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August 17, 2011
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The Battle for a More Equal America
What would FDR do?
by
S am P izzicati
grabbed $522,537, over $8 million today, in 1941
salary.
But conservative lawmakers would quickly
reject FDR's plan. Four months later, Roosevelt
tried again. He repeated his $25,000 "supertax"
income cap call in his Labor Day message.
Congress shrugged that request off, too.
FDR still didn't back down. In early October, he
issued an executive order that limited top corpo
rate salaries to $25,000 after taxes. The move
would "provide for greater equality in contrib-
How much can a U.S.
p resid en t com m itted to
greater equality hope to ac
complish when lawmakers
devoted to helping the rich
hold the upper hand?
Advocacy for equality
must take a backseat, Obama
administration insiders in
sist, when fanatical friends
The debt ceiling
"solution " that White House
u
m e fortunate
loriunaie in congress
•
.
of i the
Congress
recklessly endanger our na- Tind congressional leaders bargained does not
tion.
ask these top 400 — or any other rich Americans
B utin 1943 a U ^ p r e s j- _ t o p a y a p e n n y m o r e
t a x e s t fra n
j
dent confronted a debt ceil-
.
.
.
...
,
.
ing crisis just like Obama's
¡he 2011 debt ceiling struggle, inequality
— and came up with adiffer- has clearly triumphed.
ent answer. Facing rabid law- — -------- ---------------------------
makers every bit as opposed to taxing the rich as uting to the war effort," Roosevelt declared,
ours today, Franklin D. Roosevelt didn't let up
Infuriated conservatives saw red, literally,
on the struggle for a more equal America. He The "only logical stopping place for this move-
doubled down.
ment," fumed Princeton economist Harley Lutz,
Roosevelts debt ceiling battle actually be- would be "a completely communistic equaliza-
gan right after Pearl Harbor. The nation needed tion of incomes."
a revenue boost to wage and win the war.
Lawmakers sympathetic to the rich vowed to
FDR and his New Dealers wanted to finance kill FDR's executive order by any legislative
the war equitably, with stiff tax rates on high means necessary. They ended up attaching a
incomes. How stiff? FDR proposed a 100 per- rider repealing the order to a bill that would give
cent top tax rate. At a time of grave national the wartime debt ceiling a desperately needed
danger," Roosevelt told Congress in April 1942, lift. FDR tried and failed to get that rider axed,
"no American citizen ought to have a net in- then let the bill with it become law without his
come, after he has paid his taxes, of more than signature. He had no choice. Our troops needed
$25,000 a year." That would be about $350,000 financing.
in today's dollars.
Roosevelt had definitely lost the debt ceiling
The year before, steel exec Eugene Grace had battle over the salary cap, as he no doubt knew
à
he would. But sometimes a leader can win by
"losing." FDR didn't prevail on the cap. He did
prevail in his far broader struggle to shape the
wartime finance debate.
Roosevelt's relentless campaign to cap top
incomes kept that debate focused on taxing the
rich. Conservatives didn't want to do that taxing.
They wanted a national sales tax, as do many
conservatives today. But FDR's aggressive
advocacy for equity never let that regressive
sales tax notion get traction.
The war revenue debate would be fought on
Roosevelt's terms — not on whether to tax the
rich, but on how much. And, in the end, that
"how much" would turn out to be quite a great
deal. By the war's end, America's wealthy would
be paying taxes on income over $200,000 at a 94
percent statutory rate.
Americans making over $250,000 in 1944—
over $3.2 million today— paid 69 percent of their
total incomes in federal income taxes, after ex
ploiting every loophole they could find. In 2007,
by contrast, America's 400 highest earners paid
just 18.1 percent of their total incomes, after
loopholes, in federal taxes.
The debt ceiling "solution" that White House
and congressional leaders bargained does not
ask these top400— or any other rich Americans
— to pay a penny more in taxes than they do
now. In the 2011 debt ceiling struggle, inequality
has clearly triumphed.
So what does FDR's debt ceiling battle teach
us? Maybe this: We really can have a more equal
America. We just need to fight for it.
Sam Pizzigati edits Too Much, an online
weekly on excess and inequality published by
the Washington, D.C.-based Institute for Policy
Studies.