Although the highest marginal tax rate may be have been 91% in the Eisenhower/Kennedy years, only 250 or so households were actually taxed at this rate. Plus no one paid 91% because of the various “loopholes” or deductions available, which decreased the effective rate to less than 50%. Therefore, the 91% tax rate is a liberal fantasy. It might have been 91% on paper, but in reality it is about half.
That is what a marginal tax rate means. Not sure what your claiming is a myth, liberal or otherwise.
What are the criteria for ‘liberal fantasy’?
As Simplicio noted, what makes the effective tax rate much lower than the highest marginal* tax rate for most taxpayers is not “loopholes” or “deductions” so much as the fact that most of their income is not taxed at the top rate. (That’s what “marginal” means: you pay each marginal tax percentage only on the “margin” of income remaining after you reach a certain minimum amount which is taxed at a lower rate.)
So yes, even a wealthy taxpayer in the 91% top marginal bracket might well have been paying an effective tax rate of about half that, or even less. I don’t know why you imagine that liberals in general are unaware of this perfectly commonplace fact.
What’s your cite for suggesting that a half-century ago only about 250 households were taxed at a rate of 91%? And is that 91% supposed to be the top marginal rate for them or their actual effective tax rate?
What I’m curious is what did those very high tax rates in the '50s actually go to fund? Most of the New Deal programs and the mass mobilization from World War II was over while Medicare, Medicaid, and the Great Society hadn’t been instituted yet. Was it the Cold War spending plus paying off war debts and the Interstate freeway construction?
They went that high in 1946. So presumably to pay off the debt from WWII + Great Depression, and then later the Korean War + Cold War build-up.
The Interstate system was payed for largely by state taxes and a federal fuel tax.
I saw a brief interview with a woman who said she was going to take time off so she didn’t hit the 250k number. So she thought that hitting 250k means that all her income is taxed at the higher rate.
My father in law thinks the same thing. It’s just a stupid bit of misinformation that many people share.
The rich make more money today, but they beared a similar tax burden in the days many liberals fantasize about (economically). Therefore the explanation for income inequality being caused by changing tax rates is laid to waste.
The percentage of total federal tax revenues being paid by the rich is kind of a red herring, because it disguises the issue of their effective tax rate.
If the richest people have a disproportionate share of the wealth and income, then naturally they’re going to pay a disproportionate share of the total tax revenue. But that does not mean that they are being disproportionately burdened by taxation.
And yes, when wealthy people have lower effective tax rates, they get wealthier faster, and consequently accumulate more of the total national wealth, and that increases economic inequality. You can argue that economic inequality isn’t a bad thing, but you can’t really argue that lowering effective tax rates on the wealthiest doesn’t conduce to economic inequality.
This really works against whatever point you’re trying to make. I assume you’re sympathetic to the ideas of those who think raising the top marginal rate is the worst conceivable thing possible, who talk about 38% as being a ridiculously high proportion of their income. But you’re right - no one pays anywhere near their top marginal rate as an effective tax rate, and those who make the most money also have the best tax planning and use of the legalities of the tax code. The reality is that the actual tax rates are nowhere near the nomimal top marginal tax rates, which means raising them by a few percent really isn’t a big deal at all.
I tend to think that this is just as much a part of the legacy of the “Greatest Generation” as much as WW2. They racked up a huge amount of debt fighting the war, then they came home and actually paid for it. They took it to be their responsibility, instead of shrieking about how slightly increasing historically low tax rates is the worst thing in the world. Compare the big taxpayers of the greatest generation to the massively entitled little bitches who complain about our debt now but think tax cuts are the only solution to everything.
It’s a conservative myth that this is a liberal myth.
And simultaneously experienced one of the greatest periods of economic growth in US history.
Well said on everything else. I think that it bears repeating whenever assertions regarding economic growth and top marginal rates are made.
I just went to look at the history of federal debt, thinking about the assertion that revenues underthe top marginal rate went to paying down the debt. I was struck by something I read on Wikipedia. It said that debt reached a low under Nixon, but increased consistently since then, except under Carter and Clinton.
That strikes me as a really odd and misleading way to phrase that .
They didn’t pay off shit.
Debt after FY 45-46: $269.4 billion
Debt after FY 53-54: $271.3 billion
If few people actually paid the top marginal rate, it’s the conservative bubble that bursts, not the liberal one. The conservative orthodoxy that high marginal rates are killing growth is burst by the fact that few people pay it. Similarly, the conservative orthodoxy that high corporate tax rates are job-killers is debunked by the fact that there are so many loopholes that many huge corporations pay no tax at all.
My dear sweet mom is one of the “Greatest Generation.” She constantly complains about how medicare doesn’t pay enough of her bills, and how her government retirement doesn’t go far enough and how she doesn’t get enough social security even though she never put more than a token amount of money into those systems. Then she votes conservative because of all the “freeloaders” on welfare are ruining America.
The “Greatest Generation” is the same generation that mortgaged the future of their children, like me, to make their retirements as luxurious as possible and to pay for the best possible end-of-life medical care. The “Greatest Generation” IS the entitled generation and it’s no coincidence that just as they are dying out we finally have to deal with the massive debts they ran up. They consistently take more out of Social Security than they ever paid in and they consistently take more out of Medicare than they ever paid in. The big taxpayers of the WWII years may be dead now but the people who you call entitled little bitches are the current elderly who have voted as one huge block for the government to pay for everything for them for the last 70 years, because they fought a war once.
This may have some truth to it, but not as much as the postwar generation. Those that weren’t even born during WW2 are now able to draw SS and Medicare with benefits that are in the same range as those who came before, (if not better due to Medicare part D). Plus they didn’t have to pay those high postwar taxes.
Is that a fair comparison, though? If the debt went up by $2 billion, but the GDP went up $150 billion (as it did from '46 to '54), I’d consider that pretty damn good.
It’s pretty good, but the statement was that the greatest generation racked up a war debt and paid it off. They did no such thing. Not that the debts were unreasonable by any means, but to present that generation as the ultimate in responsibility is just silly, they weren’t any better than we are.
I think some cites would do a lot to answering some of the questions people have. And, as noted, a 50% effective federal income tax rate (assuming that is what you mean) is still a lot higher than it can possibly be today since the highest marginal tax rate is much less than that.
It appears you’re sort of right. I remember charts like this but it appears that it only looks good in terms of debt to gdp ratio, rather than absolute debt. Still, taxation rates were at historic highs in the post war period, weren’t they? The deficits instantly vanished despite the need to pay back war bonds. But I guess I interpreted it incorrectly - is it just because the economy grew so much that the debt picture as a whole looked good?
