the lawmakers in thrall to them — felt the same exact way. In 1916, war had already begun in Europe, and “responsible” leaders in Congress all agreed that the United States needed to be fiscally prepared for whatever way that war would turn. Prudence demanded, they argued, an increase in the top rate of the then three-year-old federal income tax from 7 to 15 percent.
That increase would become law in the 1916 Revenue Act, and the lawmakers responsible for it would be exceedingly proud of their handiwork. None of them could imagine a tax burden on the rich any heavier than the 15-percent top rate this new legislation put in place. Federal tax rates on high incomes, announced Henry Rainey from Illinois, a future House speaker, had reached their “very highest notch.”
But then, on April 2, 1917, President Woodrow Wilson raised the stakes. He asked Congress to join the war effort in Europe and fight to make the world “safe for democracy.” Meanwhile, only days before, U.S. progressives had already declared a war of their own. Against plutocracy.
“We do not believe,” Amos Pinchot, the chair of the newly formed American Committee on War Finance, would tell reporters, “that any real patriot wants the poor people of the nation to bear the burden of the cost of war in addition to the burden of fighting.”
The 1916 tax rate hike to 15 percent, Pinchot and his fellow activists argued, had merely inconvenienced the rich. To meet the bill for waging actual war in Europe, inconveniences would no longer suffice. The nation would either have to directly attack plutocratic power and tax the rich at significant rates or borrow from the rich, a policy choice that would likely leave the United States even more plutocratic.
This stark choice thrilled the respectables in Pinchot’s circles, figures like E. W. Scripps, the maverick San Diego publisher who had built up a national newspaper chain and founded the national news service that would become United Press International. Scripps and reformers of like mind believed that the war would enable a thrust against plutocratic fortune that peace would never countenance.
“The country will be the gainer by tapping and reducing the great fortunes,” as Scripps wrote Pinchot shortly after the American Committee on War Finance went public.
‘I dread the killing of men. I dread the syphilization of vast numbers of our men,” Scripps passionately continued, “but I gladly welcome the financial consequences of war.”
Within weeks after the U.S. entry into Europe’s war, the activist American Committee on War Finance had assembled a nationwide network of 2,000 volunteers and circulated thousands upon thousands of flyers asking Americans to commit themselves “to further the prompt enactment” of the boldest tax-the-rich proposal any American political grouping had ever advanced: a “conscription of wealth.”
After paying taxes, the War Finance Committee declared, no American should be able to retain “an annual net income in excess of $100,000,” an income limit that should remain in effect “until all bonds and other obligations issues for war purposes are paid.”
The Committee’s income-cap plan called for a 2 percent “normal” tax on income over $3,000, with a series of steeply graduated surtax charges above that, ending with a 98 percent levy on all income over $150,000. The bottom line: No American, after taxes, would have a residual income above $100,000, a bit over $2.3 million in today’s dollars.
“If the government has a right to confiscate one man’s life for public purposes,” War Finance Committee chair Amos Pinchot pronounced, “it certainly ought to have the right to confiscate another man’s wealth for the same purposes.”
By mid-spring 1917, the “conscription of wealth” campaign had completely redefined the nation’s tax-the-rich frame of reference. Less than a year before, after the passage of the 1916 Revenue Act, a top tax rate at 15 percent on the nation’s highest incomes appeared impressive. Now Americans were buzzing about the prospect of a 100 percent top tax rate.
“It is up to every real American citizen to see to it that the war is conducted honorably, and not degraded into a golden business opportunity for a small minority of unpatriotic persons,” Pinchot would testify before Congress. “Neither the United States nor any other country can carry on a war which will make the world safe for democracy and the plutocracy at the same time. If the war is to serve God, it cannot serve Mammon.”
The World War I tax-the-rich battle would go another year. In 1917, Congress did up the top tax rate on the nation’s top-bracket income to 67 percent and also included a 60-percent excess-profits tax on annual corporate earnings over 33 percent. But progressives kept up the tax-the-rich pressure.
“We believe that as we have conscripted men, so should wealth be conscripted by means of a heavy graduated income tax,” resolved the North Carolina division of the Farmers’ Educational and Co-operative Union of America in March 1918. “The dollar should not be more sacred than man.”
Lawmakers would get that message. Later in 1918, they upped the top-bracket income tax rate up to 77 percent and lowered the threshold for that top rate from $2 million to $1 million in annual earnings.
None of these tax-the-rich numbers, regrettably, would survive the years right after the war ended. After the 1918 Russian Revolution, plutocrats found themselves living in a world with an actual workers state, a socialist republic. The specter haunting Europe had now become reality — in the new Russia. If they gave an inch, America’s plutocrats feared, their fortunes would be no more.
In the 1920s, after an appalling wave of repressive moves against America’s left and labor activists, these fearful plutocrats would have their way. By decade’s end, the top federal income-bracket tax rate had shrunk all the way down to 25 percent.
But the Great Depression and World War II would once again re-energize America’s tax-the-rich campaigners. During World War II, President Franklin Roosevelt would become their most fervent champion. Four months after Pearl Harbor, FDR echoed the World War I-era activist demand for a 100 percent top tax rate.
“In time of this grave national danger, when all excess income should go to win the war,” FDR told the nation, “no American citizen ought to have a net income, after he has paid his taxes, of more than $25,000 a year,” the equivalent of just under $500,000 today.
Congress would eventually hike the nation’s top-bracket tax rate to 94 percent in 1944, and that top rate would hover around 90 percent for the next two decades, years that would see the emergence in the United States of the world’s first mass middle class.
The new Oxfam tax proposals build on this tax-the-rich history. May they meet with more lasting success.
This article was produced by Common Dreams.
Sam Pizzigati, veteran labor journalist and Institute for Policy Studies associate fellow, edits Inequality.org. His recent books include: The Case for a Maximum Wage (2018) and The Rich Don't Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970 (2012).