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Tax Progressivity: A Blow to Plutocracy

February 19, 2013

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Progressives of 100 years ago hoped that the 16th Amendment and the introduction of federal income tax would be a blow to plutocracy, according to Sam Pizzigati, author of The Rich Don’t Always Win: The Forgotten Triumph Over Plutocracy That Created the American Middle Class, 1900—1970, in a recent article in The Nation entitled “Real tax reform: Give the rich a tax incentive to support pay increases for the rest of us.” In the first tax schedule following the Amendment, tax rates on the highest brackets were much lower than progressives wished for. However, World War I boosted tax rates for those with an income of over $100,000, a tradition that persisted through the Great Depression and the Eisenhower Era. Taxes on the richest were widely viewed as necessary to prevent concentration of wealth and the destruction to American society that it would bring.

Though the dismantling of tax progressivity is often blamed on Ronald Reagan, it was actually John F. Kennedy who cut taxes, including those of the very rich, in order to promote economic growth. Conservatives ran with JFK’s logic and cut taxes on the wealthy to lower and lower rates. Now, 100 years after the 16th Amendment, we face unsustainable tax rates on the rich and a resurgence of plutocracy.

Pizzigati claims that the passion of the 99 percent to enact a higher tax on the rich can’t match the 1 percent’s desire to keep them down. Pizzigati suggests that if the 99 percent had a greater stake in the topic— if, for example, the highest tax bracket was 25 times the average minimum wage worker’s income, making a rise in minimum wage also rise the level that could be made before reaching that bracket— there would be greater incentive for the 99 percent to fight for tax progressivity. Combined with ending tax preferences for capital gains and dividends, going after overseas tax havens, and pressing for financial transaction, wealth and carbon taxes, there may be a solution to the unsustainable situation we’ve found ourselves in.

Read more of Sam Pizziagi’s thoughts on this topic in The Rich Don’t Always Win: The Forgotten Triumph Over Plutocracy That Created the American Middle Class, 1900–1970.

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