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Really now? How come we decided long ago that if you made $100 MM a year, you got taxed 80% on your marginal income. At other times, we decided you get taxed be

Really now? How come we decided long ago that if you made $100 MM a year, you got taxed 80% on your marginal income. At other times, we decided you get taxed below 20%. Sounds like the market doesn't decide, it's the politicians.

ch4s3 5y ago
Literally no one paid that rate in the US. During that period the government captured ~17-18% of GDP in taxes which is the post war average. There were a ton of tax breaks then, by today’s standards.
- mbesto 5y ago
  > Literally no one paid that rate in the US. Literally they did. In 1944, the top rate peaked at 94 percent on taxable income over $200,000 ($2.5 million in today’s dollars3). That’s a high tax rate. Over the next three decades, the top federal income tax rate remained high, never dipping below 70 percent. https://bradfordtaxinstitute.com/Free_Resources/Federal-Income-Tax-Rates.aspx https://bradfordtaxinstitute.com/Free_Resources/Federal-Inco... Note the parent said "marginal" tax rate. > During that period the government captured ~17-18% of GDP in taxes which is the post war average. Even if the 17~18% of GDP is true (not saying it isn't, just dont have time to verify), it's very likely the highest tax bracket had way fewer people than it does today, so it would be equivalent of taxing earners of $100M/year in today's world. Weighing against GDP total negates increases in spending by the government to provide services that spur economies / provide benefits / etc. Point is - this figure is irrelevant and doesn't normalize the discussion.
  - ch4s3 5y ago
    No, no one really really did practically[1]. There are ways to capture more revenue, but it usually involves a VAT. Other methods historically cause economic contraction which lowers tax receipts. It’s important to be realistic about what policy can practically accomplish. [1] https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/ https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/
    - mbesto 5y ago
      Marginal tax != effective tax[0] Yes they literally did. Your article says exactly what I said: The 91 percent bracket of 1950 only applied to households with income over $200,000 (or about $2 million in today’s dollars). Only a small number of taxpayers would have had enough income to fall into the top bracket – fewer than 10,000 households, according to an article in The Wall Street Journal. Many households in the top 1 percent in the 1950s probably did not fall into the 91 percent bracket to begin with. You need to understand the difference between marginal tax and effective tax. What you're referring to is effective tax. The parent very explicitly said marginal tax. [0] - https://www.cbpp.org/research/federal-tax/marginal-and-average-tax-rates https://www.cbpp.org/research/federal-tax/marginal-and-avera...
      - ch4s3 5y ago
        The Saez paper points out that even among the 0.01% people were avoiding that top rate.
        mbesto 5y ago
        It points it out, but it's not conclusive. From the article you linked: The data from Piketty, Saez, and Zucman is not divided among federal, state, and local taxes, so it is difficult to tell exactly how much the rich were paying in federal income taxes specifically during this period. Some of the distributional assumptions in the Piketty, Saez, and Zucman paper are questionable. In particular, the authors assume that the full burden of the corporate income tax falls on owners of capital, which may not be correct. However, the authors note that they “have tested a number of alternative tax incidence assumptions, and found only second-order effects.” > The Saez paper points out that even among the 0.01% people were avoiding that top rate. Of course there were - tax avoidance is inevitable, but to say literally none of them were pay the stated rate with no evidence is disingenuous. Bringing this back the overall point of the discussion - with a marginal tax rate that high (even with avoidance) it raised the effective tax rate nearly ~600 basis points higher. That's significant.
- HWR_14 5y ago
  It's commonly claimed that no one paid the 70% rate. But do you have any evidence that that is true? It feels like one of those "facts" that has no sourcing.
  - ch4s3 5y ago
    Here you go [1]. Most high income earners in the 50s paid about 42%. It’s hard to squeeze income much more than that without the income going somewhere else. Historically speaking. [1] https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/ https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/
    - deleted 5y ago
      [deleted]
    - HWR_14 5y ago
      As that link points out, the majority of the high earners (top 1%), which were averaged to get to 42%, did not even reach the highest tax bracket. The vast majority it turns out. The highest tax bracket applied to less than 2% of the top 1%.
      - ch4s3 5y ago
        Who likely didn’t pay that as they had plenty of tax avoidance strategies, not unlike the ultra-wealthy today. The apocryphal story I read some years ago was that these rates were cooked up to make it seem like the wealthy were shouldering the burden of WWII rather than profiting from it.
        onlyrealcuzzo 5y ago
        This is a common myth. If .2% of earners REPORT INCOME greater than $x, they paid tax on that! We get the percentiles straight from the IRS data. There's this idea that people report they made $100 MM to the IRS, but are like, "Well, I only want to pay tax on $300k of that." And the IRS is like, "Sure." You wouldn't be in the top .2% if you only reported incomes of $300k to the IRS. You'd barely be in the top 2%.
- taurath 5y ago
  Wealth inequality is completely out of control now than compared to when we had those rates, so I don’t buy that argument.
  - ch4s3 5y ago
    there’s nothing about inequality that should mean that we’re collecting a lower percentage of GDP in taxes. There are lots of reasons outside of tax policy that wealth may accumulate.
    - taurath 5y ago
      Agree, but tactically if you want to reduce wealth inequality that’s the first one given passive investment beats working for income both in tax advantages, lack of estate taxes, and effectiveness. There’s a giant sucking sound as all the money in the economy accumulates out of towns and cities and into the endless digital coffers of the investment class.
ridruejo 5y ago
There are two parts to this. Who decides how much money what you made is worth, which is the market (and what I was referring to), and how much % of that the government takes.
refurb 5y ago
OP said "paid $100M" but now you're talking about tax rates. Why?

ch4s3 5y ago

Literally no one paid that rate in the US. During that period the government captured ~17-18% of GDP in taxes which is the post war average. There were a ton of tax breaks then, by today’s standards.

mbesto 5y ago
> Literally no one paid that rate in the US. Literally they did. In 1944, the top rate peaked at 94 percent on taxable income over $200,000 ($2.5 million in today’s dollars3). That’s a high tax rate. Over the next three decades, the top federal income tax rate remained high, never dipping below 70 percent. https://bradfordtaxinstitute.com/Free_Resources/Federal-Income-Tax-Rates.aspx https://bradfordtaxinstitute.com/Free_Resources/Federal-Inco... Note the parent said "marginal" tax rate. > During that period the government captured ~17-18% of GDP in taxes which is the post war average. Even if the 17~18% of GDP is true (not saying it isn't, just dont have time to verify), it's very likely the highest tax bracket had way fewer people than it does today, so it would be equivalent of taxing earners of $100M/year in today's world. Weighing against GDP total negates increases in spending by the government to provide services that spur economies / provide benefits / etc. Point is - this figure is irrelevant and doesn't normalize the discussion.
- ch4s3 5y ago
  No, no one really really did practically[1]. There are ways to capture more revenue, but it usually involves a VAT. Other methods historically cause economic contraction which lowers tax receipts. It’s important to be realistic about what policy can practically accomplish. [1] https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/ https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/
  - mbesto 5y ago
    Marginal tax != effective tax[0] Yes they literally did. Your article says exactly what I said: The 91 percent bracket of 1950 only applied to households with income over $200,000 (or about $2 million in today’s dollars). Only a small number of taxpayers would have had enough income to fall into the top bracket – fewer than 10,000 households, according to an article in The Wall Street Journal. Many households in the top 1 percent in the 1950s probably did not fall into the 91 percent bracket to begin with. You need to understand the difference between marginal tax and effective tax. What you're referring to is effective tax. The parent very explicitly said marginal tax. [0] - https://www.cbpp.org/research/federal-tax/marginal-and-average-tax-rates https://www.cbpp.org/research/federal-tax/marginal-and-avera...
    - ch4s3 5y ago
      The Saez paper points out that even among the 0.01% people were avoiding that top rate.
      - mbesto 5y ago
        It points it out, but it's not conclusive. From the article you linked: The data from Piketty, Saez, and Zucman is not divided among federal, state, and local taxes, so it is difficult to tell exactly how much the rich were paying in federal income taxes specifically during this period. Some of the distributional assumptions in the Piketty, Saez, and Zucman paper are questionable. In particular, the authors assume that the full burden of the corporate income tax falls on owners of capital, which may not be correct. However, the authors note that they “have tested a number of alternative tax incidence assumptions, and found only second-order effects.” > The Saez paper points out that even among the 0.01% people were avoiding that top rate. Of course there were - tax avoidance is inevitable, but to say literally none of them were pay the stated rate with no evidence is disingenuous. Bringing this back the overall point of the discussion - with a marginal tax rate that high (even with avoidance) it raised the effective tax rate nearly ~600 basis points higher. That's significant.
HWR_14 5y ago
It's commonly claimed that no one paid the 70% rate. But do you have any evidence that that is true? It feels like one of those "facts" that has no sourcing.
- ch4s3 5y ago
  Here you go [1]. Most high income earners in the 50s paid about 42%. It’s hard to squeeze income much more than that without the income going somewhere else. Historically speaking. [1] https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/ https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/
  - deleted 5y ago
    [deleted]
  - HWR_14 5y ago
    As that link points out, the majority of the high earners (top 1%), which were averaged to get to 42%, did not even reach the highest tax bracket. The vast majority it turns out. The highest tax bracket applied to less than 2% of the top 1%.
    - ch4s3 5y ago
      Who likely didn’t pay that as they had plenty of tax avoidance strategies, not unlike the ultra-wealthy today. The apocryphal story I read some years ago was that these rates were cooked up to make it seem like the wealthy were shouldering the burden of WWII rather than profiting from it.
      - onlyrealcuzzo 5y ago
        This is a common myth. If .2% of earners REPORT INCOME greater than $x, they paid tax on that! We get the percentiles straight from the IRS data. There's this idea that people report they made $100 MM to the IRS, but are like, "Well, I only want to pay tax on $300k of that." And the IRS is like, "Sure." You wouldn't be in the top .2% if you only reported incomes of $300k to the IRS. You'd barely be in the top 2%.
taurath 5y ago
Wealth inequality is completely out of control now than compared to when we had those rates, so I don’t buy that argument.
- ch4s3 5y ago
  there’s nothing about inequality that should mean that we’re collecting a lower percentage of GDP in taxes. There are lots of reasons outside of tax policy that wealth may accumulate.
  - taurath 5y ago
    Agree, but tactically if you want to reduce wealth inequality that’s the first one given passive investment beats working for income both in tax advantages, lack of estate taxes, and effectiveness. There’s a giant sucking sound as all the money in the economy accumulates out of towns and cities and into the endless digital coffers of the investment class.

ridruejo 5y ago

There are two parts to this. Who decides how much money what you made is worth, which is the market (and what I was referring to), and how much % of that the government takes.

refurb 5y ago

OP said "paid $100M" but now you're talking about tax rates. Why?