Two previous posts—“When the Top U.S. Tax Rate was 70 Percent—or Higher” and “Who Is Paying Their ‘Fair Share’?”—went into the endlessly complex and newly politically relevant question of the “fairness” of the American tax system.
The question is complex for obvious reasons. It’s politically relevant as evidence comes in about the effects of the Trump-Republican tax cut of 2017, and as Democratic proposals come forth to raise top-bracket tax rates again—for instance, as high as 70 percent (which was their minimum level between 1932 and 1982).
A huge torrent of mail has arrived, of which I expect this will be the next-to-last sampling. Not the very last, because there’s a technical issue I want to understand better before posting information about it. But next-to-last, because there’s a limit on fresh perspectives.
Here we go, with numbered entries and a brief blurb on the perspective each one represents.
1) “Stop saying that high marginal tax rates ‘Made America Great’ in the first place.” Several previous reader-messages have stressed the high tax rates during America’s post-World War II growth decades, as a sign that higher top-bracket rates could be valuable once again. Here is a long, detailed response to that argument, from a reader on the West Coast:
The argument, if you can call it that, over the top marginal tax rate vs national economic well-being is—in my opinion—a correlation vs causation pissing match that takes as its subject an issue of secondary or tertiary importance at best.
It’s fun to bash the tennis ball back and forth across our contemporary social and political divides about the rich and rates, but the absolute, fundamental fact about the United States after the Second World War (which seems to be the consensus Lost Golden Age) was that it had been dealt not only all the aces in the global economic poker hand, but most of the face cards as well. To recap:
- The physical industrial capacity of the most advanced industrial economies of Europe and Asia ranged between meaningfully damaged and nearly destroyed. The United States by contrast had just invested tremendous amounts of human energy in the construction of productive infrastructure that no one ever attacked.
- The United States suffered less than 3 percent of the war’s combatant deaths and less than 1 percent of the total global death toll. Considering combatant deaths only, the US suffered in absolute terms about one fifth of the deaths of Japanese soldiers, less than one tenth the deaths of German soldiers, and less than one twentieth the deaths of Soviet soldiers. US military deaths were fewer than those of Yugoslavia. These numbers of course skew even further in the U.S.’s favor when considering total deaths including civilians, and then again when considering total deaths as a percentage of prewar populations.
- The United States was the refuge of choice for scientists and other intellectuals who fled Europe, i.e. there was a tremendous brain drain in the U.S.’s favor
- The U.S. had the advantage of significant natural resources in energy and materials (oil, coal, metals).
- Ethnic tensions were controlled e.g. via the violent subjugation of black Americans, to take only the most obvious and terrible example.
- The U.S. had as ready markets all the degraded and destroyed industrial economies of the world to export its goods to, with unprecedented demand for capital goods to rebuild those economies.