I think most people don't know that; I had no idea whether you were one of them or not. I think most people who see a 91% tax rate would assume that's on ever dollar.
Tamar
>I fail to see the purpose of your example. Do you seriously assume that I did not know how brackets work?
>
>>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
