Post WWII Tax Rates

[Vol Main]

One huge issue in the budget crisis is the top tax bracket, now at 35%. Here are some historical numbers for that bracket. Bear in mind that the income level for the bracket varied over time.

During the Truman, Eisenhower, and Kennedy Administrations, the tax rate on the top income bracket was 90% or slightly above 90%. That's right, it was 90%. The country emerged from WWII with a huge debt, and the high tax rate helped pay for it. Remember that the economy grew at a healthy rate for much of that time. The top rate was lowered to 70% during the Johnson Administration. When Ronald Reagan took office, the top tax rate was still 70%.

Here are numbers for the top tax bracket for a married couple, during the Reagan years:
1981--70%
1982--50%
1983--50%
1984--50%
1985--50%
1986--50%
1987--38.5%
1988--28%

The Reagan Administration spent a lot of money. Even with tax rates higher than they are today for seven years of his Presidency, the national debt went into a boom phase. The 28% bracket left to Bush 41 had to be raised, about 3%. During the Clinton Administration, it was raised again to 39.6% for the top bracket. The economy grew at a healthy rate, and the budget was finally balanced with a nominal surplus. The Bush 43 Administration increased federal spending at the highest rate since the middle of the Second World War, but he lowered taxes, twice I think...down to 35% on the top bracket where it remains to this day. President Obama wants to raise it back up to 39.6% ONLY on incomes over 200,000 or 250,000. Can't recall which at the moment. During negotiations with Republicans, he compromised with an offer to make that increase apply ONLY to incomes of 1,000,000 and higher, but Republicans refused any tax rate increase, even for the most wealthy Americans. The Republicans also refused to eliminate tax loopholes for the wealthy paying very low real rates, saying that eliminating tax loopholes would be a tax increase. Numerous of the Republicans have signed a public oath to not raise taxes. That means by not one dollar, quarter, dime, nickel, or penny...on millionaires and billionaires...while our nation's budget is in crisis.

 

[MG1968]

 

[Weezy]

Most of the modern world was in ashes and off-shoring wasn't practical. Do it now, and they will just go elsewhere. And if I recall, tax rates weren't anywhere near the effective rate.

 

[Gannon Goodson]

One huge issue in the budget crisis is the top tax bracket, now at 35%. Here are some historical numbers for that bracket. Bear in mind that the income level for the bracket varied over time.

During the Truman, Eisenhower, and Kennedy Administrations, the tax rate on the top income bracket was 90% or slightly above 90%. That's right, it was 90%. The country emerged from WWII with a huge debt, and the high tax rate helped pay for it. Remember that the economy grew at a healthy rate for much of that time. The top rate was lowered to 70% during the Nixon Administration. When Ronald Reagan took office, the top tax rate was still 70%.

Here are numbers for the top tax bracket for a married couple, during the Reagan years:
1981--70%
1982--50%
1983--50%
1984--50%
1985--50%
1986--50%
1987--38.5%
1988--28%

The Reagan Administration spent a lot of money. Even with tax rates higher than they are today for seven years of his Presidency, the national debt went into a boom phase. The 28% bracket left to Bush 41 had to be raised, about 3%. During the Clinton Administration, it was raised again to 39.5% for the top bracket. The economy grew at a healthy rate, and the budget was finally balanced with a nominal surplus. The Bush 43 Administration increased federal spending at the highest rate since the middle of the Second World War, but he lowered taxes, twice I think...down to 35% on the top bracket where it remains to this day. President Obama wants to raise it back up to 39.5% ONLY on incomes over 200,000 or 250,000. Can't recall which at the moment. During negotiations with Republicans, he compromised with an offer to make that increase apply ONLY to incomes of 1,000,000 and higher, but Republicans refused any tax rate increase, even for the most wealthy Americans. The Republicans also refused to eliminate tax loopholes for the wealthy paying very low real rates, saying that eliminating tax loopholes would be a tax increase. Numerous of the Republicans have signed a public oath to not raise taxes. That means by not one dollar, quarter, dime, nickel, or penny.

Let me see if I can help another American.

NOBODY paid those rates. There were far more loopholes and deduction, especially for those in the highest brackets.

The Clinton economy is perhaps the biggest myth of the Democrat Party. Democrats take the credit because he was president, and Republicans take credit because they controlled Congress. The truth is neither is right. We lived in a bubble economy under Clinton. Remember Lucent Technologies? Look at all the companies that no longer exist. It was called the NASDAQ bubble. We lived on cheap credit because the Fed kept interest rates way too low. Alan Greenspan raised interest rates at the end of Clinton's second term to fight inflation, and he burst the stock market bubble. We then went into a recession as George Bush took office.

To avoid a deep recession the Fed lowered interest rates to 1%. That took us right into the housing bubble. The Fed got Americans hooked on cheap credit and housing prices were bid into the stratosphere. The crisis was a creation of the federal government because they started guaranteeing mortgages through Fannie and Freddie and strong-armed the banks into lending to people with horrible credit. The teaser rates (adjustable rate mortgages) meant that people were sure to defaut once those rates reset after a couple of years. They could no longer afford the payments on the houses they bought but could never afford. That's how we got subprime.

The high tax rate at the end of WWII didn't help the economy, nor did it help us pay off the debt. Those factories that were used for war production were turned over to domestic production. While the rest of the world lay in ruins, America became the largest industrial and manufacturing power the the planet had ever seen. FDR and his New Deal did nothing. We spent the 30s and early 40s still in a depression and all that government spending and money printing only PROLONGED the Great Depression.

Government spending will never grow the economy. Taxing the rich will not grow the economy. Government regulation and red tape will not grow the economy. Barack Obama will not grow the economy because he has no idea how an economy grows.

 

[volinbham]

NOBODY paid those rates. There were far more loopholes and deduction, especially for those in the highest brackets.

Not sure why this has to be repeated so much but it does.

Funny how the same people that use this argument (that the tax rate used to be 90, 70 or whatever) also argue that while our corporate rate may be high no companies actually pay that effective rate.

The disconnect is stunning.

 

[volinbham]

Some interesting findings in this study.

The average individual income tax rate in 1960 reached an average
rate of 31 percent at the very top, only slightly above the 25 percent average rate at
the very top in 2004. Within the 1960 version of the individual income tax, lower
rates on realized capital gains, as well as deductions for interest payments and
charitable contributions, reduced dramatically what otherwise looked like an extremely
progressive tax schedule, with a top marginal tax rate on individual income
of 91 percent.

91% was meaningless dues to all the deductions and loopholes (as has been pointed out repeatedly).

http://elsa.berkeley.edu/%7Esaez/piketty-saezJEP07taxprog.pdf