Political Memes

In the 1950s and into the 1960s, we had a 91% tax rate on the top tier tax bracket. By the late 1960s and to the 80s, that was reduced to about 70%. By the end of the 80s, it was under 30%.

In the 1950s, when a businessman realized they were $10,000 into that top tier, they had two options: Cut a check to the IRS for $9100, or increase their business spending by $10,000. Keep $900 for themselves, or keep $10,000 worth of products and services for their business. Nobody chose the former. Nobody paid the 91% tax rate. They all spent it. Even if they falsely claimed personal expenses as business, they spent it. They were using it to buy sports cars and airplanes and other things produced by workers. They weren't spending it on stock portfolios.

In spending that $10,000, they paid workers, whose income was taxed. Those workers spent their extra earnings, paying sales tax and more workers. Those workers spent their extra earnings, paying sales tax and more workers. The avoidance of the high tax rate kept the money from stagnating in a portfolio. It drove the economy, which increased tax revenue.

Her $2 billion wouldn't pay off the deficit, no. But, circulating that same $2 billion through the economy, increasing the "velocity of money" would increase total tax revenue far beyond that $2 billion.