TAXING LIKE IT’s 1959: A Guide to Fiscal Responsibility
December 6, 2024
If there’s one thing Americans can agree on, it’s that everyone loves money, especially other people’s money when it comes to solving societal woes. The United States, a nation born out of tax-related rebellion, now finds itself wrangling with a modern-day fiscal crisis. Balancing the federal budget and ensuring Social Security and Medicare/Medicaid’s solvency are challenges we must tackle. But what if the answer isn’t as complicated as we think? What if, instead of gutting programs or printing enough money to build a second moon, we simply look backward to President Dwight D. Eisenhower’s America, where the richest among us paid their fair share? Let’s explore how two straightforward policy changes, returning to Eisenhower-era tax rates for the wealthiest and removing the cap on Social Security contributions, could save the day.
Once upon a time, in a land not so far away (mid-20th century America), the United States had a federal income tax system that asked the richest Americans to fork over 91% of their income above a certain level. Now, before you clutch your privates and cry “socialism,” let’s remember that this was during the presidency of Eisenhower, a Republican and a decorated war hero, not exactly a Marxist revolutionary. The economy was booming, the middle class thrived, and the government could afford to build interstates without crowdfunding.
Fast forward to today. The highest marginal tax rate is 37%, and we’re all wondering why the roads look like they were designed by a drunk engineer and there are more potholes than smooth surface. This dramatic reduction in tax rates for the wealthiest coincides with the rise of astronomical budget deficits. Coincidence? Probably not.
According to economists, taxing the richest 1% at Eisenhower levels could generate hundreds of billions of dollars annually. How much exactly? Let’s just say it’s enough to make a noticeable dent in the federal deficit while leaving the ultra-wealthy with more than enough for their second yachts and artisanal oxygen subscriptions. Even a slightly lower level, say 75% instead of 91%, would have a huge impact.
But won’t the rich flee? Ah, the age-old argument: if you tax the rich, they’ll flee to more tax-friendly locales, like Monaco or Mars. The reality, however, is less dramatic. The ultra-wealthy are surprisingly sticky. Moving vast empires of wealth isn’t as easy as packing a suitcase. Plus, the U.S. remains one of the best playgrounds for the rich, offering access to vibrant markets, elite schools, and whatever it is billionaires do for fun (polo matches? Cryptocurrency-themed escape rooms?).
Moreover, history shows that higher tax rates on the wealthy do not shut down economic growth. In the 1950s and 1960s, when tax rates were at their peak, the U.S. experienced robust economic expansion. People bought houses, cars, and Jell-O molds in bulk. Capitalism didn’t collapse; it flourished.
Let’s pivot to Social Security, the bedrock of American retirement planning. Social Security is not broke, it’s just mismanaged. Despite its importance, Social Security has long been underfunded, thanks in part to a quirky feature: the payroll tax cap. Currently, Social Security taxes only the first $160,200 of income (as of 2023). If you earn more than that, congratulations! You’ve unlocked the “stop paying taxes on income above this level” bonus round.
For billionaires and multimillionaires, this means they contribute a smaller percentage of their income to Social Security than a teacher, nurse, or firefighter. Removing this cap and requiring everyone to pay the same percentage of their earnings could extend Social Security’s solvency for decades, or more.
The math is simple: lifting the cap would bring in billions of additional dollars every year. These funds could be used not only to stabilize Social Security but also to potentially increase benefits, helping the millions of Americans who rely on it.
Medicare and Medicaid, the twin titans of American health care programs, are also in fiscal trouble. The good news? Removing the Social Security payroll tax cap wouldn’t just help retirees; it could also increase Medicare funding.
In fact, if we applied a similar approach to Medicare’s funding structure, requiring high earners to contribute more, we’d see a significant boost in revenues. This extra funding could cover rising health care costs, ensuring these programs remain viable as baby boomers age and millennials slowly realize kale can’t prevent all health issues.
Some will argue that balancing the budget should involve spending cuts, not just tax hikes. And sure, cutting wasteful spending is always a good idea (looking at you, $640 toilet seats). But the reality is that much of federal spending goes toward essential programs like Social Security, Medicare, Medicaid, and defense. Cutting these programs would hurt the most vulnerable Americans, including seniors, veterans, and low-income families.
Moreover, draconian cuts often have unintended consequences. For example, slashing funding for education and infrastructure might save money in the short term but could harm economic growth in the long run. Investing in these areas is like planting seeds; it might take time, but the harvest is worth it.
At its core, this debate isn’t just about numbers; it’s about values. Do we want a society where billionaires fly to space while middle-class families struggle to pay for insulin? Or do we want a system where everyone contributes their fair share to the greater good?
Returning to Eisenhower-era tax rates and removing the Social Security tax cap are steps toward a fairer, more equitable society. They’re not punitive measures; they’re practical solutions to real problems. The rich will still be rich, Jeff Bezos or Elon Musk, isn’t going to start shopping at Walmart because of higher taxes. But the middle class and working poor will have a fighting chance at financial stability.
Now some might say, “But isn’t this all too simple?” To which we respond: yes, and that’s the beauty of it. Instead of inventing convoluted schemes involving magic beans, why not use tried-and-true methods that have worked before?
Picture it: billionaires grumbling as they pay their taxes while America rebuilds its bridges, funds its schools, and ensures Grandma can afford her prescription meds. It’s not just good policy; it’s morally right.
The solutions to America’s fiscal challenges don’t require reinventing the wheel; they require a willingness to look back, learn, and adapt. By taxing the richest 1% at Eisenhower-era rates, or close, and removing the Social Security payroll tax cap, we can balance the budget, secure essential programs, and build a society that works for everyone, not just the lucky few.
And who knows? Maybe one day, we’ll look back at these changes as the moment we finally figured out how to make taxes both effective and fair.
