Did the 50s really have 90 percent tax rate? I thought that was a good economic decade?
Post 15
There were a LOT of loopholes and deductions back in those days that got the actual rate way down.
The idle rich got taxed at 90% but the working rich had tons of loopholes for expenses for housing business and family expenses. Keeped the tax accountants very busy and very rich. Now the loopholes have mostly closed but I think the amount of tax into the system is higher for working rich but the idle rich pay less and give to the democratic party (graduates of indocrinating, overly expensive liberal colleges and trustifarians).
I could be wrong but I’m sticking to it.
Yes. Almost nobody ever paid that rate.
Then, as now, the tax code was filled with exceptions and loopholes. And there are hundreds of provisions in the tax code which appear to have been written for specific companies or even specific individuals wealthy enough to rent a Congressman.
With the nominally lower tax rates of today, I suppose it must be somewhat cheaper to rent a Congressman (adjusted for inflation) than it was in the 50's.
Back then the graduated income tax did indeed have a top rate over - over - 90%. There were a lot of tax brackets in the graduated table. The result of the very high tax bracket rates was full employment for accountants. And people who had very high earnings potential not only using loopholes but ultimately limiting the amount of work they did in a year. Movie stars like Ronald Reagan, and others even more highly paid, just didn’t bother to earn as much as they readily could have.The high rates were carried over from the FDR/Truman Administrations. After JFK got elected he declared that “a rising tide lifts all boats” and proposed - and Congress enacted - a tax cut which reduced the top bracket to about 50%, still insane but not quite as delusional.
With the multitude of tax brackets, inflation had an inherent tendency to raise taxes - and in the Seventies we got inflation, in spades. Along with stagnation. Hence the term, “stagflation,” which was the phenomenon you got when tax rates biting too deeply into economic incentives not just at the top bracket but throughout the income spectrum. The more stagnation, the louder the cry for more tax revenues for more (magical) government spending by Democrats. The more taxation, the more stagnation, the spending the more inflation . . .
The problem flared up during the Ford Administration, and Ford came out with his own magic nostrum, the “Whip Inflation Now” button. And a call for more taxes. I myself, at that stage, thought that a tax hike might be necessary. Then Jack Kemp stepped up and stated that the emperor had no clothes. That the problem was not that tax rate was too low but that, because of inflation, it had become too high. It was a revelation, but not one which the GOP as a whole leaped to embrace. Kemp proposed an annual 10% cut in all income tax rates for three years, ultimately a 30% cut.
The Carter malAdministration led us into double digit inflation/interest rates, and double digit unemployment. I held my breath during the Reagan’s announcement of his candidacy in 1980, hoping for him to support the Kemp-Roth tax cut bill. Thanks be to God, he did not disappoint. GHW Bush called it “voodoo economics,” and after winning the WH as the third term of Reagan by promising, “read my lips, no new taxes” he then proceeded to raise taxes.
Bottom line: FDR did a lot good in WWII, the more I research it. But he had FUBARed the economy in the Thirties, by continuing and exacerbating Hoover’s errors, and making his own. Kemp-Roth economics (“Reaganomics”) was the crying need of America in the Thirties, and we had "Doctor New Deal” instead. That carried over into some bad economic policy during the war, and afterward. After the war, there was Korea to fight, and economic policy was mediocre to bad until JFK.