This page has been archived and commenting is disabled.
The Good Ol' Days: When Tax Rates Were 90 Percent
Submitted by Andrew Syrios via The Mises Institute,
It’s quite interesting indeed when both progressives and conservatives seem to be nostalgic for those good ol’ days in the 1950s, for different reasons, of course. Conservatives want to go back to the nuclear Leave It to Beaver family and what not while liberals like to talk about those 90-percent tax rates that we owe our prosperity to. Or something like that. We’ll focus on the latter for the time being.
Bernie Sanders noted that “When radical, socialist Dwight D. Eisenhower was president, I think the highest marginal tax rate was something like 90 percent.” Paul Krugman said the same thing as did Michael Moore in his film Capitalism: A Love Story and you’ll see this factoid repeated on countless memes floating around the Internet.
However, what a tax rate is and what is actually paid are two very different things. Indeed, in 1955, the only people paying 90 percent (actually 91 percent) were those making over $3,425,766 when adjusted for inflation. And these are marginal rates, so they only paid that on any earnings above that threshold.
Tax law has changed a lot over the years. As you can see by looking at the top marginal rate versus the inflation-adjusted top income bracket for those filing jointly from 1950 until 2013:
Source: Tax Foundation.
Today, there are seven tax brackets. In 1989, there were only two. In 1955, there were an utterly ridiculous twenty-four different tax brackets.
Regardless, one should ask how much the rich were actually paying. It should be noteworthy that back in the 1950s, the government wasn’t actually collecting any more in tax revenue as a percentage of GDP. There’s something called Hauser’s Law, which basically states there is a maximum threshold on how much the government can tax out of its population. I think this “law” is no such thing. If the government really wanted to expropriate more, it could do so. But Hauser’s Law based on the fact that in pretty much every year since 1950, the government has collected between 17 to 20 percent of GDP in taxes. Here are the government tax receipts compared to the top marginal tax rate:
Sources: Tax Foundation and Tax Policy Center.
As you can see, no matter what the rate has been, the tax receipts have pretty much been the same. Whether or not you can raise the amount collected is really immaterial here, the only thing that matters is what has happened (particularly when tax rates were over 90 percent) and it’s pretty much always been the same.
Of course, there are a lot of other taxes than personal income taxes. Still, tax receipts from personal income taxes have consistently been between 7 and 9 percent. In 2014, they were 8.1 percent. Furthermore, as you can see, the chart looks pretty much the same when looking at personal income tax receipts and the top marginal tax rate.
Source: Tax Foundation.
But who is paying these taxes a liberal might retort? Has the burden fallen more on the middle and lower classes? Well, no. In fact, the percentage of taxes paid by the highest quintile of income earners has steadily gone up since 1980. In 1980, the top 20 percent paid about 55 percent of all income taxes. Today, it’s just shy of 70 percent. The same goes for the top 1 percent, which went from about 15 percent in 1980 to just shy of 30 percent today.
The first of many reasons that this was the case is that we need to look at the effective tax rate, not the top marginal tax rate. So for example, if I make $20,000, I owe 10 percent under today’s tax code, but only on any income over $18,450 (filing jointly). So I only owe 10 percent of $1550, or $155. Yes, my marginal tax rate may be 10 percent, but my effective tax rate is 0.78 percent.
A study from the Congressional Research Service concludes that the effective tax rate for the top 0.01 percent of income earners during the period of 91-percent income taxes was actually 45 percent. Given that the top bracket is so much lower today ($3,425,766 in 1955 vs. $413,200 in 2015), the 39.6 percent top marginal rate probably yields something pretty close.
Some of this was because corporate rates have always been lower than 50 percent. And as Alan Reynolds noted, when the personal income tax rates were reduced, it “… induced thousands of businesses to switch from filing under the corporate tax system to filing under the individual tax system.” In other words, many rich people kept their money in corporate entities when personal tax rates were higher.
Another major factor was the myriad of deductions and loop holes that used to be available. Many of these were eliminated by the Tax Reform Act of 1986, which by no coincidence coincided with the biggest rate deductions. For one, interest had previously been deductible on all loans. After the act, it has only been deductible on home mortgages.
But what was probably the biggest lost deduction for wealthy individuals was the elimination of deductions on passive investment losses on real estate. Before 1986, wealthy individuals would often buy real estate with no hopes at all of it cash flowing. That wasn’t the point. The point was that real estate is depreciated every year in the eyes of the IRS. Even though in the long run, properties usually go up in value, the IRS assumes that every twenty-seven-and-a-half years a property’s value will depreciate to zero.
This “loss” can be written off. So, for example, say a man earning $100,000 a year buys a property worth $275,000. He rents out the property and breaks even on it. The tax code allows that person to write off $10,000 as a loss which he can count against his income for that year. So now he only has to pay taxes on $90,000. If he owned ten such properties, his income would be zero, at least according to the IRS.
That deduction is now gone for everyone but “active” real estate investors, or those who invest in real estate as a career.
Indeed, one former tax accountant even made the case that there were so many deductions, loop holes and the like in the pre-1986 tax code that “… there was a massive amount of tax fraud at all income levels under the old code. It was so bad and so common that most people took pride in telling others how they cheated on their taxes.”
I’ll leave how true that statement is to the reader, but from what I’ve heard, it sounds about right.
Regardless, the simple fact is that the rich never paid 90 percent of their income in taxes or anything even remotely close to that. Unfortunately though, some memes die hard.
»
- 651 reads
- Printer-friendly version
- Send to friend
- advertisements -
doesn't matter what the tax rate is, the irs code was written to hand out gifts, favors and perform social engineering
dem ronies
PROGRESSIVE taxes are illegal...freaking socialists
GODDAMN SOCIALISTS DEMOCRATS WANT IT BACK THERE, TOO!
PS to all you low-class Jew Haters....get the fuck off ZH, you're giving the site a bad name
We don't just hate jews, we hate blacks too!
Oh, & libs. But then I'm being redundant.
We ???
Oh, you mean low-class, right?
Got it.
The 50's tax rates of 90% were for the rich who got rich on a bullshit war.
Now the super rich get tax breaks, or move their money off shore or put it in their kids names or, (my favorite) start a non profit/think tank.
50's? try 50 years earlier my friend, facts dont matter to you do they?
Did you even bother to read the article? The punchline was that the 90% top rate was a joke, there were a million loopholes to exploit, and only a fool or an ignoramus would actually pay that 90% marginal rate. Everyone else got a good tax accountant who would tell them how to navigate the code to avoid most of the tax.
"The 50's tax rates of 90% were for the rich who got rich on a bullshit war."
No one paid the top tax rate or any where close to it. Back then the tax code had more loop holes in it than screen door. Reagan increase the effective tax rate, even though the marginal rates came down by closing most of the tax loopholes.
Same old Bullshit class war propaganda. As long as you don't include the Social Security tax, it sounds like the lower and middleclasses are not paying their fair share, include the Social security tax (it goes into the general fund just like all other taxes) and you find out who is really paying the frieght, include the inflation tax and reality is complete opposite of what the auther is trying to portray. the top 2% doesn't own more than the bottom 80% by over paying taxes.
Traveler Rick Steves talked to some Norwegian cousins of his about the high taxes in Norway. The Norwegians said they'd gladly pay higher taxes because they don't have the worries Americans have - paying for health care, paying for higher education, and saving for retirement. Like walking a tight rope - do you want to pay for a safety net or save some money and risk killing yourself. Here in America the risk takers want EVERYONE to take the risk
And we still pay the same taxes as they do, when you add it all up. For example, next time look at all the taxes on you cellphone bill.
Norway is a homogenous culture of genetically honest people with a consistent set of shared values which means they can trust each other. They can make a welfare state sort of work, or at least they could until they started letting the Muslims in.
America has always been multi-ethnic/multi-cultural, we used to understand that, which is why we were late to the welfare-state party. Of course now we're balls-deep into a welfare state and its about to submarine our system of government and our entire culture.
"Norway is a homogenous culture of genetically honest people with a consistent set of shared values which means they can trust each other."
Norway is a net exporter of Oil and Gas, and thus can afford to subsidize its economy. Norway also has a shrinking population. Younger people get their state funded degree and then leave Norway to escape the taxes
...leaving plenty of room for the ever-breeding Muslims.
"the IRS assumes that every twenty-seven-and-a-half years a property’s value will depreciate to zero."
My Grandfather used to run a 15 year depreciation schedule on his business properties for about, oh, 25 years or so. I only discovered this after he passed away and my Grandmother asked if I could help her with her taxes.
Wiley old coot.
Start collecting 90%. Can't wait for the Hollywood type's reaction when .gov confiscates 90% of their movie deal. Imagine what the pro jocks will say when it happens? Some of these guys already complain that they can barely feed their families.
If you have a company.
And you employ 100 people.
Your salary cost is 2,5 times what the employee takes home.
so, the employer pays 2,5 of what the employee feels like he should give his boss in labor.
That's not profitable and the employee feels like the boss ain't paying enough.
And that employer manages to have a creative accountant who makes sure that the boss doesn't need to pay other taxes.
Is that boss a bastard for not paying more taxes?
Or is the state simply taxing to much?
Everybody feels like somebody should pay more taxes because it's fair but almost nobody is calling for lower taxes... weird... because... nobody wants to go against the state.
And the state made sure you can't sue them because all the fees you'll need to be are just crazy. you just pay and shut up.
But the boss!!!! You can sue him and it's only one person! And everybody channels their anger of those taxes in a different form to him.
Nobody really dares to hire anymore these days! If you hire somebody for 1 day, and he sucks and you want to get rid of him, it already costs you about 12000 euro's...
So... jobs are scarce and if you look for somebody, now you get about 200 résumés!! 200!!!!
And that number is rising.
So the day that employers who everybody thinks are evil, can employ a robot... guess what will happen... even if they need to pay more taxes on them. Because you never need to keep him motivated or fear all the legal crap that costs so much money if the employee doesn't feel motivated or wants to work anymore.
And most employers work 14 hours a day. Employees hurry home after their 8 hour workday.
but yet, employers are so evil....
And not everybody is a banker or has a billion dollar business!! Most have stress at the beginning of every month and wonder how they'll pay the salaries of their employees who all think they're rich bastards.
And when that boss is sick of it all.
Gives up.
Decides to go home after 8 hours of working.
He wants to see his family. He also wants to watch TV, have that weekend BBQ and stay in bed after a hangover.
And goes bankrupt...
Those 100 employees... are on the street.
And the old boss is still a bastard because he didn't want to keep fighting.
That bastard...
LOL, any employer so short sighted as to not understand that hiring robots is firing your customers doesn't have the smarts to be in business.
oh contrare, fuck these $15 wannabes, those jobs were created for high schooler and college students to learn, and make a few bucks. the unwashed masses of the free shit army have made it a career
i would welcome a robot over a dindu anytime!
"the unwashed masses of the free shit army have made it a career"
I take it by your attitude about people who work for a living that you must be one of those mythical John Galt/Ayn Rand supermen I've heard so much about. Tell us, how do you manage to get through the day carrying the rest of us worthless "unwashed masses" on your mighty shoulders, O godly one? Is there anything more the rest of us can do to lower your (already effectively near-zero %) tax burden? Or compete harder against all those "guest workers" your class keeps on importing to help keep the rest of us "competitive"? Pray tell.
I lost a great job due to RIF in 2012 and have been reinventing myself ever since...i have changed whole careers twice since then, and now have started my own business (its just me) and can barely make ends meet...i have no savings anymore, the retirement was burned to live on.
I have a degree, but take time to learn something new every day, I work damn hard for what I have...I pay my taxes fella. I've paid in for 40 years and expect to get ZIP for it, cause the system is broke!
My age had a factor in not being able to get a new job in my field...so what is your excuse?
crickets, yeah, that's what I thought...next time you may want to think about what you accuse others of first
"those jobs were created for high schooler"/// pre 1990, that was true...but in 2015, those are the new "Middle/lower Class Blue Collar Jobs" for the masses.
"any employer so short sighted as to not understand that hiring robots is firing your customers doesn't have the smarts to be in business."
Most don't really have a choice but to automate. Customers can't afford the prices of goods and services without automation. To pay salaries, taxes, regulations all cost money, and increases drive up costs. Companies are automating to offset rising costs so that consumers can afford continue to buy. Without automation people would soon need to start financing the cost for thier meals.
The short sightness is from the gov't, by driving companies out of business. Companies either adapt (automate) or go out of business. Eventually even some automated business will be forced out of business due to lack of paying customers, but automation defers the date when they will be forced to close.
The Goobermint especially HATES small business and will do everything in their power to make life nearly impossible. The U.S. Treasury LOVES companies like Wal Mart or Home Depot because they pay their taxes (especially sales taxes) in fast cycles in an automated fashion.
The U.S. Small Business Administration is the biggest oxymoron of an agency I have ever seen. Worse than the Department of Education.
"Government" drives companies out of business because CORPORATIONS LOBBY FOR IT!
I'ts called Crony Capitalism and it's destroying this country...
For those that down voted me:
1. How many of you own an american car? (and I mean a Ford, GM or Crysler, not a US assembled import)? Bet none of you!
2 How many of you shopped for only US made goods? (applicances, electronics, furnature, tools, etc)
I can gaurentee that you buy what ever gives you can afford regardless of where is produced.
It goes like this: American company sees sales decline. Sees competitor selling lower quality products made overseas at a discount. US company forced to change production to match competitors pricing, or go out of business. US gov't adds fuel to the fire by making labor too expensive to compete with overseas labor (regulation, insurance, etc).
Tax Receipts are for the 90%....the .1% don't record receipts in this country...Come and get your solar credit Goldman Sach and then send it to a shell company in Ireland and then off to a Cayman accounts, do a debt buyback of the American shell corporations and for your $10 investment...you wipe out $10 billion of profit...all bonuses are recorded in Turkish Lira that can be paid back in 50 years when it is worth ZERO...You don't even pay income taxes on bonuses...Joe lunch bucket...paid 15% before he saw the money...then another 27% when he receives his check and and percent to SS and another to property tax and another to state taxes....he only get $10 out of his $1000 paycheck
burnie slanders only has one pair of underwear, i dont think he will make to next november, thank God.
Bernie 'Socialismo o muerte' t-shirt: ironic or insane? - See more at: http://thepeoplescube.com/peoples-blog/bernie-socialismo-o-muerte-t-shir...
oh fuck
che-burn, i've seen it ALL now!
good find...
I wanna take 90% of that idiots income so he goes broke and cant run for pres...
"ironic or insane?"
Neither. Just good common sense. Average working Americans did much, much better when uniuons were strong, "evil" protectionsism kept high-paying industrial jobs at home, top marginal tax rates on the uber-rich were high (and far fewer loopholes) and social(ist) programs like Social(ist) Security, Medicare/Medicaid, the VA, public universities, etc were fully funded.
One more sad attempt by the far right to conflate American/Canadian/European style socialism (highly successful) with Soviet-style Marxist Communist totalitarianism (not successful).
What ever happened to Warren Buffet's secretary media spin?
Warren Buffett's Secretary Likely Makes Between $200,000 And ...
I'll tell you a secret. Increase minimum wage to maximize IRS tax inflow.
Just ONE reason why my big investment in US treasuries is safe - the regime has not even begun to confiscate (ie tax) your earnings - just wait till the Hillary bitch gets into the White House and the Reid+Pelosi team take over Congress again - they will be implementing unimaginably huge new entitlement programs on top of both old and new huge entitlement programs.
"Regardless, the simple fact is that the rich never paid 90 percent of their income in taxes or anything even remotely close to that. Unfortunately though, some memes die hard."
Some memes certainly do die hard. For instance, the meme that credits all the wonderful economic growth under Reagan to him reducing the terrible tax burden on the rich. If your research proves anything, it's that Reagan did nothing of the kind. So by your own research, the Reagan "miracle," trickle-down and the appropriately named Laffer Curve are all bunk. That's the problem with making the stats support your lies: they end up disproving the lies you told before.
Another problem is this: you've gone to impressive lengths to dig up stats, breaking down tax rates, effective rates, marginal rates, total tax take, etc. etc., but you don't break down the effective rate on the top 0.01 percent today. There is so much anecdotal evidence to suggest that those folks are paying basically nothing, yet you don't bother to learn the truth. Instead, you guess, saying that the current take from them "probably yields something pretty close" to the take from the '50s. That's a nice try, but my guess is that they are "probably not paying anything near" what they did in the 50s. You must have been looking for the mindless zombies when you slipped that in. They are over on Facebook. Not here.
And while we're on the subject of tax deadbeats, let's talk about corporations. In the 50s, they contributed 28 of federal tax revenues. Today, they contribute ~10%. I understand that you're not paid to tell the truth about anything, but the liberals have been yelling about this since at least 1996, so again, you're looking for the Facebook zombies. Not us. Your big problem here is that when you stick to the old game plan of shoveling crap around, you only get it on yourself.
Corporations don't pay taxes. Their customers do.
Some corporations don't pay taxes: S-CORPS, but the SHAREHOLDERS do, therefore, income taxes are being paid at whatever tax bracket the shareholder is in. So what's the problem again? On the other hand, C-CORPS are paying taxes and on top of that the SHAREHOLDERS pay too. This is called DOUBLE TAXATION. Is that what everyone want's, to be taxed twice? Guess what, C-CORPs actually don't pay income taxes in the end, YOU the customer pay through higher consumer prices because those taxes are embedded in the price of the good or service. OBVIOUSLY/DOH.
Unbelievable. When it comes to class warfare, ignorance is bliss even on ZH. It never ceases to amaze me when people demand that corporations pay income taxes or higher income taxes without ever making the connection those taxes are ultimately paid by the consumer/YOU!
just spinning the BS like it's never been spinned before. Oh well, tia's ZH for you, Libertarian BS, followers of a lesbian, killer admiring Jew.
"In 1980, the top 20 percent paid about 55 percent of all income taxes. Today, it’s just shy of 70 percent. The same goes for the top 1 percent, which went from about 15 percent in 1980 to just shy of 30 percent today."
And what this right-leaning op-ed fails to mention is that the SHARE OF OUR NATIONAL WEALTH of that top 5% (and especially the top 0.01%) has skyrocketed way, way beyond their share of the federal income tax burden. The REASON why the rich now account for a larger share of the income tax is that they are the only ones left with anything to tax. When one Koch brother owns 100% of the nation's wealth, his share of the tax burden will also be 100%.
Chart: 6 Walmart Heirs Hold More Wealth Than 42% of Americans Combinedhttp://www.motherjones.com/mojo/2012/07/walmart-heirs-waltons-wealth-inc...
The "upper quintile" of "income earners" are still middle class. The rich do not earn "income", and neither do the wealthy.
No American should be paying taxes to the US Federal Government in the first place. It's a usurpation that the emerging aristocracy directly imposed on the poor and middle class, in order to keep them from building wealth. The moronic "Progressives" goose step right along with that agenda.
The rich "Progressives" know the fuckery they are supporting, while the poor "Progressives" scarcely rise to the level of useful idiot. Their support is no longer needed, and you know what that means. That's why the "Progressive" politicians issue a big Fuck You to the rank and file "Progressive" call to help the poor.
Democrats don't help the poor, they sign off on "Welfare Reform" to impoverish the people even further. And lifelong Democrat voters lap that shit up while making excuses for their masters.
The US Government can print all the currency it needs. Why are there taxes at all?
It would be difficult to believe tax rates were lowered from Kennedy on because the 1% wanted to have a higher tax burden.
"It would be difficult to believe tax rates were lowered from Kennedy on because the 1% wanted to have a higher tax burden. "
One of the many reasons he got a bullet....or four.
Squid
The interesting thing about the income tax is that only “black citizens” are subject to it.
That’s how the law is written; how it is imposed, however, is completely different.
The tax is imposed on the “income of every individual”.
A curious thing about the Internal Revenue Code (IRC): every significant word or phrase has a legal definition; and these definitions are scattered thru-out the IRC.
“Individual”, for example, is defined as “a resident alien or US citizen.”
Search further afield and we find, “every US citizen shall have the same rights as are enjoyed by white citizens…” Title 42, section 1982.
In other words, “white citizens” are not “individuals” as the latter is defined for purposes of the IRC.
I took these findings to one of my lawyers; he spent two years researching it (not ignoring his usual business); and found nothing wrong with my work.
Of course, you shouldn’t act on this information until after consulting with me. Otherwise official thieves might launch a classic inquisition against you; as they did against me.
In the "old days" when the average worker made $1, a CEO would make about $50, and pay $45 max tax. Now when the average worker makes $1, CEO makes $204 and pays $81 max tax. Gee wiz, the tax rate went down and the CEO paid way more tax! Using the same kind of logic as in the article, we can conclude that his pay must go back down to 50X the average worker if they raise the tax rate for him back to 90%, because we now all know that the amount the government collects always stays the same. HA!
How much were they taking in from corporate income taxes in the 50s versus now?
As long as we're looking at the data through rose-colored glasses and all.
The vast majority of you have no idea of the definition of the word "income" in a tax statute is. A tax on your labor is not an "income tax". It is a direct tax on your labor and is unconstitutional unless apportioned as set up in the Constitution. LEARN THE LAW!
Don't forget, too, that before the days of unrestriced money printing there also used to be something called maket based interest rates where money had a real value over time, meaning that when as a rich person or any other type of person, you loaned your money, like to a deposit in a bank or to any thing or anyone else, you got paid a substantial sum for it. The money you were paid was caled interest, and it was usually significant.
During the period, which was most of human history and prior to GW Bush, Obama, Alan Greenspand and his successors, if the government ever got carried away with tax rates, you could always make a decent living by simply halting any productive economic activity whatsoever and also cease investing in real companies that increased the nation's wealth. The rich of the time could just invest all their money in tax free municipal bonds, earn a real positive rate of interest and go to the country club to drink and play golf. These bonds almost always paid enought to earn real income and it protected all the principle an income from the federal income tax, whether the tax was 1% or 100%. This was of course one of the most famous "loopholes" of all time and it was widely used. In this era of zero interest rates to the rich, it is of not much consequense.