Paul Krugman reviews “Capital in the Twenty-First Century” by French economist Thomas Piketty, and discovers the origins of “Confiscatory Taxation on Excess Incomes: An American Invention.” What do you know?
one point Piketty makes is that the modern notion that redistribution and “penalizing success” is un- and anti-American is completely at odds with our country’s actual history. One subsection in Piketty’s book is titled “Confiscatory Taxation of Excess Incomes: An American Invention”; he shows that America actually pioneered very high taxes on the rich:
When we look at the history of progressive taxation in the twentieth century, it is striking to see how far out in front Britain and the United States were, especially the latter, which invented the confiscatory tax on “excessive” incomes and fortunes.
Why was this the case? Piketty points to the American egalitarian ideal, which went along with fear of creating a hereditary aristocracy. High taxes, especially on estates, were motivated in part by “fear of coming to resemble Old Europe.” Among those who called for high estate taxation on social and political grounds was the great economist Irving Fisher.
Just to reemphasize the point: during the Progressive Era, it was commonplace and widely accepted to support high taxes on the rich specifically in order to keep the rich from getting richer — a position that few people in politics today would dare espouse.
There are many reasons our precursors would have been against these trends that support the creation of an American aristocracy. Egalitarian ideal? Isn’t that socialism? Creating wealth is fine and plenty noble, but safeguarding it is not what life is about – much to the dismay of some of us. To our further dismay, the whole notion of what was and what was not imagined by the founders of this country or by later generations who helped shape it continues to be a poorly understood system of rakes on the path. Please do watch out.
Image: Andrew Carnegie, who made a lot of money but also had ideas about the role of surplus wealth that many might find surprising.