If you read everything published on what constitutes a fair share of taxes paid by the rich, you might feel a little bit like the poor girl in “The Exorcist,” the movie in the early 1970s. As a historian by nature, I prefer to research and consider methods that have worked well in the past.

If you read everything published on what constitutes a fair share of taxes paid by the rich, you might feel a little bit like the poor girl in “The Exorcist,” the movie in the early 1970s. As a historian by nature, I prefer to research and consider methods that have worked well in the past.

Why? No matter how much times change, the human nature that underlies all behavior and decision-making does not.

President Calvin Coolidge was a man of few words, but these resonate clearly today: “The wise and correct course to follow in taxation and all other economic legislation is not to destroy those who have already secured success but to create conditions under which every one will have a better chance to be successful.” (“The Quotable Calvin Coolidge,” by Peter Hannaford, Bennington, Vt., 2000, p. 151.)

When promoters sold the income tax to the public via the 16th Amendment, they promised only the highest few earners would ever pay it. In 1913, the income tax debuted at a top marginal rate of 7 percent. After a few years of World War I spending, it hit 73 percent for those earning in excess of $1 million per year. Meanwhile, in 1920, the initial lie was already exposed since those earning less than $5,000 were paying $166 million, over 15 percent of the total income tax. On the other hand, those earning over $100,000 paid $321 million or almost 30 percent of the total of $1.075 billion, all this in the midst of a bad recession.

Republican Treasury Secretary Andrew Mellon thought the wealthy should pay more. As he put it, high tax rates inevitably put pressure upon the taxpayer to withdraw his capital from productive business – wealth is failing to carry its share of the tax burden; and capital is being diverted into channels which yield neither revenue to the government nor profit to the people.

By the Revenue Acts of 1921, 1924, and 1926, top marginal rates fell to 58, 50, 46, and then 25 percent by 1925 on all income over $100,000. By 1928, those above that same income paid 61 percent of $1.164 billion and the poorer folks under $5,000 of income paid $13 million or 1.1 percent of the total. That is an incredible change. What happened?

Regardless of what you call it – supply-side, trickle down, totally unfair – any economy’s health depends upon capital investment and hiring by people who have the money. Therefore, what happened in the 1920s, 1960s, and 1980s was a resulting rising economic tide strong enough to lift all boats.

From 1922 to 1928, gross national product grew at an average of 4.7 percent per year and unemployment fell from 6.7 percent to 3.2 percent. The average income of dastardly, high-income group increased by 15 percent. Oh, and the number in the group nearly quadrupled. And imagine this, the group of taxpayers earning between $10,000 and $100,000 rose by 84 percent while the number of those earning less than $5,000 fell. All that occurred without any inflation too.

Protesting, demonizing the rich, ludicrously calling us lazy or even making the federal government the employer of millions does not work. Communism, Marxism and socialism do not work. If anything, make sure more than half of us have some skin in the game and pay at least a little income tax. Let’s do more of what actually works!


Statistics and quotations from de Rugy, Veronique, “Tax Rates and Tax Revenue,” Cato Institute Tax & Budget Bulletin, No. 13, February 2003.