While America has always been a place where a person could get rich, it used to be that you got rich a bit more slowly, and everyone benefited in the process. This is because we used to have very high tax rates at the top.
A person could do very well, but income that came in above a certain level was highly taxed and used to pay for the teachers, police, courts and roads that enabled businesses to thrive. Just how high were taxes? During America's "golden years" of 1951-1963, tax rates were over 90 percent on income over $400,000. Then through the 1960s and 70s, they were 70 percent on income above $200,000.
This had many beneficial results — especially for the people who paid higher taxes. Back then, government could afford to invest in programs that improved everyone's standard of living, including health, knowledge and technology, all without borrowing. History recalls these as the years we created and grew our prosperous middle class, built our public universities, conducted our economy-changing scientific research and developed a culture of thriving entrepreneurial businesses.
Back when it took time to make a fortune, business people had to rely on the health of the greater community to nurture their own enterprises. They had to think and act long-term. They had to carefully build solid businesses that satisfied their customers. They had to hold on to workers because their experience was valuable.
Meanwhile, the roads and bridges used by their trucks were kept in repair, our schools provided excellent education to their potential employees, and our courts were well funded to properly enforce contracts. Businesses and communities depended on each other to do well.
But once top tax rates were lowered, vast personal fortunes could be realized from a single quick deal. This created incentives for people to engage in activities that we can now see helped make our country a worse, and less prosperous, place.
Corporations became predatory, caring little for the community because executives planned to get rich quick and leave soon. Short-term business models that cut employees to the bone and took advantage of customers began to make sense.
Because of reductions in tax revenue, we cut spending on schools and infrastructure. Yet even with all these cuts, our federal government had to borrow to make up a shortfall. Now we have a massive debt that costs us hundreds of billions in interest each year.
Once businesses' interdependence with the community went out the window, it became more profitable to outsource or sell off our manufacturing capacity. Then, as communities fell apart, those few who benefited from such business practices could just fly away in their private jets. The greater community was of no use to them except as a crop to be harvested.
We can see the effects of this quick-buck, short-term thinking all around us today. Our roads and bridges and schools are falling apart. The experiment in low taxes has nearly destroyed our economy, too, and may yet if we don't stop borrowing instead of asking the wealthy to pitch in.
So it is time to change the formula. It is time to make our businesses part of our communities again. The way to do this is to continue to help people become wealthy — just a bit more slowly, please, and bring us all along. Bring back the top tax rates of our golden years so we can all enjoy the benefits of our economy again.
DAVE JOHNSON is a fellow at the Commonweal Institute of San Francisco. He wrote this article for the Mercury News.