In October 1936, Franklin Roosevelt gave a historic speech that addressed the need for progressive taxation as a necessary condition for a civilized society. He spoke of the need for every citizen to pay his or her dues.
FDR argued that each of us should pay taxes according to our ability. He argued that because corporations and wealthy business owners put a higher toll on physical infrastructure in shipping goods, require educated and skilled employees (products largely of public education), they should pay a higher tax rate than employees.
Roosevelt cast his plea for tax reform in the shadow of the Great Depression. The U.S. spent $20 billion (roughly $1 trillion today) to finance our involvement in World War I largely with deficit spending. In response, under President Woodrow Wilson, taxes for the highest tax bracket rose to as high as 91 percent. Under Wilson’s plan the war debt would have been retired in five years. Under President Warren Harding, taxes for the top 1 percent were reduced to 25 percent and federal deficits exploded. Meanwhile, a series of speculative bubbles grew and popped during the Roaring ’20s, culminating in a real estate collapse in the late ’20s followed by a stock market crash in 1929.
So here we go again. The real estate bubble has burst. We would have already seen a complete meltdown of Wall Street in 2009 without a monumental bailout by taxpayers. FDR was right: “…rule by organized money is just as dangerous as rule by an organized mob.”