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53 Years Ago
Message
From
18/07/2008 13:15:17
 
 
To
18/07/2008 09:26:36
General information
Forum:
Politics
Category:
Other
Title:
Miscellaneous
Thread ID:
01331925
Message ID:
01332337
Views:
8
First, I'm pretty sure that the 91% was a marginal rate. That is, it applied only to the income above the top of the previous bracket. As I understand our tax system, it works like this. Say there are four brackets, as follows (and I'm making these numbers up, and choosing them for easy calculation):

1: Income under $20,000; tax rate 0%
2: Income between $20,001 and $50,000; tax rate 10%
3: Income between $50,001 and $100,000; tax rate 20%
4: Income over $100,000; tax rate 30%

AIUI, that would mean someone earning $35,000 pays:

20,000 * 0 + (35,000 - 20,000) * 10% = $1,500

Someone earning 75,000 would pay:

20,000 * 0 + 30,000 * 10% + (75,000-50,000) * 20% = $8,000

And someone earning $200,000 would pay:

20,000 * 0 + 30,000 * 10% + 50,000 * 20% + (200,000 - 100,000) * 30% = $43,000

I'm not entirely sure that, in fact, everyone gets to pay 0 for the lowest bracket, but I'm pretty sure about the rest.

So if I understand this correctly, that 91% applied only to income over $400,000. The first $400,000 would be taxed at an assortment of lower rates. I don't know what that $400,000 is worth today, indexed for inflation.


>I think that Tracy gave you a good explanation why your assessment is wrong. $400K income 50 years ago is probably equal to $4M now, so it is just small fraction of population affection. Please, don't take me wrong it's totally unfair, and, imo, plain criminal that someone had to pay 91% tax at that time. I just mean that if you apply all brackets then you will see that taxes are higher now then they were 50 years ago. It is not a rocket science to know the reason for that: entitlements programs are getting out of control (big surprise) and taxes are the only source to plumb holes.

I have neither the time, nor the skills to go back and compute effective tax rates historically, but here's a blog that seems to indicate that at least in 2005, they were lower than on average over the last 30 years: http://gregmankiw.blogspot.com/2007/12/tax-rates-current-vs-historical.html

Tamar
>
>>(Boy, I hate top-posting, but I'm feeling too lazy to re-align this whole sub-thread.)
>>
>>I mean that we hear people complain all the time about how high taxes are in this country, when in fact, they used to be much higher, _especially_ for those at the top end of the income scale.
>>
>>Tamar
>>
>>>Sorry, I can't figure out what was your idea. Do you mean that taxes were higher that time?
>>>
>>>>Yeah, I think we flattened the whole thing some years back, reducing the number of brackets. But still, the idea that at some point, we had a marginal tax rate of 91% for anyone, even it was only a fraction of a percent.
>>>>
>>>>Tamar
>>>>
>>>>>That's misleading. I looked it up and it was only effective for those making taxible income over 400,000 a year... Back then, there were very few making that amount so it didn't impact the average American. In fact, it probably still wouldn't..
>>>>>
>>>>>(Source is from the snopes article)
>>>>>
>>>>>http://staff.jccc.edu/swilson/businessmath/fit.htm
>>>>>and
>>>>>http://www.truthandpolitics.org/top-rates.php
>>>>>
>>>>>
>>>>>>The bottom tax bracket for federal income tax in 1955 was 20%, the lowest that rate had been since 1943. The highest tax bracket had first exceeded 50% as far back as 1932, and it was an astounding (by modern standards) 91% in 1955.
>>>>>>
>>>>>>Take that, those who think taxes are too high today.
>>>>>>
>>>>>>Tamar
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