Revisiting the New Deal And Taxes

Image (1) FDR-1936.jpg for post 15191

Many parallels have been drawn between the coming election year and the 1932 election year. In 1932 the country and the world were in dire financial straits with people starving across the globe. While that is not true today we are only a few years removed from a near catastrophic collapse of the world financial system. Our current economy has been built on the sugar highs of huge tax cuts for the wealthy and artificially low interest rates.

On the surface things seem much better than 1932, but that is only on the surface. Also in 1932 we were enduring a financial collapse. Today we also have an environmental crisis of monumental proportions as the climate changes creating areas of super dryness and areas of continuous flooding. As evidenced in Venice Italy last week, seas are rising and they will be encroaching on highly populated areas.

In 1932 Franklin Roosevelt peopled a New Deal for America. In a similar fashion this year we have many Democratic politicians calling for a “Green New Deal” which will help undergird the economy with good paying and very necessary public works projects that will get money to workers who will spend the money while helping to stem the coming environmental crisis.

In 1932 the problem was how to pay for it all. We will have the same problem today. Republican fiscal policies over the past 40 years have been geared to one thing: bankrupting our government so any social programs would have to have their funding cut. So now we stand some $22 Trillion in debt with another couple of trillion added annually.

So let’s look back to see how the New Dealers of the 1930s handled the financial aspects.  

“New Deal efforts to address the economic catastrophe of the Great Depression required much more revenue than was coming in at the beginning of the 1930s; and later in the decade the Roosevelt Administration would face the need to raise more revenues for mobilization as the world girded for war.  To meet these exigencies, New Deal leaders created several new taxes along the way, such as a liquor tax, coal tax, and Social Security tax [1].  Furthermore, President Roosevelt and his advisors were committed to the idea of progressive income and wealth taxation; as one tax historian puts it, “When it came to taxes, Roosevelt simply believed that rich people should pay more than poor people. And in emergencies, they should pay a lot more” [2].

The 1920s had been a period of continuous tax-cutting by Republican administrations, but after the stock market crash of 1929 federal revenue plummeted so dramatically that the government could not fulfill its basic functions.  Even President Hoover had to relent, and the Revenue Act of 1932 was enacted.  This law “spread its burden widely across the population with steep new rates for income taxpayers, as well as numerous new levies on consumption” [3].  Tax increases continued under FDR, but with greater emphasis on progressive taxes on income and wealth, rather than regressive consumption (sales) taxes [4].  The only major exception was the Social Security tax on wages, starting in 1937.

The Revenue Act of 1934 raised income taxes on the wealthy and reduced them for lower income groups; it also raised estate taxes on the wealthy and closed corporate tax loopholes [5].  The Revenue Act of 1935, sometimes called the “Wealth Tax Act,” raised taxes on the wealthy again: “The top rate jumped from 59 percent on incomes over $1 million to 75 percent on incomes over $500,000”; it “placed graduated net income taxes on corporations and a tax on incorporated dividends”; and it once again raised estate taxes [6].  The Revenue Act of 1936 taxed undistributed corporate profits and the Revenue Act of 1937 aimed to clamp down on corporate tax avoidance [7].  The Revenue Act of 1940 – by which time national defense spending was ramping up – raised taxes on corporations by 1%; increased taxes on incomes between $6,000 and $100,000; and lowered personal exemptions by 20%, thereby broadening the tax base [8].

<<snip>>

Federal taxes were the most progressive in U.S. history after the New Deal (for example, top marginal income tax rates were 91% from 1954 through 1963) and remained so through the postwar golden age of U.S. economic dominance [13].  Rates have been whittled down in the modern era, especially under presidents Kennedy, Reagan, George W. Bush, and Donald Trump.  Not surprisingly, the national debt has soared alongside these persistently low tax rates [14].”

Simply stated if we understand that the looming environmental crisis is real {it is} and we need to become fiscally stable once again, reining in the disparities of the rich and the poor, we can find ways to pay for it. Remember that improvements made will create new jobs and new revenue streams. 

Elizabeth Warren has already shown that financial plans for her Medicare for All plan can be created. So then can a way to pay for the Green New Deal be created.

Also remember that in 1933 FDR faced an attempted coup from some of the richest families in America. Sort of feels like we have gone through a 40 year coup that needs to end.

About Dave Bradley

retired in West Liberty
This entry was posted in #trumpresistance, 2020 election campaign, Blog for Iowa and tagged , , . Bookmark the permalink.

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