Why do dems never mention that when Kennedy was President, the rich payed a 90% income tax?

[Hippo_Tron]

The Republicans talk all of the time about how John Kennedy was a moderate tax cutter. Yea, he cut the top income bracket from 90% to 70%. Today the top income bracket is 35% and capital gains are much lower than that as are dividends.

If moderate is advocating that the rich have to pay 70% of their income then I'm right of center. I'd settle for 45-50%.

[Deja Q]

1. K&R

[Skinner]

2. Are you sure about this?

Did the rich *really* pay 90%? I find this extremely difficult to believe.

[Starbucks Anarchist]

3. Might be referring to marginal tax rates.

[motocicleta]

22. It is the marginal rate, but

it doesn't change the fact that the marginal rate now is 35%. Marginal rate = the rate paid on income (not dividends or capital gains) over a certain amount of income. Here is a link to historic marginal rates: http://www.truthandpolitics.org/top-rates.php
I cannot seem to find average tax rates right now, and certainly there were all kinds of creative ways to shelter your dollars. Kevin Phillips in Wealth and Democracy shows how the wealthiest Americans continued to grow their wealth during that era which was brought about by the need to pay for WWII.
Here is another link, though, to percentages of revenue by source: http://www.taxpolicycenter.org/TaxFacts/TFDB/TFTemplate.cfm?Docid=204
This shows that while the amounts collected from individuals has remained fairly stable over the past 40 years, the amount collected from corporations has dropped over 10%.

What would be nice to find is the percentage revenue collected over these time frames from each segment of the taxed population, so we could see how the tax burden on the wealthiest Americans has varied over time compared to the burden on the poor and middle class. I cannot find it right now. I think it is fair to say, however, that during a time of war wealthy Americans could be asked to do more right now.

[Selatius]

7. It was payroll income that was taxed at 90 percent, it was that way to pay for WW2

I am not sure it was that high in terms of capital gains tax or dividend taxes.

[Hippo_Tron]

11. Don't think it was 90% on capital gains or dividends but still higher than today

Capital gains and dividends are both below 20% today.

[Selatius]

14. Last time I checked, it was cut to 15, which was the central core of Bush's tax cuts.

That is where most of the revenue was lost...when Bush cut taxes on the incomes of the very wealthy. Your typical CEO might actually make only 500,000 in payroll income. It's the dividends or his trading activities on the stock market that bring home his bacon. Nevermind the stock options which he has yet to exercise. The payroll check is usually a pittance compared to his capital gains and dividends.

[Hippo_Tron]

9. I know that tax shelters were easier back then

So it's hard to say. How much effect that had I'm not sure. Still I'm pretty sure that what they paid is far higher than today.

[flamin lib]

13. It works like this:

*Picking numbers out of my head for simplicity*
0-20,000 15% = $3000
20,000-50,000 25% = $7500 + the 3000
50,000-100,00 35% = $17,500 + $10,500
. . . .
1 mil to infinity, 90%

It's not 90% from dollar one.

[A HERETIC I AM]

19. you beat me to it, Flamin. I need to read more posts!

Your and my post below agree. You put it very well.

[flamin lib]

23. Happens to me all the time. Lag between typing and submit will

get ya' every time . . .

[hfojvt]

31. your numbers are too low

when I was a senior in High School (cough, way back in 1979) I did the numbers for $1,000,000 income. The top rate was 70% and it started at about $300,000 AGI (Adjusted Gross Income). The total taxes on $1 million were about $670,000 - pretty close to the top rate.

They have bumped those numbers up a little, but as recently as 2003 the top rate of 35% started after AGI of $311,950 and the tax on a million dollar income (unless, as others point out, it is dividend or capital gains income) is $331,332 or 33.1% - not too far from the top rate of 35%. The tax on a $10 million AGI is $3,481,332 or 34.8%. (Or it was in 2003. I started using the 1040A and they do not have those formulas in my instructions for more current years. Oh the humiliation, I am not important enough to use the 1040 anymore.)

edited to put in more commas for Holden Caulfield

[flamin lib]

33. Yeah, they're made up numbers for the sake of discussion. nt

[Skinner]

36. I am well aware of how marginal tax rates work.

My question is whether anyone actually paid anything close to the 90% marginal rate. The cynic/realist in me suspects that the most powerful members of our society -- the super-wealthy -- would not stand for it. Sure, the law might have been on the books, but was anyone actually paying the full 90%? I suspect there were plenty of ways to get around it.

[unblock]

38. it was the marginal tax rate, but there were loopholes galore

so rich people invested in companies that were designed to shelter income, give losses, etc. to lower taxes.

few people actually paid at the marginal 90% rate.

many of the loopholes were, unsurprisingly, non-productive crap that rich people and their lobbyists crammed into law. but, some of the loopholes were actually government incentives for rich people to do the right thing with their money. this was back in an era when the people thought the government had the right -- indeed, the responsibility -- to direct the economy and society.

[AikidoSoul]

39. There was a huge increase in tax shelter activity starting in the 60s

which continues today. The super wealthy never paid the top rates unless their accountants and tax shelter technicians were asleep.

[A HERETIC I AM]

18. It was the MARGINAL rate...

As the table on the link below shows, the marginal tax rate was 91% on income OVER $400,000.

In other words, the first $15,000 is taxed at 10% (for example), the next $25,000 in income was taxed at 25% and so on.
If you made $420,000 ONLY the $20,000 above 400K was taxed at 91%

http://www.truthandpolitics.org/top-rates.php

[On the Road]

27. The Phrase Should be "Tax Bracket"

which Hippo_Tron used in the body of the post. As you get into the financial stratosphere, the tax bracket starts to approach the tax rate for reportable income, so "tax rate" is sometimes used as a shorthand.

It is true that tax deductions used to be easier. However, the huge falloff in revenue after Reagan's and Bush's tax cuts and growing inequality demonstrate how much more the upper class used to pay than it does now.

[hfojvt]

28. see it would be answered by the myth of the loophole

I do not believe that myth, for two reasons

1) when Reagan cut the tax rate from 70% to 40% with ERTA in 1981, tax revenues went down. If the rich really were not paying taxes because of loopholes, why would that have happened?

2) After Reagan CEO salaries skyrocketed. - Why? My answer is that 'because they could' and now their was not a huge disincentive for the rich to grab more cash. Look at the old system. Say a CEO was making $2 million a year. Maybe he feels like he should be making $6 million a year. Maybe, because he is supposedly hot stuff, another company has offered him $6 million a year. Will he take it? Or will he demand a higher salary? Before Reagan, probably not. Of that extra $4 million 2.8 of it would just goto Federal taxes and another $240,000 or more to State and city taxes. So the extra $4 million in salary 'only' nets him $960,000. Before Reagan, it was not worth it. After Reagan, it was.

And thirdly, I would say that a huge loophole - "schedule A" is still there.
http://journals.democraticunderground.com/hfojvt/25

Has there really been legislation to close tax loopholes in the 1970s and 1980s? That strains the limits of my credulity. I'd like to know when and where. Find me an old CPA who can tell me how a CEO would have dodged alot of taxes on that extra $4 million.

[hfojvt]

30. whoops, to answer myself again

Somerby has quoted Johnston, author of "Perfectly Legal", who used the example of Teresa Heinz-Kerry. She does not pay a high tax rate because she makes millions of dollars in interest from tax free munincipal bonds. That's not a new loophole either though.

The AMT (alternative minimum tax) might address some of these loopholes, but notice how they plan to kill it in the name of the middle class, as if families with incomes of $40,000 a year are paying the AMT.

[Warren Stupidity]

4. Because we don't have an opposition party?

We have a diarchy:

"Diarchy (or dyarchy) is a society or an organization with two rulers on an equal standing. Diarchies are known from ancient Sparta, Rome, Carthage as well as from Germanic (see Germanic king), India and Dacian tribes. Ranks in the Inca Empire were structured in moieties, with two occupants of each rank, but with different prestige, one hanan (upper) and one hurin (lower)."
http://en.wikipedia.org/wiki/Diarchy

Or as I refer to it we have The Kleptocracy, and it runs or tries to run both 'official' parties. The Neoliberal/Neoconservative consensus has a majority in both parties. For the most part they run with one banner until we get sick of that game, then they just change the banner.

[Selatius]

5. 45 to 50 percent is fine provided you don't lump in people who make 100K a year with...

your average CEO, who makes 20,000,000 a year or something very close to it. Aim the top bracket at the top 1 percent. I'm not just talking about their payroll income; I'm also talking about their income derived from capital gains, which is where the bulk of their money comes from.

Qualified capital gains are taxed at a low flat rate of 15 percent, so if 95 percent of your income is capital gains, you pay a lower percentage of your income to taxes than the workers who work to make you more money whose income is largely derived from payroll income.

[Hippo_Tron]

12. I'd say one bracket for 100k-500k another for 500k-1 million and then another for over 1 million

[ntesla]

6. It was also in our Constitution

According to the U.S. Constitution; income from labor was off limits but taxes on business income was fine. In addition, Congress had the responsibility & duty over the creation and distribution of our currency.

Now we have the Federal Reserve (a private entity) and income taxes for all labor.

Like the slowly boiled frog...

[Hippo_Tron]

15. Sixteenth Amendment

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.


It says "Incomes from whatever, from whatever source derived" not "Incomes from whatever source derived, except labor."

I also saw Aaron Russo's "documentary" but my bullshit detector went off in the first five minutes.

[ntesla]

20. Have you read the Supreme Court Opinions?

It will peg you B.S. sensors. They basically claim the new amendment was a recategorization of the original Constitutional definition and not an additional law. I'm not going to even mention the issue with improper ratification.

This was not what our founders originally designed.

[dogman]

8. The old figures don't lie, but liars figure.

This is a point that has driven me just short of crazy. There was also a luxury tax instituted to keep down consumption and raise revenue for the War. I heard recently that incomes above 100,000 were taxed at 100% during the War also. w seeks to make everyone happy thinking there is no cost to the Iraq War by keeping it off budget and claiming he is reducing the deficit.

[Warpy]

10. Probably because Kennedy LOWERED it to 70%

which was a huge mistake, in retrospect. It gave men like Scaife enough of a windfall to start buying the government, something Kennedy hadn't considered.

Instead of a giveaway to the obscenely rich, he should have tied the progressive income tax to the median wage, to be calculated once a year in quiet times and four times a year in times of rapid inflation or deflation.

Any income over a million a year should be hit by nearly confiscatory taxation. Nobody is worth what the robber baron CEOs are getting, and I mean nobody.

[A HERETIC I AM]

21. The top marginal rate was 91% until 1964 then it was lowered to 77%...

see my post above and the tax table in the link. Kennedy might have lowered it but it didnt take effect until the next year. He was shot in November of 1963. It was lowered to 70% in 1965 and so too was the threshold, from $400K to $200K. That obviously had the effect of including more people in the highest bracket.

edited for clarity

[DuaneBidoux]

16. I thought it was about 75&% IMO either one is too much.

[Warren Stupidity]

26. Why?

In today's dollars that would be an effective income cap at around 1,000,000. Why would that be a bad thing?

[Selatius]

32. Usual free market answer: "It's a tax on progress, a disincentive to work"

Laffer Curve basically says that there is a marginal rate in which you can maximize income collection. For instance, if you have a tax rate of zero percent, what do you get? Zero dollars. If you had a tax rate of 100 percent, what do you get? Eventually, zero dollars because it modifies the behavior of people. People stop going into areas that are penalized at 100 percent by going through an alternative route.

Basically, they say the best marginal rate is somewhere between 0 and 100 percent. It could be 35 percent or 66 percent. Who knows? But the Curve suggests something close to 90 percent or higher will simply make the largest capitalists not work as hard such that they are put into those high brackets or make the largest capitalists more determined to find ways not to pay taxes, including lobbying congress to corporate media consolidation in order to shift the course of a nation's discussion onto a pro-growth track at the expense of a pro-redistribution track.

Whether or not one buys into the Laffer Curve is another idea altogether. Tax revenue after George W. Bush's tax cuts did not increase as suggested by the Laffer Curve. In fact, it went down, not up, but the funny thing is one could just as easily use the Laffer Curve to suggest the drop in revenue was due to the idea that a top marginal rate of 39 percent under Clinton was already too low, that cutting it further won't increase government revenue but decrease it.

In my mind, I could easily use the Laffer Curve to justify a 50 percent maximum marginal rate, especially since it's equally distant between the hypothetical scenarios I mentioned with zero and 100 percent tax rates.

[Warren Stupidity]

34. Yes sure free market idiocy postulates a free lunch

For 25 years we have listened to moronic blather about the perils of taxation used primarily to justify shifting the actual tax burden to working people and pensioniers.

However the point is that this would be simply a ceiling on wages and not in any way a disincentive to work. Suppose the marginal rate for income over 1,000,000 was indeed 90%. Who exactly would disincentised to work? CEOs? Hollywood stars? Baseball players? Normal people would pay at normal rates and would have normal incentives to keep on being productive.

The largest capitalists aren't going to work hard? Do you think Bill Gates cares what his salary is? Capitalists are not interested in or motivated by their salaries, they are too busy accumlating vast empires of capital accumulations.

[Vidar]

17. Their corporate masters won't let them.

[David__77]

24. I think 90% is not unreasonable at a certain level.

The wealthy should reinvest rather than take income for consumption. Extravagant consumption should be discouraged as a threat to economic growth. Reinvested income should be taxed at a lower rate.

[OHdem10]

25. When Kennedy came to office

The War Tax to pay for Wars under FDR, Truman had never
been discontinued. Common Sense told Kennedy it was
time to discontinue the War Tax. plus others that
had crept up.

[Strawman]

29. That's right

The most progressive tax proposal anywhere near the table is Kucinch's which I don't believe even crosses the 40% threshold at the top margin. And then the punditocracy acts as if the "left wing" of the Democratic party is such a threat to Wall Street. Please.

I don't know enough about economics or the Laffer curve or whatever it is to necessarily endorse a 90% marginal rate, but it seems like progressives ought to at least be sniffing 50% as the top marginal income tax rate for millionaires. Inevitable" loopholes or not, it seems we ought to endorse such a tax system as a matter of principle.

[BlueIris]

35. K&R, 'cause, when I, as a young ankle-biter, learned of the 90% thing,

I was shocked. In what universe had the top 1% of wage earners been expected to actually, you know, put back into the society that allowed them to make their hundereds of millions (or billions) dollars?

Pre-Raygun universe, that's what. Yes, I know, other "leaders" paved the way, but: Raygun screwed us.

Those of you of a certain age probably remember the 90% (ie; fair) days vividly. When our products were the envy of the world, our state governments were functional and schools were, well, um, sorta kinda better.

WHAT THE HELL WAS SO GODDAMN WRONG WITH 1955? (Apart from the Cold War, illegal abortion, and Eisenhower, that is?)

[Sgent]

37. The marginal tax rate was 90%

then 70% -- but it wasn't the same as it is today.

The deductions for businesses were essentially unlimited (they aren't today), especially for things like entertainment, domestic help, and entertaining.

So a CEO would pay 90% marginal rate on his taxes -- but only on the amount he received after paying for a maid, gardener, 1/2 his mortgage (for entertaining), country club dues, meals out, gifts for "business" associates, etc.

According to some accountants I know from back then, the total tax bill after Reagan's reform actually went up in most cases since so many sundry deductions were eliminated.

FYI -- dividends and interest were taxed at the marginal tax rate (not separately like capital gains).