In 1935 FDR pushed through the Revenue Act of 1935. Affectionately called the “soak the rich” act, the bill’s stated intention was to redistribute wealth of America’s most wealthy. The bill imposed an income tax of a whopping 79% on incomes over $5 million per year (which admittedly was very a very high income at the time).
While this tax was progressive in nature (taking a higher percentage from wealthier individuals) it came alongside other regressive taxes also implemented by the administration, like the Social Security Act.
This wealth tax, as expected, was extremely unpopular among the more affluent and conservative Americans. Despite its shock value, the revenue act of 1935 did little in the way of raising additional revenue for the US government and was more of a political ploy painting FDR as a Robin Hood of sorts.
In 1936 FDR also enacted the Undistributed Profits Tax which was intended to tax retained corporate profits to “encourage redistribution of profits to employees in the form of compensation and dividends”.
This tax policy disrupted businesses economic calculations in saving for the future and reinvesting into better satisfying the needs of consumers. The depth of its economic damage is likely difficult to accurately depict.
The bill was widely criticized, however, by conservatives who argued that such a burdensome tax would hinder large businesses and crush small ones (who had fewer options for raising new capital). In implementation, the bill was diluted by congress who set the tax rates far lower than originally proposed (between 7 and 27%) and was eventually lowered again in 1938 and entirely removed by 1939.
Here we can see, even long before the effects of inflationary global central banking had had time to sink their venom into financial policy making, ground work was being laid which was harmful to successful entrepreneur’s and their ability to plan for the future. Forcing a business’s hand to a quick turnaround on reinvestment defies a basic understanding of economics.
All the while, the creeping tendrils of the state advanced their control around the auspices of society. Increasing revenues, increasing spending, and increasing incentives to borrow in order to sustain its own ends.
Of course, many arguments have and will be made that corporate monopolies must be kept in check by governments through things like excessive, progressive taxes. But governments create monopolies through legislative advantages in the marketplace in the first place, although, that is a story for another day.
Book of the Month:
The Ethics of Money Production by Jorg Guido Huulsman
-“Nicholas Oresme distinguished three ways of gaining through money in unnatural ways: (1) the art of the money-changer: banking and exchange, (2) usury, and (3) the alteration of the coinage. “The first way is contemptible, the second bad and the third worse”
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