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Not that he needs any further lessons from the master of confiscatory taxation.
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Not all congressmen agreed with Chandler. Many opposed Roosevelt’s “capital levy,” as Senator Robert Taft (R-OH) called it. Senator Arthur Vandenberg (R-MI) called it “prejudicial class baiting.” During the congressional debate, Rep. Charles Gifford (R-MA) said, “The administration [has] set loose the forces of prejudice and disunity.” Rep. John Jennings (R-TN) said of the American taxpayer, “Heretofore, we have sheared him annually—now it is proposed to skin him.” Jennings added, “I do not hold any brief for Henry Ford, but I am glad that he started life with a pair of blue overalls and a monkey wrench and the genius that God Almighty put into his brain, and became a millionaire, because he made other men rich and paid the highest wages that up to that time had ever been paid to the American workingman and covered this whole country with a network of highways.”
Jennings concluded, “The time will come if we continue on down the slippery, steep road we are now on to the precipice that leads to the bottomless pit, the abyss of financial bankruptcy and ruin, the time will come when we can put a taxpayer on exhibition and make money charging admission for people to see him.”
FDR, however, clearly wanted Congress to pass a tax bill that gave him withholding and double taxation on the rich. When the Senate refused to pass such a bill, FDR threatened a veto. “The Senate bill,” the president wrote, “would result in a highly inequitable distribution of the cost of the war and in an unjust and discriminatory enrichment of thousands of taxpayers in the upper income groups.” Yet this “unjust” Senate bill already taxed large incomes almost 90 percent. The Senate-House conference committee, however, under threat of an FDR veto, turned out a bill that taxed million-dollar incomes at 100.6 percent per year for 1944 and 1945. Six months later, however, when Congress refused to raise those rates further in the Revenue Act of 1943, FDR vetoed it and called it “not a tax bill but a tax relief bill providing relief not for the needy but for the greedy.”
FDR’s ACTIONS SEEM PUZZLING. Why “soak the rich” for 100 percent of their income (more or less) when they already face rates of 90 percent in both income and corporate taxes? He knew that rich people would shelter their income in foreign investments, tax-exempt bonds, or collectibles if tax rates were confiscatory. In fact, he saw it happen during his early New Deal years. When he raised the top rate to 79 percent in 1935, the revenue into the federal government from income taxes that year was less than half of what it was six years earlier when the top rate was 24 percent. After that, FDR admitted privately, “Barney Baruch has been saying right along that you have got to reduce the top taxes and that if you do that people will take chances.” But he refused “to pay usury in order to get recovery,” and he kept rates high. Why?
Three points are important here. First, FDR, as a progressive, believed with his cousin Teddy that “swollen fortunes” needed to be taxed at punitive rates to redistribute wealth. In fact, as we can see, redistributing wealth was more important to FDR than increasing it. FDR was the first U. S. president to take redistribution that far.
Second, high taxes on the rich provided excellent cover for his having made the income tax a mass tax. How could a steelworker in Pittsburgh, for example, refuse to pay a new 24 percent tax when his rich factory owner had to pay more than 90 percent?
Third, and possibly most important, class warfare was the major campaign strategy for FDR during his whole presidency. He believed he won votes when he attacked the rich, or they attacked him, and he discussed that with Ray Moley, his speechwriter, and later with Henry Morgenthau, his secretary of the treasury. During the 1936 campaign, when FDR still had double-digit unemployment, he used the rich again and again as scapegoats. Two weeks before the election, FDR announced that wealthy people had long been refusing “to pay a fair share” of the cost of government. Therefore, he boasted, “we increased still further the taxes paid by individuals in the highest brackets—those with incomes over one million dollars a year. Wasn’t that the American thing to do?” Later, when those millionaires sheltered their income to escape the high new rates, Roosevelt publicly denounced them for “tax avoidance” and for not paying their “fair share.” In 1937, perhaps thinking of his next reelection campaign, he told two prominent Democrats, Senator Pat Harrison and Rep. Robert Doughton, that if they would form a “subcommittee to investigate tax avoidance,” that the Democrats would gain “at least 10,000,000 [votes]” by publicly exposing those who sheltered income.
FDR won his long-term battle to retain the withholding tax and keep a large percentage of Americans paying incomes taxes. But in the next generations, Presidents Kennedy and Reagan were each able to slash the top rates; Presidents Clinton and Bush were able to cut the capital gains tax as well. Because these rate cuts created more revenue, and sparked economic growth in the U.S., the old campaign for redistribution slowed down until the arrival of Barack Obama on the political scene.
NO POLITICIAN SINCE FDR has locked into the campaign for redistribution as faithfully or as enthusiastically as Barack Obama. He clearly admires FDR and compares himself to FDR. Perhaps tongue-in-cheek, Obama said FDR was “pretty fiscally conservative,” but in practice Obama has copied Roosevelt’s tax strategy, using his main tactics and even some of his words.
During the 2008 campaign, we saw Obama parallel FDR’s commitment to the principle of redistribution — even if it reduced wealth in society. In an ABC News segment, for example, on April 16, 2008, Obama said he wanted to raise the capital gains tax. Interviewer Charlie Gibson asked:
George Bush has taken it down to 15 percent. And in each instance, when the rate dropped, revenues from the tax increased; the government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down. So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?
Obama replied, “Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness….” When Gibson retorted, “But history shows that when you drop the capital gains tax, the revenues go up,” Obama said, “Well, that might happen, or it might not.”
Thus, whatever the impact on revenue, Obama has fought during his presidency to raise the capital gains tax. Not only is it a matter of principle, it is for Obama, as it was for FDR, a useful campaign strategy. Both FDR and Obama had huge spending programs that resulted in high unemployment, increased national debt, and a stagnant economy. The class warfare theme that worked so well for FDR is a major part of Obama’s campaign for reelection. Regardless of whether massive federal spending and high taxes hurt the economy, the political point is that few Americans earn $1 million a year and those who don’t can be riled up at those who do. That’s how, as FDR showed, an incumbent campaigning for reelection can win and win again during hard times.
Republicans put “party over country,” Obama said during an October 6, 2011 press conference. “Millionaires and billionaires…have lower tax rates in some cases than plumbers and teachers.” True, capital gains taxes at 15 percent are lower than income taxes for some middle-class Americans, but that is because the capital gains tax is, in a real sense, a second tax on top of the income tax. All cash invested toward capital gains has already been shrunk by the income tax (and possibly the corporate tax as well). But census data reveal that the top 1 percent of income earners pay 38 percent of the federal income tax; and the bottom 50 percent shoulder less than 2 percent of that total tax burden—which is not a statistic shared by the president. Instead, Obama promotes his new surtax on millionaires, thus “making our tax system fair and just and promoting growth.”
Those who thrive on class warfare, like FDR and Obama, seem to have insurmountable advantages. They can divide America, demonize the rich, and fish for votes among the middle-class and poor. But, as FDR and Obama have discovered, when you penalize the rich, they shelter their wealth, or take it elsewhere. That makes an already depressed economy even more stagnant. Ronald Reagan, by contrast, slashed tax rates on incomes and corporations, and then watched as unemployment and inflation plummeted. The U.S. dramatically expanded its industrial hegemony in the world. Along the way, Reagan carried 49 of 50 states when he ran for reelection. What’s more, when the economy opened up, the poor really did get something from the rich—computers, iPhones, Garmins, the Internet, and flat-screen TVs, for starters. That beats the WPA, the OPA, cash for clunkers, and Obamacare. And it gives those who believe in freedom hope that the votes for President Obama will be redistributed in 2012.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
Was the President done in by the economy, or by the politics of the economy?
H/T to National Review Online