The Lesson We Need to Teach Our Nation’s Rich
We will not let your wealth come at the expense of our children’s future.
Overcrowded classrooms. Crumbling bridges. Shuttered libraries. These have become our everyday realities after over a generation of tax-cutting political bravado.
A shrinking middle class. Rising dead-end poverty. The splurges of a new super rich. These have also become the markers of our time.
Is it all the Beatles’ fault?
Did the lads from Liverpool pave the way for the “Reagan Revolution” and the rise of the 1 percent?
Do today’s billionaires owe the Fab Four some gesture of eternal gratitude?
At first take, questions like these all seem ridiculous. How can we possibly consider the Beatles enablers for Ronald Reagan and his fellow tax-cutting conservatives? Back in the 1960s, after all, conservatives saw the Beatles and their rocking brethren as a threat to the American way of life. In the culture wars of those years, no one ever saw Ronald Reagan and the Beatles on the same side.
But Ronnie and Ringo, John, Paul, and George did share something in common. They all couldn’t stand the steeply graduated progressive income tax rates of the decades right after World War II. For most of that time, in both the United States and the United Kingdom, income in the highest tax bracket – income over what would be about $3 million in today’s dollars – faced tax rates that hit over 90 percent.
Tax rates on America’s rich first reached that lofty level during World War II, and Ronald Reagan, then a budding Hollywood star, took that tax bite personally. High taxes on high incomes turned Reagan from a New Deal-loving actors union president into a tax-hating corporate shill for General Electric.
In the mid 20th century, that tax-hating zeal kept Ronald Reagan on the margins of American political life. Most Americans supported the nation’s progressive tax rates. High taxes on high incomes, Republicans like President Dwight Eisenhower agreed, keep income and wealth from concentrating dangerously in the pockets of a few – and help finance the public services a decent society demands.
The high taxes the rich paid throughout the Eisenhower years also helped average Americans feel better about the more modest tax bills they themselves were paying. Yes, taxes could pinch, average Americans felt, but we all had to do our part. And we all were doing our part, even the rich and powerful.
Exceptions, of course, did exist. The big oilmen of Texas had “depletion allowances” that kept their tax rates at a fraction of what other rich Americans were paying. These oilmen also had enough strategically placed lawmakers in their pockets to block repeated attempts to repeal the oil depletion allowance loophole.
But America’s mid-20th century rich as a whole, even with the free pass for oilmen, were shelling out on average well over twice as much of their income in federal income taxes as today’s wealthiest. Ronnie Reagan could only fume.
But over in the UK the newly rich Beatles could do more than fume. They could write incredibly cool songs. In 1966 George Harrison wrote a doozy, “a contagious blast of angry guitar rock,” as one musical analyst notes, that would open the riveting Beatles Revolver album.
The “Taxman” track that the Beatles recorded 50 years ago this April savaged the British tax system. Besieged British taxpayers, the lyric would imply, were paying almost all their income in taxes.
“Should five per cent appear too small,” went the song’s most memorable couplet, “be thankful I don’t take it all.”
In effect, George Harrison’s musical triumph of a song was putting to a magical beat all the rants against progressive taxes that angry wealthy taxpayers had been making for the previous half-century. Over the next few years, millions of listeners – on both sides of the Atlantic – would nod their heads to that beat and mindlessly sing along.
Did “Taxman” turn young people into rabid Reagan tax-cutters? Songs seldom have anywhere near that sort of transformative power. But “Taxman” did help shift the transatlantic cultural vibes and legitimize the conservative take on taxation and tax collectors. “Taxman,” in effect, helped make tax hate hip.
In 1978, a dozen years after “Taxman,” California voters would adopt a statewide tax-cut ballot initiative that launched a wave of similar measures across the United States. In the UK, voters gave tax-cut champion Margaret Thatcher her first parliamentary majority in 1979. Ronald Reagan won the White House the next year.
By 1986, the tax rate on income in America’s highest income bracket would be down to 28 percent. The formal top rate on high incomes has bounced a bit up since then. But the actual tax rate America’s richest pay, after loopholes, has sunk even lower. In 2013, Americans with the nation’s 400 highest reported incomes paid, after taking advantage of every loophole they could find, less than 23 percent of those incomes in federal income tax.
Back in 1955, the nation’s 400 highest incomes paid, after exploiting all available loopholes, over 51 percent of their incomes in federal income taxes.
The top 400 in 2013, by the way, averaged $265 million each in income. The top 400 back in Dwight Eisenhower’s 1955 averaged, by contrast, only $14.3 million, after adjusting for inflation. Decades of tax cuts at the top, in other words, have helped our rich today become fantastically richer.
Our society, in the meantime, has become fantastically unfriendlier to young men and women and their hopes and dreams. If George Harrison were still alive today, would he appreciate the irony?
Back in the high-tax 1950s, the young George Harrison had plenty of opportunity. Those years, as the famed 83-year-old British film director John Boorman observed in an interview last year, saw a huge expansion of health, education, and other public services. Every young person in the UK finally had a chance to attend a modern secondary school.
“For the first time, every kid was taught some element of music and art,” remembers Boorman, the director of Deliverance. “And the kids who were going to these schools grew up to be the Beatles and the Rolling Stones.”
Mr. Taxman deserved to be thanked for all that, not skewered.
Sam Pizzigati, an Institute for Policy Studies associate fellow, co-edits Inequality.org. His most recent book: The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900–1970 (Seven Stories Press). Follow him on Twitter @Too_Much_Online.