Friday, March 23, 2007

History of the U.S. Tax Code, Highest Marginal Rate

Getting ready to pay/file your taxes? If you're in a high income tax bracket, it could be a lot worse, you could be paying 91% like during the 1950s or 70% during the 1960s. The average highest marginal tax rate since 1913 is 60.3%.

Is is any wonder that the economic conditions in the 1930s turned from bad to worse, when the highest income tax rate was raised from 25% to 79% during that decade?

8 Comments:

At 3/25/2007 8:12 AM, Anonymous bob wright said...

92% tax bracket: This is border-line criminal; I earn a dollar and the government takes $0.92 of it?

Tell me why I would make any effort at all to earn an extra dollar under this scenario.

 
At 3/25/2007 6:09 PM, Anonymous Princeton said...

Because that income tax rate is only for the HIGHEST bracket. Hence the wisdom of a *progressive* income tax!

 
At 3/25/2007 9:05 PM, Anonymous bob wright said...

My point exactly. If I earn just under the 92% bracket, why would I do anything productive to take my earnings into the 92% bracket.

This is an example of the government discouraging productive activity.

You can call it progressive or anything you want. The government taking 92% of a dollar I earn is not wisdom - it's criminal.

 
At 3/26/2007 7:34 AM, Anonymous elvis said...

Bob, since you're obviously in the highest tax bracket, we can see how productively your ilk uses it's time.
...blogging! need I say more? Fork it over, buddy. There are a lot of needy Americans out there.

 
At 9/07/2007 5:55 PM, Anonymous Anonymous said...

Neither Elvis nor Bob seem aware that, up until 1986, legally avoiding the highest tax bracket was easy, and pandemic. It didn't discourage earning. The highest marginal rate may have discouraged outrageous over-compensation, via manipulated or backdated executive compensation and stock options. The "Code" still provides legal avoidance, for encouraging investment, employment, housing or research, but why bother, if you can be paid $125 million for some deal, and only pay 35%? Bob doesn't sound like a high bracket guy to me; more like a dupe. He and Elvis should seize more books on economics and history before they blog-comment.

 
At 10/30/2008 11:09 AM, Blogger Josh said...

"My point exactly. If I earn just under the 92% bracket, why would I do anything productive to take my earnings into the 92% bracket."

You could still make that much money, you'd just have to find another way to get rid of it, such as investing it or paying your other employees higher wages, so your personal income isn't hitting the 92% bracket. That's the beauty of it "spreading the wealth around". That may sound like socialism to you, but it makes the economy work a lot better than one guy (or 2.5% of the population) hording all the wealth.

 
At 10/31/2008 4:21 PM, Anonymous Anonymous said...

Bob, you are clearly have little understanding of how taxes are calculated. I suggest you educate yourself before spouting off with an ignorant opinion.

If you happened to be "just under" the 92% tax bracket and then you make a little bit more money to put you in the 92% bracket the 92% isn't applied to your entire AGI. It is only applied to the dollars made from where the bracket begins and upward. The dollars you earned before you hit that bracket are taxed the same way the already were. For instance in 2007 your first $16,050 is taxed at 10%, the next 49,050 is taxed at 15% etc. So a person whose AGI is $400,000 and has a taxable income of $360,000 (thus putting them in the "35% tax bracket") actually only pays 24.45% of their $400,000 in taxes.

 
At 12/16/2008 8:13 PM, Blogger i blog therefore said...

Professor Perry, not sure I understand your reasoning("bad to worse in the 30's"). Eccles (Fed chairman under Roosevelt) believed that the depression was partly caused by concentration of wealth at the top; it seems to me that this was probably exacerbated by the drop in the marginal interest rate in the late 20's. In addition, the depression reached it's peak in 1933 (industrial production started an upward climb), and this was before the tax rate was raised. Can you tell me what I'm missing?

 

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