US tax rate history - A return to the glory days

[Ivan Seeking]

When considering the best path to US solvency, it might be useful to consider the tax rates that helped to build this country.

Back when Kennedy took office, the top marginal tax rate was 91%. Today, it is 35%.
http://www.taxfoundation.org/publications/show/151.html

It appears to me that the incessant drive towards lower taxation, which imo has helped to bring the US to its financial knees, is unprecedented in the modern context.

 

[Al68]

Seriously? OK, it should be obvious that not only are tax revenues are not proportional to tax rates, but that tax revenues as a percentage of GDP have beenhttp://reason.com/blog/2010/11/29/the-remarkably-stable-amount-o" :

And the reason is http://online.wsj.com/article/SB10001424052748703514904575602943209741952.html?KEYWORDS=hauser". It should be equally obvious that a lower tax rate/higher GDP combination is far better than a higher tax rate/lower GDP combination. The government collects about the same percentage of GDP either way, but having a bigger "pie" to take the ~19% cut from not only benefits government, the other 80% of the economy and the people are obviously far better off.

But I don't expect that pointing out facts will have any effect, since they have been pointed out repeatedly. This issue just goes around in circles in this forum:

Step 1: Nonsensical claims like this thread starter
Step 2: A complete refutation
Step 3: Claims that those who disagree just have a "failed ideology".
Step 4: Facts pointed out repeatedly to decidedly refute nonsense.
Step 5: Some time passes.
Step 6: Repeat step 1 as if unaware that it's a tired old rerun.

 

[Vanadium 50]

But why just focus on tax rate? Lots of things have changed since 1961. Back then, a woman's place was in the kitchen. Shall we return to that as well? Also, back then, a Good Ol' Boy didn't have to worry about losing out on a good job to an "uppity" minority. Surely you're not arguing that we should return to that.

The 91% bracket in 1961 was for incomes above $400K in a year - about $3 million in today's dollars. If you want to balance the budget with a 91% tax bracket, it needs to kick in at about (looks like just under) $75,000 a year.

 

[WhoWee]

When considering the best path to US solvency, it might be useful to consider the tax rates that helped to build this country.

Back when Kennedy took office, the top marginal tax rate was 91%. Today, it is 35%.
http://www.taxfoundation.org/publications/show/151.html

It appears to me that the incessant drive towards lower taxation, which imo has helped to bring the US to its financial knees, is unprecedented in the modern context.

How many categories of spending have been added since Kennedy took office? How much money has been spent on the "war on poverty"?

BTW - Anyone that's ever owned a business will tell you Worker's Compensation and Minimum Wage legislations are also taxes - and should be counted in the totals - same with SOX and just about everything the EPA has ever mandated.

Please malel my post - IMO.

 

[Al68]

Please malel my post - IMO.

OK, we'll "malel" your post accordingly.

 

[WhoWee]

OK, we'll "malel" your post accordingly.

Wow, my "malel" made less sense than the OP - again please LABEL IMO.

 

[Al68]

Wow, my "malel" made less sense than the OP...

Well, I wouldn't go so far as to say that.

 

[Ryumast3r]

Instead of talking about the tax rates - which are always obscure and blurred due to our complicated tax-code in that it used to be much easier to evade taxes (and is still relatively easy if you're in the stock-market game), and that many tax loopholes have been closed since we had that 91% income tax bracket - I think it would be better to talk about the Laffer Curve and which side we are on, and how (if there is a way) we could increase revenue without hurting the economy too much.

There is also the point that GDP has gone down recently due to a recession (so tax revenue is down), and that, due to the recession as well, many programs that are designed to run in a recession are working right now, resulting in an increase in spending. I think the Laffer curve is a good place to start though.

 

[Al68]

Instead of talking about the tax rates - which are always obscure and blurred due to our complicated tax-code in that it used to be much easier to evade taxes (and is still relatively easy if you're in the stock-market game), and that many tax loopholes have been closed since we had that 91% income tax bracket - I think it would be better to talk about the Laffer Curve and which side we are on, and how (if there is a way) we could increase revenue without hurting the economy too much.

There is also the point that GDP has gone down recently due to a recession (so tax revenue is down), and that, due to the recession as well, many programs that are designed to run in a recession are working right now, resulting in an increase in spending. I think the Laffer curve is a good place to start though.

An important issue with using the Laffer curve is that in addition to disagreement about the curve's specifics, it only predicts government revenues as a function of tax rates. While the financial well-being of government is a significant concern, improving it at the expense of the other 80% of the economy is a horrible plan in a recession, even if the Laffer curve predicted an increase in government revenues. Note that higher tax rates have diminishing returns even on the left side of the curve. Even if the Laffer curve rose linearly, every dollar collected by government in taxes would still be a drain on the other 80% of the economy, ie the most important part of the economy.

The bottom line is that taxation doesn't create wealth, it consumes wealth. Some taxation is necessary for government, yes, but it is always a burden to the rest of society.

 

[WhoWee]

Tax rates of 100% are inadequate when spending exceeds revenues.

 

[OmCheeto]

When considering the best path to US solvency, it might be useful to consider the tax rates that helped to build this country.

Back when Kennedy took office, the top marginal tax rate was 91%. Today, it is 35%.
http://www.taxfoundation.org/publications/show/151.html

It appears to me that the incessant drive towards lower taxation, which imo has helped to bring the US to its financial knees, is unprecedented in the modern context.

bolding mine

It wasn't the vote down of the tax¹ to pay for a new Sellwood Bridge² that prompted you to create this thread was it?

Perhaps someone should have splashed images of that bridge³ in Minnesota that failed recently.

When people are so anti-tax, that they will not pay annually, for what they will pay daily for a latte, something is dreadfully wrong.

1. $22 million - Clackamas County VRF ($5 per year vehicle registration fee)
2. In 2008 the County injected glue in cracked sections of concrete to seal them against corrosive water and air.
3. [PLAIN]http://upload.wikimedia.org/wikipedia/commons/thumb/9/9d/35wBridgecollapse.gif/220px-35wBridgecollapse.gif[/SIZE]

 

[Ryumast3r]

An important issue with using the Laffer curve is that in addition to disagreement about the curve's specifics, it only predicts government revenues as a function of tax rates. While the financial well-being of government is a significant concern, improving it at the expense of the other 80% of the economy is a horrible plan in a recession, even if the Laffer curve predicted an increase in government revenues. Note that higher tax rates have diminishing returns even on the left side of the curve. Even if the Laffer curve rose linearly, every dollar collected by government in taxes would still be a drain on the other 80% of the economy, ie the most important part of the economy.

The bottom line is that taxation doesn't create wealth, it consumes wealth. Some taxation is necessary for government, yes, but it is always a burden to the rest of society.

Unless the taxes are used to help the 80% of the economy that isn't the wealthiest 20%, or, in the United States' case, the top 10%. The laffer curve, while it is only a function of government revenues and marginal tax rates, does show that taxing to a certain point will not hurt the rest of the economy to an extreme degree (not necessarily 50% taxation, as the top of the curve varies by country/etc, but it's usually placed there for reference sake). If the taxes are then used to help the part of the country that needs it at the time (whatever part that may be), then it is more useful than no taxes at all or minimal taxes to keep whatever basic functions running (like military or whatever is deemed necessary at the time).

Tax rates of 100% are inadequate when spending exceeds revenues.

That's what the laffer curve shows... The laffer curve shows that (Here I will use the general case where 50% is the top marginal income for the government), if you tax 100%, then you get just as much revenue as you would if you taxed nothing, as nobody would be there. On that note, taxing 1% isn't very beneficial, just like 99% isn't. 1% since you're not getting any of what is earned/produced, and 99% because hardly anything IS produced.

 

[WhoWee]

When considering the best path to US solvency, it might be useful to consider the tax rates that helped to build this country.

Back when Kennedy took office, the top marginal tax rate was 91%. Today, it is 35%.
http://www.taxfoundation.org/publications/show/151.html

It appears to me that the incessant drive towards lower taxation, which imo has helped to bring the US to its financial knees, is unprecedented in the modern context.

Are you suggesting you're in favor of a 22% tax rate starting at $4,000 in income Ivan? Now that's a good starting point for discussion.

 

[Al68]

Unless the taxes are used to help the 80% of the economy that isn't the wealthiest 20%, or, in the United States' case, the top 10%. The laffer curve, while it is only a function of government revenues and marginal tax rates, does show that taxing to a certain point will not hurt the rest of the economy to an extreme degree (not necessarily 50% taxation, as the top of the curve varies by country/etc, but it's usually placed there for reference sake). If the taxes are then used to help the part of the country that needs it at the time (whatever part that may be), then it is more useful than no taxes at all or minimal taxes to keep whatever basic functions running (like military or whatever is deemed necessary at the time).

That might be true in a hypothetical sense, but that's a completely fictional story in the real world. In the real world, "taxing the rich" hurts working people far more than any resulting benefit from government. The idea that those taxes are paid from rich peoples' fat cat cigar funds instead of from their investments in the economy is total fiction.

 

[Antiphon]

Let's also not forget the broad-based effect of oil prices on everything. Back in the '60s you tanked up your car for $5. This afternoon it cost me $60. It's calculated that for every dollar increase in the price of oil the average household pays around $1000 in the added marginal transportation costs of everything it buys. If you consider that a hidden energy tax then we are paying vastly more than we did 40 years ago.

No society can increase prosperity by burdening the productive with an even greater load. It defies logic, common sense, morality, and decency. Only someone who has attended a university more than four years could believe such a thing.

 

[Al68]

bolding mine

It wasn't the vote down of the tax¹ to pay for a new Sellwood Bridge² that prompted you to create this thread was it?

Perhaps someone should have splashed images of that bridge³ in Minnesota that failed recently.

When people are so anti-tax, that they will not pay annually, for what they will pay daily for a latte, something is dreadfully wrong.

You mean "would be" dreadfully wrong, if such a thing were even remotely accurate? There is a profound and obvious difference between not wanting to increase taxes by $5 and not wanting to pay $5 in taxes, particularly when taxes should be lower, not higher.

Making that out to be people not wanting to pay "just $5" in taxes is fraudulent, at a level of transparency that most 9 year olds could see through.

"Gee, we know we've robbed you blind already, taking thousands from each one of you every year, but we waste it instead of building that bridge we need. So cough up another five bucks each year".

 

[WhoWee]

You mean "would be" dreadfully wrong, if such a thing were even remotely accurate? There is a profound and obvious difference between not wanting to increase taxes by $5 and not wanting to pay $5 in taxes, particularly when taxes should be lower, not higher.

Making that out to be people not wanting to pay "just $5" in taxes is fraudulent, at a level of transparency that most 9 year olds could see through.

We're not talking about $5 are we? A $1,000,000 earner would pay $910,000 under Ivan's plan - net $90,000 - oh what glorious incentives to risk capital in a small business!

 

[Al68]

We're not talking about $5 are we? A $1,000,000 earner would pay $910,000 under Ivan's plan - net $90,000 - oh what glorious incentives to risk capital in a small business!

I was referring in that post to OmCheeto's remarks about that $5/year tax hike for that new bridge, not Ivan's "return to the glory days" of the socialist left's mass pillaging. Wasn't that a line from some movie about the USSR?

 

[Ryumast3r]

That might be true in a hypothetical sense, but that's a completely fictional story in the real world. In the real world, "taxing the rich" hurts working people far more than any resulting benefit from government. The idea that those taxes are paid from rich peoples' fat cat cigar funds instead of from their investments in the economy is total fiction.

And not taxing the rich, and allowing the wage gap to increase more hurts the economy as well - just as much, if not more - than putting a marginal increase in taxes on the rich and helping out millions located in the bottom percentages of the economy.

 

[Averagesupernova]

I prefer to look at the big picture like this: If the current trend continues with a small percentage of the population getting a large percentage of this country's wealth, who will pay the taxes when that small percentage of people control virtually all the wealth? I see that scenario like a spoiled kid who steals all of his siblings toys and then whines because at christmas time he has to cough up a larger share of older toys to give to charity as opposed to the toys he had to give up when his siblings were sharing that burden. Those who control the majority of the wealth should pay the largest share since they have the most to lose which to a large part is protected by where our tax dollars go.

 

[WhoWee]

And not taxing the rich, and allowing the wage gap to increase more hurts the economy as well - just as much, if not more - than putting a marginal increase in taxes on the rich and helping out millions located in the bottom percentages of the economy.

Aren't Government worker wages growing faster than the private sector? How fair is that?

 

[WhoWee]

If an investor has $1,000,000 to invest in a small business and the bank will loan an additional $1,000,000 to start a business that might provide $500,000 in income for 20 years - is it a good investment - given a 91% tax rate as suggested by the OP?

Would you risk $2,000,000 to earn $45,000 per year - or would you leave your money in passive investments earning the same $45,000 per year?

 

[Ryumast3r]

Aren't Government worker wages growing faster than the private sector? How fair is that?

Considering that a lot of government jobs aren't simply people like legislators, I wouldn't see this as a bad thing, especially since we're in a recession and business are laying off people (and were before at very quick rates). The Government, in this case, provided some stability in terms of jobs, which, as we all know, if you keep people working and earning then they can keep spending.

If an investor has $1,000,000 to invest in a small business and the bank will loan an additional $1,000,000 to start a business that might provide $500,000 in income for 20 years - is it a good investment - given a 91% tax rate as suggested by the OP?

Would you risk $2,000,000 to earn $45,000 per year - or would you leave your money in passive investments earning the same $45,000 per year?

I don't think I ever personally agreed with the 90% tax rate, though if I did somehow inadvertently do so then I apologize.

However, a 90% tax rate isn't a good idea. No. Even looking at the Laffer curve shows it's a bad idea, it's too far over. You don't promote any business with that and won't earn any revenue. I think a higher tax rate should be considered, yes, but not 90%.

I agree with a return to more Clinton-era tax rates. Now, I don't agree with everything Clinton did, however, you can't disagree that he was on route to get rid of the debt, businesses weren't suffering too badly (dare I say almost at all?). This would result in a top marginal tax increase of 10-15% (10 for people earning over a million dollars to about 33%, and 15 for the top 400 households, increasing it to about 30%). This wouldn't be so drastic as a 90% tax rate on those top people, still encouraging a good amount of growth, especially since this is individual income taxes, not corporation/business taxes, so businesses would only be affected as far as they allow themselves to be affected by the top 0.1% of the country (which, face it, isn't going to be that much in reality).

 

[Al68]

And not taxing the rich, and allowing the wage gap to increase more hurts the economy as well - just as much, if not more - than putting a marginal increase in taxes on the rich and helping out millions located in the bottom percentages of the economy.

More fiction. Trapping people in poverty for the sake of a voting constituency isn't helping them.

 

[Al68]

I prefer to look at the big picture like this: If the current trend continues with a small percentage of the population getting a large percentage of this country's wealth, who will pay the taxes when that small percentage of people control virtually all the wealth? I see that scenario like a spoiled kid who steals all of his siblings toys and then whines because at christmas time he has to cough up a larger share of older toys to give to charity as opposed to the toys he had to give up when his siblings were sharing that burden.

Completely fallacious analogy, and a completely fictional "big picture."

Those who control the majority of the wealth should pay the largest share since they have the most to lose which to a large part is protected by where our tax dollars go.

First, it's not "the wealth" as if we're talking about a pie that exists a priori, so that part doesn't make sense. As far as the rich paying a larger share of the tax burden, that's a complete strawman, since nobody has argued otherwise. As far as I can tell, not a single person on the planet has such a position, despite the popularity of that strawman argument with the left.

 

[Ryumast3r]

More fiction. Trapping people in poverty for the sake of a voting constituency isn't helping them.

I never said trap them in poverty, now did I?

No.

If you earn $1,000,000 and you get taxed 50% of it (total), then you end with $500,000. Poverty level is defined, in the United States, as follows (2009 data):

The 2009 Poverty Guidelines for the
48 Contiguous States and the District of Columbia
Persons in family Poverty guideline
1 $10,830
2 14,570
3 18,310
4 22,050
5 25,790
6 29,530
7 33,270
8 37,010
For families with more than 8 persons, add $3,740 for each additional person.

So, even with 50% taxes (which we're not even close to that in terms of marginal tax rate, which is what you actually pay), the top people wouldn't be even close to poverty.

You tried twisting my words, and you still aren't even close. Try again?

Edit: Let me just add:

with that $500,000 that you get from taxing one person who earns $1 million, you could help nearly 23 average sized families (4 people) every year maintain an exact poverty-level amount of money in their hands.

I am not talking about taking 90% of the money from the rich and making it so everyone earns the exact same wage, I am talking about keeping people fed and clothed.

 

[OmCheeto]

We're not talking about $5 are we?

Yes we are.

The measure to establish a $5 a year motor vehicle registration fee dedicated to the project was defeated by a margin of 63 percent to 37 percent.

http://www.estacadanews.com/news/story.php?story_id=130575747261546400"

I don't think the point of the thread is to return to the 91% level. I think it's meant to point out how the anti-tax rhetoric has become so ludicrous, that even vital infrastructure projects are shunned for what amounts to less than 2 cents a day.

Hell, even the people of Burundi* could afford that.

*Not to pick on the people of http://en.wikipedia.org/wiki/Burundi" lists them as having the lowest per capita(PPP) income in the world, at $300 per annum.

 

[WhoWee]

Yes we are.

http://www.estacadanews.com/news/story.php?story_id=130575747261546400"

I don't think the point of the thread is to return to the 91% level. I think it's meant to point out how the anti-tax rhetoric has become so ludicrous, that even vital infrastructure projects are shunned for what amounts to less than 2 cents a day.

Hell, even the people of Burundi* could afford that.

*Not to pick on the people of http://en.wikipedia.org/wiki/Burundi" lists them as having the lowest per capita(PPP) income in the world, at $300 per annum.

Perhaps Ivan should clarify the point of the thread?

 

[Al68]

I never said trap them in poverty, now did I?

No.

If you earn $1,000,000 and you get taxed 50% of it (total), then you end with $500,000. Poverty level is defined, in the United States, as follows (2009 data):... the top people wouldn't be even close to poverty.

You tried twisting my words, and you still aren't even close. Try again

Sure, I'll try again, but it seems pretty fruitless. I obviously wasn't using the word poverty to refer to the rich, before or after taxes. And you say I was twisting your words?

 

[Al68]

I don't think the point of the thread is to return to the 91% level. I think it's meant to point out how the anti-tax rhetoric has become so ludicrous, that even vital infrastructure projects are shunned for what amounts to less than 2 cents a day.

Again? Seriously? The same kiddie-level transparent fraud I just pointed out?

 

[OmCheeto]

Again? Seriously? The same kiddie-level transparent fraud I just pointed out?

You'll have to point out your kiddie-level transparent fraud. I think I missed it.

 

[Al68]

You'll have to point out your kiddie-level transparent fraud. I think I missed it.

https://www.physicsforums.com/showpost.php?p=3316742&postcount=16".

 

[OmCheeto]

Perhaps Ivan should clarify the point of the thread?

Naw. Let's see if we can start from scratch and analyze what he was trying to say, without any hyperbole this time.

When considering the best path to US solvency,

He has identified a perceived problem. Excellent!

it might be useful to consider the tax rates that helped to build this country.

Back when Kennedy took office, the top marginal tax rate was 91%. Today, it is 35%.
http://www.taxfoundation.org/publications/show/151.html

He has displayed some historical facts.

It appears to me that the incessant drive towards lower taxation, which imo has helped to bring the US to its financial knees, is unprecedented in the modern context.

He has stated an opinion. A simple one. One which I agree with.

Ok.

Next!

 

[ParticleGrl]

Aren't Government worker wages growing faster than the private sector? How fair is that?

They aren't. Skilled labor always makes less working for the government.

 

[WhoWee]

Naw. Let's see if we can start from scratch and analyze what he was trying to say, without any hyperbole this time.

He has identified a perceived problem. Excellent!

He has displayed some historical facts.

He has stated an opinion. A simple one. One which I agree with.

Ok.

Next!

Ivan must agree with you?