Once the top marginal tax rate is reduced to ZERO, who or what will the GOP blame for any economic slowdown? If you think that question is absurd, one has to look no further than just about every single 2012 Republican candidate or “future candidate.” Tim Pawlenty, the former governor of Minnesota has proposed a reduction in corporate taxes all the way down to 25%, and also followed that up with a capital gains tax of ZERO. Michele Bachmann, the tea party hopeful has proposed 9% corporate tax in her “perfect world.”
The GOP has been proposing lowering the top marginal tax rate for a generation, all on a premise that by allowing the wealthy to keep their money, they will invest it and create jobs. That theory has been discussed at length and I would hate to beat a dead horse, so let’s take the GOP and the conservatives at their word. Back in 1980s the Republicans, headed by Ronald Reagan began cutting the top marginal tax bracket. In 1982-1986 the top marginal tax rate was 50%. In 1987 the tax rate dropped to 38.5%, so for the majority (7 out of 8 years) of Reagan’s terms the tax rate for the wealthiest Americans was well above the top tax rates of today. In fact the wealthy only kept HALF or less of their money under most of Reagan’s presidency, yet that was enough to stimulate the economy according to many conservatives who credit the tax rates for the economic expansion of the 1980s.
Today, under President Obama and former President Bush, the top marginal tax rate on the wealthiest Americans is 35%. The wealthy are actually forking over LESS under President Obama than they did under Reagan. The wealthy are keeping more of their money than during the 1980s and they have been since 2003. This leads us to the question, if lowering the tax rates under Reagan to 50% and the wealthy keeping only HALF of their money stimulated the economy, why aren’t these current tax rates stimulating the economy? The wealthy are keeping 65% of their wealth NOW than under the majority of Reagan TWO terms which was only 50%. This is mathematically backwards.
Remember how President Bush and many conservative economists credited Bush’s 2001 and 2003 tax cuts for the increased economy? Well, that 35% tax rate was enough to spur economic growth then according to them, but today it is not low enough and is halting economic growth. We could use these analogies over and over again because the story doesn’t change.
Perhaps it is just that the “reduction” that stimulates the economy, is somewhat psychological. Would the United States stimulate the economy if we raised the top marginal tax rate to Reagan’s 50% in 2012 and cut it down to 40% in 2013 and held it there for 10 years? That would work if it is purely psychological. A 10% tax cut might be enough to “stimulate” the economy.
Going back to the original question, if we continue reducing the top marginal tax rates until they hit ZERO that would essentially mean only the middle class is paying the country’s bills. Historically this is called an aristocracy. Is that where these Republicans want to take us? Are we to become a nation where only the “little people” pay taxes? If you read Thomas Paine’s pamphlet called “The Rights Of Man” and “Agrarian Justice” he was extremely concerned about aristocratic rule. There was a group of founding fathers that believed that the wealthy should rule and Paine spoke against those men. Today that fight continues, and the GOP is the new front group for the old aristocracy.