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Wednesday, 20 January 2016 00:00

Under Eisenhower, the Top Tax Rate Was 91 Percent. Was He a Socialist?

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aaaaaaaaaaaaaaaaaeisenwhowerWas President Dwight Eisenhower a socialist in disguise? (Photo: Marion Doss)

Based on the attacks on Bernie Sanders by the wealthy and corporate sectors, you'd think that his call for the wealthy to pay higher taxes makes him a Communist.  

However, as has been pointed out by Sanders himself, the highest marginal income tax rate in the last 65 years was 91 percent, and it was in place under President Eisenhower. In November 2015, PolitiFact reported:

U.S. Sen. Bernie Sanders, I-Vt., wouldn’t reveal just how high he’d raise income taxes on the rich during the Iowa presidential debate, but he guaranteed it wouldn’t be as much as it has been in the past.

In order to pay for making college tuition-free for Americans, Sanders said that Wall Street owed the middle class for bailing it out during the recent financial crisis. He said he would demand "that the wealthiest people and the largest corporations, who have gotten away with murder for years, start paying their fair share."

Sanders was asked at the debate how high he might raise the marginal rate on upper bracket Americans? His response was, "We haven’t come up with an exact number yet, but it will not be as high as the number under Dwight D. Eisenhower, which was 90 percent."

PolitiFact examined charges that Bernie Sanders was incorrect in his assertion about the Eisenhower administration tax rate. PolitiFact concluded:

A look through the records shows that top earners in the eight years of Eisenhower’s presidency paid a top income tax rate of 91 percent. It was even a bit higher before he took office.

We rate Sanders’ statement True.

It is important to note that the United States has a tiered tax (marginal rate) system, which means people pay increasingly higher percentages in taxes only above certain income thresholds. (Although, of course, many people avoid forking over the highest percentages by utilizing tax loopholes.)

To today's oligarchy, taxing the rich at an above 90% marginal rate is akin to Lenin setting US government policy, which is why many of the richest people in the nation sneeringly refer to Sanders' "Democratic socialism" - which actually preserves capitalism - as dyed-in-the-wool Bolshevism.

Indeed, if you look to the three Scandinavian nations - Sweden, Norway and Denmark - that Sanders refers to as models for his particular vision of "Democratic Socialism" (which is not by any means a comprehensive state-run ownership of production or property), they are capitalist - not socialist - nations with a strong safety net. The Scandinavian governments might provide everything from health services to free college tuition to livable pensions (with variations among them), but their economies are not socialist; they are strongly capitalist. Sweden and Norway - because of its vast wealth from North Sea oil - are particularly prosperous.

According to the pro-corporate think tank, the Tax Foundation, "Denmark’s top marginal effective income tax rate is 60.4 percent. Sweden’s is 56.4 percent. Norway’s top marginal tax rate is 39 percent."

The highest federal marginal tax rate in the United States is 39.6 percent.

In fact, even the business-friendly Tax Foundation concedes that the Scandinavian nations are more tax-friendly to corporations than the US:

While Scandinavian countries raise a lot of revenue from individuals through the income tax, payroll taxes, and the Value-added tax, they don’t really raise much more revenue than the United States from capital and business taxes and don’t have much higher marginal rates on capital income....

Marginal corporate tax rates in Scandinavian countries are around the OECD [Organization for Economic Co-operation and Development] average of 25 percent and much more competitive than the United States’ rate. Denmark’s corporate income tax rate is 24.5 percent, Norway’s general corporate income tax rate is 27 percent, and Sweden has a corporate tax rate of 22 percent. The U.S. marginal tax rate on corporations is much higher at 39.1 percent (average of federal and state).

So who pays for the generous government services in Scandinavia? One can assume that the Scandinavian nations allow less tax evasion. They also, as the Tax Foundation points out, do not provide government services, in general, for free. Workers and the wealthy alike contribute to the state coffers that pay for public services for the entire population of the countries through income and consumption taxes, as well as the corporate taxes referred to above. Norway is an exception, because a lot of its national treasury is filled with money from the sale of North Sea oil. 

It might also be worthy to note that the Scandinavian nations spend much less of their national budgets percentage wise than the US does on the military, for example. This allows them more funds to be put toward benefiting citizens of the nations.

If one is an advocate of true socialism, the Scandinavian nations are not a good example of such a model. That is because they are economically structured as capitalist nations, although they allocate a greater percentage of the gross domestic product for services than the US does. These services address needs that individuals in the United States generally pay for out of pocket, with the exception of programs such as Medicare and Social Security (both of which workers and employers pay into with each paycheck).

In this context, Sanders' "Democratic socialism" is a modified form of capitalism, one that reins in the most glaring excesses of capitalism, raises taxes and social accountability on the wealthiest, and offers a broad government network of public services for the common good.

Tellingly, in the Fox Business Network-sponsored GOP debate on January 14, host Maria Bartiromo asked presidential aspirant Ohio Governor John Kasich, 

So what does it say about our country that a candidate who is a self-avowed socialist and who doesn’t think a 90 percent tax rate is too high could be the Democratic nominee?

To which Kasich responded, "Well, if that’s the case, we’re going to win every state, if Bernie Sanders is the nominee." 

In short, based on Kasich's statement, Dwight Eisenhower couldn't be nominated by the GOP today because on the issue of high marginal taxes for the wealthy - which is a defining issue for Bernie Sanders - Eisenhower would be considered a socialist.

Not to be posted without permission of Truthout.