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How the New Deal Soaked the Rich, Middle Class, and Poor
The New Deal was paid for mainly by the middle class and the poor. This was because excise taxes were the biggest revenue generators for the federal government. They applied to beer, liquor, cigarettes, chewing gum and other cheap pleasures enjoyed disproportionately by the middle class and the poor. Until 1936, excise taxes generated more revenue than the federal personal income tax and the federal corporate income tax combined. Not until 1942 — in the middle of World War II — did the federal personal income tax become the biggest revenue generator for the federal government. ...

...Accordingly, FDR proposed raising the top rate to 75 percent, compared with Hoover’s top rate of 63 percent. In addition, FDR declared, “Great accumulations of wealth cannot be justified…. I recommend, therefore, that in addition to the present estate taxes, there should be levied an inheritance, succession, and legacy tax.”

The Revenue Act of 1935 didn’t prove to be very effective at raising federal revenue or redistributing the wealth. But it did send a clear signal to employers and investors that they were under attack. Such taxes encouraged them to conclude that they would be foolish to put their money at risk.

Then in 1936 FDR signed into law a graduated undistributed profits tax that penalized companies for building up savings essential for investment. Companies that retained 1 percent of their net income would see 10 percent of it taxed away. Companies that retained 70 percent of their net income would see 73.91 percent of it go to the government. Internal Revenue Service Commissioner Guy Helvering described the purpose of undistributed profits tax rather delicately: “the Federal government shall not be unreasonably and inequitably deprived of necessary revenues.” ...

...FDR demonized investors and employers as “economic royalists” and “privileged princes.” Opinion surveys of private sector employers suggested widespread fear of the federal government because of FDR’s policies. An American Institute of Public Opinion poll reported that a majority of employers anticipated more government control of the economy in the future. In a November 1941 Fortune poll, 93 percent of employers said they expected their property rights to be undermined, and there could be a dictatorship. ...