On income taxes
What were we thinking?
by David F. Rankin
It’s that time of year again when the income tax bubbles up as a hot topic of conversation in households all across America. For many, it’s not quite as bad as a root canal, but it may come close. At least with a root canal, when it’s over, it’s over. To comply, the search will be on for receipts, statements, proof of deductions, expenses, transactions, W2s, W9s, 1040s, and on and on.
Prior to 1913, life was a lot simpler: there was no federal income tax. None. Zero. Everything changed when political leaders passed the 16th Amendment to the Constitution, created the federal income tax, and began tapping into a vast reservoir of national personal income. The amendment reads: “The Congress shall have the power to levy and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.”
What were they thinking? Talk about giving a blank check to the federal government without any requirement to share with the states! The federal government does share some of the revenue, but it almost always comes with strict rules, regulations, and mandates.
In 1913, citizens bought in to the idea as they were told the income tax would only affect the wealthy. It started out that way, but as most of you reading this article know all too well, it did not last. It began with a maximum rate of 5 percent on income over $500,000 (only affecting the wealthiest of the wealthy). Political leaders kept increasing the rates, and by the 1960s the top income-tax rate was up to a shocking 91 percent. This was too much, and the economy suffered.
Count costs first
Economic chickens come to roost
by David F. Rankin
The year 2023 has arrived, and we wonder: What happened to the U.S. economy? In January three years ago, Americans enjoyed low inflation, a humming economy, low interest rates, and a U.S. federal government that was trillions less in debt.
This is where we were in January of 2020 when the coronavirus hit the world and common sense flew out the window. Panic can be destructive, and it certainly was in this case. With scant public information about the nature of the virus, exactly who was going to the hospital, and who was most susceptible, we shut the economy down. As it turned out, most of the working-age population, particularly the young, were not in much danger from the virus. Seventy-five percent of the fatalities occurred in the over-65 age group.
Did anyone count the cost of shutting down a $22 trillion economy in terms of jobs lost, incomes vaporized, businesses destroyed, education halted, and debt accumulated? The U.S. did what no nation should ever do: It shut down. And much of the world followed suit. The bottom line is we as a nation panicked, and we forgot to count the economic cost. Moreover, as it turned out, the health benefits of the shutdowns have proven difficult to document.
As a result of our hasty action, by the second quarter of 2020 the U.S. economy was declining at a 33 percent annual rate. We were headed for a second Great Depression. Fortunately, the Federal Reserve System and the federal government recognized what was unfolding and threw money at the problem fast. They dump-trucked approximately $2.5 trillion on the economy, which halted the decline and created the shortest recession in our history.
Although the national economy reopened in April, unfortunately many states continued lockdowns well into 2021. California’s emergency declaration will not officially end until next month. Interestingly, China made an even more serious mistake with its zero-covid policy, which produced economic calamity for the nation. States which decided against lockdowns (like Arkansas) found their economies not only did very well during 2021 and 2022, but many actually prospered.
Surviving the wave
May 7, 2020: The turbulent economic conditions of today have far exceeded any economic challenge the U.S. has faced since the Great Depression of the 1930s. Newly released numbers indicate that 30 million Americans are unemployed. Businesses, both large and small, are struggling, and too many are teetering on the edge of bankruptcy.
What exactly are we going to call this economic free-fall due to the coronavirus? Let's hope we don't have to call it the Second Great Depression.
OPINION | DAVID F. RANKIN: Resist siren call
The socialism attraction
by DAVID F. RANKIN SPECIAL TO THE DEMOCRAT-GAZETTE | November 5, 2020
Ratified in 1791, the addition of the Bill of Rights to the U.S. Constitution guaranteed citizens' specified rights and helped set the stage for an upstart nation to grow into the world's most powerful economic and military power. Government was small in the early years, and government power was widely divided between the states and the central government in Washington.
[article excerpt from Arkansas Democrat-Gazzette]