100% Supertax on Billionaires? (feat. Robert Reich)

Good morning, bad news: In order for an average worker at a big corporation, -- not the lowest paid but average -- to make as much as their CEO does in one year, they’d have to work 40 hours a week, for 300 years. America is the richest nation in the world – richer than this nation has ever been. But if you’re a member of the middle or working class, and especially if you’re a Millennial or Gen Z, your share of that wealth has been in a steady freefall since the 1970s. One reason is the richest Americans have siphoned an entire third of the middle class’s share of income into their own pockets. But it doesn’t have to stay that way.

Hi, I’m Robert Reich here for Good Morning, Bad News, to talk about a maximum wage, and why despite the hysterical shrieking that comes from billionaire-funded propaganda, a maximum wage is neither radical, nor unprecedented. In fact, America has already had a maximum wage, and it was during the strongest middle class economic growth in our history.

So how does a maximum wage help solve these problems without collapsing the economy and killing innovation, as billionaire-propaganda claims it would?

It may surprise you to learn that the United States actually used to effectively have a maximum wage. Little-known historic fact: Not only was Franklin Delano Roosevelt responsible for enacting the minimum wage in 1938, but he also proposed a 100% supertax on excess income. In the early 1940s, FDR told Congress “no American citizen ought to have a net income, after he has paid his taxes, of more than $25,000 a year,” which today is equal to about $425,000.

As a compromise, Congress ultimately enacted what was in effect a maximum wage -- a 94% income tax rate on the richest Americans, before all deductions and tax credits, combined with two already-existing taxes on extreme wealth -- the estate tax and capital gains tax, which limited how much people at the top could hoard.

So what happened when the United States had a high tax rate on the richest Americans? Did the economy collapse while the rich fled to other countries? No. Just the opposite. Instead, we witnessed the birth of the largest middle class in history, the strongest-ever economic growth, and plentiful well-paid jobs with good benefits and pensions. All this allowed many Americans to pay for college, afford healthcare, buy homes and cars and televisions, and raise their families without going deep into debt. 

And the reason is simple: when the super rich can’t hoard unfathomable wealth, more money is spent on wages and jobs, which in turn is spent in the real economy, not piled into a stock market that’s mostly owned by a small portion of the population. It was the American Dream we hear so much about, and it started disappearing around 1981. Why? Two words: Ronald Reagan.

In the early 80s, Reagan convinced Americans that funneling money from the middle class to the richest 1% was actually good for the middle class. It was called “trickle-down economics.” And now, 40 years later, we’re seeing what should have been obvious from the beginning - that this policy basically only enriched those at the top. 

A maximum wage isn’t a radical idea. It doesn’t stifle innovation or hurt the economy. Instead it would help create a new middle class that’s  thriving, not just barely surviving. In fact, the best incentive for companies to innovate is a large and growing middle-class, because that’s where the demand comes from.

Of course, a maximum wage alone won’t do this. We also need a living wage at the bottom. And unions to give workers enough bargaining power to get good wages. And tough antitrust enforcement to break up monopolies.

Here’s what won’t work: continuing to do nothing about surging inequality and trusting a market and political system manipulated by the richest Americans to fix itself.