Yes, spread the wealth
Ike had the right idea: high tax rates on the rich good for the country
Nearly 50 years ago, a famous American gave a speech in which he advocated spreading the nation’s wealth. In some countries, he said, “a few families are fabulously wealthy, contribute far less than they should in taxes, and are indifferent to the poverty of the great masses of the people. …
“A country in this situation,” he continued, “is fraught with continual instability.”
The speaker? Then-President Dwight D. Eisenhower, a Republican.
Eisenhower’s words, spoken in 1960, were not controversial. Americans largely agreed that it was wise to spread the wealth. Societies in which a tiny majority accumulated vast amounts of money were considered inherently flawed and unstable.
The tax code at the time reflected this consensus. Incomes greater than $400,000—slightly more than $3 million in today’s dollars—were taxed at
91 percent. Then as now, of course, the wealthy found loopholes in the law.
In 1955, the average income of the nation’s top 400 earners was $12 million in today’s dollars; they paid, after loopholes, 51.2 percent in taxes.
In comparison, in 2005 America’s 400 richest taxpayers averaged $214 million in income and paid taxes at the rate of 18.5 percent. In other words, they took home nearly 20 times as much money and paid one-third as much in taxes.
What we’re seeing today in the financial markets is just the kind of instability Eisenhower worried about. When wealth accumulates, speculation replaces production, greed replaces responsibility, and the system spirals out of control.
We now remember the quarter-century after World War II as period of growing middle-class prosperity in which family incomes more than doubled in real dollars. Since the abandonment of spread-the-wealth policies during the 1980s, under President Ronald Reagan, and their replacement by tax cuts for the rich, average wages have gone down in real dollars, while the rich have accumulated obscene amounts of wealth.
If Americans’ incomes were proportionally the same as they were in 1973, the average family in the bottom 90 percent would have an additional $10,000 to spend each year.
Today, Republicans are attacking President Obama for wanting to increase the top tax rate from 35 percent to 39.6 percent—a pittance, really, though it has Sen. John McCain in high dudgeon. It’s “redistributing money instead of spreading opportunity,” he huffs. We hope the president realizes McCain is the wrong Republican to listen to. We like Ike.