Skip to comments.need help refuting leftist claims about 1950s tax rates
Posted on 10/09/2010 10:42:15 AM PDT by mainestategop
Im preparing to write an article about Liberal myths and lies concerning Bush Reagan and Obama and I keep coming back to this claim that liberals have been making on youtube and several other places that in the 1950s taxes on the wealthy were at an all time high and our economy was flurishing. Any old timers from that bygone era care to comment? Has anyone heard this?
Government needs to lower taxes, and get out of everybody's hair.
Either they do it, or we will.
“Flourishing” is a relative term.
Houses were smaller. Most families had one car (if any). Medical care was about what you’d get at a minor emergency center, at best.
Basically, everyone’s standard of living was probably about the level of what the poor/lower-middle class is today.
I don’t know the numbers but Kennedy wouldn’t have run on reducing taxes if this were true. Remember we were still recovering from FDR and the war in the fifties.
These 4 happy conditions no longer exist. The moral evil of confiscatory tax rates aside, low marginal tax rates are now utterly necessary (as well as a number of other things) for the US economy to resume flourishing.
Insofar as your leftist acquaintances are working, whether they admit it or not, for the destruction of the US, they will perforce also support higher marginal tax rates.
I am not that old but the did have ratio write-offs. The largest was 1017-1 so if you put a dollar in your company you got to deduct 1017. You could also deduct all interest on credit cards, hell everything was deductible get a copy of 1950’s tax return.
I watch bryan gumbal on good morning America (that goes way back) they had a guy put his tax return on tv. He made over 1 million dollars and after doing his taxes he got a refund of over 300,000.
It’s true the income-tax brackets were higher then, than they are today.
However, however, however.
Nobody, but nobody, ever paid 90% (or whatever) in income taxes.
The rate was on the books, but nobody paid them.
Loopholes; managing one’s money so as to have to pay as little as possible in income taxes.
Old Man Joe Kennedy was a pro at doing that.
The reality is although the rates were sky high, so were the number of deductions one could take that effectively wiped out the rates. When Reagan created his tax cuts, the receipts to the Treasury more than doubled because he also took away many of the traditional deductions like medical and credit cards.
I’ve always said that if people today had to revert to the standard of living of the 1950’s there would be weeping & wailing & gnashing of teeth.
We do not realize how materially blessed we are these days.
PS The 50’s were just great!
In 1952 U.S. Steel Corp. alone made more steel than the rest of the world put together. There was little if any competition, there was pent up demand from WWII, and we were rebuilding Europe and Japan. We had not created a welfare state and the top rates applied to much higher relative incomes IIRC. There is no comparison to today.
Hemingway was scrupulous in staying in Cuba at least six months and a day, every year. It wasn't just because he loved the place.
"Considering that the top marginal tax rate for the wealthiest Americans today is 35 percent, that figure seems astounding. But it's true that in the 1950s, the top marginal tax rates were over 90 percent.
So does that mean that someone in 1955 making a half million dollars had to fork over $450,000 of it to Uncle Sam? No.
We are talking here about "marginal" tax rates. Moore doesn't go out of his way to explain this, so we will. The marginal tax rate is the top rate of income tax charged to individuals on their last dollar of earnings. So in 1955, for example, when the top marginal tax rate was 91 percent, that was the tax rate owed on a person's income over $300,000. That person would, however, pay 20 percent on the first $2,000 of income; 21 percent on the next $2,000 in income; 24 percent on the next $2,000 and graduated on up to the highest rate. On average, a person making, say, $500,000 would pay substantially less than 90 percent of their income in federal taxes.
The top marginal tax rates peaked in 1952 and 1953 at 92 percent for income over $300,000.
Bob Williams of the Tax Policy Center:
In 1952 and 1953, Williams said, when the top income tax rate was 92 percent for income over $300,000, a person would have to make waaaay more than $300,000 to actually end up paying an average of 90 percent of their income. According to Williams, someone would have to make $2,328,400, and therefore pay $2,095,560, to get to that 90 percent threshold.
But people with income of less than $2.3 million remember we're talking about 1952 and 1953 would have paid, on average, something less than 90 percent, and perhaps much less.
Still, Moore's point is valid. The top marginal tax rates paid by the richest Americans were far higher in the 1950s than they are now. In 2009, the top marginal rate was 35 percent on income above $372,958. And although Moore didn't use the term "marginal tax rate," he did say "top tax rate." People without CPAs might mistake that for a person's average tax rate (it's not), but it's valid wording. And so we rule this one Mostly True."
Personally, I really don't care how today's tax rates stack up against those in the 50s. It clear that billions are being wasted by the lard-arses in government. Give that money back to those that earned it.
The myriad variety of exemptions/deductions/marginal rates over the past 97 years makes it IMPOSSIBLE to conduct a valid analysis of income tax changes over the years!
For every specific income profile it will vary from year to year and, no meaningful conclusion can be established. You can't compare SPECIFIC APPLES TO SPECIFIC ORANGES!
P.S. This is not by coincidence, it is by design! This year's congress ALWAYS "giveths with one hand and takeths away with the other"!
Yahoo search results for "tax rates" "historical"
Yep, income taxes were higher. The difference was that they didn’t have all the rules and regs that kept businesses from expanding and new ones from starting up. The economy took off even better once the war time tax rate was abolished, but then the greenies gained the upper hand sometime in the late 70s, early 80s and businesses started failing and new businesses were unable to get started as easily.
This was the reason the “Alternative Minimum Tax” was devised during the 1960s.
Despite having 75-90% tax brackets, many of the wealthy and super-wealthy got away with paying no income taxes at all.
There was the case of the multi-millionairess Marjorie Merriwether Post (I think that was her name), the heiress to the Post cereal fortune, at the time the wealthiest woman in America, who paid zero—not a cent—in income taxes for decades.
That’s why the “Alternative Minimum Tax” was invented.
This doesn’t give actual tax rates but is a lengthy series of quotes from JFK pointing out that lower taxes increase revenue. He talks about how it increases employment etc.
When you compare tax rates you also have to include all the hidden tax rates such as on electric service or phone.
That said, there used to be a lot LOT more deductions. Thus, someone at the 60% level might only pay an actual 20%. When Reagan lowered the progressive rates, the vast array of deductions were also trimmed back heavily to a shadow of what they were.
Finally, “The Wealthy” used to be wealthy. However, the jump off point for “high income earners” has dropped enormously as a factor of buying power. In the 50’s someone who made enough to own a large home with a pool in a nice neighborhood was considered middle class. Now they are considered “the wealthy”.
The people who can or will do the essential things that others can't or won't are paid the most. They comprise the top 10%. When you tax that top 10% heavily, then those people, can and will raise their rates of compensation. What you are left with are stupid people voting to sock it to those evil rich people, but who instead effectively increase their own costs of essential items and services.
Think of it this way. Ten people come to my water stand in the middle of the desert, where I have dug a well. They get mad that I have done well selling water for a $1 a glass, so they vote to put a 90% on desert water sales. In turn, I raise the price of my water to $10 a glass, and the morons think they've ripped me a new one. Of course, there is also the possibility that I will just cap my well and they'll die of thirst.
Our economy flourished in the 1950’s, in part, because much of industrial Europe and Japan had been destroyed during WW II. Hence, there was much less competetion than today.
Although I was just a pre-teen then, I remember that our family and those of my friends was wonderful - not lower class. Everyone I knew had someone to do the heavy cleaning for them, we had clothes only for Sunday and going to town and clothes just for school, everyone had one car but we bought a new car every other year, everyone had plenty of good locally grown food. Christmas time was special and we had lots of presents but just a few toys, mostly things like books and clothes-like a year’s supply of underwear and new pajamas. Very little was purchased during the year except a new outfir for Easter and new shoes for school. My mom owned a small women’s clothing store with several employees, most expensive blouse was $5.99, most were $2.99. We lived in a huge two story house. Everybody worked at something. Nobody talked about money or taxes - ever! Major difference between today and then - more stuff to buy so more materialistic society. Not necessarily better, just different.
Credit cards in the '50s? No such thing. We had store charge accounts, but the only major credit card was American Express and you had to pay a fee for that and pass a rigorous exam for credit. And AMEX required the card to be paid in full each month. Generally the only people who had an AMEX card were people who traveled for business -- and that was in the 60s.
Exactly. Not much job outsourcing going on back then either.
Diners Club Credit card company was formed in 1950
True, but I think our colleague ed just innocently overlapped two distinct trends; it happens.
During the 1950s and 1960s, when credit cards were rare, interest paid on installment loans and store cards were deductible.
During the 1970s, credit cards became more common, in many individual cases replacing the loans and store cards entirely.
But interest paid to credit card companies was deductible, as their older versions had been. And as people were using credit cards more and more, they got rather used to the idea of being able to have that interest as a deductible.
The Reagan tax cuts of the early 1980s--which we all agree were a very very good thing--then they closed thousands of income-tax loopholes, this was one of them. From then on, one could deduct only interest paid on a home mortgage.
I think there's still some middle-income resentment about this, nearly 30 years later, but one has to remember for each of their loopholes closed up, the "wealthy" had lots and lots of other loopholes closed up.
For the record, I am not, nor have I ever been, "wealthy."
RE: “Credit cards in the ‘50s? No such thing.”
“Diners Club Credit card company was formed in 1950”
Don’t forget Carte Blanche cards!!!
Regardless, all credit card interest was tax deductible, whether a retailer’s card or national card. AND all sales tax was deductible, too, including that on car purchases! Now there’s a motivation to buy a new car!
Some on this thread generalized that overall one cannot compare the 1950's to today. The major basic advances in electronics during the 1950's were already in embryo such as the transistor; today's advances in medicine are largely in diagnostics which flow from electronics. In general, advances today over the 1950's are in application, technique and refinement not fundamental like the transistor.
The 1950's were fun.
In 1950, when BusinessWeek first catalogued the pay of the nation's corporate elite, the highest-paid executive was General Motors Corp. (GM ) President Charles E. Wilson, whose $652,156 pay package--$4.4 million in inflation-adjusted dollars--would make modern-day CEOs [laugh.]
Mr. Wilson would have paid 91% on $252,156 w/o the myriad loopholes. He probably got a refund. :)
The truly salient point is made by SAJ. For ten years after WW2, the rest of the then-industrialized world was in utter smoking ruin. The rest of the world could absorb any and everything the US could produce.
Even so, I believe there was a significant, though quite normal (especially compared to what our current circustances are) recession circa 1957-1958 that really crunched car sales. The Edsel came out and was not only not-market-friendly, but it came onto the market when Buicks and Chevys weren’t selling as well as they had in the prior 5 years. It was as if the US had tooled up for infinite expansion post-WW2 and overshot in terms of estimating the demand....which is absolutely the most normal thing there is in the business cycle...and the excess capacity had to be “burned off”...an utterly typical inventory correction which productive economies go through every so often.
The wealthy have the advantage over the less affluent in that they can manage their income to avoid taxes.
The income tax is a tax waged on income as defined by law. The wealthy will manage their income to circumvent the highest rates of taxation.
Recently so of the highest earners (corporate officers) have used stock options to do this; diverting their compensation in to the form of stock options to take advantage of the lower tax rates on capital gains (profits from the sale of stock, real estate and other physical assets as defined by law).
The point being that people can be resourceful in tax avoidance and in avoiding taxes they change their behavior. These changes in behavior will cause the financial markets and the economy in general to move in directions that are not necessarily beneficial to the country or the world.
I personally am changing my behavior this year to try to avoid taxes. I am the owner of a rental property. If Obama is successful in allowing the Bush tax cuts to expire the capital gains tax rate will increase from 15 to 20 percent January 1. Also in the Obama Care bill was a new tax on rental income. So I have been pushed by taxes in to trying to sell my rental property by the end of the year.
Changes in taxes change the behavior of people in the real world. The Left has a bad habit of not taking this in to consideration when they contemplate their tax and spend schemes.
Secondly, you didn’t have the size of government that you have today...no war on poverty, no Department of Education, no Department of Housing and Urban devlopment, no depertment of health and human services, no department of veterns...etc...no Clean water act,
The AMT was enacted to “get” the high income individuals who were using loopholes and deductions to pay NO tax. I read somewhere that at the time, it was only going to affect a couple hundred people in the country. Now it’s going to “get” people in the middle class. Yes, the very people the democrats “care” so much about.
No department of energy—just what does that do anyway? You didn’t have a handful of intelligence agencies do the exact same thing...
Yes and deductible sales tax and interest would not have had the distorting effect on the car market of the Cash for Clunkers program. Nor would it have cost the government as much money. Nor would it have taken millions of dollars worth of used cars out of the economy.
One thing I have not seen discussed in the media about Cash for Clunkers is how the removal of those cars from the economy reduced the velocity of currency. The used car market in 2006 was making more profits for dealers than was the new car market.
Diner’s Club? What’s that? Seriously, Diner’s Club has never been a player in credit card circles. It never was accepted very many places. I don’t know its rules; I never had one. Probably the ONLY credit card I’ve never had. I think it was used by traveling saelsmen only. Never widely held.
Strictly speaking it was not a credit card because the balance on the card was due on receipt of the bill.
Visa and American Express did not show up until 1958, Master Card in 1966. So through most of the 50s they had a monopoly and momentum carried them through most of the 60s.
Yes, American business was a juggernaut of ingenuity, an eager workforce and few regulations to hamper growth. Not to mention our manufacturing was leaving a war-devastated Europe and Asia in the dust because our infrastructure was intact, so people bought American. At the time, no amount of high tax could overcome our output. Now, things are very different and we have a smaller margin for error and fewer markets to conquer, IMHO.
We succeeded in spite of the high taxes.
Credit cards were invented in 1950. It all started when Frank X. McNamara and two of his friends went out to supper.
My parents had CC during that time however had money - I am guessing mas use of credit cards were as you described.
Also in the 50’s we had won WWI, WWI, Korea, and had no debt. The last balanced budget was signed by Johnson in 1965.
We had put men on the moon and, government was 1/3 the size and scope it is today. BUT, what did not exist in 1965 that has cost the huge increase in government.
The top two would be:
Welfare there was no free housing, food, medical, education, virtually nothing came from Federal government.
Kennedy’s immigration bill opening the country to vastly poor uneducated masses and living off the state.
Credit cards actually go back to the Knights Templar. Limited to trade merchants and travelers.
Also keep in mind until America was founded, there was no concept of a “middle class”. You either would be born into landownership or were a slave or surf to landowners.
The marginal rate was higher but it affected far fewer people. That’s because it started at something like $300,000 which is the equivalent of like $3 million today. So it only affected the truly rich. And they knew how to move their money around to avoid it anyway.
Ask the liberals you’re arguing with whether they’d be okay with having the highest bracket start at $3 million.
>> Ive always said that if people today had to revert to the standard of living of the 1950s there would be weeping & wailing & gnashing of teeth.<<
LOL Most of them would simply die off. We had to grow much of our own food, butcher our own animals and cook out own meals. There are a lot of people today who wouldnt know how to cook enough to stay alive. Especially in the winter. Can you imagine them having to put up anything to have through the winter?
There were more tax brackets and many more things were deductable...like credit card interest.