The following is an excellent excerpt from the book “THE RICH DON’T ALWAYS WIN: The Forgotten Triumph Over Plutocracy That Created the American Middle Class, 1900-1970” by Sam Pizzigati from Chapter Seven titled “Fighting Fascists, Capping Incomes” on page 195 and I quote: “In 1939, after a half-dozen years of the New Deal, the 130,880 taxpayers in the nation’s most affluent 0.1 percent averaged just $467,662 in today’s dollars, a half million less than the incomes they averaged in 1929. But these 1939 rich paid taxes at nearly twice the 1929 rate [10.9 percent]. Uncle Sam would collect 18.1 percent of their total income.
The real haircut for America’s richest wouldn’t come until the war years. In 1943, the booming war economy would have top 0.1 percent incomes averaging $612,837 in today’s dollars. But IRS records show that federal income taxes in 1943 took 55.3 percent of that income. After federal taxes, the 135,105 taxpayers in the nation’s richest 0.1 percent of 1943 had just $273,886 in income, as measured in today’s dollars. After taxes, the richest 0.1 percent of 1929 averaged $835,728, over three times as much. The loopholes conservatives in Congress opened up in the 1944 Revenue Act would reduce the effective hit on high incomes, but only slightly. In 1944 and 1945, the top 0.1 percent of Americans would pay 50.4 and 49.7 percent of their incomes in federal income tax, respectively, about five times the tax rate they had paid in 1929.
Average tax rates on the richest of the rich—the top 0.01 percent—would reach 71.7 percent in 1943. The 13,511 Americans who made up that tiny top fraction of the US population would be left with $520,882 in after-tax 1943 income, in today’s dollars. The top 0.01 percent in 1929 cleared after taxes $3,773,300, over seven times as much.
By war’s end, in short, America’s rich had never had less of the means necessary to domineer.
Roosevelt’s relentless drive to make sure the war created “not a single war millionaire” had made an incredible difference. His refusal to take “no” for an answer on his $25,000 income cap proposal had kept the entire war finance debate revolving around the rich and how much they ought to be paying in taxes. Conservatives didn’t want that debate. They wanted a national sales tax that would shunt the war’s heavy burden onto average Americans, but FDR’s aggressive advocacy for equity never allowed a sales tax to gain traction. Roosevelt would not get all he wanted on the tax equity front. But he did get plenty, enough to deliver against plutocracy a staggering knockdown.
The knockdown FDR delivered would be no purely personal triumph. He had help. Organized labor was marching with him every step of the way. Unions, particularly the new CIO industrial unions, beat their drums for FDR’s $25,000 income cap all through the war years. In January 1943, for instance, CIO Secretary-Treasurer James Carey would tag team with National Farmers Union president James Paterson for a national radio debate on FDR’s $25,000 salary cap order. The pair went up against the chairman of Universal Pictures and Senator John Danaher, a Republican from Connecticut.
That August, after the repeal of FDR’s $25,000 salary cap order, CIO President Philip Murray launched what the Los Angeles Times would call a union offensive for a “$25,000 ceiling on individual income to offset what he termed ‘selfish minority’ Congressional demands for a sales tax.” Two months later, the CIO rallied an assortment of national groups to call for a $25,000 limit, and the next month an even broader coalition—including the NAACP and six other national groups—attacked the House Ways and Means Committee for failing to adequately tax “high personal incomes” and “unparalleled corporate profits,” then went to restate support for capping income at $25,000.
The CIO’s support for Roosevelt’s tax agenda would be more than rhetorical. The incredibly low turnout in the 1942 midterm elections—and the resulting huge gains for the New Deal’s most fervent opponents—had shoved the CIO deep into electoral politics. CIO leaders had watched fiercely antilabor politicos like Martin Dies from Texas get elected to Congress in 1942 with the votes of no more than 5 percent of their constituents. They vowed to organize politically as never before and “stem the reactionary tide.”
In July 1943, the CIO leadership unveiled the vehicle for this organizing, the new CIO Political Action Committee. Observers didn’t quite know what to make of “the PAC.” The new formation made no claims to be a political party. But the new PAC did all the things political parties did—raise funds, circulate political literature, get out the vote—and more as well. The PAC launched intensive political education efforts that aimed to win union member hearts, not just their votes.
Labor had done political action before, but never on so comprehensive a scale. The PAC established national offices in New York and Washington and fourteen additional regional offices that covered all forty-eight states. The new PAC, CIO leaders pledged, would be “a permanent organization, a mighty force devoted to keeping the great majority of Americans vigilant and alert in guarding their proper political interests.” Labor political action had traditionally been about rewarding friends and punishing enemies. The new PAC, by contrast, actively promoted a vision for a new society, and this vision drew from the many different strands that wove through America’s progressive past and new Deal present.
From the anti-”bigness” activism that Louis Brandeis had inspired would come a focus on restraining monopoly power. The 1930s had ended with a New Deal fixated on rooting out economic concentration. The intense concentration of the war years would revive that interest. In 1944, the nation’s two hundred and fifty biggest corporations held 78 percent of all major war contracts and ran 79 percent of the new factories built with federal dollars.
From the old Socialist Party and the left parties that had spun out of the Socialist Party orbit would come the conviction that America’s working stiffs, once organized in a spirit of social solidarity, could and should help lead the nation.
From progressive businessmen like Edward Filene would come the understanding that no nation can have vibrant mass markets without mass purchasing power. The last landmark New Deal social legislation enacted, the Fair Labor Standards Act of 1938, had inaugurated a federal minimum wage at a rock-bottom twenty-five cents an hour. New Dealers considered this first federal minimum just a foot in the door. The new CIO PAC would seek to knock that door wide open.
From the bitter battles against private corporate control over “natural monopolies”–in everything from electric power to telephone lines—would come calls for TVAs all over America. New Dealers like Tennessee Valley Authority Director David Lilienthal believed that TVA-like programs in America’s great river valleys had the potential to “awaken in the whole people” a forgotten “sense of common purpose.” Democratically accountable TVAs, Lilienthal preached, would be able to nurture and protect America’s natural resources.
From the New Deal disciples of the British economist John Maynard Keynes and homegrown Keynesians like Marriner Eccles would come the understanding that private markets could never be counted on to self-correct. Government needed to intervene, and those interventions needed to be carefully and democratically planned to ensure all American jobs and preclude future depressions.
And the glue that would hold all these progressive strands together? That would be the ongoing struggle to shear America’s rich down to democratic size. Neither lasting prosperity nor enduring peace would ever be attained, as New Deal Senator Robert Wagner from New York put it in a 1944 speech, “upon the narrow foundation of a privileged few.” The nation would never be able to realize mass purchasing power if the nation’s wealth kept siphoning off into a handful of bank accounts. Monopoly power, New Dealers believed, only sped that siphoning. By clamping down on monopoly behaviors with TVAs that prevented private control over natural monopolies and antitrust regulations that curbed monopolistic practices in the rest of the private sector, a postwar America could keep new wealth from amassing unconscionably at the top. By progressively taxing whatever new income and wealth did manage to amass, the federal government would raise the revenue needed to enrich the lives of average Americans and keep the economy humming.
The clearest academic expression of this antiplutocratic imperative would come from Charles Merriam, a founder of modern American political science and a reformer with a personal history that went back to Teddy Roosevelt’s Republican progressivism. In 1941, Merriam published a lecture that asked whether American politics had become little more than “a cloak for old-fashioned and unbending capitalism, for pluto-democracy.”
“Are we struggling for the glory, fame, profit, position, and prestige of a few?” Merriam would wonder. “Or are we parts of a great movement for the emancipation of mankind, for new life bursting through the old-time shells?”
We had to be, he concluded, shell-busters.
“The root problem of democracy in our day,” Merriam would contend, “is to see that the gains of our civilization are fairly distributed and translated into terms of the common good without undue delay.”
CIO publicists would spell out that same notion in a more down-to-home wording.
“Democracy can work,” Joseph Gaer would write in a celebratory 1945 book on the new CIO PAC. “Our present economic system can be made to work—provided it is made to work for the benefit of all. Free Enterprise must therefore be understood as freedom of opportunity, and not freedom to waste the nation’s resources and manpower to satisfy the avarice of a few.”
Taxes, FDR’s wartime Vice President Henry Wallace also stressed, would play a pivotal role in the struggle against this plutocratic avarice. Wallace told a Seattle audience in 1944 that to ensure “profits for the many instead of the few, it will be necessary after the war to use our taxation system for economic objectives much more skillfully than we have in the past.” That would mean, above all else, continuing “heavy, steeply graduated taxes on personal incomes after the war.” Americans needed to learn from the horror of Nazi Germany, Wallace had written soon after the United States entered the war. We needed to tax away grand concentrations of private wealth because demagogues like Adolf Hitler could only come to power with plutocratic financial support.
”The demagogue is the curse of the modern world,” Wallace explained, “and of all the demagogues, the worst are those financed by well-meaning wealthy men who sincerely believe that their wealth is likely to be safer if they can hire men with political ‘it’ to change the signposts and lure the people back into slavery of the most degraded kind.’”
A nation that took all these lessons to heart could work wonders. Men and women hovering in and around the CIO PAC didn’t just believe that. They knew it. They were witnessing these wonders with their own eyes all throughout the World War II years of struggle and sacrifice. The United States of the war years was doing almost everything progressives envisioned that a nation ought to be doing: taxing the rich and corporate profits at steeply progressive rates, regulating business as never before, respecting labor rights, running major economic enterprises. Conservatives had always claimed that no free modern economy could ever survive a set of public policies as “anti-business” or “socialist” as these. But America’s World War II economy wasn’t just surviving. America’s economy was thriving. Industrial production had soared. The Great Depression had finally exited, stage left.
Progressives, everywhere they looked, saw their fondest dreams turning into social and economic realities. Corporate titans were grumbling about their personal tax bills and bargaining collectively with their workers for the first time ever. The titans had little choice. Worker walkouts in 1940 and 1941 had left FDR convinced that war production would be constantly interrupted if corporations continued to deny workers their basic rights. FDR moved to end that denial.”
(FRANKLIN ROOSEVELT HAD QUITE A TIME TO GET THROUGH CONGRESS A FAIR INCOME TAX SYSTEM WITH HELP FROM THE LABOR UNIONS. BUT HE STAYED AT IT. HE KNEW HE HAD TO GET SOMETHING THAT EVERYBODY AGREED ON. HE WAS SO SUCCESSFUL IN PUTTING THIS SYSTEM IS PLACE THAT PRESIDENTS TRUMAN AND EISENHOWER ALSO KEPT THE RATES AT 90 PERCENT FOR 20 YEARS. LIKE PRESIDENT EISENHOWER SAID, “WHILE THE MONEY IS COMING IN, AND WE HAD JUST WON THE WAR, WE’RE GOING TO BUILD A ROAD SYSTEM LIKE I SAW WHEN I WAS IN GERMANY DURING THE WAR” WHICH HAS REALLY SERVED US WELL OVER THE YEARS BUT IT HAS BEEN ERODING OVER THE YEARS BECAUSE THE LATER PRESIDENTS STARTED LOWERING THE INCOME TAX AND YOU HAD TO START CUTTING FROM ALL OF OUR INFRASTRUCTURE AND OUR QUALITY STANDARDS KEPT DETERIORATING. TO SLOW THIS UP, WE STARTED BORROWING MONEY FROM ANY COUNTRY WE COULD BORROW FROM AND THAT GOT US FURTHER IN DEBT BECAUSE AFTER THE WAR, WHEN PRESIDENT EISENHOWER WAS IN OFFICE, WE WERE THE LEADING CREDITOR NATION IN THE WORLD. NOWADAYS, WE HAVE DETERIORATED TO A DEBTOR NATION IN ABOUT 23RD PLACE IN THE WORLD. THIS IS WHY, ANYONE READING THE HISTORY OF FDR, AS WELL AS THIS BOOK, ONE CAN LEARN FROM HISTORY BY KEEPING THE BIG CORPORATIONS FROM BECOMING MONOPOLIES WHERE ONE COMPANY RUNS EVERYTHING AND THERE WAS NO COMPETITION AND IT HAS HAPPENED IN BIG CORPORATIONS AND IN BIG INVESTMENT BANKS. SO BIG THAT THEY EVEN TELL THE GOVERNMENT THAT THEY ARE “TOO BIG TO FAIL” SO, THEY DON’T HAVE TO BE EFFICIENT ANY MORE LIKE THE MIDDLE CLASS HAD TO BE EFFICIENT AND STILL ARE. SO LET’S GET BACK TO BASICS AND GRADUALLY GET OUR DEBT PAID FOR.
LaVern Isely, Overtaxed Independent Middle Class Taxpayer and Public Citizen and AARP Members