It's hard to imagine today, but our modern society was in fact founded upon the fundamental principle that the wealthy should contribute their fair share to society through substantial tax rates on high incomes.
Today, however, we live under a very different regime. The wealthy have managed to take over politics, and they have wielded their political power not to improve society overall, but instead - surprise surprise -- to drastically slash their own taxes. A nifty little trick.
So here we are today, plagued by severe income inequality throughout our society.
But it wasn't always like this. In fact, for just about our entire modern history, our society required the wealthy to contribute their fair share of taxes.
Our modern society began in the aftermath of the Industrial Revolution of the late 1800s and early 1900s. The Industrial Revolution has been characterized as the single most significant event for human civilization around the world. It represented an age of mechanical invention that enabled food and other products to be mass produced in automated factories. In many areas around the globe, the Industrial Revolution lowered the cost of production and raised the standard of living. Wonderful.
But the Industrial Revolution also had a very dark underside. It gave rise to deplorable exploitation.
The wealthy class refused to share the profits of industrialization fairly with the workers. Instead, the wealthy class leveraged their advantages and disproportionate power to exploit those who were at a disadvantage. They sought to wring as much profit out of the system for themselves at the expense of the workers. The wealthy devised all sorts of ways and means to maximize productivity by forcing the workers to toil away under ever longer hours, while minimizing corporate costs by paying the workers as little as possible. Sound familiar?
This led to the so-called Gilded Age with vast amounts of wealth being concentrated into the hands of a very few filthy rich people, while the overwhelming majority of the population was left behind to struggle with barely enough to get by. The riches in this society, however, were only a thin "gilded" layer on the surface that concealed the underlying heaps of exploitation, unfairness and corruption.
The people of this great democracy rejected this unfair model for American society. Ordinary citizens all across the land gloriously rose up around the early 1900s in what became known as the Progressive Era to oppose this exploitation by the wealthy class. Ordinary people forced the creation of all sorts of measures to restore equality throughout society, and it was this Progressive Era that eventually defeated the exploitation of the Gilded Age.
One critical achievement of the Progressive Era was the creation of the federal income tax in 1913, which required nothing less than the full-blown 16th Amendment to the U.S. Constitution. Prior to 1913, the nation basically had no federal income tax, if you can believe that. The robber barons of the Gilded Age, such as Rockefeller, Carnegie, Vanderbilt and J.P. Morgan, were all extracting vast fortunes from society, and paying no income taxes!
Right from the start, the tax rates were "progressive," or "graduated," meaning that the wealthy were required to pay higher tax rates than the middle and lower classes. This is just basic fairness. Those who have greater amounts of excess income can well afford to contribute a greater share toward society.
Throughout our modern history, these enhanced tax rates for the extremely wealthy have been widely regarded and accepted as fair and appropriate. Now, keep in mind that these high taxes were not imposed upon the middle or lower classes. No. The highest tax rates were applied only to the super-wealthy in the highest tax bracket.
Dating all the way back to the creation of the income tax in 1913, and extending all the way up to contemporary times in the 1980s, the top income tax rate for the super-wealthy averaged approximately 70%. Yes, that's right, 70%. For a period of almost seven decades! Straight!
This is unthinkable today. But these substantial taxes on the wealthy are exactly what our society required throughout our entire modern history ever since the creation of the income tax in the first place.
And for many of these years the highest tax rate was even higher. From 1944 all the way up through 1963 -- so for twenty years straight, including the entire decade of the great prosperity of the 1950s, and including under the two Republican terms of President Dwight Eisenhower -- the top tax rate exceeded 90%. Yes, that's right, 90%. For twenty years straight. Imagine that. And for the first two of those years, 1944-1945, the rate was its highest ever at 94%.
My goodness! Did the sky fall?
Not hardly. In fact, during this time the nation experienced periods of some of its greatest prosperity, and enjoyed far greater equality. For all these many decades, these taxes were regarded as the fair and appropriate contribution that the wealthy were required to make in order to ensure a more free and fair society.
So what happened?
Well, along came President Ronald Reagan in 1980. Reagan bestowed a wonderful gift upon his super-wealthy Republican friends by granting them a shockingly huge tax cut. Reagan slashed the tax rate for the wealthy all the way down to 28%. Yes, that's right. Reagan took the top rate from 70%, down to 28%.
Whoa! That's enormous!
Enormous, indeed. It was a decrease of 60%! Wowza! We're not talking about knocking a few percentage points off the top. We're not talking about 5%. Or even 10%. Or even 20% for goodness sake. No. We're talking about nothing less than a bonanza. A decrease of 60%! This is truly astonishing. Talk about a huge tax cut for the rich! Boy oh boy, it sure does pay to be wealthy and able to influence government.
Ever since Reagan, the wealthy have been on a mad rampage to protect this bonanza and keep their tax rates down at this low level. And they have been extremely successful. President Bill Clinton was able to nudge the highest rate back up a little bit to 39.6% in 1993, but President George W. Bush (the elder brother and advisor to the current Republican presidential candidate Jeb Bush) dropped it back down for the wealthy to 35% in 2003. With great difficulty, President Barack Obama was able to edge the rate back up to 39.6% in 2013 where it stands today. But still, this tax rate is only around half of where the rate has been for the wealthy for most of our modern history.
The Republican Party has gone to great lengths to shield the wealthy from having to contribute increased taxes. One absurd initiative was to create a written pledge to never increase taxes by so much as a single penny, and then attempt to pressure members of Congress into signing it even though they had no obligation whatsoever to do so. At one point, as incredible as this sounds, around 95% of Republicans in Congress had voluntarily signed this ridiculous pledge.
In another absurd example, a number of Republicans vowed to reject a hypothetical budget deal that included a tax increase even though the deal favored them overwhelmingly by a 10-to-1 margin. The hypothetical was that the budget must first generate $10 in spending cuts before it could raise only $1 in taxes. Nope. These Republicans would still reject any such proposal.
Obviously, their chief priority is not their proclaimed concern of reducing government spending. Instead, they care most about protecting the wealthy class from having to contribute to society any additional amount whatsoever.
We also see this reflected very clearly in the budget plans that are proposed from time to time by various Republicans. These Republicans adamantly refuse to have the wealthy contribute one penny more from their own bulging pockets. Instead, they are perfectly willing to impose drastic cuts upon the most vulnerable people in society who need this assistance the most, like slashing programs that provide food stamps, Medicare, Medicaid, Social Security, unemployment benefits, education, low income housing assistance, and on and on.
It is more important for Republicans to preserve the drastic tax cuts enjoyed by the wealthy than to care for our society overall.
It seems that we have regressed back to where we were in the Gilded Age.
And it seems that what we need now is a new Progressive Era to end the exploitation of this current Gilded Age and restore fairness and equality in America.