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Forum Post: Taxes on the rich under President Eisenhower

Posted 2 years ago on Nov. 26, 2012, 10:11 p.m. EST by clamor (-40) from Hopatcong, NJ
This content is user submitted and not an official statement

Liberals often claim that the rich paid a 91% income tax rate during the Eisenhower years, and while it is true that the top marginal rate was 91% from 1954 to 1963 that is not what matters. The important part is how much the rich actually paid.

Here were the effective individual income tax rates of the 3 very high income AGI groups.

$200,000-$500,000 group: Tax as Share of Amended AGI (%)

1953 = 45.9

1954 = 39.3

1955 = 36.8

1956 = 37.4

1957 = 38.6

1958 = 36.9

1959 = 33.8

1960 = 33.1

1961 = 31.5

$500,000-$1,000,000 group: Tax as Share of Amended AGI (%)

1953 = 46.3

1954 = 38.7

1955 = 35.6

1956 = 36.7

1957 = 36.6

1958 = 36.0

1959 = 32.1

1960 = 30.8

1961 = 29.1

Over $1,000,000 group: Tax as Share of Amended AGI (%)

1953 = 49.3

1954 = 38.8

1955 = 35.8

1956 = 36.1

1957 = 40.0

1958 = 33.1

1959 = 30.6

1960 = 31.3

1961 = 27.2

SOURCE: William Williams, The Changing Progressivity of the Federal Income Tax, National Tax Journal (1964)

Quote:

In 1954, for example, the 0.3 percent of the taxpayers with more than $40,000 AGI reported almost $13 billion in AGI (including 100 percent of capital gains but excluding exempt interest); yet their effective tax rates ranged from as little as 27 percent to 39 percent—far from the infamous rates conjured up by the Code tables.

SOURCE: Eisenhower-Era Marxist-Confiscatory Taxation: Requiem for the Rhetoric of Rate Reduction for the Rich

http://ir.uiowa.edu/cgi/viewcontent.cgi?article=1006&context=law_pubs

So the rich really didn't pay anything close to 91% during the Eisenhower years, and their effective tax rate was steadily reduced.

http://boards.straightdope.com/sdmb/showthread.php?t=665814

41 Comments

41 Comments


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[-] 3 points by jrhirsch (4714) from Sun City, CA 2 years ago

So your point is don't raise taxes on the wealthy? Let's see what the difference in incomes was than and now.

http://desertbeacon.files.wordpress.com/2012/07/top-income-composition.jpg

The graph above shows all income sources, salaries, capital gains, dividends, and business income for the top 1 out of a thousand individuals. As you can probably see, during the 50's, the top 0.1% made 3 1/2% to 4% of total U.S. income. Today their share has more than tripled to 12%.

Since they are now making an 8% greater share of total U.S. income, others must be making a lesser share. I don't understand why you're defending the excessive wealth of the few when you're probably making less than your fair share just like the rest of us.

[-] 1 points by clamor (-40) from Hopatcong, NJ 2 years ago

My point is people are lying about the history of taxes. Got it?

[-] 2 points by jrhirsch (4714) from Sun City, CA 2 years ago

Exactly. Focusing on Federal income taxes while ignoring capital gains, corporate, and other taxes is misleading. The following graph shows the total tax burden on income groups since the early sixties. As you can see the wealthy did at one time pay a much higher tax rate.

http://visualeconsite.s3.amazonaws.com/wp-content/uploads/nytimes_taxes_graph.gif

[-] 0 points by hchc (3297) from Tampa, FL 2 years ago

Globalism is a real bitch.

Our tax rates needing to compete on a global scale going forward is a very real problem. I think that basically this is going to end up leveling the planet, where our quality of life is drastically lower but many developing countries are much better.

[-] 1 points by jrhirsch (4714) from Sun City, CA 2 years ago

Tax rates that benefit the rich will weaken our economy overall. You can't have a healthy economy when the upper body is fat and the lower body is emaciated.

[Removed]

[-] 0 points by hchc (3297) from Tampa, FL 2 years ago

But thats the thing. The lower is growing. Its just not the lower in this country.

The globalists/free traders dont see things as this is my nation, and that one is yours, etc. Its all the same. And Brazil, China and India are experiencing record setting growth.

[-] 1 points by arturo (3169) from Shanghai, Shanghai 2 years ago

Actually, the economy in China is declining. I work in an English school here, and other teachers who had worked here last year say the decline in student enrollments has been substantial due to the economy.

Globalization was quite the mixed blessing for the Chinese. It allowed village people, who were making next to nothing, to move to the cities and make a few hundred to a thousand dollars a month.

However, now that western consumers have less and less expendable income, since their good paying jobs had been exported to China, fewer and fewer western people are able to buy China's inexpensive products. And those Chinese villagers, although being better of than they were, cannot afford to buy their own products either.

China wants to move to a higher wage economical model, to create its own internal consumer base, and I think all nations should do the same. This is what we once called "the American way".

[-] 0 points by hchc (3297) from Tampa, FL 2 years ago

Right, it takes time. Somebody doesnt go from a pee on to king overnight. But the changes in China, Brazil and India have been incredible the last 20 years. Probably the most rapid growth the world has ever seen in only two decades.

i think they are forcasting around 6% growth for 2012 right?

[-] 1 points by arturo (3169) from Shanghai, Shanghai 2 years ago

6% could be right. I've seen some higher projections, but don't know for sure.

Its true, the changes have been incredible, but in China, its a mixed bag. You have many different influences interacting here. My opinion is that the purpose of globalization has been to induce a worldwide economic collapse. This is sought by the financial oligarchs who want to consolidate their wealth and power by reducing the global population to under a billion people, in a short time frame, through economic collapse, war, famine and plague.

Besides globalization, you also have national economic development programs in China emphasizing the construction of infrastructure on a vast scale. There's also a heavy emphasis on education.

If we can rid ourselves of globalization/free trade in the US, and reinstate a national economic development program, something like FDR's New Deal, we could collaborate with other countries on infrastructure development projects, like the train route, long ago envisioned, that would connect north America to all of Asia by a tunnel or bridge crossing the Bering Strait.

[-] 0 points by jrhirsch (4714) from Sun City, CA 2 years ago

True, their allegiance is to profit above all. The people are just another commodity to exploit. The lower are growing in other countries, catching up to us, while the lower half in this country haven't grown at all in the last 40 years. In another 20 years we might be supplying the low wage labor for Chinese consumption.

[-] 0 points by hchc (3297) from Tampa, FL 2 years ago

I know the IMF released a statement that we will be #2 economy after 2016.

If Europe slides into a total mess, which is inevitable, then that leaves us, China and Russia to duke it out.

[-] -2 points by clamor (-40) from Hopatcong, NJ 2 years ago

It's time for EVERYONE to kick in, not have half the population as freeloaders.

[-] 2 points by Buttercup (1067) 2 years ago

Yes, you're an idiot. For starters, do you know what the EITC is and why it exists?

http://www.washingtonpost.com/blogs/wonkblog/wp/2012/09/18/who-doesnt-pay-taxes-in-charts/

And the 91% top bracket is a point of reference. Of course people didn't pay that. Don't be ridiculous. Everyone knows that. It's a point of reference.

Most serious economic data puts the effective tax rate of the wealthy from the 1940's-1970's around 50-60%, on average, for that period (ie: Journal of Economic Perspectives, Picketty and Saez 2007).

In recent decades, the wealthy's 'share' of contribution to the federal government has increased, while their rates have decreased. As a result of accumulating more wealth. In other words, for the woefully ignorant - if their 'share' of wealth were less, their 'share' of taxes paid would be less. If the wealth were 'enjoyed' more evenly, share of taxes paid would be more evenly spread across income groups.

There is a very distinct inverse relationship between top marginal tax rates and income/wealth accumulation and wealth disparity.

http://visualeconsite.s3.amazonaws.com/wp-content/uploads/2008/07/extremeinequalitychart.jpg

And by the way, who's the source you're quoting from? Mark Linder? Looks very amatuer. If you're going to quote an academic economist, you should stick to serious academics who are recognized experts in their field. Whose works have been thoroughly vetted and critiqued through peer reviews and published in professional journals. Not some random Prof. who has written a paper in between classroom duties. If I've got this wrong you let me know.

[-] 1 points by Middleaged (5140) 2 years ago

Good posts. Here is more of the story for declining Corporate Taxes:

http://nationalpriorities.org/budget-basics/federal-budget-101/revenues/

Of course it is confusing to me that there are so many ways to avoid tax, use loopholes, off shore profits, get public private partnerships, get low interest government guarenteed loans, and get outright government subsidies. Most this i get from David Cay Johnston books.

[-] -1 points by clamor (-40) from Hopatcong, NJ 2 years ago

Piketty and Saez? Really? Serious academics? Serious BS artists with an agenda. That agenda would be INCOME REDISTRIBUTION. In other words, "don't worry about earning it, just take it from others". Just more idiot statists masked as economists.

http://www.lmgtfy.com/?q=Piketty+and+Saez

We were never this "progressive" even under Clinton for fook sakes. Pull your head outta yer butt. We're importing poverty and anyone with brains and money is leaving our shores. Wake the fook up before we're third world, unless that's what you aspire to in the name of "equality". North Korea has "equality" down to a science. Hows that working out?

[-] 2 points by jrhirsch (4714) from Sun City, CA 2 years ago

If you would care to back up your claim that Piketty and Saez are idiots please show us the evidence. Even Richard Burkhauser wouldn't say that. You might like this link because he comes to a different conclusion than Saez.

http://www.econtalk.org/archives/2012/04/burkhauser_on_t.html

[-] -1 points by clamor (-40) from Hopatcong, NJ 2 years ago

They're idiots and right up there in the same camp as Paul Krugman and Cloward and Piven. These aren't economists. They're bleeding hearts with an agenda...redistribution.

[-] 1 points by jrhirsch (4714) from Sun City, CA 2 years ago

Ad hominem doesn't prove anything. Explain your reasoning. Tell us what the real facts are.

[-] 2 points by Buttercup (1067) 2 years ago

Oh this I must hear. Tell us Fruit Loop. What is the motive behind 'The Picketty and Saez Agenda'?

If we're on our way to being a third world country it would be the result of Neolibs Gone Wild aka The Republican Party. Third world countries have nice small governments. Many of them lack basic necessities like food, water and healthcare. Not to mention infrastructure and education. But what they heck. They have those small governments! Whoot whoot!

Taxes are inherently redistributive. People have known this for centuries. Holy shitballs idiot. You're just figuring this out? Does the firetruck stop at your house twice a year and spray water on it just for the heck of it? Of course taxes are redistributive. And the sun is big hot fireball of burning gas. Got any other obvious facts you want to point out to us there Chief Fruit Loop.

You really don't have the slightest clue wtf you're talking about do you?

[-] -3 points by clamor (-40) from Hopatcong, NJ 2 years ago

I told you their motive. Are you illiterate also?

[-] 2 points by Buttercup (1067) 2 years ago

What exactly do they have to gain? They are recognized academic experts in their field. Or do you just imagine there is an 'agenda' for their research because it might get in the way of your 'beliefs'. Careful Chief Fruit Looper. Don't let the facts get in the way of your beliefs. Tee hee hee.

[-] 2 points by Middleaged (5140) 2 years ago

Maybe I haven't figured out what the definition of Effective Tax Rate is. It should mean something like the percent of actual tax of AGI paid. But I'm thinking Romney doesn't have to report all Income in a given tax year ...and that any statistics gathered for that year are missing data.

Part of the Point is moot because some wealthy have loopholes and strategies ...that allow them to 1) not declare part of income in year earned, 2) to delay tax events like in a fund, equity holdings, or corporate earnings off shore, 3) Dividends have different tax rates 4) Carried Interest have different tax rates

A) Corporate Executives can Deffer Yearly Income ...That is they don't have to claim the income in the year earned ...they do this by putting Income into a Trust Fund set up by the Corporation if they are Executives (according to David Cay Johnston). They can leave Income undeclared for at least 20 years while earning Interest in a Trust Fund ...then when they declare the income the Interest can pay off all the original tax owed on the Year Earned.

So there are too many unanwered questions about Income that is not taxed and all the Loopholes that allow deductions. ....many problems with Transparency.

The Effective US Tax Rate pretty much means nothing ... if money is hidden offshores, in Trust Funds, or if special loopholes exist.

B) In the 1960s the first Wealthy American Paid No Tax and Congress knew about it. More and more corporations and Wealthy Earners have "Learned the System" (Played the System). (Obviously I am not tax expert or novice). Corporations can deduct Executive Salaries and Benefits, Bonuses, Car Fleet, Air Plane, Houses for executives, beach houses for conferences, Dividends Paid to Stockholders... and it all comes out of the Revenue and reduces the Profits and Taxes. And corporations are not rated for their high expenses or high compensation rates for executives.

[-] 0 points by clamor (-40) from Hopatcong, NJ 2 years ago

I doubt there's much hidden offshore. Much of the money is taken offshore in remunerations for work done here and sent by individuals to families abroad where a dollar goes a long way vice their local currencies. Latin American workers here do that all the time.

But the days of hundreds of billions in Swiss accounts are over. Just read the news stories. The gubment has clamped down on that over the last decade. There's some, but it isn't substantial. That's the left's pipe dream; that there's this hidden stash of money the rich have somewhere that will cure all and they won't have to cut the welfare they love so much. It ain't reality.

Reality is the U.S. gubment borrows and spends 4 billion more every day than it takes in, and having half the population not paying anything is part of the problem. Again, we weren't this progressive under Clinton.

[-] 1 points by Middleaged (5140) 2 years ago

I agree. It is very hard for US Citizens to open bank accounts overseas from my research. Foreign banks have been affected by US Regulations and initiatives related to Terrorism or acts like the Patriot Act. I can't imagine foreign banks liking dealing with US Citizens except when it is all above board and there is a lot of money involved.

Probably I agree Income Offshore is very small percentage. Of course the IRS goes after small US Earners with Zeal, so Transparency of 100 thousand dollar money flows from US Investments or Corporations is a good pursuit. The other side is that ... we have given up some privacy ...Not sure I will ever make money in another country ...If so looks like I would either get taxed in that country or in the US for the Income. Stashing money overseas is not the same thing. We might want to put money overseas for some security reasons or to reduce systemic risk.

Lastly, we have to figure that the tightening of global banking rules would produce new creative methods for dealing with money stashes and overseas income. There are still Shell companies. As I understand if your money is legitimate you can create an annonymous shell company overseas. How to define legitimate? Drug money or Terrorist Money is probably the focus...

[-] -2 points by hchc (3297) from Tampa, FL 2 years ago

After the Swiss decided to peg their currency to I believe the Euro, franks are officially done as a decent currency to hide with.

I think they lost like 10% value overnight a couple years ago or something after they did this...

[-] 2 points by LetsGetReal (1420) from Grants, NM 2 years ago

I agree that the effective tax rate gives a more accurate picture. During the Eisenhower era, not only the top marginal rate, but also the effective rates were much higher than they are now.

For example, in 2008. the 400 highest income Americans paid an effective tax rate of only 18.1%, whereas they would have paid double that amount in the good old days.

http://www.ctj.org/pdf/irstop400may2011.pdf

[-] 0 points by clamor (-40) from Hopatcong, NJ 2 years ago

Hey, you can't tax enough to get us out of this hole. We've promised way to GD much. You haven't figured that out yet? We could tax everyone at 100% of their earnings and take everything they own and we couldn't pay off the national debt.

That "great society" is working out real swell now isn't it?

The ugly numbers: http://www.usdebtclock.org

[-] 2 points by gsw (2740) 2 years ago

the deficit has accumulated over many years. cant be paid back in just 1 year, but we need to start sometimep, pay off a half trillion a year starting now, maybe the fed will have to underwrite, so we don't pay so much interest.

http://zfacts.com/sites/all/files/image/debt/US-national-debt-GDP.png

[-] -1 points by clamor (-40) from Hopatcong, NJ 2 years ago

What's this "we" stuff. You ain't payin' schit.

Fed is already underwriting. Didn't you get the memo? It's called Quantitative Easing. Do you see interest payments going down?

[-] 2 points by gsw (2740) 2 years ago

how bout we just write it off.

start over.

[-] 2 points by gsw (2740) 2 years ago

I've been paying for 46 years.

and don't insult my grandma again. She was a liberal and a catholic

[-] -1 points by janus2 (-387) 2 years ago

how does she feel about the catholic church being forced to pay for abortions and birth control?

[-] 1 points by LetsGetReal (1420) from Grants, NM 2 years ago

Do you have any data which would support your assertion?

[-] 0 points by clamor (-40) from Hopatcong, NJ 2 years ago

Yes, and I gave you the link. Do the math on insurmountable numbers...

http://www.usdebtclock.org

[-] 1 points by LetsGetReal (1420) from Grants, NM 2 years ago

If you aren't willing to provide the numbers on which you base your conclusion, I have to wonder if you have any.

You posted the marginal tax rates of the 1950's. How does that demonstrate that the national debt can't be paid off? It seems to me that a return to the tax rates of the fifties, where the wealthiest paid double the marginal tax rate they do now, would make a bigger dent in the debt.

What you say may be true, the debt is enormous, but you need to present some relevant data if you want to convince anyone.

[-] 1 points by clamor (-40) from Hopatcong, NJ 2 years ago

We had a 91% tax rate on dividends, but hardly anyone paid it because we also had a 25% capital gains tax. So everyone favored high growth stocks, rather than dividend paying ones and paid a 25% tax. Who the hell is gonna put up 100 grand, get a dividend check for $1,000 and walk away with $90 bucks in their pockets after all is said and done? You're gonna put up investments (with risk) so 90+% can be taken? On what planet? THINK! Use your upper two inches.

The debt is nearly $52,000 for every person in the country. We also face a GLOBAL ECONOMY now where we have to compete with other more motivated populations for goods and services in the world. This isn't the 1950's (or didn't you get the memo?) We're already not competitive based on wages and heavy regulation. Your way isn't working. We're smack dab in the middle of "your way" and it's killing the country as we speak. And for what? So the government can study why monkeys throw poop and how cow farts affect the ozone? So prisoners get tax refunds and so illegal aliens can claim 10 dependents on their w-4 and pay no taxes, get more services and become a permanent underclass? So states and municipalities can go broke based on federal unfunded mandates? No thanks. Wake up. Central planning doesn't work and the last thing we need to do is take more from the private sector so the public sector can misallocate limited resources.

Use your head for a change! You have all the relevant data you need... all you need is some common f'n sense.

[-] 1 points by LetsGetReal (1420) from Grants, NM 2 years ago

Insulting people is a very poor tactic to persuade them to your way of thinking.

[-] 1 points by shoozTroll (17632) 2 years ago

Tickers are fun. huh?

Here's one that shows something much more important.

Oooops......there goes another school.

Oooops there goes another police department.

Oooops there goes somebodies pension.

http://costoftaxcuts.com/

Oooops............ there's a BIG big part of why there's a deficit.

[-] 0 points by RedDragon (-161) 2 years ago

The rich never paid 91% due to the myriad of deductions. In fact so many celebrities, tycoons, and heiresses made the papers for paying zero tax that they eventually introduced the AMT. During this timer period the working and middle classes, with their deductions, typically paid 10% or less.

[-] -1 points by clamor (-40) from Hopatcong, NJ 2 years ago

Yup, another law with more and more unintended consequences. Now AMT is affecting some people making $75,000

The more Washington DC does, the worse things get.