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Did anybody actually pay that rate? Correct me if I'm wrong, but my understanding was that the rich had more tax loopholes, which they exploited more aggressive

Did anybody actually pay that rate? Correct me if I'm wrong, but my understanding was that the rich had more tax loopholes, which they exploited more aggressively. e.g. if you drilled for oil, you got a 'depletion' allowing of 22.5% of the value of the oil you sold, since you were getting one asset (oil in barrels) and losing another (oil in the ground). Drill for enough oil, at a low enough profit margin, and your tax bill drops to zero. You've heard of three-martini lunches, right? You know that they existed because the cheapest way to drink was to make it a business expense (paid for with pretax dollars) instead of a personal expense (after-tax dollars). At a 92% tax rate, it's 11X as expensive to drink personally as to drink professionally--so the tax policy you laud had the wondrous result of making a decent fraction of American executives half-drunk by noon.

btilly 17y ago
Truth be told, not many. From my readings the most popular tax dodge among the truly rich was the flying nun exemption - donate more than your total income to charity and you owed no taxes. How could this be a win over high taxes? Simple. You would donate an asset that had appreciated for the full value of the asset, which was less than the purchase price. As long as you had a supply of rapidly appreciating assets, your effective tax rate was much lower. The most popular kind of asset to donate for this purpose was art. The most popular place to donate it was to foundations run by the rich families in question. And appreciation was easy to guarantee when everyone else was following the same strategy. So the idea is buy 5 Monets for $1 million. A couple of years later donate a million to the family run foundation, the foundation uses that million and buys one Monet from you. You then donate 4 more Monets at the new found valuation of $1 million each. For $2 million in expenses you have now canceled out $5 million in income. The most lasting legacies of this tax loophole are insanely high art prices and public museums full of extremely expensive art.

btilly 17y ago

Truth be told, not many. From my readings the most popular tax dodge among the truly rich was the flying nun exemption - donate more than your total income to charity and you owed no taxes. How could this be a win over high taxes? Simple. You would donate an asset that had appreciated for the full value of the asset, which was less than the purchase price. As long as you had a supply of rapidly appreciating assets, your effective tax rate was much lower. The most popular kind of asset to donate for this purpose was art. The most popular place to donate it was to foundations run by the rich families in question. And appreciation was easy to guarantee when everyone else was following the same strategy. So the idea is buy 5 Monets for $1 million. A couple of years later donate a million to the family run foundation, the foundation uses that million and buys one Monet from you. You then donate 4 more Monets at the new found valuation of $1 million each. For $2 million in expenses you have now canceled out $5 million in income. The most lasting legacies of this tax loophole are insanely high art prices and public museums full of extremely expensive art.