8 ms·

US Historical Income Tax Rates

24 points by hairytrog 5y ago

giantg2 5y ago
Interesting. I think it would be more impactful/meaningful if it also had columns for inflation adjustment, income distribution, and average effective tax rate. It seems like when it first started, it only taxed the rich and at a very low rate. Then it expanded from there, to the point where 20% was the min and 91% was the max. Then lower to what we have now.
- HarryHirsch 5y ago
  Nowadays you get taxed because your mate lent you 1200 dollars through Venmo because you couldn't make the security deposit for the new overpriced apartment. (Of course your mate will be taxed as well when you repay him.) But Jeff Bezos can borrow against stock that he owns. Income tax is completely meaningless when the 1%-ers have tax evasion strategies that Joe Citizen couldn't possible take advantage of.
  - modeless 5y ago
    This is false in the US. Neither loans nor gifts of $1200 are taxed. Also, loans don't evade the capital gains tax, they merely delay it. Stepped-up basis is what evades the capital gains tax.
    - HarryHirsch 5y ago
      Yes, when your friend says it's a loan and you treat it appropiately on your tax return it's not taxed. Else it will be. And if you can delay capital gains tax, great for you! How do I delay income tax?
      - modeless 5y ago
        Wrong. If it's not a loan then it's a gift and that's not taxed either for $1,200 as I mentioned. No need to even report it if it's under $16,000 per year.
        HarryHirsch 5y ago
        Venmo will happily send you a 1099 form if it's above the 600 dollar threshold. We have Joe Biden to thank for that. It used to be higher.
        oh_sigh 5y ago
        The 1099 is for sales of goods and services. Your friend loaning you $1200 is not a sale of a good or service.
        vmception 5y ago
        A form doesn’t mean a tax is due It means a transaction was reported and that you better have a good story about why the tax isn’t due and why you didn’t report it on your own forms The people that are worried about the venmo 1099 are the people that have not been doing a lot more under the table (Not to invalidate the rest of the population that is just irrationally afraid of tax collectors)
        giantg2 5y ago
        I'm not sure that's true. They are only supposed to report on a 1099 if they know it's earned income, not just a transfer. If they're reporting mere transfers to the IRS, then that's a problem. That said, based on personal experience, I don't think Venmo is sending 1099s to everyone above that cumulative amount. I do believe they categorize transfers based on personal or commercial use. I expect a 1099 to be issued only for the commercial transfers.
        vmception 5y ago
        Transaction is the word I use, not transfer, just in case you mentioned transfer for some other reason. My reason is deliberate. Some kinds of transactions are tax events, others aren’t. Venmo has no way of knowing. Anybody doing automated 1099s has no way of knowing. 1099s just tell the IRS to look for a tax filing from the same tax ID that matches.
  - onlyrealcuzzo 5y ago
    The 1% aren't borrowing against stock - or if they are - it's minimal and not worth discussion. 99% of the borrowing is coming from people worth close to a billion or more (0.001%).
    - giantg2 5y ago
      I have no idea if this is how they do it, but I imagine they somehow "mortgage" their shares, then use the money as their own. Any interest you pay on investments is tax deductible, so that would reduce their tax burden. Not to mention, most of it isn't taxed since they aren't realizing those gains. Again, just me brainstorming loopholes.
      - vmception 5y ago
        You talk to an investment bank and ask You can borrow against anything, if someone is willing to lend Collateralized lending is the least constructive of all Make it worth their while
      - modeless 5y ago
        The interest is only tax deductible if you reinvest the money, which essentially means you can't use it. If you use it for living expenses, to buy a lambo, etc, then no deduction for you. Also, the loan must eventually be repaid, which means selling the assets and paying the taxes. Only if you carry the loan and pay the non-tax-deductible interest all the way until you die, then the capital gains taxes get erased by stepped-up basis and your heirs pay off the loans without paying capital gains tax. So stepped-up basis is the loophole, not the fact that you can take loans. Also, carrying ever-increasing loans (including loans to pay the interest on the previous loans) until you die means you pay a lot of interest! The "buy, borrow, die" strategy only works if you withdraw about 1% per year or less, otherwise the loan interest will catch up to you, and eventually you'll be at risk of losing everything to margin calls. Meanwhile if you withdraw normally without loans, then you can withdraw more like 4% per year indefinitely and have way more money to spend per year even after paying tax. So "buy, borrow, die" only works for huge fortunes where you didn't plan to withdraw more than 1% per year anyway. It's not something that most rich people are going to do. It severely limits your cash flow during your lifetime simply for the sake of saving taxes for your heirs. The people complaining about these loans have no idea how it actually works.
  - oh_sigh 5y ago
    I'd encourage you to actually research how any of this works, because you are extremely misinformed and parroting the same lines that I see repeated verbatim around the internet by other misinformed people(ie "Bezos can just borrow against stock he owns and never pay any taxes!").
    - giantg2 5y ago
      Do you have a link or can give a brief explanation? How the loans work that you say we don't understand?
      - oh_sigh 5y ago
        Not really, because I have no idea the extent of ignorance I'm dealing with. A simple question would be - how does the loan ever get paid off? A simple point would be that not paying taxes on loans is not some crazy loophole that only the rich have access to. Literally anyone who has ever taken out a mortgage for a house or a loan for a car has taken advantage of this - I'd guess at least 80% of adults in America have a car or home loan.
        giantg2 5y ago
        How about a link then? It seems like you're trolling or otherwise violating the spirit of HN. I mean calling us all ignorant and uninformed, telling us that we're all wrong, then not explaining how we're wrong. In fact, your second comment conflicts with your prior one (claiming that Bezos can't borrow against stock to avoid taxes, then claiming that's exactly what people do).
        oh_sigh 4y ago
        Here you go, enjoy: https://www.irs.gov/privacy-disclosure/tax-code-regulations-and-official-guidance https://www.irs.gov/privacy-disclosure/tax-code-regulations-... Who is "us all" I'm calling wrong? Are you part of a group of tax ignorant fellows with HarryHirsch? Is it a group of people who get their understanding of tax code from r/antiwork? Delaying taxes is not the same as avoiding or evading them.
- ljhsiung 5y ago
  Looking at 1961, where we have 20% and 91% marginal tax rates, this comes out to be ~19k and 1.9mil, adjusted for inflation (2k and 200k nominally). Compare these days, where we have 12% min and 37% max for 10k and 500k respectively. If we were to tax at 37% using 1961 threshholds, you'd have to be making 95k inflation adjusted (that's the 38% threshhold), or 10k nominally. Something else I found fascinating was that we had over 25 brackets back in the day. I can only imagine the headache that would be without an Excel spreadsheet. People (myself included) might complain about taxes now, I can only imagine in the 60s. Thanks for the insights, OP.
  - rootusrootus 5y ago
    > Something else I found fascinating was that we had over 25 brackets back in the day. I can only imagine the headache that would be without an Excel spreadsheet. I have to imagine that the IRS tax tables aren't a recent creation, so the math should have been similarly easy.
  - giantg2 5y ago
    It might not be that bad, depending on the simplicity of deductions and other structures. For example, 401k, IRA, 529, 403b, etc didn't exist. A lot of states and localities didn't have income taxes at that time either. If the deductions and overall tax code was simpler, then calculating the brackets would be easy - you're basically taking the percent times each bracket max until you get to your top bracket, then the amount in that bracket times that percent. My understanding is that most people could do their taxes just based on the instructions on the back of the form just because there weren't so many deductions, credits, and complicated securities/instruments. I couldn't find info on the deductions, but this was interesting. https://www.nbcnews.com/id/wbna29861648 https://www.nbcnews.com/id/wbna29861648
insickness 5y ago
Graph: Historical Marginal Tax Rate for Highest and Lowest Income Earners https://commons.wikimedia.org/wiki/File:Historical_Marginal_Tax_Rate_for_Highest_and_Lowest_Income_Earners.jpg https://commons.wikimedia.org/wiki/File:Historical_Marginal_...
- revnode 5y ago
  - mymllnthaccount 5y ago
    How is it deceptive when it clearly states that is what it is doing?
    - revnode 5y ago
      Charts can be deceptive even if the axes are clearly labeled. It's deceptive exactly for the reasons I stated. It excludes the majority of the data from the chart.
      - chrismcb 5y ago
        The chart isn't deceptive. It clearly states what it is. You can USE it deceptively. But that didn't mean the chart itself is deceptive. In this particular case the idea is to compare the top earners to the lowest earners. The middle isn't important.
  - rootusrootus 5y ago
    > Who cares about the extremes? What fraction of taxpayers pay the minimum rate?
    - datavirtue 5y ago
      Every single one of them according to the charts.
  - 5y ago
donatj 5y ago
I don't understand why we don't just not tax income below say $20k. It can't be a lot of money for the government even in aggregate, and it would make a huge difference in low income people's lives, arguably larger than any of the government programs their taxes are going to fund.
- csdvrx 5y ago
  > I don't understand why we don't just not tax income below say $20k. Because you want people to feel like they have skin in the game.
  - rootusrootus 5y ago
    I wonder if they'd feel better about that if they could instead earn enough where they actually had to pay income tax. It's not much consolation that you have skin in the game if you can only get 15 bucks an hour.
    - csdvrx 5y ago
      With the deductions it cost nothing, but it gets then the same feeling, and a visibility of how it works should they start making more money.
- decebalus1 5y ago
  This is easy. Because we have a well-established institutional hate for poor people. There is a subconscious belief that poor people are poor solely because of poor decisions. So, it's not our job to improve their lives. It would be 'unfair' for the rest of society to keep these 'freeloaders' afloat. /s There's gonna be a lot of comments in here saying ^^ but unironically. It's just ingrained in the fabric of our society.
  - deleted 5y ago
    [deleted]
- whiddershins 5y ago
tick_tock_tick 5y ago
Honestly kinda worthless without knowing the average marginal rate that people in each income brackets payed. People always hype up the 90% tax bracket but tax deductions and credits were so plentiful that the raw rates are very misleading.
- cplusplusfellow 5y ago
  Not to mention it was still a society where one could legitimately hide income from the government with ease.
frabjoused 5y ago
In 1944 the Federal income tax rate was as high as 94% for those making more than $200,000.
- floren 5y ago
  Posters will now stumble over each other to assure you that tax evasion was so widespread that actually the effective tax rate was lower than Reagan's wildest dreams.
  - credit_guy 5y ago
    All right, then I'll ask the other question. What do you consider "fair"? You don't say it, and the GP doesn't, but the implicit assertion is that the rich don't pay their "fair share", presumably because in some mythological past they used to pay 94%. What is then "fair"? 94% ? Do you have a formula? At least a principle. If I make $100 MM (I don't), should I pay 50%, 60%, 70%? I mean, even if I pay 99%, I still retain more than 99% of the Americans, right?
    - dane-pgp 5y ago
      > Do you have a formula. At least a principle. I have a formula and a principle. Anyone earning $100 MM or above should pay the same effective percentage as the median taxpayer... relative to their wealth. The median US household has a net worth of $120k and pays about $10k in taxes each year. That equates to an 8% wealth tax. If a billionaire has $1 MM in income one year, they could pay $2 MM in tax and not even notice, despite that being a 200% effective income tax rate. What matters, in terms of "fairness", is what that burden feels like, which is losing 0.2% of their wealth (assuming wealth of exactly $1000 MM). For the median household that would be like paying $240 in taxes. Note that this doesn't even take into account the law of diminishing marginal returns, which states that the millionth dollar matters less to someone than their first dollar, so the millionth dollar should be taxed at a higher rate for the same hedonic burden.
      - azth 5y ago
6gvONxR4sf7o 5y ago
I'd love to see these state-wise as well. Looking at the highest ever federal rate and adding my current california rate would put the total marginal rate at 103%. It's actually kind of amusing to think about what a marginal rate over 100% would lead to. If the top bracket is $1M+ and you earn $100M, and that last $99M is taxed at 102%, then you owe roughly $101M of your $100M earned, leaving you negative for the year. Better not go above the max! Quick! Donate that $99M in order to maximize your earnings!
- diggernet 4y ago
  Then in future years, make sure to avoid the problem by furloughing all your workers as soon as you hit $1M. Sure, that means both you and your workers only work 1/100 of the year, but what's the point in working longer than that if it earns you nothing? Yeah, you could also pay your workers a lot more and take less yourself. But in that case you'd spend the whole year working to make what you could make in 1/100 of the year. So again, what's the point? So I suspect a >100% (or even >90%) marginal tax rate would have a lot of very negative side effects. (Keep in mind that back when the top rate was officially >90%, there were so many loopholes that nobody actually paid that. Closing the loopholes and drastically lowering the top rate was actually revenue-neutral.)
  - 6gvONxR4sf7o 4y ago
    > furloughing all your workers as soon as you hit $1M You'd likely have a hard time getting them to come back the next year. Who is going to take a job that pays a normal daily wage but only employs you for three days? And can you really ramp the org back up up in three days? Maybe you'd be better off working for a few days then handing the job off to someone else for the rest of the year. Even then, good luck convincing the board that you're doing anything worthwhile coming in 3 days per year. I think the equilibrium for this would be fascinating.
BurningFrog 5y ago
A reminder that comparing old tax rates with modern ones is very hard, since there was a huge amount of deductions available for the high income earners, and hardly anyone actually paid anywhere near the nominal 91%.
- qeternity 5y ago
  It's also arithmetically impossible to pay the highest bracket given that it's a marginal tax rate.
  - chrismcb 5y ago
    Huh? This makes no sense. If you made over 400k you were in the guest tax bracket Yes, b you wouldn't pay 91% of your income but you would pay 91% of everything over 400k.
- throwaway0a5e 5y ago
  And there were fewer taxes and government income streams so single big taxes (like income tax) represented a larger share of an individual's overall tax burden.
arrty88 5y ago
Now adjust those 1990 numbers for inflation
SpodGaju 5y ago
1950 Tax Rate - 91.0% > $400,000 The economy overall grew by 37% during the 1950s. At the end of the decade, the median American family had 30% more purchasing power than at the beginning. Inflation was minimal, in part because of Eisenhower's efforts to balance the federal budget. Unemployment remained low, about 4.5%.
- nojito 5y ago
  No one paid that tax rate. https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/ https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/ Average rate paid by the 1% back then was around 41%
  - SpodGaju 5y ago
    Apples, meet oranges. "The data comes from a recent paper by Thomas Piketty, Emmanuel Saez, and Gabriel Zucman that attempts to account for all federal, state, and local taxes paid by different groups of Americans over the last 100 years" But regardless, it was higher in 1950, almost 6 points higher. And look at al the caveats... 1] 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.” [3] It is worth noting that, per the Piketty, Saez, and Zucman data, the tax rates of the top 0.1 and 0.01 percent of taxpayers have dropped substantially since the 1950s. The average tax rate on the 0.1 percent highest-income Americans was 50.6 percent in the 1950s, compared to 39.8 percent today. The average tax rate on the top 0.01 percent was 55.3 percent in the 1950s, compared to 40.8 percent today. [4] 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.
    - nojito 4y ago
      >But regardless, it was higher in 1950, almost 6 points higher. Sure, but you're being quite disingenuous with your post by suggesting that tax rates were any different back then compared to now.
throwaway0a5e 5y ago
Ok, now do the effective rates paid. Better yet, do overall tax burden rather than just income tax. Everyone loves to get a good ideological circle jerk going over the nominal 1950s rates but the actual tax burden at (various different points on the income spectrum) paints a very, very, different picture.
- Volundr 5y ago
  > the actual tax burden at (various different points on the income spectrum) paints a very, very, different picture. Do you have this data? I'd be very interested in this picture.
hackeraccount 4y ago
The raw rate tells you something but not everything. What are the available deductions? What counts as income?

24 points by hairytrog 5y ago

Interesting. I think it would be more impactful/meaningful if it also had columns for inflation adjustment, income distribution, and average effective tax rate. It seems like when it first started, it only taxed the rich and at a very low rate. Then it expanded from there, to the point where 20% was the min and 91% was the max. Then lower to what we have now.

HarryHirsch 5y ago
Nowadays you get taxed because your mate lent you 1200 dollars through Venmo because you couldn't make the security deposit for the new overpriced apartment. (Of course your mate will be taxed as well when you repay him.) But Jeff Bezos can borrow against stock that he owns. Income tax is completely meaningless when the 1%-ers have tax evasion strategies that Joe Citizen couldn't possible take advantage of.
- modeless 5y ago
  This is false in the US. Neither loans nor gifts of $1200 are taxed. Also, loans don't evade the capital gains tax, they merely delay it. Stepped-up basis is what evades the capital gains tax.
  - HarryHirsch 5y ago
    Yes, when your friend says it's a loan and you treat it appropiately on your tax return it's not taxed. Else it will be. And if you can delay capital gains tax, great for you! How do I delay income tax?
    - modeless 5y ago
      Wrong. If it's not a loan then it's a gift and that's not taxed either for $1,200 as I mentioned. No need to even report it if it's under $16,000 per year.
      - HarryHirsch 5y ago
        Venmo will happily send you a 1099 form if it's above the 600 dollar threshold. We have Joe Biden to thank for that. It used to be higher.
        oh_sigh 5y ago
        The 1099 is for sales of goods and services. Your friend loaning you $1200 is not a sale of a good or service.
        vmception 5y ago
        A form doesn’t mean a tax is due It means a transaction was reported and that you better have a good story about why the tax isn’t due and why you didn’t report it on your own forms The people that are worried about the venmo 1099 are the people that have not been doing a lot more under the table (Not to invalidate the rest of the population that is just irrationally afraid of tax collectors)
        giantg2 5y ago
        I'm not sure that's true. They are only supposed to report on a 1099 if they know it's earned income, not just a transfer. If they're reporting mere transfers to the IRS, then that's a problem. That said, based on personal experience, I don't think Venmo is sending 1099s to everyone above that cumulative amount. I do believe they categorize transfers based on personal or commercial use. I expect a 1099 to be issued only for the commercial transfers.
        vmception 5y ago
        Transaction is the word I use, not transfer, just in case you mentioned transfer for some other reason. My reason is deliberate. Some kinds of transactions are tax events, others aren’t. Venmo has no way of knowing. Anybody doing automated 1099s has no way of knowing. 1099s just tell the IRS to look for a tax filing from the same tax ID that matches.
- onlyrealcuzzo 5y ago
  The 1% aren't borrowing against stock - or if they are - it's minimal and not worth discussion. 99% of the borrowing is coming from people worth close to a billion or more (0.001%).
  - giantg2 5y ago
    I have no idea if this is how they do it, but I imagine they somehow "mortgage" their shares, then use the money as their own. Any interest you pay on investments is tax deductible, so that would reduce their tax burden. Not to mention, most of it isn't taxed since they aren't realizing those gains. Again, just me brainstorming loopholes.
    - vmception 5y ago
      You talk to an investment bank and ask You can borrow against anything, if someone is willing to lend Collateralized lending is the least constructive of all Make it worth their while
    - modeless 5y ago
      The interest is only tax deductible if you reinvest the money, which essentially means you can't use it. If you use it for living expenses, to buy a lambo, etc, then no deduction for you. Also, the loan must eventually be repaid, which means selling the assets and paying the taxes. Only if you carry the loan and pay the non-tax-deductible interest all the way until you die, then the capital gains taxes get erased by stepped-up basis and your heirs pay off the loans without paying capital gains tax. So stepped-up basis is the loophole, not the fact that you can take loans. Also, carrying ever-increasing loans (including loans to pay the interest on the previous loans) until you die means you pay a lot of interest! The "buy, borrow, die" strategy only works if you withdraw about 1% per year or less, otherwise the loan interest will catch up to you, and eventually you'll be at risk of losing everything to margin calls. Meanwhile if you withdraw normally without loans, then you can withdraw more like 4% per year indefinitely and have way more money to spend per year even after paying tax. So "buy, borrow, die" only works for huge fortunes where you didn't plan to withdraw more than 1% per year anyway. It's not something that most rich people are going to do. It severely limits your cash flow during your lifetime simply for the sake of saving taxes for your heirs. The people complaining about these loans have no idea how it actually works.
- oh_sigh 5y ago
  I'd encourage you to actually research how any of this works, because you are extremely misinformed and parroting the same lines that I see repeated verbatim around the internet by other misinformed people(ie "Bezos can just borrow against stock he owns and never pay any taxes!").
  - giantg2 5y ago
    Do you have a link or can give a brief explanation? How the loans work that you say we don't understand?
    - oh_sigh 5y ago
      Not really, because I have no idea the extent of ignorance I'm dealing with. A simple question would be - how does the loan ever get paid off? A simple point would be that not paying taxes on loans is not some crazy loophole that only the rich have access to. Literally anyone who has ever taken out a mortgage for a house or a loan for a car has taken advantage of this - I'd guess at least 80% of adults in America have a car or home loan.
      - giantg2 5y ago
        How about a link then? It seems like you're trolling or otherwise violating the spirit of HN. I mean calling us all ignorant and uninformed, telling us that we're all wrong, then not explaining how we're wrong. In fact, your second comment conflicts with your prior one (claiming that Bezos can't borrow against stock to avoid taxes, then claiming that's exactly what people do).
        oh_sigh 4y ago
        Here you go, enjoy: https://www.irs.gov/privacy-disclosure/tax-code-regulations-and-official-guidance https://www.irs.gov/privacy-disclosure/tax-code-regulations-... Who is "us all" I'm calling wrong? Are you part of a group of tax ignorant fellows with HarryHirsch? Is it a group of people who get their understanding of tax code from r/antiwork? Delaying taxes is not the same as avoiding or evading them.
ljhsiung 5y ago
Looking at 1961, where we have 20% and 91% marginal tax rates, this comes out to be ~19k and 1.9mil, adjusted for inflation (2k and 200k nominally). Compare these days, where we have 12% min and 37% max for 10k and 500k respectively. If we were to tax at 37% using 1961 threshholds, you'd have to be making 95k inflation adjusted (that's the 38% threshhold), or 10k nominally. Something else I found fascinating was that we had over 25 brackets back in the day. I can only imagine the headache that would be without an Excel spreadsheet. People (myself included) might complain about taxes now, I can only imagine in the 60s. Thanks for the insights, OP.
- rootusrootus 5y ago
  > Something else I found fascinating was that we had over 25 brackets back in the day. I can only imagine the headache that would be without an Excel spreadsheet. I have to imagine that the IRS tax tables aren't a recent creation, so the math should have been similarly easy.
- giantg2 5y ago
  It might not be that bad, depending on the simplicity of deductions and other structures. For example, 401k, IRA, 529, 403b, etc didn't exist. A lot of states and localities didn't have income taxes at that time either. If the deductions and overall tax code was simpler, then calculating the brackets would be easy - you're basically taking the percent times each bracket max until you get to your top bracket, then the amount in that bracket times that percent. My understanding is that most people could do their taxes just based on the instructions on the back of the form just because there weren't so many deductions, credits, and complicated securities/instruments. I couldn't find info on the deductions, but this was interesting. https://www.nbcnews.com/id/wbna29861648 https://www.nbcnews.com/id/wbna29861648

insickness 5y ago

Graph: Historical Marginal Tax Rate for Highest and Lowest Income Earners https://commons.wikimedia.org/wiki/File:Historical_Marginal_Tax_Rate_for_Highest_and_Lowest_Income_Earners.jpg https://commons.wikimedia.org/wiki/File:Historical_Marginal_...

revnode 5y ago
- mymllnthaccount 5y ago
  How is it deceptive when it clearly states that is what it is doing?
  - revnode 5y ago
    Charts can be deceptive even if the axes are clearly labeled. It's deceptive exactly for the reasons I stated. It excludes the majority of the data from the chart.
    - chrismcb 5y ago
      The chart isn't deceptive. It clearly states what it is. You can USE it deceptively. But that didn't mean the chart itself is deceptive. In this particular case the idea is to compare the top earners to the lowest earners. The middle isn't important.
- rootusrootus 5y ago
  > Who cares about the extremes? What fraction of taxpayers pay the minimum rate?
  - datavirtue 5y ago
    Every single one of them according to the charts.
- 5y ago

donatj 5y ago

I don't understand why we don't just not tax income below say $20k. It can't be a lot of money for the government even in aggregate, and it would make a huge difference in low income people's lives, arguably larger than any of the government programs their taxes are going to fund.

csdvrx 5y ago
> I don't understand why we don't just not tax income below say $20k. Because you want people to feel like they have skin in the game.
- rootusrootus 5y ago
  I wonder if they'd feel better about that if they could instead earn enough where they actually had to pay income tax. It's not much consolation that you have skin in the game if you can only get 15 bucks an hour.
  - csdvrx 5y ago
    With the deductions it cost nothing, but it gets then the same feeling, and a visibility of how it works should they start making more money.
decebalus1 5y ago
This is easy. Because we have a well-established institutional hate for poor people. There is a subconscious belief that poor people are poor solely because of poor decisions. So, it's not our job to improve their lives. It would be 'unfair' for the rest of society to keep these 'freeloaders' afloat. /s There's gonna be a lot of comments in here saying ^^ but unironically. It's just ingrained in the fabric of our society.
- deleted 5y ago
  [deleted]
whiddershins 5y ago

tick_tock_tick 5y ago

Honestly kinda worthless without knowing the average marginal rate that people in each income brackets payed. People always hype up the 90% tax bracket but tax deductions and credits were so plentiful that the raw rates are very misleading.

cplusplusfellow 5y ago
Not to mention it was still a society where one could legitimately hide income from the government with ease.

frabjoused 5y ago

In 1944 the Federal income tax rate was as high as 94% for those making more than $200,000.

floren 5y ago
Posters will now stumble over each other to assure you that tax evasion was so widespread that actually the effective tax rate was lower than Reagan's wildest dreams.
- credit_guy 5y ago
  All right, then I'll ask the other question. What do you consider "fair"? You don't say it, and the GP doesn't, but the implicit assertion is that the rich don't pay their "fair share", presumably because in some mythological past they used to pay 94%. What is then "fair"? 94% ? Do you have a formula? At least a principle. If I make $100 MM (I don't), should I pay 50%, 60%, 70%? I mean, even if I pay 99%, I still retain more than 99% of the Americans, right?
  - dane-pgp 5y ago
    > Do you have a formula. At least a principle. I have a formula and a principle. Anyone earning $100 MM or above should pay the same effective percentage as the median taxpayer... relative to their wealth. The median US household has a net worth of $120k and pays about $10k in taxes each year. That equates to an 8% wealth tax. If a billionaire has $1 MM in income one year, they could pay $2 MM in tax and not even notice, despite that being a 200% effective income tax rate. What matters, in terms of "fairness", is what that burden feels like, which is losing 0.2% of their wealth (assuming wealth of exactly $1000 MM). For the median household that would be like paying $240 in taxes. Note that this doesn't even take into account the law of diminishing marginal returns, which states that the millionth dollar matters less to someone than their first dollar, so the millionth dollar should be taxed at a higher rate for the same hedonic burden.
    - azth 5y ago

6gvONxR4sf7o 5y ago

I'd love to see these state-wise as well. Looking at the highest ever federal rate and adding my current california rate would put the total marginal rate at 103%. It's actually kind of amusing to think about what a marginal rate over 100% would lead to. If the top bracket is $1M+ and you earn $100M, and that last $99M is taxed at 102%, then you owe roughly $101M of your $100M earned, leaving you negative for the year. Better not go above the max! Quick! Donate that $99M in order to maximize your earnings!

diggernet 4y ago
Then in future years, make sure to avoid the problem by furloughing all your workers as soon as you hit $1M. Sure, that means both you and your workers only work 1/100 of the year, but what's the point in working longer than that if it earns you nothing? Yeah, you could also pay your workers a lot more and take less yourself. But in that case you'd spend the whole year working to make what you could make in 1/100 of the year. So again, what's the point? So I suspect a >100% (or even >90%) marginal tax rate would have a lot of very negative side effects. (Keep in mind that back when the top rate was officially >90%, there were so many loopholes that nobody actually paid that. Closing the loopholes and drastically lowering the top rate was actually revenue-neutral.)
- 6gvONxR4sf7o 4y ago
  > furloughing all your workers as soon as you hit $1M You'd likely have a hard time getting them to come back the next year. Who is going to take a job that pays a normal daily wage but only employs you for three days? And can you really ramp the org back up up in three days? Maybe you'd be better off working for a few days then handing the job off to someone else for the rest of the year. Even then, good luck convincing the board that you're doing anything worthwhile coming in 3 days per year. I think the equilibrium for this would be fascinating.

BurningFrog 5y ago

A reminder that comparing old tax rates with modern ones is very hard, since there was a huge amount of deductions available for the high income earners, and hardly anyone actually paid anywhere near the nominal 91%.

qeternity 5y ago
It's also arithmetically impossible to pay the highest bracket given that it's a marginal tax rate.
- chrismcb 5y ago
  Huh? This makes no sense. If you made over 400k you were in the guest tax bracket Yes, b you wouldn't pay 91% of your income but you would pay 91% of everything over 400k.
throwaway0a5e 5y ago
And there were fewer taxes and government income streams so single big taxes (like income tax) represented a larger share of an individual's overall tax burden.

arrty88 5y ago

Now adjust those 1990 numbers for inflation

SpodGaju 5y ago

1950 Tax Rate - 91.0% > $400,000 The economy overall grew by 37% during the 1950s. At the end of the decade, the median American family had 30% more purchasing power than at the beginning. Inflation was minimal, in part because of Eisenhower's efforts to balance the federal budget. Unemployment remained low, about 4.5%.

nojito 5y ago
No one paid that tax rate. https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/ https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/ Average rate paid by the 1% back then was around 41%
- SpodGaju 5y ago
  Apples, meet oranges. "The data comes from a recent paper by Thomas Piketty, Emmanuel Saez, and Gabriel Zucman that attempts to account for all federal, state, and local taxes paid by different groups of Americans over the last 100 years" But regardless, it was higher in 1950, almost 6 points higher. And look at al the caveats... 1] 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.” [3] It is worth noting that, per the Piketty, Saez, and Zucman data, the tax rates of the top 0.1 and 0.01 percent of taxpayers have dropped substantially since the 1950s. The average tax rate on the 0.1 percent highest-income Americans was 50.6 percent in the 1950s, compared to 39.8 percent today. The average tax rate on the top 0.01 percent was 55.3 percent in the 1950s, compared to 40.8 percent today. [4] 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.
  - nojito 4y ago
    >But regardless, it was higher in 1950, almost 6 points higher. Sure, but you're being quite disingenuous with your post by suggesting that tax rates were any different back then compared to now.

throwaway0a5e 5y ago

Ok, now do the effective rates paid. Better yet, do overall tax burden rather than just income tax. Everyone loves to get a good ideological circle jerk going over the nominal 1950s rates but the actual tax burden at (various different points on the income spectrum) paints a very, very, different picture.

Volundr 5y ago
> the actual tax burden at (various different points on the income spectrum) paints a very, very, different picture. Do you have this data? I'd be very interested in this picture.

hackeraccount 4y ago

The raw rate tells you something but not everything. What are the available deductions? What counts as income?