To quote President Dwight D. Eisenhower at a corporate tax rate of 90%:
“High corporate tax rates create incentives for large companies to spend and expand (i.e. new locations, new employees, new equipment and product R&D) that can be deducted from taxable income, thereby driving reported assets into a lower tax bracket. Better to spend a majority of the revenue on expansion than hoarding it and paying Uncle Sam 90% of it. It’s not communism. It’s responsible economy. “
Simply that way. Our factories age, equipment becomes obsolete, and corporations send jobs and taxable income overseas as our highways and bridges crumble. Low tax rates allow companies to spend outrageous sums of money on CEO salaries and stock buybacks, but those monies don’t fund new factories, new equipment, and more jobs here at home. The case that President Eisenhower brought up is particularly significant today. Since the 2017 tax reform promoted by the Republican Party in 2017, companies have become richer and their employees poorer. The income of the average worker has fallen below the gross domestic product per capita.
Richard Nixon resigned under threat of impeachment as a result of the Watergate scandal, but had also toyed with his own tax returns and owed $ 400,000 in back taxes. This scandal was largely subsumed by the Watergate burglary scandal. Nixon added 34.3% to the country’s total debt.
Johnson cut the top federal tax rate from 92% to 70% and reduced the federal debt by about half while ditching welfare programs and funding the Vietnam War.
President Reagan cut all personal tax brackets by 25 percent and 400,000 Americans became millionaires. But national debt rose with the high-profile tax cuts that came with Reaganomics in 1985, when corporate tax rates were cut from 50% to 35%. The debt ratio rose from 31% to 51%.
The George HW Bush presidency left tax rates essentially unchanged, but the number and type of deductions increased, increasing the debt ratio from 51% to 64%.
With President Clinton, we saw negative income tax, where those who did not pay taxes in current years could receive tax credits that could be used to offset taxes in future years if taxes were otherwise due. Coupled with increasing deductions, the negative income tax system brought huge discounts to the wealthiest businesses and individuals. Still, under Clinton, the debt ratio fell from 64% to 55%.
Under President George W. Bush, the debt ratio rose from 55% to 82%, which financed the futile war of mass diversion in Iraq. President Barack Obama inherited the Great Recession and two wars from George W. Bush, and an aging population is placing increasing strain on Social Security and Medicare benefits. Obama continued Bush’s tax cuts to fuel a stagnant and fragile economy. Those tax cuts, which cost $ 858 billion, and a stimulus package of $ 878 billion got us out of recession, but raised the debt ratio to 104%.
Under President Donald Trump, the tax picture changed again with the Tax Cuts and Jobs Act 2017, which slightly lowered tax rates for the middle class but abolished many popular middle class deductions. The bill included much bigger cuts for businesses and billionaires and inheritance taxes. The net result was mixed for those in the lowest tax brackets and devastating to our treasury. It resulted in tax cuts for businesses and individuals who least needed it, and added $ 6.2 trillion in national debt. The debt ratio rose 25% from 104% to 129% in Trump’s first three years. The figures are not yet available, but the final figure should be another 8% – with a debt ratio of around 137%.
We are now considering taxing wealth instead of income, increasing inheritance taxes and levying higher capital gains tax. While it’s not a popular thing yet, it’s interesting. Current tax law allows huge deductions and lower tax rates for high income taxpayers and companies that we know are not geared towards expansion or new equipment or hiring more workers in this country or increasing their wages. It’s going in the direction of higher salaries and more social benefits for CEOs who are already overpaid. We must consider giving tax breaks to industries and companies that stay in the US and penalizing those who do not.
We can also start taxing companies at higher rates, which Eisenhower said encourages companies to invest domestically.
We need to take steps that encourage our industries to stay here. One of the largest US prescription generic manufacturers – Mylan – was recently sold to Viatris, a foreign pharmaceutical company that operates in India and Australia and made 1,400 people unemployed in West Virginia.
Joe Manchin’s daughter, CEO of Mylan, walked away with $ 31 million.
Martha Johnson is a resident of Elizabeth City.