In a book, Benjamin Anderson tells the story of how a wealthy entrepreneur reacted to the imposition of much higher income-tax rates in 1935 at the bottom of the Great Depression. Anderson’s Economics and the Public Welfare, a highly regarded study of the Great Depression, was based on his personal experience as an economist for the Chase Manhattan Bank and the editor of the Chase Economic Bulletin. Anderson recounts the case of one rich man who,
at the age of 25, had inherited an estate of about $12 million — some thirty years before these 1935 taxes came. He had nursed his $12 million into an estate of about $30 million during those thirty years.
He had done it by a kind of activity particularly helpful and useful to the country….
He had taken many risks, knowing that many of them would turn out badly, but counting on a few of them to turn out well enough so that the profits on the successful ones would offset the much more numerous losses on the unsuccessful ones….
In the individual … a vigorous man fifty-five years old, the effects of the new taxes were paralyzing. More than three-fourths of any profits which he might have [made] from a new venture would be taken away from him by income taxes. Any losses which he might incur … would be his own.
Read More at The New American . By Bob Adelmann.
Photo Credit: 401K 2012 (Creative Commons)