Crashing the party

Published 3:49 pm Wednesday, March 10, 2010

If there was ever a party that needed to be crashed, it is the hubbub being perpetrated on the American public currently by the so-called Tea Party. The members of this group would like for us to believe that they represent some new faction of American thinkers. They are, in fact, just the same old inhabitants of the far right chanting the same sad demands that got the country into the trouble its in. They want, of all ridiculous things, to lower taxes. This makes as much sense as chopping another hole in the bottom of a sinking ship to let out the flood waters.

Heres how I judge these demands: They echo problems these same people scream about wanting to free the nation from

namely the scourge of entitlements. Yes, the demand for lower taxes is a kind of entitlement that has its roots in the recent history of the conservative movement – they are entitled to earn more but pay less.

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After watching and listening to the Tea Party animals and the mewling of the conservative obstructionists until I could no longer stand it, I decided to check out the history of taxation in America to see how things have fared just in my lifetime.

During the time period when the nation rose to greatness, namely the two decades during and after World War II, the highest income earners were taxed at a marginal rate of 94% in 1944/45 to 91% afterwards. This rate held until 1964 when, under a Democratic administration, the rate for the top earners dropped to 77%; then dropped again the next year to 70%. This rate remained in effect until the second year of the Reagan era when the rate dropped drastically to 50%. Since that time, the marginal rate at which the highest American income earners have been taxed has slowly decreased to todays rate of 35.0%. This rate was achieved during the second year of the George W. Bush administration when the rate was lowered from 38.6%. Gratefully this time-limited rate is due to expire at the end of the current year; the 38.6% rate should be in effect again for 2011.

Another factor involved in the tax scenario is the capital gains tax. This is tax due as the result of profit from the sale of assets. The rate at which this profit is taxed has changed substantially during the past 5 decades. From being taxed as ordinary income, todays lowered rate is a mere 15% for long-term capital gains (i.e. profit from the sale of assets held for more than one year). This rate was lowered from 20% by G. W. Bush in 2003. The 20% rate was approved by Clinton from the previous rate of 28%.

An example of the effect of these tax policies can be readily seen by looking at the income levels and taxes paid by the wealthiest Americans.

Recent figures from the IRS website indicate that the wealthiest 400 American families averaged $87 million in income for 2007 – up from $17 million in 1990. However obscene that may seem, the obscenity is compounded by the fact that the effective tax rate paid by these earners was a paltry 16.6%. Three quarters of this income was from capital gains and dividends (which also received the benefit of the tax break approved by Bush II &bsp; namely that no tax at all is paid on dividends).&bsp; &bsp;

Perhaps it shouldnt be surprising that as the tax rates have fallen, the national debt (both in actual terms and as a percent of Gross Domestic Product [GDP]) has risen dramatically. National debt quadrupled during the Reagan/Bush I years and doubled again under Bush II. The size of this debt is troubling to all Americans and has ironically become a part of the trumpet call of the Tea Party aficionados. In their rush to be heard, the Tea Partiers blame the Democrats for problems created by their own treasured policies.

The implications of the demands of the Tea Party are serious indeed. Apparently these people are driven by self-interest only. They either havent bothered to scrutinize the historical repercussions of the policies they advocate, or they just dont care about the overall effect of returning to the path that led us to the current difficulty.

Or maybe it isnt Tea thats being served up at this particular party. In any case, this is a party that needs to be crashed by more rational citizens.

Don Weathington is a retired psychotherapist and business owner who lives in Gillette Woods at a place called Birdland.