Posted on May 20, 2011, Printed on May 21, 2011
Forty years ago, wealthy Americans financed the U.S. government mainly through their tax payments. Today wealthy Americans finance the government mainly by lending it money. While foreigers own most of our national debt, over 40 percent is owned by Americans – mostly the very wealthy.
This great switch by the super rich – from paying the government taxes to lending the government money – has gone almost unnoticed. But it’s critical for understanding the budget predicament we’re now in. And for getting out of it.
Over that four decades, tax rates on the very rich have plummeted. Between the end of World War II and 1980, the top tax bracket remained over 70 percent — and even after deductions and credits was well over 50 percent. Now it’s 36 percent. As recently as the late 1980s, the capital gains rate was 35 percent. Now it’s 15 percent.
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