With the escalation of our “new” war with ISIS (ISIL), how is this going to paid for — with “offsetting costs” (PAYGO) — such as cutting food stamps, rather than raising the capital gains tax rate on the war profiteers?
- The Revenue Act of 1862 was passed by Congress to help fund the Civil War.
- The Revenue Act of 1916 and War Revenue Act of 1917 (and the Revenue Act of 1918) passed because the entry of the United States into World War I greatly increased the need for revenue.
- The crisis of World War II led Congress to pass four excess profits tax statutes between 1940 and 1943. After the war in 1945 Congress repealed the tax.
- The Korean War induced Congress to re-impose an excess profits tax, effective from July 1950 to December 1953.
- The Tax Reform Act of 1969 (Vietnam War) The maximum tax rate increased from 25 percent to 29.5 percent in 1970, 32.5 percent in 1971, and 35 percent in 1972 and later years. The alternative tax rate on corporate long-term capital gains income increased to 28 percent in 1970 and 30 percent in 1971.
The Only War (Ever) in U.S. History that was not Funded with Tax Increases
After invading Iraq, Bush didn’t raise taxes to fund the war, but instead lowered the capital gains tax rate from 20% to 15% — the lowest since it was first established in 1921 at 12.5%. After the Bush tax cuts were extended 2 more years in 2010 (as a compromise with the GOP for extending unemployment benefits), and after they expired in 2013 (and with ObamaCare’s new 3.8% surtax), the capital gains tax rate is currently only 23.8% — a lot less than the top marginal rate of 39.6%. (That's why Warren’s secretary pays a higher rate than her boss.)
How is this new war going to be paid for? On the backs of the poor? With more government debt? With less investment in infrastructure, education and research? With more cuts to NASA and our most necessary government agencies — such as the Centers for Disease Control and Prevention, the Food and Drug Administration, Federal Aviation Administration and the IRS (for auditing tax dodgers and their offshore bank accounts).
Corporations hold about $2 trillion in excessive profits, but they aren't hiring or raising wages, so they can afford a war tax. We already paid for the last war with a housing collapse, the Great Recession and mass unemployment. We already bailed out the banks and the auto industry and got very little in return. And if the Defense Industry wants a war, tax them and make them pay for it.
And who will pay for the next natural disaster — especially if it happens in a Red state? The unemployed and poor? The Red states already receive more federal dollars than they pay in with revenues.
It's time Congress passes a new tax bill to pay for this new war.