The Rich Haven’t Always Hated Taxes

Once upon a time, the wealthy elite took pride in the fact that they paid higher rates than other Americans

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AP

Oliver Wendell Holmes, the U.S. Supreme Court justice pictured here in 1931, was known to "enjoy" his taxes. "With them I buy civilization," he said.

Mitt Romney has proclaimed, “I pay all the taxes that are legally required, not a dollar more.” While most Americans may not agree with his tax rate (14%), few would disagree with his sentiment. Almost no one willingly pays more taxes than required. Yet there was a time when elites willingly acknowledged that they should pay far higher rates than others. In fact, when the income tax was first regularly put into place in 1913, the well-off were the only ones required to pay it.

Before that time, our government relied upon a system of tariffs for revenue. But as the nation grew in population and economic prowess, it required public works like more efficient transportation to grease the wheels of capital, public goods like schools to create more skilled workers, and public protections to help those who the market failed. Our leaders — many of whom came from the wealthy elite — turned to the idea of an income tax. In 1909, Republican president Teddy Roosevelt argued in favor of income and inheritance taxes, as they would promote, “equality of opportunity.”  The programs required a constitutional amendment, and by 1913, 88% of states agreed that it was time to tax the income of its citizens. But not all its citizens — instead the income tax burden fell solely on couples who made over $4,000 (in today’s terms, around $88,000). If you made less, you paid nothing. And the more you made, the more you paid.

(MORE: One Nation, on Welfare: Living Your Life on the Dole)

For the next 60 years Americans lived under a progressive tax structure. And while elites were not overjoyed to pay higher taxes than other Americans (and some sought ways to avoid them), most understood their tax burden as their civic duty. Franklin Delano Roosevelt argued that, “Taxes shall be levied according to ability to pay. That is the only American principle.” Supreme Court Justice (and Boston Brahmin) Oliver Wendell Holmes was known to “enjoy” his taxes. According to Felix Frankfurter’s book Mr. Justice Holmes and the Supreme Court, Justice Holmes told a young law clerk who complained about paying them, “I like to pay taxes. With them I buy civilization.” When John D. Rockefeller Sr. died in 1937, the estate tax was nearly 70%, yet complaints from his family would not be publicly heard. Two years earlier his son earned more than $5 million; this gave him the distinction of being the only person in America’s highest tax bracket (at a rate of 63%). No editorials were written by John Jr. to suggest class warfare, or that the rich were being unfairly singled out.

Yet in the 1970s, this attitude began to change. Elites began to use their increasing political power to lower their taxes, an effort that came to fruition under Ronald Reagan. Today our elites employ what political scientist Jeffrey Winters calls “the income defense industry” to greatly reduce their taxes. These lawyers, lobbyists, and tax consultants have worked to protect the wealthy with special laws, legally move money to special places like the Cayman Islands and Switzerland, and undermine progressive taxation.

(MORE: The Phony Battle Over the Self-Made Man)

The results have been successful. As economists Thomas Piketty and Emmanuel Saez have shown, between 1970 and 2004 the rich cut their overall effective tax rate by more than half — from 75% to 35% — while the American average has remained at 23% (this includes individual, corporate, payroll and estate taxes). But at what cost? Inequality has increased, mobility has declined, and the American Dream is dying. Not every wealthy American believes they are being robbed — both Warren Buffet and Bill Gates have taken the position that loopholes for the wealthy should be closed, taxes should be raised, and billionaires should pledge to give away at least half their fortunes. (When Warren Buffett was married in 1952 he had a discussion with his new bride about the fact that they were going to be rich. “We agreed with Andrew Carnegie, who said that huge fortunes that flow in large part from society should in large part be returned to society.”) But the rich who lobby against progressive taxation have replaced the civic principle of taxing on the basis of the ability to pay with the individual principle that nothing should get in their way of being as rich as possible.

MORE: Rich People Problems? The Summer of Elite Disconent

60 comments
khi.mah.uk
khi.mah.uk

The rich don't pay their fair share of taxes. They always find loopholes and avid paying. At most they pay only 5% of what they earn.
Most people would happily part with 33% of their income. It's this very wealth that gives many an education and the opportunity to earn a good living. Because the rich don’t pay the middle class ends up paying 30% in income tax and a further 20% in VAT.
It's time the Labour unions demanded the rich pay their fair share of taxes or stop conducting business here and instead setup shop in Bermuda!

SADHU-VEDANT-MUNI
SADHU-VEDANT-MUNI

it is true that the taxes are the sources of income of the government and the expense d done by the government  for the welfare of the citizens. but at present there are much misuses of the exchequers of the government. tax evasions are more due to heavy taxes led by the government. in our country IN India, LORD Rishabha  Dev ji had advised to the rulers about the taxes and how tax should be imposed on citizens in this way that THE COWS give milk to the owner and remained part gives to her calf without pain. like wise the government should  not imposed the heavy taxes on the citizens. it should be painless.

Fatesrider
Fatesrider

I have a simplified tax structure.  It will cover the needs of the nation and is based on the individual national poverty rate rather than a strict dollar amount.  Currently, the individual poverty rate (2009) is about eleven grand.  This would allow for inflation or wage reductions to be accounted for, but would require an annual update of the poverty rate.

If you make below twice the poverty rate PER PERSON in the family, you pay nothing.  The idea that a single dependent only costs you 3700 bucks is ridiculous.  A family of nine could make 198 grand and pay no taxes.  An individual would make 22 grand before he would pay any taxes.  And no tax amount would let someone make LESS than that.  So if someone made 22100, they wouldn't pay 2.5% in taxes (About 550 dollars).  The most they'd pay is 100 bucks.  That double the poverty rate per person is a guaranteed minimum if you make it.

Above that for every multiplier of the national poverty rate, it goes up two and a half percent to a maximum of 80%.  Someone making five times the national poverty rate per person pays 7.5% in taxes.  Someone making twelve times the national poverty rate would pay 25%.   There is no guaranteed minimum for these tax brackets. 

At an 80% tax rate, that would mean someone making 34 times the national poverty rate.  That would give a single person 74800 grand to live on as opposed to the 22 grand a person making twice the poverty rate has.  And for the family of two, that would be 150 grand.  A family of nine would get to keep over half a million dollars if they earned it.

This is amount you keep at the LOW END of the scale.

I think most people can live very nicely on that.

Simplified math: All income from all sources (including investments) divided by number of people in the household being claimed as dependents equals the per person income rate of the household.  Divide that amount by the current national poverty rate.  You have the number of times you are above it.  If it's less than two, you're below it and owe nothing.  If it's over two, round up whatever it is to the next whole number.  Subtract two.  Multiply by 2.5.  If it's over 80, make it 80.  Divide by 100.  Multiply your per-person income with that fraction.  That's how much you owe in taxes per person.  Multiply it by the number of people you are claiming.  That's your total taxes.   Subtract that amount from your total income.  That's what you keep.

No exemptions.  No deductions.  No special inclusions.  No loopholes.

This should be phased in over the next five years, starting with the top two and bottom four scales first - assuming the tax revenue from that is balanced in favor of excess tax generation so as not to reduce current tax revenue.

Government spending increases would be tied to the rate of inflation combined with the population and other specific considerations to project a future budget.  The budget would have to be balanced each year.  Every time it is not balanced, Congress would have to make up the difference from their own paychecks and political donations.  If they are over more than that combined total, fine, they don't get paid.

After all, you don't pay someone who doesn't do their job.

 The government is obligated to use any EXTRA tax revenue to pay off the debt first.  I see that as a short-term thing.  If the debt is paid off, any extra goes first to fund social security then back to the tax payers who will receive it proportionally to what they paid - those paying the most getting the most back.  Fair's fair, after all.  If the tax structure needs to be scaled to meet projected needs, it can be scaled by the poverty rate or tax rate itself.  As long as it just changes one number.

Good luck getting re-elected if the taxes go up.

This would likely generate more than enough tax revenue to balance the budget and makes it a very simple tax code that proportionally taxes the most those who can most afford it.

Better yet, it is redistribution of wealth from those who do not spend enough of it in enough places to stimulate the economy to those who do live in enough places who are willing to spend it.  Bottom-up demand for the goods and services of businesses is what stimulates job creation and growth.  Nothing else does.  That is the reality of a capitalist economy.

While the wealthy (especially those in the middle part of the income brackets)  may see a slight decrease in the exorbitance of their life-styles, no one will miss a meal, no one will ever have to worry about not having a roof over their heads.  And if you cut taxes on the poorest, they'll spend their money, putting money into the economy from the bottom up, generating demand, which will stimulate job growth to meet that demand.

Then everyone will be making more money.  In the end, everyone benefits - some more than others, but in a much more fair way than we have today.

Publius
Publius

In 1992, the Clinton campaign painted Republican President George H.W.

Bush as untrustworthy and a “hypocrite.” Why? Because when running in 1988,

Bush famously said, “read my lips—no new taxes.” And then, in 1990, Bush

compromised with a Democratic House and Senate and approved a relatively modest

tax increase—presumably because that is what he felt was the best way for the

country to reduce the deficit. Historians, however, attribute the Clinton

campaign’s ability to brand Bush as dishonest and hypocritical as one of the

primary reasons for his victory. Clinton won the election, but America lost all hope of bipartisanship henceforth.

Read more in essay Number XXIII, "What's In a Name?" at thepubliuspapers. com  

Gary McCray
Gary McCray

The rich don't hate taxes now either, they just don't think they should be the ones paying them.

Nonaffiliated
Nonaffiliated

Disclaimers first:  I am not rich and I support most entitlement programs.

Why have 'the rich' changed their attitude toward taxes?  Once upon a time, taxes were only for infrastructure, law enforcement , defense (not offense), schools, and little else.  Rich folk's dislike for taxes seems to have grown in direct proportion to entitlement spending.   The rich aren't against spending money, but they do prefer to see some result from that.  With entitlement spending, it seems like a bottomless pit that can never be filled.  Indeed, the more that is spent today, the larger the need tomorrow. 

Today, our roads are crowded, our schools perform poorly, the justice system moves slowly, infrastructure is falling apart (all of which are important to our economic health), and even defense is being downsized as entitlements consume an ever-increasing share of spending.   Even 'the rich' don't make enough money to cover our projected deficits.  So, even when you increase their taxes, it would be wise not to completely ignore their warnings about unrestrained entitlement spending. 

harrykuheim
harrykuheim

When JFK was inaugurated he was Heir to a Billion dollar fortune that dwarfed any other Presidents wealth in History...and still does. Romney has a mere $20-$30 Million and all we hear is how rich Romney is.

When you are in such a position, as JFK was, you care little about a portion of your money being taken in Taxes for vague purposes knowing your Fortune can never be significantly impacted and is inexhaustible.

On the other hand...if you have a finite amount of wealth...that Tax "Bite"  15%- 35% means a lot...

jamis77731
jamis77731

The rich, not only rig the private sector for their unfair gain, they buy off congress, the tax writers. Germany and France have tax codes that are less than 1000 pages, while the U.S. tax code is over 70,000 pages. All those extra pages, with their special exemptions and loopholes, are bought and paid for by the wealthy, as they continue their re-distribution of wealth upwards.

This is just another example of the rich re-distributing wealth upwards.  They do it in the private sector where executive salaries in the U.S. have skyrocketed to obscene amounts, as compared to the rest of the world.  They tell workers there's less money for you because it's a global economy now, but they don't apply that same rule to themselves.  Money that workers have earned,  is now taken from their pockets and reallocated to the top tier.

iamacat
iamacat

If you don't buy civilization, sooner or later you get a violent revolution. People will not tolerate a system that is (or is perceived to be) rigged against 99% indefinitely. The only question is if the transition is peaceful or otherwise.

Fundy Stewart
Fundy Stewart

It seems the rich have starved the consumer away from the store and refuse to accept the blame for their own downfall.

 

bzelbub
bzelbub

I have never made more than $38,000/year and have never minded that I pay taxes. And no I do not use food stamps or other tax lowering aids, I feel that those who really need the help should be able to get help. Taxes and voting are what makes me an American, I'm proud to be able to contribute.

 It does irk the  heck out of me that so many people and corporations are able to legally shirk their duties to be good citizens, and then call the rest of us suckers in the process.

Stephen Williams
Stephen Williams

My thought on the rich paying taxes (more than the working class) is that it would be in their interest. Not only as someone else stated, that they have the most to lose from an instable government (which is what is happening from the lack of income our country has); also because the working class is the backbone of the economy in America.   The more disposable income the working class has, the more items are bought (if a company makes 1,000,000 do-hickeys, and sells them for $100 each, a single billionaire will not buy every last do-hickey with the money they save in tax breaks (especially if their company makes them), but 1,000,000 members of the working class might (even if they are an employee of the company that makes them)).  

Right now, in America, the rich are hording the money in this nation. I do not understand this mentality, because it causes their wealth to stagnate.  In order for wealth to grow, it needs to be invested (wisely).  The wisest investments are the ones which build the strongest economy, the ones that create a healthy (financially, mentally, sociologically, and medically) consumer. Building a factory to produce items does no good, if no one can buy them.

I do not feel deregulation of businesses, or tax breaks for business foster growth in the job market. These items only increase profits for the businesses.  The company that produces the do-hickeys will not hire more people to make more do-hickeys, if no one can affords them; they will just call the tax breaks “profits, as putting the money toward producing unsellable products would be foolish. In order to create jobs, you need to increase productivity. In order to increase productivity, you must increase demand for products. In order to increase demand for products, you need consumers; people with money in their pockets, after they pay the bills each month.

The way to create a healthy consumer is to invest in the working class. It would be a long process, with many milestones, including: increasing pay to stay consistent with inflation, education, affordable health care.

A lot of people argue against shifting the tax burden more onto the rich, saying that the rich should not be “punished” for being rich. It’s not a punishment; it’s an investment in the economy, and the country that protects their investments.

A strong economy does not trickle down; it has to be built upon a firm foundation.

infamazz
infamazz

Nobody actually paid the tax rates when they were above 70%. There were myriad tax shelters that have since been made illegal. Leave it to the Time's to gloss over that important tidbit.

DWBuc99
DWBuc99

I hate it when those rich arrogant, non-caring Republicans make statements like this....

"The lessons of history, confirmed by the evidence immediately before me, show conclusively that continued dependence upon relief induces a spiritual disintegration fundamentally destructive to the national fiber. To dole our relief in this way is to administer a narcotic, a subtle destroyer of the human spirit. It is inimical to the dictates of a sound policy. It is in violation of the traditions of America."

Oh... my bad.... That was FDR during his 1935 State of the Union address... You see even he knew what would happen when you make someone dependent on the government for their survival!!!!  Providing temporary relief should be based in local communities where people are help accountable to the people they live near.  When you have the open ended relief that the federal government doles out, you loose all incentive to looks else where or... God Forbid... You actually have to take responsibility for yourself.

DaveMittner
DaveMittner

Wow, how our elite has fallen. If there is a class war going on, the above article details exactly why. The existence of classes is not inherently bad nor does it cause a war, but when the elite use their political and economy influence to tip the scales to their favor...

Well, history shows us that the elite minority cannot overcome the mob anger of the lower classes revolting.

cephalo
cephalo

If the purpose of government is to protect private property, it follows that the more you have, the higher interest you have in a stable, robust government. Without government, property rights have no meaning. Then it doesn't matter who 'built that'. Someone else will soon be living in that second house you thought you 'owned'.

With your taxes, 'you buy civilization'. Without which, you own nothing.

Leftcoastrocky
Leftcoastrocky

Which loopholes will Romney’s tax plan close to meet its goal of balancing the budget while cutting rates, and which government agencies will Romney merge or close.  You can trust the American public with this information, Mitt.

Prakash Iyangar
Prakash Iyangar

while u show history of people who have agreed to pay taxes and be charitable, there is a distinction first that needs to be drawn btw charity and taxes ( one is voluntary, the other is not period!) 

Apart from that, u make no case for why a rich person should pay more taxes than a poor person...? U pay taxes for services you receive from the govt, and if everyone is equal in front of the govt, there should be no excess taxation on the rich just because they can afford it. 

ranger99
ranger99

I've known plenty of very wealthy people and they have all been, without exception, the worst human beings I've ever met.  Greedy, shallow, corrupt, heartless, and rotten to the core. 

They'd cut their own Grandmother's throat for a nickle and then stash that nickle in the Cayman Islands to avoid paying taxes on it.

M
M

Higher taxes? By all means, raise taxes and let all productive people go on wellfare and let´s all be poor and on wellfare together. Why not? Some people just doesn´t see the negative correlation between higher taxes and less productive output in society. Why on earth would any intelligent human being be productive when they can live on wellfare (that is what higher taxes brings you)? The article mentions Warren Buffet speaking about the wonderful idea of paying more taxes: so why doesn´t he? There is no need to raise taxes from a legal stand-point. Just pay more than you have to and the case is closed. See? Simple. Has Warren Buffert done such a thing? I leave you all with that question.

Jeffrey Geez Glavick
Jeffrey Geez Glavick

As I have said before, Romney should be proud to show all his tax reurns, unless?

bw00045
bw00045

@Publius Good God this is embarrassing. 1) The primary reason Bush lost was because Ross Perot functioned as a spoiler, grabbing a large portion of the hardcore anti-tax wing of the Republican electorate. The vast majority of these voters would never have voted for Clinton in a million years, so at the very least it's an oversimplification to claim that Clinton's attacks on Bush were what swung the election.

2) If you think that bipartisanship ended because of Bill Clinton being a meanie in one election, rather than a) the evolution of the two parties away from ideological heterogeneity, b) the rise of the Moral Majority, Newt Gingrich, and other insurgent forces in the GOP who were always unwilling to compromise going back to the late 1970s, c) the legacy of the Nixon/Goldwater  Southern Strategy, d/e/f/g/h etc) a myriad different long-term structural factors that had been going on for the 50 years prior....let's just say I have many bridges you might be interested in buying at a massive discount.

reformedformerlibertarian
reformedformerlibertarian

 You would have had more of a point if you hadn't made the claim about defense spending.  Actually, defense is the most bloated area of federal spending amp; has spent the last 11 years consuming an ever-increasing share of spending.

bw00045
bw00045

@harrykuheim Are you from a planet that has a shortage of zeroes? Romney is worth at least $200 million, even after his campaign expenditures.

It's a bit misleading to call JFK the "heir to a billion dollar fortune" because presumably RFK, Teddy, and the other four living/mentally competent children of Joseph P. Kennedy would have shared in that inheritance. So call it a wash.


vstillwell
vstillwell

WTF are you talking about? Most social services are provided by state governments. Now, if you want to stop cashing your social security checks and stop using Medicare, be my guest.

calaislilies
calaislilies

And what do you call farm and oil subsidies? Corporate welfare is much greater than welfare for the poor. Where's your outrage at the dependence of corporations on government support?

NoFoolJule
NoFoolJule

The more money you have the more interested you are in a stable society, the more you have to lose etc. If you wish to pay as little as possible don't be surprised when the revolution starts with their lynching.

calaislilies
calaislilies

A rich person doesn't pay more. A rich person pays significantly less; some as low as nothing in taxes. 

Jarvis Glenn
Jarvis Glenn

Everyone receives services from the government; from military protection, police protection, in fact people pay taxes to pay the people that write the laws to protect them. There is not a single person in this country that doesn't receive services from the government both federal and state.

harrykuheim
harrykuheim

I know Oprah, Clooney, and Bill Gates would do that

yupthatsright
yupthatsright

I know many non-wealthy people who are as you describe.

Joe Smith
Joe Smith

You completely ignore the fact that the country as a whole was more prosperous, and the economy was growing faster, when the tax rates were both higher, and more progressive. The simple fact of the matter is that the American economy is consumer driven, and when the middle class is prosperous, consumer demand grows, benefitting everyone, from top to bottom.

ranger99
ranger99

Spoken like a true sociopath.  Put your Ayn Rand down and join us in the real world someday.

harrykuheim
harrykuheim

Likewise Obama's  educational records, writings,  place of Birth, and close prior Political Associates.

vstillwell
vstillwell

Those goodies are the for the job creators. 

DWBuc99
DWBuc99

Where did you see me qualify my statement.  All government relief , be it corporation or individual, should be rare and temporary and not a way of life.  I believe that farm subsidies and oil subsidies, bank bailouts, autobailouts, unemployment, and what is know as "welfare" and medicaid all fall into this category.

cephalo
cephalo

Exactly. Romney was wrong to say that 47% depend on the government. The true figure is actually 100%.

josiev
josiev

are you an actual human being with a brain...or some kind of republican automaton programmed to give the same ridiculous rush limpdick responces to everyone elses reasoned posts?  and btw sh*t-for-brains....oprah and bill gates have given away huge amounts of money to those less foutunate.  if you can figure out how to use google, try looking that up.....but then, i keep forgetting, you are just a clueless automaton posting inane partisan crap........    

TonyJack
TonyJack

@Joe Smith First the prosperity came from previous fiscal conservative laws that came to effect, not the higher taxes that were created afterwards. Also in the past it was easier to hide money from the government then.

Ratherbesurfing
Ratherbesurfing

I would like someone to explain to my simple mind how taking more money from one segment of the population and giving it to the government creates economic growth and prosperity.  The government doesn't currently employ the vast majority of Americans, so where is the connection?

nettwench14
nettwench14

This country is a collaboration, not an individual blood sport!

Joe Smith
Joe Smith

It took a long time, but even Alan Greenspan eventually had to admit that her "philosophy" was full of holes.

Fatesrider
Fatesrider

 If you had a brain, Scarecrow, you'd know that all that information about Obama has already been released and you could simple GOOGLE it.  But no, you'd rather drink the right-wing mental cyanide than bother using your brain even once in an attempt to educate or inform yourself outside of the political bias to which you so desperately cling.

nettwench14
nettwench14

Medicaid is actually needed to supplement Medicare for the elderly who are in nursing homes. It also helps low-income people pay for health care on a sliding scale, which is not a give-away. They could be students, or the unemployed, but it is a temporary situation, not a way of life. It's not open-ended dependency.

To equate a necessary social service like Medicaid with the Republican House giving $4 Billion to oil companies shows a shocking lack of understanding of what these programs are meant to do. They are meant to reduce suffering.

An oil company does not "suffer" when it doesn't get a government handout, despite Romney's assertion that "corporations are people."

TonyJack
TonyJack

@vstillwell The government waste majority of taxes. The majority of public schools never do as well as private schools, despite many that are equally funded. The military spending is too high. The government never done much to keep Americans healthy. How does the rich benefit more? There is no research that shows that. If anything the rich pay more taxes than the actually worth of the benefits they receive. Before you call someone stupid, how about you actually achieve something in life. You just sound like another liberal brainwashed fool.

Nonaffiliated
Nonaffiliated

You ask a good question.  What do the rich do with their money?  Spend it.  What does the government do with their money?  Spend it.  So how is government's spending better than what the rich do with it?  When the rich spend their money, they insist that the recipient of the money perform some service or provide some good in return.  The government often demands nothing.  Is that better? 

nettwench14
nettwench14

The portion of the people who don't pay income taxes because their income is too low, still pay plenty of other taxes, like payroll taxes, sales taxes, etc. So it's degrading for people like Romney to insinuate that they don't contribute. They still pay more than he does, if he only pays 10 to 15%. Why do you think people aren't happy about being called deadbeats or victims?

And many low income people are already retired on Social Security, for example. They are not on welfare!

vstillwell
vstillwell

It's called investing in infrastructure and education, genius. The economy benefits from an educated population, roads, electrical grids, stability, a military that protects us, healthy workers, etc. Those who derive the most benefit from this, pay a little more tax, chief. Were talking about a few percentage points here. We're not talking about taking all the money from the wealthy. For crying out loud. You stupid conservative baby boomers are the most pitiful generation in the history of mankind. 

Ratherbesurfing
Ratherbesurfing

That seems like a plausible connection. If we are to believe what the press has been telling us lately, already 40- 50% of Americans don't pay any federal income tax. With nearly half the population paying no federal tax at all, why aren't they spending like banshees and why is the economy still in the dumps?

Jarvis Glenn
Jarvis Glenn

The connection is the more money the government takes from the top the less they take from the middle and lower class. Guess what happens when they take less from those two groups; the people are able to buy and consume more. So in all the companies or people at the top make more money and the economy prospers.