I’ve been catching a lot of heat lately for talking about socialism on my podcast, but honestly, I don’t see why it should be controversial at all. The pushback tells me everything I need to know: a whole lot of people have built their entire lives around government paychecks, public-sector benefits, and the steady drip of tax revenue that keeps the whole machine humming. They get defensive because the conversation about taxes hits too close to home. When you point out that the income tax proposal of 1913 was a colossal mistake—one that’s strangled growth, rewarded bureaucrats, and penalized the very risk-takers who drive real prosperity—you’re not just debating policy. You’re challenging the foundation of how they pay their mortgages and fund their retirements. And the data, especially from that outstanding book Taxes Have Consequences: An Income Tax History of the United States by Arthur B. Laffer, Brian Domitrovic, and Jeanne Cairns Sinquefield, backs me up every step of the way. 

Let me take you back to 1913. That single year changed everything. The 16th Amendment was ratified on February 3, giving Congress the power to lay and collect taxes on incomes “from whatever source derived, without apportionment among the several States.” Just months later, the Revenue Act of 1913 imposed a 1 percent tax on incomes above $3,000 (about $90,000 in today’s dollars) with a top rate of 7 percent on incomes over $500,000. It affected maybe 1 to 3 percent of the population at first, and early revenue was tiny—only about $28 million in 1914.  At the same time, the Federal Reserve Act was signed on December 23, creating a centralized banking system that promised stability but, in my view, locked in the same progressive-era thinking that favored administrative control over free markets. Both moves came during the Wilson administration, a time when socialist ideas were swirling globally, and centralized power looked like the future to some. Tariffs and excise taxes had kept federal revenue under 3 percent of GDP before 1913; after the amendment, the door was wide open. By the post-war era, federal receipts stabilized around 17-18 percent of GDP, no matter how high the rates climbed—a pattern economists call Hauser’s Law.  The pie didn’t grow faster just because the government took a bigger slice; people and capital adjusted.

What Taxes Have Consequences lays out so clearly—and what a century of statistics confirms—is that the top marginal income tax rate has been the single biggest determinant of economic fate, tax revenue from the wealthy, and even outcomes for lower earners. The authors divide the income-tax era into five periods of tax cuts and explosive growth and four periods of high rates and stagnation. When rates were slashed—as in the 1920s under Treasury Secretary Andrew Mellon (top rate down to 25 percent), the 1960s Kennedy cuts, the 1980s Reagan revolution, the 1990s, and briefly under President Trump’s 2017 reforms—the economy roared. Investment flooded in, jobs multiplied, and the rich actually paid a larger share of total revenue because the tax base expanded dramatically. In the 1920s, for example, real GDP nearly doubled, unemployment plummeted, and revenues from the top brackets rose even as rates fell. The same pattern repeated in the 1980s: top rates dropped from 70 percent to 28 percent, the top 1 percent’s share of income taxes climbed from about 25 percent to over 37 percent by the late 1990s, and real per-capita GDP growth accelerated. 

Contrast that with the high-rate eras. The late 1910s, the 1930s, the 1940s-1950s, and especially the 1970s saw top rates reach 77 percent during World War I, 94 percent during World War II, and remain north of 90 percent for decades afterward. The book makes a compelling case that the 1932 tax hikes—pushing the top rate to 63 percent amid the Depression—actually deepened the crisis. Revenue from the rich collapsed, investment dried up, and the economy stayed mired until wartime spending and later rate reductions kicked in. During the 1970s stagflation, 70 percent-plus top rates coincided with sluggish growth, high unemployment, and inflation that hammered everyone, especially the working class. Lower earners suffered precisely because the rich weren’t investing or expanding businesses when the government was confiscating the upside. The Laffer Curve isn’t a theory; it’s observable history. Push rates too high, and you cross into the prohibitive range, where behavior changes: less work, less risk, more avoidance, and ultimately, less revenue. 

I’ve seen this play out in real time with people I talk to. Just the other day, I was explaining basic economics to some younger folks who were upset they weren’t making enough money. Their lifestyles told the story—video games, complaints, minimal effort. I told them straight: this is a free country. You have twenty-four hours every day. If you’re only pulling in $20,000 a year, maximize the hours. Get a second job, learn a skill, take a risk. Once you get a little capital, that engine starts turning faster. Money makes money, but you have to earn the first bit through productive behavior. The progressive tax system we’ve had since 1913 punishes exactly that ambition. Why grind harder if the government is going to take 37 percent—or more when you add state taxes—just because you succeeded? The book spends chapters on this psychological reality: high earners respond to incentives. They hire lawyers, accountants, and lobbyists. They structure investments to minimize liability. They move. And who can blame them?

Look at the migration numbers today. IRS data from 2022-2023 shows high-tax states hemorrhaging wealth and people. California lost $11.9 billion in adjusted gross income from net out-migration; New York lost $9.9 billion; Illinois lost $6 billion. Meanwhile, no-income-tax states cleaned up: Florida gained $20.6 billion in AGI, Texas $5.5 billion, South Carolina and North Carolina billions more. High earners—those making $200,000 and up—drove most of the shift. Florida’s net gain came disproportionately from wealthy movers, whose average incomes were far higher than those of those leaving. This isn’t random; it’s rational human behavior. People vote with their feet when the “fair share” rhetoric turns into confiscation. The same dynamic happened after California and New York jacked up top rates: businesses and talent fled to Texas and Florida, starving the high-tax states of the very revenue they claimed the rich owed them. 

And don’t get me started on the people who lecture us about “fair share” while enriching themselves in public office. Nancy Pelosi comes to mind immediately. She entered Congress in 1987 with a few hundred thousand in stocks; today her family’s net worth is estimated at north of $280 million, with massive gains from timely trades in tech and other sectors while she sat on committees with insider knowledge. Critics have hammered her for years over this, yet no charges stick because the rules somehow allow it. The rest of us pay accountants to navigate a tax code thicker than a phone book while members of Congress trade on information the public doesn’t have. That’s not wealth creation through risk and ingenuity; that’s parasitic behavior enabled by the very system that claims to soak the rich. The book details how, throughout history, the wealthy have found ways around punitive rates—through capital flight, tax shelters, and reduced effort. Congress critters have a faster, easier on-ramp. 

This brings me to the real heart of the problem: the administrative state and the public-sector workforce that depends on confiscated wealth. I was in Washington, D.C., recently, and the parking garages told the story better than any chart. At 8 a.m., they’re packed—government workers streaming in. By noon? Empty. Half-day culture, cushy benefits, pay scales that often run 20-25 percent above comparable private-sector jobs when you factor in pensions and job security. Federal data show the pay gap persists; total compensation for many federal roles exceeds that of private-sector equivalents, especially at mid- to senior levels. Meanwhile, private-sector risk-takers—the ones who actually grow the economy—get penalized. We’re not funding productive infrastructure or national defense with all this revenue; we’re propping up a class of paper-pushers who enjoy lives the average taxpayer can only dream of. Democrats love to create these jobs and fund them with “progressive” taxes, then act shocked when the rich use every legal tool to protect what they’ve earned. It’s human nature. People who work hard, innovate, and build don’t willingly hand over the fruits of their labor to subsidize easy government gigs. The 1913 experiment assumed otherwise, and a century of data proves it wrong. 

The book hammers this point with statistical precision. When top rates are low, the rich bring capital out of hiding, invest it, hire workers, and expand the tax base. When rates are high, they shelter, defer, or produce less. The result? Less overall growth, which hurts everyone. Real per-capita GDP growth averaged around 2 percent across eras, but the booms under low-rate policies lifted lower incomes far more effectively. Poverty fell faster, wages rose, and government actually collected more from the top 1 percent—not because of higher rates, but because of a bigger, more dynamic economy. In 2022, the top 1 percent (incomes above roughly $663,000) earned about 21 percent of income but paid 40 percent of all federal income taxes—an effective rate around 26 percent after deductions. That share has risen over the decades as rates have come down and growth has accelerated. The progressive myth that “the rich get richer and everyone else suffers” ignores how the system actually works. Once you have capital, you can leverage it—but you earned that first pile by outworking and out-risking everyone else. Penalizing success doesn’t create fairness; it creates stagnation. 

President Trump understood this during his first term, and especially in the interregnum before his second term. His tax policies—cutting corporate rates, lowering individual brackets, doubling the standard deduction—aligned with everything we’ve learned since 1913. The 2017 Tax Cuts and Jobs Act delivered exactly the results Taxes Have Consequences predicts: strong GDP growth, record-low unemployment (especially for minorities and low-wage workers), and higher revenue from the top brackets. The rich got richer in absolute terms, but so did everyone else, and the government’s slice of the larger pie increased. That’s the opposite of the socialist collective model, which assumes we can perpetually extract from producers to fund a utopia. Centralized banking and progressive taxation were sold as stabilizers, but they became tools for an administrative state that grows regardless of economic reality. The Federal Reserve’s money creation, paired with endless deficit spending, has only amplified the damage—debt now exceeds GDP, and interest payments alone rival major budget items.

I’m not saying there should be no taxes. A consumption-based system—sales taxes on what people actually use, transaction fees tied to real economic activity—would align incentives far better. Fund highways and services through the people who use them. Let growth compound without the drag of income confiscation. The book shows that broad-based, low-rate systems maximize revenue while minimizing distortion. We’ve tried the Marxist-inspired “from each according to ability, to each according to need” approach for over a century, and it has delivered exactly what human psychology predicts: avoidance, resentment, and slower progress. Younger generations especially need to hear this. Stop waiting for the system to hand you enough; the system was never designed to reward complaints or video-game marathons. Get out there, create value, take risks. The engine only accelerates once you’re in motion.

The backlash I get for saying these things proves the point. People whose livelihoods depend on the status quo—government employees, public-sector unions, politicians who promise “free stuff” funded by someone else’s ingenuity—don’t want the conversation. But facts don’t care about feelings. We have a century of statistics now. The 1913 experiment failed. It fed a monster of debt, bureaucracy, and distorted incentives that neither party has fully dismantled. President Trump’s approach pointed the way forward, and the next decade must be about rethinking the entire process. Repeal or radically simplify the income tax. Reconsider the Federal Reserve’s role in enabling endless spending. Align policy with human nature: reward risk, protect what people earn, and stop pretending government workers deserve 30 percent more compensation for half-day effort while the private sector carries the load.

This isn’t some fringe, scandalous idea. It’s an observable reality documented in Taxes Have Consequences across hundreds of pages of data, charts, and historical analysis. The rich don’t pay their “fair share” under high rates because they’re not stupid—they adjust. The economy doesn’t grow when ambition is taxed into oblivion. And society doesn’t thrive when we build it on the backs of parasites who show up at 8 a.m. and vanish by lunch, all paid for by confiscated wealth. At their core, human beings do not want to slave away so others can live easily. That truth has never changed, and no amount of political spin or election-year rhetoric can repeal it.

As we head into the 2030s, the discussion will only intensify. People are done subsidizing inefficiency. The genie is out of the bottle. If you’ve followed my work, you know I’ve been saying this for years. Subscribe to my blog and business updates—I think you’ll love the deeper dives into these ideas and practical ways to protect and grow what you earn in a world that still rewards the ambitious. The progressive tax experiment of 1913 was a gamble based on flawed psychology and socialist dreams. A century later, we have the receipts. It’s time to learn the lesson and move on.

Footnotes

1.  Laffer, Arthur B., Domitrovic, Brian, and Sinquefield, Jeanne Cairns. Taxes Have Consequences: An Income Tax History of the United States. Post Hill Press, 2022.

2.  U.S. National Archives. “16th Amendment to the U.S. Constitution.”

3.  Revenue Act of 1913 historical summaries, IRS and congressional records.

4.  Federal Reserve Act of 1913 documentation.

5.  FRED Economic Data, Federal Receipts as Percent of GDP (historical series).

6.  Tax Foundation and IRS Statistics of Income reports on top 1% tax contributions.

7.  IRS migration data 2022-2023, state AGI flows.

8.  Congressional financial disclosures and OpenSecrets analyses on member wealth.

9.  Bureau of Labor Statistics and Federal Salary Council reports on public vs. private compensation.

10.  Laffer Center summaries and book excerpts on specific historical periods.

Bibliography

•  Laffer, Arthur B., et al. Taxes Have Consequences. Post Hill Press, 2022.

•  U.S. Internal Revenue Service. Statistics of Income historical reports (1913-present).

•  Tax Foundation. Various reports on historical tax rates, migration, and economic growth.

•  Federal Reserve Bank of St. Louis (FRED). Federal Receipts as % of GDP.

•  Congressional Budget Office and Tax Policy Center data on effective tax rates and income shares.

•  OpenSecrets.org and Quiver Quantitative congressional wealth tracking.

•  Bureau of Economic Analysis and BLS employment and payroll data.

This essay reflects exactly what I’ve been saying and living: free markets, personal responsibility, and an honest look at a century of bad policy. The evidence is overwhelming. Now it’s time to act on it.

Rich Hoffman

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About the Author: Rich Hoffman

Rich Hoffman is an aerospace executive, political strategist, systems thinker, and independent researcher of ancient history, the paranormal, and the Dead Sea Scrolls tradition. His life in high‑stakes manufacturing, high‑level politics, and cross‑functional crisis management gives him a field‑tested understanding of power — both human and unseen.

He has advised candidates, executives, and public leaders, while conducting deep, hands‑on exploration of archaeological and supernatural hotspots across the world.

Hoffman writes with the credibility of a problem-solver, the curiosity of an archaeologist, and the courage of a frontline witness who has gone to very scary places and reported what lurked there. Hoffman has authored books including The Symposium of Justice, The Gunfighter’s Guide to Business, and Tail of the Dragon, often exploring themes of freedom, individual will, and societal structures through a lens influenced by philosophy (e.g., Nietzschean overman concepts) and current events.