President Obama’s recent talk about a “wealth tax” prompted the media to analyze and criticize the proposal—even though there was very little substance to the idea: no specifics, no numbers, and no chance it would ever get through Congress.
Technically, it wasn’t a “wealth tax” but a “alternative minimal” income tax, which would ensure millionaires paid the same effective tax rate as middle income taxpayers.
Nevertheless, critics promptly named it the “Soak the Rich” tax.
Curiously, this is the same name used to describe a similar plan in 1935. In that year, Franklin D. Roosevelt proposed raising the annual tax rate for individuals earning over $50,000 (roughly equivalent to $800,000 today.)
The Post—ever opposed to Roosevelt and the New Deal—believed that raising taxes on the wealthy was the beginning of a program to redistribute wealth. The rich, according to the editors, couldn’t provide the revenues needed; they simply didn’t have enough money.
The colossal debts which the Government has incurred can never be paid from “wealth taxes,” no matter how nearly confiscatory. The rich are too depleted, in both income and fortune, to yield the sums which are required. Strictly speaking, what the situation calls for is not so much more taxes as more individuals and corporations capable of paying taxes.
They believed the government could only get the revenues it needed by raising taxes on middle-income Americans.
Under any system of private enterprise, the necessary revenues cannot
be had except by making people of moderate means pay far more than they now are paying. But an official announcement of such intention would be most unpopular in a political sense at the present time. On the other hand, an appeal to “soak the rich” is one of the oldest and most popular in the whole political game. Naturally, nothing is said at the start about making other people pay. That will come later.
He is an innocent and guileless soul indeed who does not realize that this program of soaking the rich is merely a preliminary to a grinding of the face of the middle class and the poor.
The Post consistently argued against any scheme to make the wealthy pay higher taxes. But this was 1935. Back in 1913, when Congress first approved a peacetime income tax, it held a different opinion. In that year, the editors regarded income tax as an enlightened, fair-minded approach to raising government revenue. And it published an article by Congressman Benton McMillin, who explained why wealthy should contribute more to the country.
Way down in the hearts of the masses of mankind there lurks a strong sense…
that vast accumulations of wealth in the hands of individuals or corporations should help to support the Government under which they are acquired, by which they are protected and without which they would vanish.
Why tax the widow’s mite and the orphan’s bread and not tax these accumulations? Why lay tribute on what we eat and wear, and leave untaxed millions in the hands of those who can never personally consume it, and with whom it is surplus?
If there ever was a time when the concentrated wealth of the land should bear its share of our enormous expense of government, it is now.
There were only two sources of revenue, McMillin said, that could be fairly and practically taxed:
whiskey, wines, beer and tobacco, because, being subject of voluntary consumption, they are more properly taxable than the necessaries of life; and incomes, because thereby each taxed citizen pays in proportion to his ability.
An income tax was more equitable than sales taxes, he wrote, because they put a heavier burden on lower-income taxpayers.
it takes as many yards of cloth to clothe comfortably and as many pounds of sugar, meat, and vegetables to feed bountifully a poor man as a rich one.
Hence, when taxation is based on consumption… the burden is borne unequally—the poor paying more and the rich less than their fair share.
Heretofore we have taxed Want instead of Wealth.
When President Roosevelt put his “wealth tax” proposal into the Revenue Act of 1935, he knew it wouldn’t get far. But it was an election year during the Depression. A growing number of middle- and lower-income voters were feeling impatient for recovery and resentful toward the wealthy, who they believed were responsible for the ailing economy. Demagogues like Senator Huey Long were gaining broad support for programs for redistributing wealth. Roosevelt hoped to win back these voters with a proposal that would be whittled down in Congress to a modest increase.
The Revenue Act that was finally approved raised the top tax bracket from 63% to 79% for any American making over $5 million a year. Which was just one person: John D. Rockefeller.