The top marginal income tax rate: 100 years at a glance

[c1ue]

Presented without comment.

(Originally from the Washington Monthly)

[LorenS]

Re: The top marginal income tax rate: 100 years at a glance

The tax code is 3,000,000 words.

Part of our problem is that we don't really understand the problem to begin with.

Does anyone really think the "rich" ever paid taxes at the rates on the graph?

[goodrich4bk]

Re: The top marginal income tax rate: 100 years at a glance

Presented without comment.

(Originally from the Washington Monthly)

I'll provide the comment:

[This is the speech Obama should have given last December 7, 2010, when he "reluctantly" agreed to extend the Bush tax cuts in exchange for an extension of unemployment benefits]

My fellow Americans:

On this day of rememberance, I encourage all Americans to remember not only the sacrifices our soldiers made in the days following the attack on Pearl Harbor, but also the sacrifices our civilian population made to pay off the war debt following the successful completion of WW II. Remember, nobody would have blamed our fathers and mothers ---- having eliminated the threat of fascism around the world --- if they had taken a well deserved rest and passed their war debts to the next generation to pay. But that's why we call them the Greatest Generation. They refused to take a rest, however well deserved. Instead, they taxed themselves at the highest marginal rates in history ---- 91% --- and invested in roads, infrastructure and universities and created the most secure, open society with the highest and most widely shared standard of living the world has ever seen.

Today, I'm saddened to see the opposite instincts from this generation's leaders in Congress. As with prior generations, they borrowed to pay for the wars our brave men and women in uniform have fought and won. But now that success is at hand, they refuse to ask non-uniformed Americans to make any sacrifice at all. I have suggested a modest sacrifice in the form of restoring tax rates on our wealthiest citizens to the rates they enjoyed under prior Republican and Democratic administrations. In response, I hear nothing but hysterical whining.
I hear that a 4.6% raise in the marginal rate for those making over $250,000 a year in jobs that carry no risk of death, dismemberment or injury, is politically impossible.

As one of my predecessor's once said, well, there you go again. It is not politically impossible. Such nonsense --- and, yes, it is just that, nonsense --- ends today. If Congress refuses to extend unemployment benefits unless the Bush tax cuts are also extended, so be it. The result will be that taxes will rise and unemployment benefits will cease. And you know what? I doubt that any real Americans will whine. Because most of them know in their hearts that the sacrifice they will be making is the right thing to do.

As for my family, we're going to do our part, too. I am donating 100% of my salary this year to charitable causes benefiting Iraq and Afghanistan veterans. I don't expect others in our government to do the same, but I do expect them to do their job and lead.

[don]

Re: The top marginal income tax rate: 100 years at a glance

The tax code is 3,000,000 words.

Part of our problem is that we don't really understand the problem to begin with.

Does anyone really think the "rich" ever paid taxes at the rates on the graph?

Only the temporary rich - guys like professional athletes, people that won a lottery, inheritance windfalls from obscure relatives. In short, easy pickin's. Guys like prizefighters at the very top of their short-lived game delayed fighting until a new tax year. Did a top-paid CEO ever stop earning for tax reasons

[Scot]

Re: The top marginal income tax rate: 100 years at a glance

Presented without comment.

(Originally from the Washington Monthly)

Great graph, except the text at the top that was no doubt written by a complete moron that doesn't understand the difference between wealth and income.

[DSpencer]

Re: The top marginal income tax rate: 100 years at a glance

The tax code is 3,000,000 words.

Part of our problem is that we don't really understand the problem to begin with.

Does anyone really think the "rich" ever paid taxes at the rates on the graph?

Agreed. It is like solving an equation with hundreds of variables. The vast majority of variables are unknown to everyone but the sharpest tax lawyers and accountants. No one person understands all of it. The variables are subject to change at any time. Additionally, many variables are subjective and can be interpreted differently in different circumstances.

Simplification needs to be priority number one.

I'm sure that some "rich" people do in fact pay the top marginal rate. The question is how many and on how much of what the average person would consider "income". I believe for some, paying income tax is a last resort after all other tax shelters/loopholes have been used to their fullest extent.

[goodrich4bk]

Re: The top marginal income tax rate: 100 years at a glance

You are correct, but a graph showing the changes in "wealth" taxes would show the same thing. The only actual wealth tax in this country is the estate tax. When Reagan took office it was 70% on estates over $3 million with an exemption of $161k. Today it is 35% on estates over $5 million with an exemption of $5 million. So in 1980, if you left more than $3.2 million to your heirs the government picked up 70% of the overage. Now you can leave $10 million before you reach the top rate of only 35%.

I would say that whether they are defined by wealth or income, the rich in this country (okay, the "job creators") have done very well through nothing more than changing the rules that applied to their parents' generation. Those boomers who were merely debt slaves toiling in government jobs also did very well by creating defined benefit pensions for themselves that have vested and now guarantee them a retirement that their children can never hope to match. At the same time, they've forced their children borrow to pay for their education (unlike the boomer parents who taxed themselves and saved for their children's education), eliminated defined benefit plans for all new hires, created sovereign debt that will reduce their children's productivity for their entire lives and made it legal for student loans to be levied against their children's social security checks. And today the boomers in Congress shoved yet another knife into their children's back: creating a new COLA adjustment that will guarantee their children will not possibly receive the same SS benefits as today's grandmas receive.

Here is what a nation of honorable citizens who cared about their children would do instead:

1. Allow mortgage cramdowns in BK, but only for those who did not lie on their loan applications. Bring back mark to market accounting for all banks holding bad mortgage debt. This would keep honest people in their homes but force a liquidation of all other mortgage debt until home values fell to a level that most of our children could afford one.

2. Cut our military commitments 50% in five years. If we did this I suspect that many more countries would need to increase their military capability, thereby bringing new business to one of our few remaining competitive industries, military equipment.

3. Require E-verify for all employment in the U.S. This would dramatically end the employment of undocumented workers, thereby creating millions of job openings for the unskilled --- precisely the jobs young people need and can easily fill.

4. Restore a "death tax" of 50% and eliminate all exceptions and exemptions except the existing $5 million. That is enough for your children to have and any more means that you benefited
from our economic systems much more than you paid in income taxes during your life.

5. Means test Medicare, cut back on Medicaid except to offer basic care through inexpensive clinics, and extend the retirement age for SS to 70. If you can't make it to 70 your children should be helping you, and if they can't or won't, you need to acknowledge that you are a charity case and get on with living out your remaining years. This would strengthen family bonds.

6. Change tax rates to 10, 15 and 25% with no deductions. 25% should kick in at three times the median income.

7. Return corporate charters to where they started: temporary creatures of the state that could not last longer than a set number of years.

I could go on and on. There are dozens of changes that could improve fairness and increase job opportunities without spending a dime more in taxes. That would be change I could believe in. But our political parties don't want that. Today they revealed that they don't follow the economic theories of Keynes, Friedman or Von Mises. Rather, their primary teacher is Charles Ponzi. And that's because the FIRE beneficiaries own the political system and both parties to a degree that prevents any real reform. After all, "extend and pretend" is the only policy left when your masters forbid you from considering any other alternatives.

So, to paraphrase William, the first thing we need to do is kill the influence of money in our elections. All of it. And the only way to do that is if we all stopped voting for any candidate who raises campaign contributions of any kind. Vote only for an individual who creates a website explaining his/her proposed policies, experience and intentions and communicates only by free email and Youtube videos. If most of us made just that one simple commitment, money would no longer buy a seat or an ear in Washington. Only good ideas would.

[flintlock]

Re: The top marginal income tax rate: 100 years at a glance

The tax code is 3,000,000 words.

Part of our problem is that we don't really understand the problem to begin with.

Does anyone really think the "rich" ever paid taxes at the rates on the graph?

Exactly! Simply comparing top brackets doesn't really mean much. 90% of zero is still zero( to steal a line from SS) The truly rich don't get a W-2 every year like most people. They pay accountants large amounts of money to make sure they don't pay those type rates either.

So people need to be clear who they really are talking about when they say "Rich people". Rich is a relative term, and politicians love it because it can mean different things to different people. When talking at a lawyers convention, they can pretend to be talking about Bill Gates and Warren Buffet. When talking at a Union hall, they can pretend they are talking about Lawyers, etc. Is someone rich who makes $450k a year in a one time Major League fluke? Or is the guy who makes $150k year for 30 years rich? But then I suppose the old guy who owns half the county isn't rich because he "made" nothing this year? Yes, a simpler tax code would be nice wouldn't it?

[flintlock]

Re: The top marginal income tax rate: 100 years at a glance

You are correct, but a graph showing the changes in "wealth" taxes would show the same thing. The only actual wealth tax in this country is the estate tax. When Reagan took office it was 70% on estates over $3 million with an exemption of $161k. Today it is 35% on estates over $5 million with an exemption of $5 million. So in 1980, if you left more than $3.2 million to your heirs the government picked up 70% of the overage. Now you can leave $10 million before you reach the top rate of only 35%.

I would say that whether they are defined by wealth or income, the rich in this country (okay, the "job creators") have done very well through nothing more than changing the rules that applied to their parents' generation. Those boomers who were merely debt slaves toiling in government jobs also did very well by creating defined benefit pensions for themselves that have vested and now guarantee them a retirement that their children can never hope to match. At the same time, they've forced their children borrow to pay for their education (unlike the boomer parents who taxed themselves and saved for their children's education), eliminated defined benefit plans for all new hires, created sovereign debt that will reduce their children's productivity for their entire lives and made it legal for student loans to be levied against their children's social security checks. And today the boomers in Congress shoved yet another knife into their children's back: creating a new COLA adjustment that will guarantee their children will not possibly receive the same SS benefits as today's grandmas receive.

Here is what a nation of honorable citizens who cared about their children would do instead:

1. Allow mortgage cramdowns in BK, but only for those who did not lie on their loan applications. Bring back mark to market accounting for all banks holding bad mortgage debt. This would keep honest people in their homes but force a liquidation of all other mortgage debt until home values fell to a level that most of our children could afford one.

2. Cut our military commitments 50% in five years. If we did this I suspect that many more countries would need to increase their military capability, thereby bringing new business to one of our few remaining competitive industries, military equipment.

3. Require E-verify for all employment in the U.S. This would dramatically end the employment of undocumented workers, thereby creating millions of job openings for the unskilled --- precisely the jobs young people need and can easily fill.

4. Restore a "death tax" of 50% and eliminate all exceptions and exemptions except the existing $5 million. That is enough for your children to have and any more means that you benefited
from our economic systems much more than you paid in income taxes during your life.

5. Means test Medicare, cut back on Medicaid except to offer basic care through inexpensive clinics, and extend the retirement age for SS to 70. If you can't make it to 70 your children should be helping you, and if they can't or won't, you need to acknowledge that you are a charity case and get on with living out your remaining years. This would strengthen family bonds.

6. Change tax rates to 10, 15 and 25% with no deductions. 25% should kick in at three times the median income.

7. Return corporate charters to where they started: temporary creatures of the state that could not last longer than a set number of years.

I could go on and on. There are dozens of changes that could improve fairness and increase job opportunities without spending a dime more in taxes. That would be change I could believe in. But our political parties don't want that. Today they revealed that they don't follow the economic theories of Keynes, Friedman or Von Mises. Rather, their primary teacher is Charles Ponzi. And that's because the FIRE beneficiaries own the political system and both parties to a degree that prevents any real reform. After all, "extend and pretend" is the only policy left when your masters forbid you from considering any other alternatives.

So, to paraphrase William, the first thing we need to do is kill the influence of money in our elections. All of it. And the only way to do that is if we all stopped voting for any candidate who raises campaign contributions of any kind. Vote only for an individual who creates a website explaining his/her proposed policies, experience and intentions and communicates only by free email and Youtube videos. If most of us made just that one simple commitment, money would no longer buy a seat or an ear in Washington. Only good ideas would.

Excellent post. Not only do you lay it all out there, but you offer up solutions. I'm not 100% on board with all your solutions, but for the most part yes. Now it would take a civil war to get these things passed, but still, its a start.

[aaron]

Re: The top marginal income tax rate: 100 years at a glance

You should run for President or at least work has His speech writer.

[aaron]

Re: The top marginal income tax rate: 100 years at a glance

I could go on and on. There are dozens of changes that could improve fairness and increase job opportunities without spending a dime more in taxes

Please do. You make great sense so far.

[lektrode]

Re: The top marginal income tax rate: 100 years at a glance

.....politicians love it because it can mean different things to different people. When talking at a lawyers convention, they can pretend to be talking about Bill Gates and Warren Buffet. When talking at a Union hall, they can pretend they are talking about Lawyers, etc. Is someone rich who makes $450k a year in a one time Major League fluke? Or is the guy who makes $150k year for 30 years rich?

yeah huh - its kinda like the scene from the movie 'the exorcist' - you know, where the possesed grrl spins her head 360deg around on her shoulders, pukes green vomit and screams in a devlish tone: "yer mutha.... s__.. c__s ... in hell"

same sitch exactly: depending on which sliver section/demographic of the electorate they talkin to (notice i didnt make any 'partisan' comments - hey! - i'm trying, really, i am ;)

But then I suppose the old guy who owns half the county isn't rich because he "made" nothing this year? Yes, a simpler tax code would be nice wouldn't it?

sounds like the best reason i've seen for the estate tax (with a reasonable exemption/deduction), otherwise we'd have a few family 'dynasties' owning the whole GD country!

and to fix the most GLARING LOOPHOLE OF THEM ALL: abolish the income limits on the levying of FICA/medicare taxes and then, MEANSTEST SOCIAL SECURITY! (got something over say, oh i dunno 125-150% of per capita coming in, in 'retirement' ? then you dont _need_ social 'security' - since it was meant to be 'insurance' against growing too damn old to be able to work/house/feed ones self - NOT TO PAD THE MIDDLE/UPPER CLASS' RETIREMENT FUND)

and then: force congress into the same plan AS THE REST OF US!!!

sez the kinda rightwing, semi-conservative, former resident of the Live Free or Die State

and then - got this one today (once or twice before too), which is quite bloody well consistent with how things _still_ work, after 400+ years, in the Granite State: (where theres _still_ NO SALES TAX AND NO INCOME TAX and where the leg gets paid $100. + gas money to drive to concord, for their 30day session = citizen/VOLUNTEER legislators and they still manage to 'gitter done' without any of the above - but yeah, its tough to survive/make it on welfare and if you want that shiny new school, firetruck, cops/cars/jails, trash service, deputy-directors, assistant-deputy-directors, secratary-to-the-asssistant-deputy-directors, yada, yada, yada, (and they all make 100grand+/year, bluestate style) - then you gotta VOTE to RAISE THE TOWN/COUNTY PROPERTY TAXES to pay for it all - vs the slushfund/general fund scam, where it all goes into the blackhole/general fund and NOBODY is held accountable)

but i digress, sorry to get carried away - i was referring to the DC aristocracy....

Congressional Reform Act of 2011

1. No Tenure / No Pension.
A Congressman collects a salary while in office and receives no pay
when they are out of office.

2. Congress (past, present & future) participates in Social Security.
All funds in the Congressional retirement fund move to the Social
Security system immediately. All future funds flow into the Social
Security system, and Congress participates with the American people.
It may not be used for any other purpose.

3. Congress can purchase their own retirement plan, just as all Americans do.

4. Congress will no longer vote themselves a pay raise.
Congressional pay will rise by the lower of CPI or 3%.

5. Congress loses their current health care system and participates
in the same health care system as the American people.
(read: the same one they just jammed down the rest of our throats!)

6. Congress must equally abide by all laws they impose on the American people.

7. All contracts with past and present Congressmen are void effective 1/1/12.

The American people did not make this contract with Congressmen.
Congressmen made all these contracts for themselves. Serving in
Congress is an honor, not a career. The Founding Fathers envisioned
citizen legislators, so ours should serve their term(s), then go
home and back to work.

[lektrode]

Re: The top marginal income tax rate: 100 years at a glance

Here is what a nation of honorable citizens who cared about their children would do instead:

Congressional Reform Act of 2011

1. No Tenure / No Pension.
A Congressman collects a salary while in office and receives no pay
when they are out of office.

2. Congress (past, present & future) participates in Social Security.
All funds in the Congressional retirement fund move to the Social
Security system immediately. All future funds flow into the Social
Security system, and Congress participates with the American people.
It may not be used for any other purpose.

3. Congress can purchase their own retirement plan, just as all Americans do.

4. Congress will no longer vote themselves a pay raise.
Congressional pay will rise by the lower of CPI or 3%.

5. Congress loses their current health care system and participates
in the same health care system as the American people.

6. Congress must equally abide by all laws they impose on the American people.

7. All contracts with past and present Congressmen are void effective 1/1/12.

The American people did not make this contract with Congressmen.
Congressmen made all these contracts for themselves. Serving in
Congress is an honor, not a career. The Founding Fathers envisioned
citizen legislators, so ours should serve their term(s), then go
home and back to work.

-----

in the Great State of New Hampster, one _still_ cant get elected guvnah without at least infering (since the bluehampsha crowd started to sway the swayable) to 'taking the pledge':
"if i am elected governor, i will _not_ support a broadbased tax..."

and 400 years later, they still manage to get by - and hey -all the big .mil bases were closed decades ago, to boot.

so, what i want to know is: WHY CANT THE REST OF THE STATES DO THE SAME?

go ahead, educate me here, I DARE YA?

[flintlock]

Re: The top marginal income tax rate: 100 years at a glance

The real money to be made in Congress is through the deals made and inside knowledge. But limiting salaries is a start I guess.

[LazyBoy]

Re: The top marginal income tax rate: 100 years at a glance

The truly rich don't get a W-2 every year like most people. They pay accountants large amounts of money to make sure they don't pay those type rates either.

That's Trickle Down!