From 1940 - 1963 (23 YEARS!) the top marginal U.S. Income Tax Rate was 81% to 94%, & yet we became

[supraTruth]

the MOST POWERFUL NATION THIS PLANET HAS EVER WITNESSED! Ask yourself, & ask EVERY1 in the media and government: "How could that have been possible if Grover Norquist & the CONS are right?" And ask the media to ask Grover Norquist.

Pass it on!

Partial History of
U.S. Federal Marginal Income Tax Rates
Since 1913

Applicable Income First Top
Year brackets bracket bracket Source
1913-1915 - 1% 7% IRS
1916 - 2% 15% IRS
1917 - 2% 67% IRS
1918 - 6% 77% IRS
1919-1920 - 4% 73% IRS
1921 - 4% 73% IRS
1922 - 4% 56% IRS
1923 - 3% 56% IRS
1924 - 1.5% 46% IRS
1925-1928 - 1.5% 25% IRS
1929 - 0.375% 24% IRS
1930-1931 - 1.125% 25% IRS
1932-1933 - 4% 63% IRS
1934-1935 - 4% 63% IRS
1936-1939 - 4% 79% IRS
1940 - 4.4% 81.1% IRS
1941 - 10% 81% IRS
1942-1943 - 19% 88% IRS
1944-1945 - 23% 94% IRS
1946-1947 - 19% 86.45% IRS
1948-1949 - 16.6% 82.13% IRS
1950 - 17.4% 84.36% IRS
1951 - 20.4% 91% IRS
1952-1953 - 22.2% 92% IRS
1954-1963 - 20% 91% IRS
1964 - 16% 77% IRS
1965-1967 - 14% 70% IRS
1968 - 14% 75.25% IRS
1969 - 14% 77% IRS
1970 - 14% 71.75% IRS
1971-1981 15 brackets 14% 70% IRS
1982-1986 12 brackets 12% 50% IRS
1987 5 brackets 11% 38.5% IRS
1988-1990 3 brackets 15% 28% IRS
1991-1992 3 brackets 15% 31% IRS
1993-2000 5 brackets 15% 39.6% IRS
2001 5 brackets 15% 39.1% IRS
2002 6 brackets 10% 38.6% IRS
2003-2011 6 brackets 10% 35% Tax Foundation

http://en.wikipedia.org/wiki/Income_tax_in_the_United_States

[mysuzuki2]

1. The hay-day of unions too.

[spin]

2. If lower tax rates on the rich causes job creation ...

why do we have such a high unemployment rate?

Perhaps we need to warn the rich and the big corporations that if they don't start creating jobs in this country, they will face draconian tax increases.

[MyshkinCommaPrince]

3. Yeh.

They're getting back at us for that, now. Your grandfather over-taxed my grandfather, so I'm tearing down your world economy! It's just taking back what's rightfully mine!

[nilram]

4. And yet the WSJ had an article today saying how awful, AWFUL it would be

to return to even a 70% marginal tax rate. AWFUL.

I couldn't read more than a few paragraphs. If anyone really reads it, let me know if I was wrong in my summery.

"Get Ready for a 70% Marginal Tax Rate"
http://online.wsj.com/article/SB10001424052702304911104576443893352153776.html

[OnlinePoker]

7. For the 70% marginal, an example of a California teacher was given

"Take a teacher in California earning $60,000. A current federal rate of 25%, a 9.5% California rate, and 15.3% payroll tax yield a combined income tax rate of 45%. The income tax increases to cover the CBO's projected federal deficit in 2016 raises that to 52%. Covering future Social Security and Medicare deficits brings the combined marginal tax rate on that middle-income taxpayer to an astounding 71%"

At 71%, that teacher would take home just $17,400 of their $60k salary.

[indurancevile]

17. something wrong there. you don't pay income or state taxes on the whole 60K. and the employee

doesn't pay 15% social security/medicare.

someone's rigging the numbers here.

[OnlinePoker]

25. As a Canadian, I don't know what deductions you're allowed in California pretax.

I was just putting out the number based on the article's 71% marginal rate. Still, to charge someone making only $60k a year anything approaching 71% in taxes is assinine.

[indurancevile]

27. I think you don't understand what "marginal rate" means.

[dkf]

8. Your article calculates a 71% marginal tax rate on a California teacher making $60k

"It would be a huge mistake to imagine that the cumulative, cascading burden of many tax rates on the same income will leave the middle class untouched. Take a teacher in California earning $60,000. A current federal rate of 25%, a 9.5% California rate, and 15.3% payroll tax yield a combined income tax rate of 45%. The income tax increases to cover the CBO's projected federal deficit in 2016 raises that to 52%. Covering future Social Security and Medicare deficits brings the combined marginal tax rate on that middle-income taxpayer to an astounding 71%. That teacher working a summer job would keep just 29% of her wages. At the margin, virtually everyone would be working primarily for the government, reduced to a minority partner in their own labor."

[JDPriestly]

21. In spite of inaccurate numbers, the point of the OP is correct.

Higher tax rates for the top bracket of earnings make for a better economy for all.

[fascisthunter]

5. Consistent with Our Country's Decline

[RKP5637]

6. As the tax rate falls, the peasant rate rises and much of the country descends

into serfdom. How the F can anyone in their right mind, not on the take, expect this country to prosper for the good of ALL in the 21st century. We're headed for the bottom of the list in everything. It's been the trend for several decades.

[dkf]

9. How do you have 94% marginal tax rates when state taxes are often 10%?

They take everything?

[JHB]

11. For one thing, the state taxes are deductible from the federal taxes

[dkf]

12. Ah the good ole exemptions. Aka loopholes.

Unfortunately I get none so it's moot for me.

[indurancevile]

18. marginal doesn't mean what you think it does?

[nashville_brook]

10. that is how the middle class was born.

[grahamhgreen]

13. Historically, high taxes on the richest brought prosperity to all.

[Kablooie]

14. But the super rich weren't as super rich and that's what counts to them today.

They don't care if the USA corrodes into abject poverty as long as they can become richer as a result.

It's not about the USA, it's about ME!

That's the difference between then and now.

[bayareamike]

15. I was wondering if

the calculated 70% marginal rate that the WSJ article estimates is at all accurate? If it IS true that a teacher making 60k would only be taking home 17 thousand of it, is that not rather alarming?

By the way, glad to be here at DU :)

[Igel]

16. No.

Even if it were, it's unimportant.

When the marginal tax rates were over 50% the rich didn't pay more, they found ways to avoid taxes. High tax rate means you can afford to spend a lot of money in avoiding taxes and still come out ahead. Esp. if you think that the rates are unfairly high. And, no, you don't substitute others' opinion for your own.

Look at Kerry and Kennedy and Bush: Their money's old, and if their ancestors had millions after paying 90% tax on most of their income they'd have made billions--not hardly likely a century ago. Even the Beatles found ways to avoid the British Labor Party's tax rates. It wound up costing Britain money, too, although Britain was mostly in a snit--one thing that governments don't like is having a citizen respond in ways that serves the citizen but thwarts the government's goals.

You get a bump in income after you raise the marginal rates because the tax avoidance strategies take a while to put in place. You get a dip in income after you lower the marginal rates because having the strategies in place isn't a burden, it's just that when it's time to do the work to maintain them it's not cost effective. Most people like quoting the revenue increase/decrease in the year or two after a tax hike/decrease.

My analogy to the marginal tax rates is the speed limit: When the max highway speed limit was 55 mph, did everybody actually limit themselves to 55 mph? Now that it's 70 mph, do they limit themselves to 70 mph? No? You mean they *don't* automatically do what the squiggles written in the legislation say they absolutely, positively, *must* do?

[indurancevile]

19. no, it's phoney as hell. for starters, employees don't pay 15% fica.

[JHB]

23. No, that's taking all income at the top rate...

Income of $60k was equivalent to about $9k in 1966 (according to online inflation calculators).

Someone making 9k in 66 would pay portions over 6 tax brackets ranging from 14% to 22% (and with standard deductions would likely top out at the 19% bracket).

There were about 2 dozen brackets back then. A teacher wouldn't see all that much difference, but someone making 10x as much would definitely be facing a higher tax bill, or taking steps to shelter their money.

[JDPriestly]

20. Excellent point. K&R.

[PufPuf23]

22. Progressive income tax and strong regulation of financial markets

leads to a robust society and National Security.

Skewed wealth and income and rule of law and human empathy in the USA is our biggest threat and by circumstance has a huge impact on world events now.

I am way less than impressed and encouraged for the immediate future by the narrative brought to most People in the USA by corporate media.

[melm00se]

24. none of this occurs in a vacuum

taxes didn't cause the economy from 1940 - 1963 to roar along, there were other factors as well:

1940 - 1945: war. War is the largest consumer of products as they tend to get destroyed and must constantly be replaced which causes a spike in industrial output.

1945 - 1963 (on a sliding scale): Numerous factors, among them:

- the USA had the only undamaged industrial base so they were the only game in town for the many products necessary to rebuild much of western Europe so there were almost unlimited markets + no competition.

- the lack competition (this is part of the sliding scale). Germany, France, Italy, the Low Countries, the Balkans, Japan and, to a lesser extent, Great Britain, had had their economies and industrial capacity severely damaged (dropping bombs and armies running back and forth thru the countryside tend to destroy things). The USA, with its almost completely undamaged industrial base was the only source of finished industrial and consumer goods for the better part of 2 decades.

- the approx 15 years of the American consumer essentially went without. There were many worn out products that had to be replaced ranging from socks to automobiles and couple that with the one above and you have strong industrial output

- the phased reintroduction of returning veterans back into the economy. Unlike post-WWI where the returning soldiers were just dumped back into the workforce leading to the a double dip recession in 1918 - 1919 and 1920 - 1921, the Truman Administration created the GI Bill which shunted a large number of returning vets into the higher education system delaying their re-entry into the workforce by 1 - 4 years. This allowed for the economy to "recover" from not only the Great Depression but also the shift from a war-time economy to a peace-time economy.

Plus many others.

Economists can (and do) make the case:

- that the economy shot up despite the heavy tax burden
- that same tax burden actually slowed the economy to prevent that economy from overheating (along with it's attendant consequences)

Today's economic landscape is completely different, there are no physically damaged economies, tons of competition for the sale of products and, with the exception of China, a relatively lower level of demand for certain kinds of products. A kneejerk raising of the nominal tax rates could do a lot more harm than good. A better solution would be to close many of the tax loopholes that currently exist, allow a one time "tax holiday" allowing corporations to bring back some/most/all of the money that they have overseas (no company is going to bring back money and get zapped for 35%...at least no voluntarily), create disincentives for companies to move off shore (but not so much so that they cannot tap into and serve overseas markets) and, finally, begin a series of cuts to government spending. Among those cuts should be: defense, social programs (yes, I said it, asbestos undergarments donned), the elimination of duplicate or superfluous programs and departments and eliminate "luxury" departments, especially ones that duplicate efforts that occur at the state level.

[WatsonT]

26. +1

I hate attempts to compare 1950s America to today. The economic climate was completely different. Back then we were competing with . . . Canada I guess?

And now we're competing with China, the EU, India, etc.

Also the top tax brackets were higher but that was coupled with exemptions and low corporate taxes so companies simply provided CEOs with perks rather than paying them so they could do it themselves.

As a percent of our GDP total revenues were significantly lower then versus today.

[indurancevile]

28. "tons of competition" = lol.