Friday, September 11, 2009

Bold idea: Revisiting Federal Tax Rates of the 1950's and 1960's

This is without a doubt, one of the bravest and boldest suggestions by someone who knows something about business. In an op-ed in today's Roanoke Times, Virginia Tech Finance Professor G. Rodney Thompson suggest that we take a look at raising the top Federal Tax Rate address our National Debt and pay for Healthcare Reform and the laundry list of other things that we have been putting off for far too long. While he doesn't suggest the raising the top Federal Tax rate to the 75 to 92% range that existed during this period, but increasing the top Federal Tax rate to the 50 - 60% level should be more than enough.

There are some things that need to be mentioned that factor into the nation's success during this period. While he does point out that our GDP was consistently over 3.0% during this period, and we were a much bolder nation that didn't complain about taking on a collective challenge that would benefit the common good [Eisenhower Interstate System and the Space Program that put us on the Moon], other things that he doesn't mention is that Organized Labor was much stronger during this period and individual savings rates were much, much higher. This led to the creation of the middle class that we had until the "Great Recession" and also more people were in college and universities than ever before.

We did have significant social challenges, which Professor Thompson points out, but we were not in debt to anyone. Isn't it ironic that when the Regan Era was ushered in and top Federal Tax Rates were cut, that we also saw our national deficit, budget deficits, and personal debt balloon? Something worth thinking about...

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