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In reply to the discussion: Economists Say We Should Tax The Rich At 90 Percent [View all]happyslug
(14,779 posts)63. Europe was back on its feet by 1947, and Germany was already the #1 Exporter by the 1960s.
And US rates did NOT fall from the 1950s's high of 91% till the Late 1960s when do to laws pushed by JFK, but passed under LBJ the top rate was reduced to 70%.
Now, LBJ did increase taxes in his last year in office to finance the Vietnam war, but Nixon REFUSED to renew those taxes so their expired and we ran a deficient till the late Clinton Years.
The problems with the 1970s is directly tied in with the refusal to pay for the Vietnam war AND that the US was no longer a net exporter of oil.
Sidenote: the US was the #1 producer of oil from 1859 till the early 1980s. Yes, long after the US was a net importer, we were still the #1 producer of oil. US oil production started to fall in 1969, while demand for oil increased, thus the US had to start to import oil. If you would have said that the 90% top rate worked for the US was an oil exporter, that would be a more defendable position, for the #1 items imported and exported in terms of VALUE in the world is OIL (# 2 is drugs, #3 is arms).
For the US the top three imports, are oil, machines, Electronic equiipment and vehicles, http://www.worldsrichestcountries.com/top_us_imports.html.
US exports are Machines, Electronic Equipment and oil.
http://www.worldsrichestcountries.com/top_us_exports.html Yes the US does a lot of buiness in oil for we have the refinery capacity to process oil.
For Germany the main exports are Machines, Vehicles and Electronic Equipment
http://www.worldsrichestcountries.com/top-germany-exports.html
Imports for Germany are the same as the US, Oil, machines and Electronic,
http://www.worldsrichestcountries.com/top-germany-exports.html
For the US the top three imports, are oil, machines, Electronic equiipment and vehicles, http://www.worldsrichestcountries.com/top_us_imports.html.
US exports are Machines, Electronic Equipment and oil.
http://www.worldsrichestcountries.com/top_us_exports.html Yes the US does a lot of buiness in oil for we have the refinery capacity to process oil.
For Germany the main exports are Machines, Vehicles and Electronic Equipment
http://www.worldsrichestcountries.com/top-germany-exports.html
Imports for Germany are the same as the US, Oil, machines and Electronic,
http://www.worldsrichestcountries.com/top-germany-exports.html
When Reagan was elected, the economic problems caused by the refusal to pay for the Vietnam war had ended (or may be better referred to as merged) with the growing deficient as a result of the refusal of anyone to pay the deficient. Reagan solution was to reduce the top tax rate to 35% and when that failed to raise it without saying he did so (and Reagan also increased Social Security Taxes and then used that money to reduce the deficient that started with the war in Vietnam). Under Reagan the US went from a net Creditor country to a net debtor country, a position the US had NOT been in since WWI (One of the reasons the US went to War in 1917 was to protect England and France, for they own our banks a lot of money). This not only reflected GOVERNMENT Debt by PRIVATE Debt and in many ways the later is the more serious problem, for unlike Government, which can always increase taxes to pay off a debt, people generally can NOT allocate more money to pay off a debt.
If you take out Oil, Drugs and Weapons from international trade, most trade dies with it. Yes people buy Japanese Cars and Electronics, but those tend to be one times purchases, you buy your food daily AND you use electricity daily (Both of which are US produced). Oil is a big question, but think about it, when you drive your car (excluding electric and hybrids) during the life time of that car, do you spend more on the car or Fuel? The US is still the #3 oil producer in the world, thus most of the gasoline was pumped in the US and then refined in the US.
My point is most things we use that are imported tend to one time purchases not daily or even monthly purchases. The later items, items that we tend to spend more money on, tend to be US made or for labor used in the US. The Internet main centers are in the US (Which is why Putin wants to isolate the Internet from Russia).
Back to the 1950s, Honda had been founded after WWII (Honda is one of the few Japanese Companies that is NOT tied in with one of the Large Corporation that ran Japan prior to WWII). Honda became a large Motorcycle producer in Japan by the 1950s was ready to start to export to the US. Honda noticed the huge sales of Harley Davidson so decided the US would be a good market for its largest cycles. In the late 1950s Honda shipped to the US its largest cycles along with salesmen to talk about them. The Salesmen all rode smaller Honda, 750 cc and smaller and were sent to the US to talk up the largest Honda Motorcycles. The problem was everyone wanted to talk about the smaller bikes the Salesmen were riding NOT the larger bikes they were trying to sell. Honda realized there was a demand for 750 cc and smaller motorcycles in the US and decided to try to take over that market, thus in 1960 Honda started to export these smaller bikes, and sales boomed. It was a niche the US Motor Cycle industry had dismissed since the closing of Indian motorcycles in the early 1950s. On the other hand, while these cycles were produced in Japan, sales AND service of them was in the US. Thus most of the value produced by these imports, tended to be US in puts (Labor in repairs and Gasoline used).
Volkswagen found that to be true, thus once sales reached a certain level, VW (like Honda and other "foreign" vehicle makers) opened plants in the US for such vehicles are costly to produce AND then ship. Below a certain number, it is cheaper to ship, but above a certain number it is better to ship parts and set up final assembly in the country the vehicle will be sold in (Ford found this out prior to WWI, thus Ford is actually larger overseas then in the US).
Yes, I am Bring up a lot of things that seem not associated with each other, but it is to bring up a point, the US was NOT isolated from Imports in the 1950s, it imported items in the 1950s (The Marshall Plan was more to increase Exports from Europe to get them on their feet, for the US was running to high a trade surplus with Europe in the post war era for Europe EVER to pay off, thus the US was looking at a Collapse of Europe unless the US returned the money earned from the exports to Europe). Thus Europe was back on its feet by the late 1940s and starting to exports items to the US (including high end cameras and other "Electronics" high end binoculars and similar items). Japan in the 1950s was noted for exporting the same Junk we are getting from China today.
Thus the US had exports and imports in the 1950s, but the #1 item traded is the same as the #1 item traded today, oil. As long as the trade in oil is the #1 trade item, imports are NOT the Treat it could be to a 90% tax rate. The 70% tax rate was NOT a problem in the 1970s but the 35% top tax rate under Reagan ended up being a problem that even Reagan wanted to end.
One angle where the 90% tax rate will do a lot of good is speculators. Right now profits from such speculation goes into the pocket of the speculators. When the tax rate was 90%, most profits from Speculation went to the Federal Treasury. When FDR supported the High 90% tax rate, it was to drive these speculators out of the market for they were the cause of the Stock Market boom of the 1920s AND its collapse in 1928-1932 (Which lead to the closing of every bank in the US EXCEPT for the Bank tied in with the US Post Office (The US Post Office Bank was closed in 1969 by congress as no longer needed for the bank regulations of the 1930s had ended any need for a Government owned bank i.e the bank lobbied congress to cut out a competitor). FDR wanted such high tax rate on short term gains on the grounds that such gains did NOTHING for the Economy as a whole.
Please note the 90% top tax rate was subject to a 50% disregard if the profit was the product of a five year investment. i.e. if you bought stock and sold it within a year at 100% profit, 90% of that profit went to the Government. On the other hand if you held it for Five Years, 50% of the gain would be viewed as NON taxable, thus you paid 90% tax on 50% of the 100% gain, i.e. a 45% effective tax rate. Thus long term investment was encouraged, while short term speculation was discouraged.
There was a downside, someone whose salary reached the lower levels of the 90% top rate (Some Actors and Actresses were at this rate). To avoid such high rates actors and Actresses started to demand part of the profit from any movie they were in, thus took it as a long term investment not as salary. Authors of books often tried to make the book something of a long term investment not sales from the first years of sales (If done right, by delaying payment over many years, could be viewed as a long term investment). Income tax averaging also could be used to offset the problems caused by such high rates (Income can be averaged back 3 years and forward five years, to spread out a one time huge increase in income).
Notice there are downside to the 90% top tax rate, but most are know from the last time we had a 0-0% top tax rate and are still on the books.
Just come comments on why a high TOP TAX rate would be good for the country.
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Oh but there most certainly was competition -- mostly "made in Japan" was a saying
loudsue
Oct 2014
#100
A few hundred thousand men KIA in a World War had no impact on unemployment?
cherokeeprogressive
Oct 2014
#69
The biggest correlation has been the huge increase in speculation since the early 1980s
happyslug
Oct 2014
#94
Low tax rates on top earners have meant lots of recessions, lots of economic upheaval.
JDPriestly
Oct 2014
#19
The wealthy love recessions because they can buy a good company for little or nothing and ride out
Jim Beard
Oct 2014
#95
Good point. Trade is a smaller part of our economy (24%) than any other country other than Sudan.
pampango
Oct 2014
#105
You dont think that was a big part of it? We made EVERYTHING. Others made very little.
7962
Oct 2014
#53
I notice both your cite and my cite rely on the same Government data, and the difference is SS
happyslug
Oct 2014
#92
Europe was back on its feet by 1947, and Germany was already the #1 Exporter by the 1960s.
happyslug
Oct 2014
#63
The growth came about because of full employment (which there wasn't, between 1929 and 1942 or so)
Spider Jerusalem
Oct 2014
#50
Couldn't you say industry failed to run amok with planned obsolescence back then?
RedCloud
Oct 2014
#52
Yes, but the rates that were ACTUALLY paid by the wealthy and big business were higher then than now
stillwaiting
Oct 2014
#108
What's the objective source for the allegation that high tax rates led to general prosperity?
Spider Jerusalem
Oct 2014
#45
I've been saying that for a long time. I'm glad economists finally agree with me. eom
Blanks
Oct 2014
#11
Good riddance. We don't need people buying prime real estate in the US and then not paying
JDPriestly
Oct 2014
#28
When you tax at 100%, what incentive is there for them to do anything?
Shoulders of Giants
Oct 2014
#85
Eliminate all deductions and loopholes and increase the rate to 55% for the top 1 %.
roamer65
Oct 2014
#77
Alas, the people (congress) who could do this have been bought by uber-rich.
Tierra_y_Libertad
Oct 2014
#65
If a top marginal rate of 90% would increase everyone's well-being, it could be argued that these
indepat
Oct 2014
#70
Reagan's intention seemed to be to turn America into a feudalistic nation
AZ Progressive
Oct 2014
#82
I think this is the single most effective way to strengthen the middle class.
lovemydog
Oct 2014
#74
I am for 50 K, and threy is support that that would INCREASE revenue to the Government.
happyslug
Oct 2014
#84
Sadly, Democrats asked the wealthy only to pay a little more, as if a little more would have cured
indepat
Oct 2014
#96
And I'd like a Federal Department of crisp, lossless, Grateful Dead soundboards.
Warren DeMontague
Oct 2014
#103
Yup. Not much to add to that other than saying: Share that graph far and wide.
True Blue Door
Oct 2014
#107
I would be happy with FDR's 60%-80% top rate from 1933 till WWII started. n/t
pampango
Oct 2014
#109
$100 million income taxed at 90%: can they survive on just $1 million per year?
Martin Eden
Oct 2014
#116
Democratic Party isn't strong enough to advocate for working families. Social justice
whereisjustice
Oct 2014
#118
I'll agree if the $$ goes towards Social programs and not to more military empire building.
Amimnoch
Oct 2014
#121