From the bottom up

How does the graduated income tax encourage investments at home instead of abroad? I filed my first income-tax return in 1958. We had 24 tax brackets, the highest being 91 percent. A rich man could cut his taxes by incorporating his business, which was taxed at 52 percent. He could lower his taxes by taking less taxable salary and more stock options. Stock options were not taxed in the year exercised, but in the year the stock was sold. By holding the stock for two years, the sale was taxed at 25 percent as long-term capital gain.

He could lower his corporation’s income taxes by paying his workers more and paying his executives less salary and more stock options. This encouraged the executives to take the long view rather than the short view that they have now (replacing higher-paid workers with lower-paid workers, improving the bottom line, and moving on to a higher-paying job before the trouble starts).

My first real job was with SoconyMobil Oil headquarters in New York City in 1957. We had paid vacations, medical insurance, pensions, paid sick and family leave, and you could buy company stock at 50 percent. I worked in the mailroom. We all wore suits and ate in the cafeteria on the top floor at subsidized prices. To make our stock worth more, we tried to grow the company.

This is a thumbnail sketch of why our economy ( GDP) grew twice as fast from 1945 to 1980 as in the subsequent 35 years. This is demand-side economics. Demand starts at the bottom and works its way up, not the other way around.

To increase demand, we should cut taxes on working people, not on the rich. The rich will simply invest the money where they can get the biggest return, China and Southeast Asia, for instance.

RUUD DuVALL

Fayetteville