In the mid-1950s, the U.S. government taxed the pants off the rich—and no one called it socialism, even though the Red Scare was at its height in those days. The government taxed the rich hard because it knew very well that, with a few exceptions, most people who made more than a million dollars a year were getting help of one kind or another from Washington to make it.
The government also taxed the rich hard because of a belief that its most important constituent was the average person—the working person, the returned World War II vet—and that if the economy wasn't working for the benefit of that average person, something was wrong.
Then, say Chuck Collins, Alison Goldbert, John Cavanagh and Sam Pizzigati in a report for the Institute for Policy Studies entitled The Great Tax Shift, tax policy changed so that the wealthy paid less tax and work was taxed at a higher rate (now up to 35 percent) than returns on investments (15 percent). The Bush administration, they contend, pulled out all the stops, taking advantage of war and other situations to throw extremely lucrative contracts to wealthy corporations and lowering "already low" taxes on America's wealthiest.
"In 1955," according to Collins et al., "America's top 400 taxpayers paid three times more of their income in taxes than the top 400 of 2006, the most recent year with IRS data available& If the top 400 of 2006 had paid taxes at 1955 rates, the federal treasury would have collected—from these 400 taxpayers alone—an additional $35.9 billion more in revenue in 2006."
And there are bigger sums at stake. In 1955, Americans making over $2 million a year were taxed at 49 percent, while in 2006, those in that group paid federal income tax amounting to 23.2 percent of their incomes. "If the over-$2 million set in 2006 had paid taxes at the same rate as their 1955 counterparts, the federal treasury would have collected $202 billion," say the report's authors.
"Our grandparents seriously taxed the rich," the researchers conclude. "Why can't we?"
