A recent OECD study demonstrates that the United States has the most progressive tax system of its member nations — much more progressive than France’s or the Scandinavian nations’, for instance — with the top 10 percent of U.S. income-earners paying 45 percent of household taxes, which include income taxes and employee social security contributions, but not value-added taxes, corporate income taxes, or excise taxes.
(The U.S. also taxes capital more heavily than the welfare states of Europe.)
Shannon Rich uses this surprising fact as a springboard to discuss Why the Really Rich Love Socialists:
Our own history shows that the very wealthy benefit from leftist policies of high tax rates, “targeted” taxation and industrial policy.
The ugly truth is that the really wealthy can manipulate the political system to their own ends better than ordinary people. They can lobby for specific tax breaks that only they can take advantage of. They can get government trade protection for their companies. They can get bailouts. If all else fails, the truly wealthy can simply relocate their wealth into whatever area the government policies du jour make the most profitable.
In the extremes, they can simple sit on their wealth and wait for the political winds to change.
The history of Europe since WWII has shown that it really pays to be a big company in a socialist country. Socialists like stasis. Socialist politicians like to guarantee jobs. They like predictable tax revenue. To this end they select a handful of major companies and in return for heavy regulation, protect them internal and external competition. The largest companies in Europe are much larger compared to the size of their national economies than are the largest companies in America. The largest companies in Europe also keep their top positions while a great deal of turnover by comparison occurs in American companies.
America saw the same thing happen between 1945-1980. At the zenith of the Left’s influence in America the tax code grew so riddled with loopholes and shelters that the wealthiest paid little taxes. For three years in the 1970s, Malcomb Forbs, then the world’s richest man, paid zero income tax. After the Reagan tax reforms, such a thing would be unthinkable today.
The Democrats want to put us on a road back to the 1970s when the rich got off scot free, corporations grew fat and lazy behind trade barriers and high taxes, and inflation and deteriorating government services slammed the middle class. It will happen again. The perverse outcomes are guaranteed by the incentive structure built into our political system.
Why do we have to go through all that again?
Today’s U.S. tax code is fully progressive for everyone except those whose income is derived predominantly from Cap Gains, Dividends, and Carried Interest (not to be confused with Regular Interest). The wealth demographic where this predominance occurs is roughly the 0.1% class. And by the 0.01% class, the marginal rate is FAR lower. Starting roughly at the 0.1% wealth class level, America has REGRESSIVE taxation. It’s called “supply side” fiscal policy.
For instance, a 1%-er pays an average 24% Fed rate, but a 0.01%-er pays an average 14% Fed rate. Surprise! Remember George Soros’s 9% tax on $80M? Remember Romney’s 11% tax on $25M? The 1% class pays 40% of our tax, but now owns nearly 50% of our wealth (much of it offshore and untaxed). From 1945-1980, when we had a TRUE progressive tax code for ALL Americans, the 1% paid 33% of the tax and owned around 25% of all wealth.
You tell me which fiscal period was more equitable, proportionate, and smart. Oh, the 1% class, and mostly the 0.1%, continue to suck wealth from the 99% at a 10-year moving average rate of 0.4%/yr. We have not been this socioeconomically out of whack since 1928.
http://www.daviddegraw.org/peak-inequality-the-01-and-the-impoverishment-of-society/
Your assertion that the “wealthy” had loopholes 1945-1980 is patently false. Yes, there were tax credits available (nobody paid the 90% marginal rate!), but the more you made (from ANY source), the higher your rate. NO exceptions.