Forum Post: The logic behind higher taxes for the rich and higher wages for the rest

It's interesting to look at economic history to see if our ideas about taxation actually worked in the past. From 1958 to 1968 the U.S had 10 of the best years in memory. Average income grew by $13,000 with the lower 90% sharing 62% of that gain. All income levels benefited.

http://stateofworkingamerica.org/who-gains/#/?start=1958&end=1968

The top marginal tax rates were much higher than today. Income tax 90% then, 35% now, corporate tax 50% then, 35% now, and capital gains tax 25% then, 15% now.

http://visualizingeconomics.com/2011/04/14/top-marginal-tax-rates-1916-2010/#.UDHMt6AsFGg

According to people who favor low taxation, we should have had a much weaker economy. The fact we had a strong economy was probably due to a stronger union presence, which kept low and mid income wages up, and higher taxes on the rich which meant a lower tax rate on the low to mid income workers.

One way to look at economics is to compare it to a human body. Blood flow being analogous to money flowing through our economy. If the blood flow is shunted to the head, as with high profits and low taxes for the rich, the legs and arms do not receive enough blood flow and can't function properly. The economy slows, unemployment rises.

The period from 1919 to 1929 had relatively low marginal tax rates with the result being the bottom 90% receiving just 4% of the gains.

http://stateofworkingamerica.org/who-gains/#/?start=1919&end=1929

Directing money back to the low and mid income workers by increasing taxes on the rich and reducing profits by increasing wages actually makes the overall economy healthier. It may not sound fair, but try putting a tourniquet on one leg for a few hours to simulate low wages and high taxation for the low to mid income workers and see which form of taxation you prefer.