Sarah Palin's War On Taxes - And History


Among the qualities that uniquely define Sarah Palin is that she doesn't know what she doesn't know. But as her confusion about climate change, the First Amendment and even Alaska's energy production showed, Palin's ignorance of a subject is no barrier to her speaking out with great conviction about it. So it is once again with talk of potential tax increases to fund the escalating war in Afghanistan. War time taxes are never necessary, Sarah Palin seemed to suggest this week, because during World War II "many Americans gave what little money they had to buy the war bonds that funded it all."

As Andrew Sullivan noted here and here, the Quittah from Wasilla used this week's anniversary of the Japanese attack on Pearl Harbor to invent a new myth about how the United States mobilized and paid for the war which followed it. Palin wrote this December 7:

The attack on Pearl Harbor launched America into the Second World War, and our Greatest Generation did not hesitate when asked to sacrifice for their country. American men enlisted in droves, American women went to work in the factories that became our "Arsenal of Democracy," and many Americans gave what little money they had to buy the war bonds that funded it all.

Of course, in reality Americans funded the war through massive debt and massive tax increases (above).

As NPR recalled in August, Americans starting in 1942 began paying dramatically higher taxes, with the richest paying the most of all:

During World War II, tax rates for the wealthy soared as high as 94 percent. But poor and middle-class families also paid taxes at rates substantially higher than today's. Despite those high taxes, the vast majority of Americans surveyed by Gallup back then said the taxes they paid were fair.

Just two weeks ago, former Reagan Treasury Department economist Bruce Bartlett quantified those war time taxes and how that vast new burden was shared across the Greatest Generation:

During World War II, federal revenues roughly tripled as a share of the gross domestic product (GDP) and the number of people paying income taxes expanded tenfold, from 3% of the population in 1939 to 30% by 1943. In 1940, a family of four needed close to $80,000 of income in today's dollars before it paid any federal income taxes at all. By the war's end, it saw its effective tax rate rise from 1.5% to 15.1%. (Today such a family only pays a federal income tax rate of about 6%.) But taxes weren't the only way the war was paid for. Spending on nondefense programs was cut almost in half, from 8.1% of GDP in 1940 to 4.4% in 1945.

While loopholes and other provisions of the IRS code enabled the wealthy to pay lower effective tax bills, the top marginal rate remained above 70% until 1981. Nonetheless, as Bartlett noted, new taxes were enacted to fund the smaller conflicts in Korea and Vietnam:

Even during wars closer in magnitude to those in which we are presently engaged, significant sacrifices were made. In 1950 and 1951 Congress increased taxes by close to 4% of GDP to pay for the Korean War, even though the high World War II tax rates were still largely in effect. In 1968, a 10% surtax was imposed to pay for the Vietnam War, which raised revenue by about 1% of GDP. And there was conscription during both wars, which can be viewed as a kind of tax that was largely paid by the poor and middle class--young men from wealthy families largely escaped its effects through college deferments.

If that image of "young men from wealthy families largely escaped its effects through college deferments" conjures up memories of the chickenhawks of the Bush administration, it should. As it turns out, the same men who generally avoided military service in Vietnam later refused to pay for the war in Afghanistan or their unnecessary invasion of Iraq.

The contrast between war presidents George W. Bush and FDR could not greater. And to be sure, as Bartlett again highlighted, Bush's refusal to pay for his wars is an exception to the rule of American history:

In recent years, Republicans have been characterized by two principal positions: They like starting wars and don't like paying for them. George W. Bush initiated two major wars in Iraq and Afghanistan, but adamantly refused to pay for either of them by cutting non-military spending or raising taxes. Indeed, at his behest, Congress actually cut taxes and established a massive new entitlement program, Medicare Part D.


The result, of course, was an ocean of red ink. After Ronald Reagan tripled the national debt, George W. Bush and his Republican allies in Congress doubled it again. For his part, President Obama in his speech at the Brookings Institution Tuesday made certain to point out the Republicans' short memories:

"Folks passed tax cuts and expansive entitlement programs without paying for any of it -- even as health care costs kept rising, year after year. As a result, the deficit had reached $1.3 trillion when we walked into the White House. And I'd note: These budget-busting tax cuts and spending programs were approved by many of the same people who are now waxing political about fiscal responsibility, while opposing our efforts to reduce deficits by getting health care costs under control. It's a sight to see."

At the end of the day, proposals by some Democrats for a new Afghanistan war surtax are designed more to register their opposition to Obama's escalation there than to pay for it. (Of course, Mitch McConnell's call to fund the U.S. troop surge there from economic recovery funds is just a cynical ploy to highlight Republican opposition to the stimulus.) Ultimately, after the U.S. economy recovers, Americans will have to begin paying higher taxes, starting with the elimination of most or all of the reckless Bush tax cuts of 2001 and 2003 that never should have been passed during wartime and which are in large measure responsible for the mushrooming budget deficits he bequeathed to his successor.

As for Sarah Palin, she turned to Facebook on November 24 to announce the equivalent of "read my lips, no new war taxes":

With Congress and President Obama spending money on everything at breakneck speed, it's interesting that they are only now getting nervous about spending - but only when it comes to providing the necessary funds to complete our mission in Afghanistan. They don't need a new "war tax" to fund a strategy for victory in the war zone. They simply need to prioritize our money appropriately.

Because, only in Sarah Land, that's what the Greatest Generation did.

(This piece also appears at Perrspectives.)


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