Valuetainment - The Untold History of Taxes & War in America

00:00:00.120 You know, most of the time when we hear about taxes, we hear about Democrats raise taxes,

00:00:03.680 Republicans lower taxes, but when you study the history of taxes in the US, there's going

00:00:08.360 to be many things today where you're going to say, you've got to be kidding me, Pat.

00:00:11.440 Who came up with the IRS?

00:00:13.120 You're going to be blown away by who came up with the IRS.

00:00:15.380 The whole idea of holding your taxes when you get paid in your payroll, who came up

00:00:19.800 with that idea?

00:00:20.920 Which president raised the national debt the most?

00:00:23.340 Which president raised the percentage and dollar amount?

00:00:25.240 Then we're going to talk about the correlation between war and taxes, and why does the US

00:00:28.280 have so many military bases around the world compared to Russia, China, France?

00:00:33.380 All of that stuff we're covering in today's episode.

00:00:36.160 All right, so stick around until the very end because I'm going to have my final thoughts

00:00:42.540 in a PDF for you, but let's get right into it.

00:00:44.800 1754 to 1763.

00:00:47.200 During that time, the French-Indian War took place, which the Brits started taxing the colonists,

00:00:51.420 and the colonists said, wait a minute, why are you raising taxes without asking us?

00:00:55.400 How come we don't have any kind of representation?

00:00:57.500 That led to taxation without representation.

00:00:59.940 American Revolution began, and the founders wanted lower taxes and representation, which

00:01:04.560 led to 1775 to 1783, the American Revolutionary War.

00:01:09.380 By the time it was done, obviously, US became a country, and US had two forms of taxes, tariffs

00:01:15.080 and excise taxes.

00:01:17.000 So that led to the Tariff Act of 1789, which was a 50-cent tax on foreign ships per ton, and

00:01:23.500 it was six-cent tax on American-owned vessels per ton.

00:01:27.440 Okay?

00:01:28.440 So that's 1789.

00:01:29.440 Then we go to 1792 to 1802, which was the French Revolutionary War, and this introduced

00:01:34.420 us to property taxes.

00:01:36.280 And then in 1812 to 1815, it was the War of 1812, US declared war against the Brits because

00:01:43.580 the negotiation was going nowhere, so Madison wasn't happy about it.

00:01:46.400 And by the way, the whole story about Star Spangled Banner comes from the War of 1812.

00:01:51.280 So now it's when the juicy stuff begins.

00:01:53.000 So in 1861 to 1865, Civil War breaks out in America, right?

00:01:58.260 It wasn't pretty.

00:01:59.260 It was ugly.

00:02:00.320 Very expensive.

00:02:01.600 That's when in 1862, a president known as one of the greatest president of all time,

00:02:06.100 if not the greatest president of all time, Lincoln, came up with the Revenue Act of 1862,

00:02:11.420 which lasted for 10 years.

00:02:14.100 And in 1862 was the first ever progressive tax, 3% on income earners between $600 to $10,000

00:02:21.120 a year, 5% on those making $10,000 or more, only about 10% of Americans pay taxes.

00:02:26.800 Abraham Lincoln, known as one of the greatest presidents of all time, I have him in one of

00:02:29.940 my paintings in my office on July 1st, 1862.

00:02:34.440 You know what he started?

00:02:35.440 You know what he introduced to us?

00:02:36.820 An organization you may have heard of before called the IRS.

00:02:39.700 Yes, the IRS was started under Lincoln in 1862 with the idea of having the tax withholding

00:02:47.300 system, which means you make $1,000 in a month.

00:02:50.120 They wanted the employer to withhold the taxes to pay to the government.

00:02:54.040 Why?

00:02:55.040 Because Lincoln said, folks, we just had the Civil War.

00:02:57.140 Very costly.

00:02:58.140 Very expensive.

00:02:59.140 We need you to agree to pay some federal income taxes.

00:03:01.520 But when we pay it off, we're going to get away with this.

00:03:04.060 So guess what happened?

00:03:05.600 Started in 1862.

00:03:07.100 Do you think the federal income tax ever went away?

00:03:09.480 It did.

00:03:10.480 Ten years later, 1872, they said, we paid off the war.

00:03:12.780 Guess what?

00:03:13.780 No more taxes.

00:03:14.780 They went away with taxes and went back to what it used to be before.

00:03:17.700 In 1894, Pollock versus Farmers Loan and Trust Company, 1895, Congress tried to impose

00:03:23.420 a 2% tax on earnings in excess of $4,000.

00:03:26.780 In 1894, tax was challenged in court by a Massachusetts resident named Charles Pollock.

00:03:33.620 The Supreme Court ruled in his favor, striking down the tax, because you cannot go out there

00:03:38.420 and tax anybody for no reason.

00:03:40.160 But the Socialist Union Party, the Populist Party and the Democratic Party sat there and

00:03:45.080 said, we've got to figure something out to be able to tax people.

00:03:47.540 What is this all about?

00:03:48.540 So in 1913, we came up with the 16th Amendment, and here's how it reads.

00:03:53.540 The Congress shall have power to lay and collect taxes on incomes from whatever source derived,

00:03:58.400 without appointment among the several states, and without regard to any census or enumeration.

00:04:05.440 So that's how the first permanent income was levied in 1913, influenced by the Socialist

00:04:08.980 Labor Party, the Populist Party, and the Democratic Party.

00:04:12.060 It was 1% for those earning between $0,000 to $20,000, 2% for those $20,000 to $50,000,

00:04:17.560 3% for $50,000 to $75,000, 4% for $75,000 to $100,000, 5% for $100,000 to $250,000, 6% for

00:04:23.060 $250,000 to half a mil, and then 7% for $500,000 plus.

00:04:26.980 So keep this in mind.

00:04:27.980 So so far we have the French and Indian War.

00:04:29.320 We have the American Revolutionary War.

00:04:31.300 We have the French Revolutionary War.

00:04:32.720 We have the War of 1812.

00:04:33.720 We have the Civil War.

00:04:34.720 And then that leads to World War I, 1914 to 1918, which U.S. got involved April 2nd, 1917.

00:04:41.540 Why does this matter?

00:04:42.600 Because if you go back and look at the taxes, in 1916 the top line taxes was 15%.

00:04:48.560 The moment we got involved in 1917, taxes went up to 67%, so that was another reason why taxes

00:04:54.680 went up.

00:04:55.680 Again, war.

00:04:56.680 So then that goes to 1929 to 1933, Great Depression takes place, FDR's the President,

00:05:02.500 and in 1933, FDR's new deal is being launched, and there's two plans to it.

00:05:07.720 Part one of the deal included the Banking Act of 1933 and the Securities Act of 1933, and

00:05:13.300 part two of it was in 1935, which introduced Social Security, Minimum Wage, Fair Labor Standard

00:05:19.740 Act, and by 1936 the top tax rate hit 79%, and the economy's output plummeted.

00:05:25.560 What we still haven't covered is World War II from 1939 to 1945, which the U.S. got involved

00:05:31.880 on December 7th, 1941.

00:05:34.600 So combined the Great Depression and World War II led to, in 1945, when FDR died, the

00:05:42.540 top marginal tax rate hit 94%.

00:05:46.600 From 1940 to 1963, the top marginal tax rate hovered between 81% to 91%.

00:05:51.660 That's for 24 years, 81% to 91%.

00:05:55.060 By the way, just some fun facts, where in 1939, 4 million Americans filed taxes.

00:05:59.400 They raised $900 million of tax revenue.

00:06:02.120 By 1943, 41 million people filed taxes for $13 billion of tax revenue.

00:06:07.520 And two years later, 43 million people filed taxes, and the government's revenue went to

00:06:11.980 $45 billion.

00:06:14.120 So remember how in 1862, Lincoln comes out with the IRS and says, listen, we need to raise

00:06:18.680 money, we need to raise taxes, because the Civil War was so expensive that it led to them

00:06:24.060 coming up with the tax withholding system, which means the employer is about to pay the employee

00:06:28.380 $1,000 that you say.

00:06:30.000 They withhold the taxes, and they send to the government.

00:06:33.240 Remember that?

00:06:34.240 And then it went away, because Lincoln said, when we pay off this debt, this income tax will

00:06:39.120 go away. 0.82

00:06:40.120 And in 1872, it went away.

00:06:42.240 Well let's come to 1943.

00:06:44.160 The war is still going on, World War II.

00:06:46.160 The party, the Socialists, the Liberals, the Democrats, went to get help from a guy named

00:06:51.200 Milton Friedman, where in 1943, he helped the tax withholding system become official, where

00:06:58.700 they could start taking taxes out of your income, with the employer sending the money

00:07:03.860 to the government.

00:07:04.860 Essentially, the employer became the tax collector, not the government.

00:07:08.380 And here's what Milton Friedman had to say about this later on in life.

00:07:12.480 This would have been introduced had I been involved or not.

00:07:14.500 At the time, we concentrated single-mindedly on promoting the war effort.

00:07:18.540 We gave next to no consideration to any longer-term consequences.

00:07:22.140 It never occurred to me that, at the time, I was helping to develop machinery that would

00:07:25.100 make possible a government that I would come to criticize severely as too large, too intrusive,

00:07:30.100 too destructive, of freedom, yet that was precisely what I was doing.

00:07:34.720 Quote Milton Friedman.

00:07:35.720 So you may be saying, Pat, what's the big deal about this?

00:07:37.940 Who cares?

00:07:38.940 Leave him alone.

00:07:39.940 You even got Milton Friedman in your painting.

00:07:41.480 Why are you making such a big deal about this?

00:07:43.800 Here's why.

00:07:45.120 Because when Lincoln did it, he said, when we pay off all the costs that we paid for

00:07:50.420 the Civil War, we will stop income taxes.

00:07:53.400 However, in 1913, when Wilson introduced this, saying, when we pay off the bill for World

00:08:00.040 War I, when FDR said, when we pay off the bill for World War II, we will stop taking income

00:08:05.600 taxes, it never went away.

00:08:08.020 It became permanent.

00:08:09.360 And then the tax withholding system, check, made it very permanent, FYI.

00:08:15.340 You know how old this is?

00:08:16.900 78 years old.

00:08:18.460 That's it.

00:08:19.620 The whole tax withholding thing with your income when you get, your W-2 when you get somebody

00:08:23.700 that takes all the taxes out, it's only 78 years old.

00:08:26.860 Why?

00:08:27.860 Because no one said anything about it, and it's now been around for this many years.

00:08:31.020 So here's what's crazy about it.

00:08:32.040 This entire time, Democrats keep raising taxes.

00:08:33.940 You've got Wilson, you've got FDR here.

00:08:36.760 Taxes raised 94%, 81%, all this stuff being raised.

00:08:40.280 And then a JFK shows up and says, what are we doing?

00:08:42.360 Why do we keep doing this?

00:08:43.700 Why do we keep raising taxes?

00:08:45.120 It is time to lower taxes.

00:08:47.120 And he gives this legendary speech in August of 1962, and here's what he has to say.

00:08:51.760 A creative tax cut, creating more jobs, income, and eventually, more revenue.

00:08:56.480 And the right time for that kind of bill now appears in the absence of an economic crisis

00:09:01.300 today, and if the job is to be done in a responsible way, is January 1963.

00:09:06.780 Such a bill will be presented to the Congress for action next year.

00:09:10.000 It will increase an across-the-board, top to bottom, cut in both corporate and personal

00:09:13.940 income taxes.

00:09:15.120 It will include long-needed tax reforms that logic and equity demand.

00:09:18.820 And it will date that cutting taxes to take effect as of the start of next year, January

00:09:23.600 1963.

00:09:24.840 The billions of dollars this bill will place in the hands of the consumer and our businessmen

00:09:28.220 will both have immediate and permanent benefits to our economy.

00:09:31.520 Every dollar released from taxation that is spent or invested will help create a new job

00:09:35.980 and a new salary.

00:09:37.080 And these new jobs and new salaries can create other jobs and other salaries.

00:09:41.000 And more customers and more growth for an expanding American economy.

00:09:44.160 A democratic president for tax cuts and for entrepreneurs.

00:09:48.420 Go figure.

00:09:49.420 How confusing is this so far, right?

00:09:51.080 By the way, when he said January 1st, 1963, he gave the speech on August 13th of 62.

00:09:56.640 He died next year, November 22nd.

00:09:59.160 The tax bill went into effect, 64, under Lyndon Johnson.

00:10:03.480 And here's what it looked like.

00:10:04.340 He took the top line from 91 to 70%, and he took corporate taxes from 52 to 48%.

00:10:10.420 This is in 1964 when this came out.

00:10:12.760 17 years later, in 1981, we had the economic recovery tax of 1981 by Ronald Reagan, which

00:10:19.200 this is what Reagan did.

00:10:20.480 Reagan lowered taxes pretty much for everybody.

00:10:24.280 Tax rate, the top line, went from 70 to 50, bottomed from 14 to 11, capital gains went

00:10:28.360 from 28% to 21, higher estate tax exemption went from $175,625 to $600,087.

00:10:36.860 He established the IRA, the IRA for employees.

00:10:39.640 And this was all helped through Arthur Laffer, the economist.

00:10:43.080 And FYI, while Reagan came up with us in 1981, in 85, the IRS announced that America has officially

00:10:48.620 produced 400,000 new millionaires due to Reagan's new tax laws.

00:10:54.420 So now I'm going to stop right here because I don't want this thing to be a 30 minute episode.

00:10:57.080 Obviously after this we have Bush Senior, we have Clinton, we have Bush, we have Obama,

00:11:00.080 we have Trump, and then we have Biden today.

00:11:01.360 But I want to kind of show you a couple trends I noticed here, a couple things.

00:11:05.600 Number one, a lot of times you'll hear about taxes, you know, rich don't pay taxes, poor

00:11:10.080 pay too much taxes, the rich don't pay any taxes.

00:11:12.840 I wanted to find out who actually pays the most taxes, and what has happened over the

00:11:17.480 years.

00:11:18.480 Are the rich paying less taxes, or are the rich paying more taxes? 0.54

00:11:21.520 And here's what the data tells us.

00:11:23.420 So there's two charts I want you to look at.

00:11:24.800 The first one is the percentage of taxpayers.

00:11:27.080 This is directly from the IRS, okay?

00:11:30.680 Percentage of taxpayers.

00:11:31.680 Let's look at the bottom 50%. 0.96

00:11:33.620 You can see the majority of the taxpayers is bottom 50%.

00:11:37.960 Then the red is the top 25 to 50%.

00:11:40.640 Then the gray is 5 to 10, the top 105%, and the black is the top 1%, the richest people, 0.93

00:11:45.960 how much, how big of a population there is of the top 1%, right?

00:11:49.920 The next one directly from the IRS is, is the 1% paying more or less over the year?

00:11:55.660 If you look at from 1980 to 2018, the top 1% keeps paying more and more and more taxes.

00:12:02.620 So does the top 5%, but the top 10% is about the same from 1980 till today.

00:12:07.700 The top 25% is getting smaller, the top 50% is getting smaller, but the bottom 50% is definitely

00:12:15.660 getting smaller and smaller and paying taxes.

00:12:18.860 Now some of you may be watching this politically, you're on the left and you say, wait a minute,

00:12:21.700 what are you saying?

00:12:22.700 The top shouldn't be paying that much taxes?

00:12:24.580 Look the whole purpose of me doing it this way is to show how much contradiction there

00:12:28.620 is on the left and the right.

00:12:30.540 Why?

00:12:31.540 Because everything about the timeline I showed was what?

00:12:34.620 War, war, war, war, war, war, war, war.

00:12:39.640 Every time we have a war, there is consequences.

00:12:43.380 Look how many times we have to raise taxes, come up with new taxes just to pay off debt

00:12:49.280 from a war that we caused or we got involved in.

00:12:52.540 This led me to find out, how many military bases do we have worldwide?

00:12:56.420 And how do we compare to other countries?

00:12:59.000 If I were to ask you right now, how many military bases do you think US has outside of the US

00:13:02.660 and how many countries, what would you say?

00:13:05.140 You know what the number is?

00:13:06.380 800 foreign bases in 70 plus countries.

00:13:11.740 Do you want to know how many military bases China has in foreign countries outside of China?

00:13:17.740 You know how many it is?

00:13:19.140 One is in Africa, right by the Suez Canal, the choke point.

00:13:23.460 Why?

00:13:24.460 Intentional.

00:13:25.460 It's the only one they have because they're taking those resources and they're investigating

00:13:29.380 in the current modern way of going to war.

00:13:32.220 So now some of the folks on the right may be saying, what are you saying, Patrick?

00:13:35.700 Are you saying taxes are going up because we're going to war too many times?

00:13:38.420 Yes, America tends to get involved in too many wars that they don't need to be getting

00:13:42.460 involved in.

00:13:43.460 Why?

00:13:44.460 Because of control.

00:13:45.460 While instead of keeping that money and investing it into infrastructure, maybe in a different

00:13:49.300 way for military, we're allowing China to get stronger because they only have one military

00:13:53.460 base.

00:13:54.460 By the way, you want to know how many Russia?

00:13:55.700 You want to know how many France?

00:13:57.060 You want to know how many Britain have?

00:13:58.780 You want to know how many total they have combined?

00:14:00.780 30.

00:14:01.780 They have 30 foreign bases.

00:14:03.540 We have 800.

00:14:05.900 America has 800.

00:14:06.820 What do you think is the cost of that?

00:14:08.720 So you see what's happening when I'm showing these debt.

00:14:10.880 By the way, here's the other part.

00:14:12.220 So some of you guys are saying, well, that's right.

00:14:14.960 Republicans are spending way too much money.

00:14:17.120 Now I'm going to ask you a different question.

00:14:18.860 Which president do you think increased the national debt the most by percentage?

00:14:23.140 Which one do you think is at the top?

00:14:24.540 Ready?

00:14:25.540 So here we go.

00:14:26.540 Top percentage of national debt increase during their term.

00:14:29.060 First place, FDR, 1,050%.

00:14:32.340 Second place, Woodrow Wilson, 727%.

00:14:36.120 By the way, FDR came out with the New Deal, Woodrow Wilson came out with the 16th Amendment.

00:14:41.260 Third place, Ronald Reagan, 186%.

00:14:43.420 Fourth, George Bush, 101%.

00:14:46.300 Barack Obama, 74%, although he has the biggest dollar amount of $8.59 trillion increase.

00:14:53.200 Then it's George H.W. Bush, then it's Ford, then it's Carter, then it's Nixon, then it's Trump.

00:14:57.740 But taking a deep dive into the topic of taxes, I realized even more that taxes is not black 1.00

00:15:02.360 and white.

00:15:03.360 There's a lot of gray area, whether it's political, the influence of it, the cause of it with war.

00:15:08.060 But I was curious the more I learned.

00:15:09.400 I've got another 50 pages that I haven't covered with you.

00:15:11.340 If you want me to go even deeper with different forms of taxes, what other countries do with

00:15:15.020 taxes, press the thumbs up button and share this episode.

00:15:18.260 If this does well, I'll probably do another part two to this.

00:15:20.860 And if you want today's message in a PDF, text the word TAX to 310-340-1132.

00:15:26.940 One more time, text the word TAX, T-A-X, to 310-340-1132.

00:15:32.300 And if you're not in the States, go in the description, click on the newsletter, subscribe

00:15:35.660 to it, and we'll send you the PDF to you as well.

00:15:38.300 And last but not least, I did another episode similar to this on the topic of inflation.

00:15:41.920 If you've not watched it, click over here to watch that episode.

00:15:43.860 Thanks for watching everybody.

00:15:44.860 Take care.

00:15:45.860 Bye.

00:15:46.860 Bye.

00:15:47.860 Bye.

00:15:48.860 Bye.

00:15:49.860 Bye.

Valuetainment - May 26, 2021

The Untold History of Taxes & War in America

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