Tuesday, January 8, 2019

What Happened to America?

People often refer to the 1950s and early 60s as a golden age with high income taxes, apparently unaware that the high personal income tax was shielded by a forest of deductions.

The very strong economy of the post war period was due primarily to two factors, (1) America's standing as "the last economy standing" after the war and (2) the bulk of the tax burden's share being borne by Corporations, not the individual.

Salaries were extremely low because the dollar was worth much more than today's. In 1961, when Kennedy took Office,  NYC cops and firefighters earned about $3,000/year, or $250/month. Almost all of that was covered by the dependency deduction, alone.

Most consumer items were more expensive because the Corporate/business income tax serves as a hidden sales tax, as those taxes, like all the costs of doing business are passed onto the consumer.

Over time, inflation has killed the American worker. A NY Daily News article in 1998 chronicled that. It noted that in 1972 NYC cops and firefighters earned, on average, $12,000/year, compared to the $72,000/year on average earned 25 years in 1997. Despite earning 6X as much in dollars, the 1972 workers had 1/3 MORE purchasing power. In other words, the 1997 NYC cops and firefighters earned just $8,000/year in 1972, or another way of putting that, those 1972 workers earned $96,000/year in 1997 dollars.
Inflation is the government's friend. It allows the governments to pay back debts (including public pensions), with cheaper dollars.

Just as NYC had divested itself from its manufacturing base, in transitioning to a "FIRE Economy" (Finance, Insurance and Real Estate), the rest of the country was set on that same path in the 1970s. A massive amount of America's manufacturing base was Out-sourced, as other businesses here began In-sourching cheap labor via "Illegal immigration"/border trespassing and H-1B Visas.

Higher income taxes DO NOT "tax the rich."

Virtually NONE of the richest 2% rely on income for any significant portion of their wealth.

The top 1% of income earners (mostly physicians, attorneys and other professionals) are NOT "the rich."

The NRST (National Retail Sales Tax), which would replace the individual and Corporate income taxes, the Capital Gains tax, FICA, taxes, etc. WOULD tax "the truly rich" the most, but the Mark Cubans', Mike Bloomberg's, Jeff Bezos', and Warren Buffet's have the ability to successfully lobby against that.

That's why 3 men (Bezos, Gates and Buffett) have more wealth than the bottom 50% of all Americans.

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