Social security is NOT SPENDING to any REAL ECONOMIST! Spending is buying something disposable that was produced this year! Social Security is a TRANSFER PAYMENT from the WORKING POOR to the LONG-LIVED RICH who often don't need it or vice versa. Same with Medicare and Medicaid. The VA was socialized medicine until recently until they finally allowed Vets to get private health care. Defense is spending and investment from the private sector, socialism of hired underpaid enlistees, managing purchased products on government owned bases. Interest is a soon to balloon fraction of the budget that's also a transfer payment.
I think Jack makes an important point. High marginal tax rates in the 1950s didn't translate into equally high effective tax rates. Wealthy taxpayers adapted, revenue stayed relatively stable as a share of GDP, and the tax code became increasingly complex. He's right to challenge the myth that simply restoring 90% tax brackets would recreate the postwar economy.
But I think the deeper lesson is different.
The problem isn't that tax rates were too high or too low. The problem is that we're still taxing legal categories instead of economic reality.
Modern purchasing power comes from wages, dividends, capital gains, securities-backed loans, home equity, and other forms of credit. Our tax code treats these very differently, even though they create the same economic demand when the money is spent.
People respond to incentives. They always will.
Rather than endlessly patching loopholes, perhaps we should ask whether we're taxing at the wrong point entirely. A system that taxes economic activation, when purchasing power enters the real economy, would largely eliminate the distinction between labor income and asset-backed spending without requiring thousands of pages of special rules.
Maybe the lesson from history isn't that high taxes failed.
Maybe it's that category-based taxation has reached the limits of what it can do in a modern credit-driven economy.
All true data, but cherry-picked data. The REAL MYTH is that high nominal tax rates seldom translated into high effective tax rates from tax loopholes in 1950s, 60s, 70s (also, most other taxes were regressive: property tax after shifting, sales, fees, payroll taxes (Social Security the most regressive public PENSION plan on Earth, and most other nations let short-life span, poor laborers retire at 55, not long-lived teachers and police "triple dippers"); every Academic research study found the NET IMPACT OF ALL GOV'T at most was Proportional (never progressive), since government contracting firms pay so well. Also, most capital gains are never taxed, but instead bequeathed as untaxed TRUST FUNDS, so most such U.S. wealth has never been taxed; meanwhile, these "locked in" unsold shares assure that inefficient CEOs are never fired (and only the U.S. allows stock buy-backs to inflate stock option value). And Economics was mastering how to fine tune the macro economy (JFK/Johnson flipping the yield curve stimulated investment and growth and Nixon coordinated Fiscal with Monetary Policy for the first time, Humphrey-Hawkins bill dealt with Phillips Curve new realities of supply shocks), internalized externalities of pollution and education, subsidized deficient local public services from bloated federal budgets, restrained hi-tech monopolies (IBM and Ma Bell) to restore real competition, risk-taking, innovation, and deregulated transportation, utilities, and professional services (doctors, lawyers, stock brokers, opticians, realtors, etc.) via Carter's entire cabinet of Economists.
But once econ became ideological, policy disappeared from economics as far-right billionaires purchased New Classical School endowed chairs, think tanks, private granting groups, and took over academic journals. After 45 years of Reaganism's "public-policy can only make problems worse" mantra, the result was deregulations and defunding that gutted consumer, worker, and environmental protections from asymmetric information and monopoly advantages of big business, allowed to grow exponentially without antitrust enforcement. Four enormous tax cuts for the super rich quickly created the greatest wealth inequality in the industrialized world, enough multibillionaires and trillion dollar firms to buy (and rig) the government, a higher yield and lower risk "investment" than real investment!
So what were they spending the money on back then, defense?
In 1979 versus today (share of spending):
Defense = 23% vs 13% today
Soc Sec = 18% vs 23% today
Interest = 9% vs 14% today
Income Sup = 9% vs 7% today
Healthcare = 9% vs 24% today
Social security is NOT SPENDING to any REAL ECONOMIST! Spending is buying something disposable that was produced this year! Social Security is a TRANSFER PAYMENT from the WORKING POOR to the LONG-LIVED RICH who often don't need it or vice versa. Same with Medicare and Medicaid. The VA was socialized medicine until recently until they finally allowed Vets to get private health care. Defense is spending and investment from the private sector, socialism of hired underpaid enlistees, managing purchased products on government owned bases. Interest is a soon to balloon fraction of the budget that's also a transfer payment.
I think Jack makes an important point. High marginal tax rates in the 1950s didn't translate into equally high effective tax rates. Wealthy taxpayers adapted, revenue stayed relatively stable as a share of GDP, and the tax code became increasingly complex. He's right to challenge the myth that simply restoring 90% tax brackets would recreate the postwar economy.
But I think the deeper lesson is different.
The problem isn't that tax rates were too high or too low. The problem is that we're still taxing legal categories instead of economic reality.
Modern purchasing power comes from wages, dividends, capital gains, securities-backed loans, home equity, and other forms of credit. Our tax code treats these very differently, even though they create the same economic demand when the money is spent.
People respond to incentives. They always will.
Rather than endlessly patching loopholes, perhaps we should ask whether we're taxing at the wrong point entirely. A system that taxes economic activation, when purchasing power enters the real economy, would largely eliminate the distinction between labor income and asset-backed spending without requiring thousands of pages of special rules.
Maybe the lesson from history isn't that high taxes failed.
Maybe it's that category-based taxation has reached the limits of what it can do in a modern credit-driven economy.
All true data, but cherry-picked data. The REAL MYTH is that high nominal tax rates seldom translated into high effective tax rates from tax loopholes in 1950s, 60s, 70s (also, most other taxes were regressive: property tax after shifting, sales, fees, payroll taxes (Social Security the most regressive public PENSION plan on Earth, and most other nations let short-life span, poor laborers retire at 55, not long-lived teachers and police "triple dippers"); every Academic research study found the NET IMPACT OF ALL GOV'T at most was Proportional (never progressive), since government contracting firms pay so well. Also, most capital gains are never taxed, but instead bequeathed as untaxed TRUST FUNDS, so most such U.S. wealth has never been taxed; meanwhile, these "locked in" unsold shares assure that inefficient CEOs are never fired (and only the U.S. allows stock buy-backs to inflate stock option value). And Economics was mastering how to fine tune the macro economy (JFK/Johnson flipping the yield curve stimulated investment and growth and Nixon coordinated Fiscal with Monetary Policy for the first time, Humphrey-Hawkins bill dealt with Phillips Curve new realities of supply shocks), internalized externalities of pollution and education, subsidized deficient local public services from bloated federal budgets, restrained hi-tech monopolies (IBM and Ma Bell) to restore real competition, risk-taking, innovation, and deregulated transportation, utilities, and professional services (doctors, lawyers, stock brokers, opticians, realtors, etc.) via Carter's entire cabinet of Economists.
But once econ became ideological, policy disappeared from economics as far-right billionaires purchased New Classical School endowed chairs, think tanks, private granting groups, and took over academic journals. After 45 years of Reaganism's "public-policy can only make problems worse" mantra, the result was deregulations and defunding that gutted consumer, worker, and environmental protections from asymmetric information and monopoly advantages of big business, allowed to grow exponentially without antitrust enforcement. Four enormous tax cuts for the super rich quickly created the greatest wealth inequality in the industrialized world, enough multibillionaires and trillion dollar firms to buy (and rig) the government, a higher yield and lower risk "investment" than real investment!