Why can't we go back to the Eisenhower tax code?

[Rjjr77]

I suspect, just based on my knowledge of greed and how rigged the government is in favor of the rich and monied interests, that there's been a continuous, systematic effort by a coalition of conservatives, wealthy interest groups, lobbyists, donors, Wall Street, and the big business elite to lower tax rates for the rich over the course of the past 60 years.  JFK pushed for a tax cut, then Ronald Reagan, then George W. Bush, and the Democrats were never able to get it back to the higher rates pre-Kennedy.  From what I've heard, weren't those 50's tax rates very very high?*

*Does anyone also know if there were surpluses or deficits in the 1950s?

Can anyone explain how this happened?  Wouldn't we be able to have so much more revenue to do the things we all want to do: balance the budget, make huge payments to get us out of debt, and have the first surplus in 16 years if we simply just went back to a tax code where the people that actually had the most money to spare were asked to pay much higher rates?

Thanks... i just want to have some more information about it.. im not an economist so if you are, please explain (:

The economy is quite a bit different than it was then.

Also republicans were not tax cutters for a long time, supply side economics did not really come about until the implosion of classical Keynesian economics in the 1970s

[Rjjr77]

Basically, all countries used to have super-high top marginal tax rates and then all countries scrapped them once we figured out it actually decreases revenue through incentive effects.

The Laffer curve has been pretty discredited over the last few decades.

The countries that scaled back income tax rates in the 80s all saw substantial declines in income tax revenue (that of tens had to be recouped through regressive taxes like VAT). Furthermore, there is no clear link between reductions to the top rate of tax and economic growth rates post 1975.

The Laffer curve has not been discredited. You may not agree with placement on the curve but the Laffer curve is still accepted by economists as factual. This is a problem with the general misunderstanding of economics, the Laffer curve states that 100% and 0% taxation will bring about no revenue. The point is to find the maximum spot on the curve, some may think it's higher, others lower., but the theory of the curve itself is correct.

[Rjjr77]

A wealth tax seems good in principle, but doesn't really work, because some people's wealth is less liquid than others'. For example, real estate is less liquid than stocks.

And of course capital gains are productive for the economy. When people sell stock, they now have much more disposable income, and can buy more products. Nobody holds stock just for the hell of it.

Capital Gains should be taxed at zero.

If people want to tax large holding groups and hedge funds raising the capital gains tax wouldn't be the right move, the move would be to tax individual trades. Consider it like a fantasy football league, you can make as many add/drops as you like but after a certain number you have to pay to do it.

[Rjjr77]

A wealth tax seems good in principle, but doesn't really work, because some people's wealth is less liquid than others'. For example, real estate is less liquid than stocks.

And of course capital gains are productive for the economy. When people sell stock, they now have much more disposable income, and can buy more products. Nobody holds stock just for the hell of it.

Capital Gains should be taxed at zero.

If people want to tax large holding groups and hedge funds raising the capital gains tax wouldn't be the right move, the move would be to tax individual trades. Consider it like a fantasy football league, you can make as many add/drops as you like but after a certain number you have to pay to do it.

That would be a disaster from a pure economic & moral way. For one, in that case I would want the nation state to disband & abolish all income taxes - Let there be anarchy. I have investments in equities too. But it is absurd for someone to work hard & pay taxes & for some uber rich people to earn billions just sitting on equity & pay 0 on equity income - It is absurd, unjust & beyond stupid.

A form of a transaction tax can't replace Income tax - That is like a sales tax or an indirect tax not an income tax. Corporations pay VAT & then Corporate Income tax. Besides Indirect taxes are considered economically worse, they are regressive in nature & they will form an entry barrier for many people. The "INDIRECT" tax has to be substantial to make up for the revenue.

From a pure economic growth perspective, it is an absolute disaster. Capital Gains is disproportionately enjoyed by uber rich with very high income. They have the lowest Marginal Propensity to Consume (MPC), the more money they have instead of the middle class, the lower the Consumption function of GDP is & the lower GDP growth will be. It is always better if 10,000 people had that money.

Capital Gains brings decent amount of money & is easy to administer. If anything, Capital Gains & a small Financial Transaction tax should be used to raise revenue (& they will due to the sheer volume) for funding infrastructure, education, managing debt, etc.

You can tax income without taxing capital gains, and no it wouldn't be a disaster by any means from an economic standpoint, if anything we'd see less money placed in safer investments and more money in capital production. Consumption is an important factor in GDP growth, but eliminating capital gains and replacing with transaction taxes wouldn't in any way be regressive, you drastically mistake the type of people who make the trades that would be taxed.

Increased capital leads to GDP growth, just as an increased consumption. Capital = expansion.

If you want to make a morality argument, fine, not everyone shares your views on morality but you have a right to your mores, but don't make an economic argument, cause it isn't there.