What to do? Here’s one idea: Let’s return to the old “3 percent” rule.
Everybody loves to hate taxes. As the old saying implies, taxes are right up there with death among humanity’s least favorite things. Yet they are as old as civilization itself; tax records have been found from as far back as the Ur III dynasty of 2,000 BC, and possibly older. And we can be sure that its residents paid them grudgingly. Tax resistance is a perennial theme in history, dating back to Jesus, at least, and his alleged “forbidding us to pay taxes to Caesar” (Luke 23:2). Lady Godiva’s mythic ride through Coventry was allegedly on behalf of excessive taxes. Dozens of wars, revolts, and uprisings in the sixteenth, seventeenth, and eighteenth centuries occurred over taxation. We all know of the infamous “no taxation without representation” and the Boston Tea Party, leading to the American Revolution. Thoreau was briefly jailed in 1846 over a failure to pay taxes, in an act of civil disobedience against the Mexican-American War. Among the American public, there was significant resistance to tax increases during both World Wars and the Vietnam War. Even today, scarcely a month goes by without some anti-tax action making the news somewhere in the world.
And yet, everyone except pure anarchists wants some level of service from their government, and thus we all more or less accept the inevitable. Everyone has their favorite governmental program that they want funded; but they always want someone else to pay for it. We all would love to get something for nothing from the feds. But most of us realize that government cannot function without revenue, and that it cannot simply create money out of thin air—at least, not indefinitely. And so we pay.
Most galling of all, I suppose, is income tax: government “tribute” taken directly from our paychecks, before we see a single penny. Long hard hours put in, the daily grind, dealing with obnoxious bosses and coworkers, moronic customers, deadlines, 60-hour weeks…and then the government steps in and takes its “fair share.” We can sometimes get tricky and defer payment until Tax Day, but eventually the bill comes due; and we pay. In the US, the average worker pays 20–25 percent of income to the federal government, and another 5 percent to state or local governments: upwards of a third of our income, gone, lost, squandered.
But what if we—most of us, anyway—didn’t have to pay any income tax? What if we could have all the same governmental services that we do today, but surrender nothing from our hard-earned paychecks? It may surprise the reader to know that, for most of the history of the USA, citizens paid no income tax at all. And for decades more, only a very small percentage paid them. For 150 years, it worked. What if we could have that again? And what if the lost funds could be covered, in large part, by that most prosperous of ethnic minorities? There would be a sort of sublime justice in that, would there not?
A Short History of Taxation in America
Born out of tax revolt, the early United States government was uniquely sensitive to the question of taxation. Much of the debate centered on the role and size of a federal government. The so-called federalists, like Madison and Hamilton, argued for a strong central government and hence significant taxation, whereas others like Jefferson defended a small, decentralized, states-rights model that necessarily required lesser federal taxes. But neither side wanted to tax the nation’s farmers and small businessmen, and so it was agreed that import taxes—tariffs—would be employed to fund the government. These were easy to collect at ports of entry, and they had the added benefit of protecting nascent American industries. Tariffs, along with a few selected excise taxes on specific commodities, funded the entire federal government.
Correspondingly, the early government was relatively small. At no time in those early years did federal spending exceed 5 percent of the nation’s GDP; whereas today, the figure is around 21 percent. Jefferson’s argument evidently held sway, for well into the nineteenth century. The US continued to rely almost exclusively on tariffs and minor excise taxes, right up to the Civil War. Thus, for the first 85 years of its existence, the United States had precisely zero income tax.
With the advent of the Civil War in 1860, things changed, at least temporarily. The Revenue Act of 1861 imposed a 3% tax on income over $800 (equivalent to about $25,000 today). The income threshold was lowered the following year to $600, thus bringing in additional revenue. In 1864, the rate increased to 5% for most wage-earners, and up to 10% for the highest incomes. In any case, it was all justified only by the exigencies of war. With Union victory in 1865, the on-going need vanished and the income tax was rightly abolished a few years later.
For the next two decades, the nation again relied on tariffs for the vast majority of its funding. But meanwhile, pressure to reduce them steadily grew, in part to allow for lower prices for businesses and consumers on imported items. Congressmen realized, however, that another tax would be needed to offset the lost revenue. Hence came the Wilson-Gorman Tariff Act of 1894, which reintroduced income taxes, now of 2% on earnings over $4,000—equivalent to about $120,000 today. It was truly a tax for the well-off.
Unfortunately for the government, it was also unconstitutional. When a New York company, Farmer’s Loan and Trust, attempted to enforce the law, a wealthy stockholder, Charles Pollock, objected, sued the company, and won in the Supreme Court. It seems that, at the time, the US Constitution had no provision for a “direct” tax on income without a complex system of apportionment, i.e., payment back to the states. In effect, by the court’s ruling, the income tax was functionally abolished. For the next 20 years, the feds again had to rely on import tariffs.
This little dilemma was resolved in 1913 with the passing of the Sixteenth Amendment to the Constitution. It reads, in full: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” There were some oddities connected with both the wording of the amendment and the ratification process, but I won’t go into those here. In any case, Congress wasted no time, and the Revenue Act of 1913 reduced tariffs but imposed a 1% tax on income over $3,000, rising to a rate of 6% on incomes over $500,000. The income threshold of $3,000—about $78,000 today—effectively applied only to the top three percent of earners; a full 97% of Americans were unaffected. The vast majority of people continued to pay no income tax.
The Revenue Act of 1913 was gladly signed into law on October 3rd of that year, by first-term president Woodrow Wilson. For his part, Wilson seems to have been the first president elected with the full blessing of the Jewish Lobby. As Henry Ford saw it, “Mr. Wilson, while President, was very close to the Jews. His administration, as everyone knows, was predominantly Jewish”. His major political donors were Jews, including the likes of Henry Morgenthau, Jacob Schiff, Samuel Untermyer, Paul Warburg, Bernard Baruch, and Louis Brandeis. Wilson was also the first president to fully reward their support; Morgenthau was named ambassador to the Ottoman Empire and Warburg was appointed as the first chairman of the newly-formed Federal Reserve. Later, Baruch would assume vast powers in his War Industries Board, and Brandeis would become the first Jew on the Supreme Court.
Onset of War
Meanwhile, trouble was brewing in Europe. A complex series of treaties and alliances, combined with the untimely assassination of Archduke Ferdinand on 28 June 1914, inaugurated the First World War. For a full two years, the US avoided entanglement. Wilson ran for his second term in late 1916 with the slogan “He kept us out of war.” But to no avail; soon after winning, he declared war on Germany, in April 1917.
With the US now involved, revenues would need to be drastically increased, and one obvious means was via the income tax. Hence the War Revenue Act of 1917: a quadrupled rate of 4% (still with a $3,000 per year income threshold), along with incremental marginal rates ranging from 1% to 50%.
Into the last year of the war, 1918, rates again increased: combined rates ranged from 6% to 77%. Also, the income threshold was lowered to $1,000 per year (for individuals), drawing in many more taxpayers—though still amounting to just five percent of all taxpayers.
Postwar, the US experienced both the Roaring ‘20s and the Great Depression of the ‘30s, all while retaining the same basic tax structure. As Benjamin Ginsberg explains,
Prior to the New Deal [of the 1930s]…a high tax threshold and numerous exemptions meant that only about 3 percent of American adults were subject to [income] tax. … The system depended on more or less voluntary compliance by a small number of well-to-do individuals. This meant that income taxation was not at first a major source of federal revenue.
Thus, right up until the eve of World War Two, and excepting for a few years during the Civil War, the vast majority of Americans paid no income tax at all—in over 150 years. But that was about to change, thanks to Hebraic influence in the US Treasury.
Onset of War (again)
Just as Henry Morgenthau, Sr.’s political patronage of Wilson earned him a prime governmental post, so too his son, Henry Jr, earned the favors of the next wartime president, Franklin Roosevelt. Henry Jr and FDR went back many years, well before the latter’s stint as governor of New York in the late 1920s. As FDR prepared for his run for president, Henry and other Jews were there, happy to donate. As Myron Scholnick explains, “A number of wealthy Jewish friends contributed to Roosevelt’s pre-nomination campaign fund: Henry Morgenthau Jr., Lt. Gov. Lehman, Jessie Straus, [and] Laurence Steinhardt.” Once the primaries were out of the way, “Roosevelt’s campaign was heavily underwritten by Bernard Baruch”. As with Wilson, FDR did not fail to reward his donors; Morgenthau, for example, was named Secretary of Treasury in early 1934.
But it wasn’t only Morgenthau, of course. In time-honored tradition, Henry brought in a host of fellow Jews to help direct American economic policy. “Among those working for Morgenthau at Treasury were large numbers of Jewish economists and statisticians, including such contemporary and future luminaries as Jacob Viner, Walter Salant, Herbert Stein, and Milton Friedman, who helped to fundamentally change America’s tax system…” And change it they did.
War came again to Europe in September 1939, and by late 1940 it was becoming increasingly apparent that the US would get drawn in, one way or another. Total federal spending in 1939 was about $8 billion, of which around $1 billion (12%) came from personal income taxes. But with war looming, Morgenthau and friends knew that spending, and thus revenue, would need to dramatically increase. They had three options: personal income tax, corporate income tax, and war bonds. So they set to work; “in the realms of both taxation and bond sales, Jews played major roles,” writes Ginsberg.
Special emphasis was placed on increasing personal income taxes, both by lowering the threshold for paying, and by increasing the tax rates. The effect was dramatic. The number of taxpaying adults increased from a very modest 1 million in 1939, to 5 million in 1941, to 40 million in 1942—at the time, constituting virtually all non-farm wage-earning adults. Corresponding revenues soared from $1 billion to $40 billion by the last years of the war. Revenue increases matched spending increases, as federal expenditures rose from $8 billion in 1940 to over $100 billion by 1945.
At the start of the war, however, the Treasury Jews knew that enforcement of new tax laws would be difficult. Millions of Americans who had never even considered the possibility of paying an income tax were suddenly asked to contribute thousands of dollars. What to do? Morgenthau’s boys devised a clever plan: “a number of Jewish economists [including Milton Friedman and Morgenthau himself] championed the introduction of payroll withholding, or ‘collection at the source,’ which to this day ensures a smooth, regular flow of billions of dollars into the federal government’s coffers”. That is, the government would work with employers to extract the worker’s share of taxes prior to paying their wages. Corporations were much easier to coerce than unruly citizens, and rates could be arbitrarily raised in the future with little fuss. This tactic was a “central feature” of the 1943 Revenue Act, and would remain in effect for all future years. Thanks to payroll withholding, income tax evolved “from a minor tax levied on wealthy Americans into a major tax levied on all Americans”.
With this glorious new cash cow in place, the Treasury Jews—currently headed by Steven Mnuchin—never looked back. As a result, Americans today pay an astonishing $2.1 trillion in income and “payroll” (FICA, or social security plus Medicare) taxes, accounting for roughly 68% of all federal revenue. In other words, over two-thirds of the entire funding of our federal government comes directly out of citizens’ paychecks. This monumental burden is carried by 84% of all households, who pay either income tax, or payroll tax or, most likely, both. Most of the remaining 16% of households—representing about 50 million people—earn too little to pay any income tax at all.
And yet even this is not enough for our voracious feds. The $2.1 trillion is supplemented by some $760 billion in corporate taxes (income tax plus their share of payroll), and another $260 billion in excise and estate taxes. In sum, the government currently takes in about $3.3 trillion. But it spends around $4.1 trillion annually, mostly on defense and military-related costs, which approach a breath-taking $1.25 trillion per year. The difference—an annual deficit of about $800 billion—is pushed onto future taxpayers, in the form of additions to the federal debt, which currently stands at nearly $22 trillion. We may be excused for holding the feds in contempt.
Return of the “3 Percent” Plan
So: What to do? Here’s one idea: Let’s return to the old “3 percent” rule—that is, that the entire income tax burden should again be borne by the richest 3% of households. It worked for the decades leading up to World War II, and it could work again. After all, we’re not at war—the last formally-declared war was in fact World War II—and apart from sporadic ‘terrorist’ actions, the world is generally at peace. In a peacetime economy, the wealthiest Americans should rightly bear the full cost of income taxation.
There are several ways to make this happen, but let me lay out one proposal here. Data exists to make a reasonably accurate set of calculations. Here are the numbers:
At present, we have about 160 million tax households in the US, representing our 325 million people. The top one percent—that is, the richest 1.6 million households—earn an average of about $880,000 per year. The second-richest one percent earn around $400,000 on average, and the 3rd one-percent about $325,000. Altogether, our top 3% are paid about $2.6 trillion every year.
The problem, however, is that we need to raise $2.1 trillion in taxes from these folks. The simplest way would be to tax them at a flat rate of 80%. Imagine: you earn a hefty $1 million per year from your vulture capitalist hedge fund, and you have to pay $800,000 to the feds. Hard to make those yacht payments on just $200,000 a year.
Cruel, you say? Perhaps. Fortunately, we have an alternative. It turns out, unsurprisingly, that most of our top 3-percenters (in terms of income) are also millionaires or billionaires (in terms of assets). They have real assets—assets that can be taxed. Each household in the top one-percent, in fact, owns an average of $22 million in assets—mostly in property, stocks and bonds, and corporate equity. The second percentile household owns some $7.5 million, on average; the 3rd percentile, $5 million. In total, this group of individuals owns or controls about $56 trillion in assets—an utterly incredible sum, to say the least.
Here then is my proposal: tax the upper 3-percenters income at a flat rate of 60%; this will raise about $1.5 trillion annually. Then let’s also impose a mere 1% wealth tax on their assets, which will raise another $560 billion. In sum, we get nearly exactly the desired total of $2.1 trillion. Our richest people have fully funded the federal government. And the remaining 97% of us—around 315 million people—get to keep allof our hard-earned income. Imagine that.
And who, exactly, are these poor buggers who are about to personally fund the federal government? We know the big names: Bill Gates, Warren Buffett, Mark Zuckerberg, Jeff Bezos, the Koch brothers. But they are just the tip of the iceberg. When we run down the list of leading names, we find a striking fact: around half of them are Jews. Among the top ten, we find five Jews: Zuckerberg, Larry Page, Sergey Brin, Larry Ellison, and Michael Bloomberg. Of the top 50, at least 27 are Jews, including Sheldon Adelson, Steve Ballmer, Michael Dell, Carl Icahn, David Newhouse, Micki Arison, and Stephen Ross. More broadly, we can cite once again Benjamin Ginsberg, who wrote, “Today, though barely 2% of the nation’s population is Jewish, close to half its billionaires are Jews”.
Based on such data, we can infer that up to half of the top 3-percenters are Jews.As a whole, they therefore own or control up to $28 trillion in assets. On my proposal, they will correspondingly pay half of the annual $2.1 trillion to keep our government afloat, and to fight foreign wars on their behalf. As the prime beneficiaries of American economic policy, this is only fair.
At a minimum, some such proposal deserves wider discussion, given that it offers massive financial benefit to fully 97% of the nation. By rights, something like this should be discussed in every political debate and on every nighttime news program. The closest thing we have to this is Elizabeth Warren’s wealth tax proposal: 2% on assets between $50 million and $1 billion, and 3% on assets over $1 billion. By my estimates, this would apply only to the top 0.1% of households (versus my 3%), and would only bring in, she says, around $275 billion annually (versus my $560 billion). It’s weak, but at least a step in the right direction. And yet her proposal got almost no discussion, and virtually no endorsement. This is unsurprising, given that our media bosses include multi-millionaire Jews like Bob Iger and Ben Sherwood at Disney/ABC, David Levy and Jeff Zucker at Warner/CNN, Noah Oppenheim and Andrew Lack at NBC, and Sumner and Shari Redstone at Viacom/CBS. They certainly have no interest in any wealth tax, as it would hit them directly in the pocketbook. By definition, if it’s bad for them, it’s bad, period.
Still, such a tax system, disproportionately falling on American Jews, would have vast implications. Think of it: A $1 trillion annual contribution from the American Jewish community, in order to provide for the health and security of all Americans. It would go a long way toward burnishing their long-besmirched image, and lessening anti-Jewish hostility. By draining away some of their excessive wealth, it would reduce their ability to meddle in government and the corporate world. It would be a boon to the US economy, lifting millions out of poverty and allowing millions more to get out from under crushing debt. It would serve as a measure of true economic justice. And it would allow for an honest, transparent, fair, and just system of taxation.
But don’t hold your breath.