Why a High Corporate Tax Rate is Actually Good

There is a meme-pic on mematic.net, picturing America’s 34th president, Dwight D. Eisenhower, during whose term our corporate tax rate was the highest ever (90%!). It explains that tax rate quite logically as follows:

Corporate Tax Rate: 90%

Why? Because high corporate tax rates create incentive for big business to spend earnings and expand (i.e. new locations, new hires, new equipment, and product R&D) which are deducted from taxable earnings, thus driving reported wealth into a lower tax bracket. Better to spend a majority of earnings on expansion than to horde it and pay Uncle Sam 90% of it. It’s not Communism, it’s responsible economics.

Makes sense to me, at least as long those corporations are prevented from storing their profits in foreign tax havens as they currently do. Protecting small businesses like family farms from being squeezed out of existence by the big ones, might also be a good idea. And turning the ownership of businesses over to their workers, rather than letting them accumulate in the clutches of robber billionaire dynasties, strikes me as another. All these caveats I mention in order to remind us that what happened during the New Deal was great but not enough since it left too many doors open for corruption and plutocracy to dominate again and redirect the flow of shared prosperity into hoarded wealth of the few.

Such high corporate tax rates clearly didn’t tax corporations to death back then, even if the corporate owners hated them and went on the political offensive. These corporations did extremely well. As did their workers. The wealth of any society is best used to fuel wide-ranging prosperity rather than to be hoarded by a few who game the system to do so without regard for the disastrous consequences to their societies.

Back in the thirty to forty years following the second world war, America had a great time, a booming economy, and was envied by the rest of the world, before the backlash from the robber billionaires struck and sent our country spinning down the drain where we now find ourselves. Back then the Democratic Party was FDR’s people party, not just another Republican Party working exclusively for the rich, as it is now. Bernie Sanders, Robert Reich, and others are quite right when they regularly remind us that a better America is eminently possible. We only need to look back to how things were done in our nation from the forties to the seventies, to see what is possible. Take away racial discrimination and our horrible foreign military adventures of that period, and you have something very close to paradise on Earth (minus some of the medical miracles we now have that hadn’t been invented, yet (and many that still need to be invented)). Still, when one looks back closely enough, we can also see the lingering political corruption that was reasserting itself, leading to the backlash and repeal of most to all of the reforms which had made the U.S. so much better than before.

I came across this meme on the excellent weekly blog The Revolution Continues, by the way. It’s always good to look in on it on Tuesdays when the new installment comes out. 😉

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3 thoughts on “Why a High Corporate Tax Rate is Actually Good

  1. Thanks for the shout out on The Revolution Continues. I sometimes wonder what Ike would have said about the current state of our tax system in regards to corporations–and his political party. He’d be shaking his head in disgust most days, no doubt.

    Liked by 1 person

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