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OtherGround Forum >> The Fantasy of a 91% Top Income Tax Rate
| 12/7/12 9:11 AM | |
Team Cup
111 
Edited: 12/07/12 9:12 AM Member Since: 11/18/02 Posts: 20948 |
http://online.wsj.com/article/SB10001424127887324705104578151601554982808.html?mod=googlenews_wsjPeter Schiff: The Fantasy of a 91% Top Income Tax RateA liberal article of faith that confiscatory taxes fed the postwar boom turns out to be an Edsel of an economic idea.By PETER SCHIFF Democratic Party leaders, President Obama in particular, are forever telling the country that wealthy Americans are taxed at too low a rate and pay too little in taxes. The need to correct this seeming injustice is framed not simply in terms of fairness. Higher tax rates on the wealthy, we're told, would help balance the budget, allow for more "investment" in America's future and foster better economic growth for all. In support of this claim, like-minded liberal pundits point out that in the 1950s, when America's economic might was at its zenith, the rich faced tax rates as high as 91%. True enough, the top marginal income-tax rate in the 1950s was much higher than today's top rate of 35%—but the share of income paid by the wealthiest Americans has essentially remained flat since then. In 1958, the top 3% of taxpayers earned 14.7% of all adjusted gross income and paid 29.2% of all federal income taxes. In 2010, the top 3% earned 27.2% of adjusted gross income and their share of all federal taxes rose proportionally, to 51%. So if the top marginal tax rate has fallen to 35% from 91%, how in the world has the tax burden on the wealthy remained roughly the same? Two factors are responsible. Lower- and middle-income workers now bear a significantly lighter burden than in the past. And the confiscatory top marginal rates of the 1950s were essentially symbolic—very few actually paid them. In reality the vast majority of top earners faced lower effective rates than they do today. In 1958, an 81% marginal tax rate applied to incomes above $1.08 million, and the 91% rate kicked in at $3.08 million. These figures are in unadjusted 1958 dollars and correspond today to nominal income levels that are at least 10 times higher. That year, according to Internal Revenue Service records, just 236 of the nation's 45.6 million tax filers had any income that was taxed at 81% or higher. (The published IRS data do not reveal how many of these were subject to the 91% rate.) In 1958, approximately 28,600 filers (0.06% of all taxpayers) earned the $93,168 or more needed to face marginal rates as high as 30%. These Americans—genuinely wealthy by the standards of the day—paid 5.9% of all income taxes. And now? In 2010, 3.9 million taxpayers (2.75% of all taxpayers) were subjected to rates that were 33% or higher. These Americans—many of whom would hardly call themselves wealthy—reported an adjusted gross income of $209,000 or higher, and they paid 49.7% of all income taxes. In contrast, the share of taxes paid by the bottom two-thirds of taxpayers has fallen dramatically over the same period. In 1958, these Americans accounted for 41.3% of adjusted gross income and paid 29% of all federal taxes. By 2010, their share of adjusted gross income had fallen to 22.5%. But their share of taxes paid fell far more dramatically—to 6.7%. The 77% decline represents the single biggest difference in the way the tax burden is shared in this country since the late 1950s. The changes came about not so much by movements in rates but by the addition of tax credits for the poor and the elimination of exemptions for the wealthy. In 1958, even the lowest-tier filers, which included everyone making up to $5,000 annually, were subjected to an effective 20% rate. Today, almost half of all tax filers have no income-tax liability whatsoever, and many "taxpayers" actually get a net refund from the government. Those nostalgic for 1950s-era "tax fairness" should bear this in mind. The tax code of the 1950s allowed upper-income Americans to take exemptions and deductions that are unheard of today. Tax shelters were widespread, and not just for the superrich. The working wealthy—including doctors, lawyers, business owners and executives—were versed in the art of creating losses to lower their tax exposure. For instance, a doctor who earned $50,000 through his medical practice could reduce his taxable income to zero with $50,000 in paper losses or depreciation from property he owned through a real-estate investment partnership. Huge numbers of professionals signed up for all kinds of money-losing schemes. Today, a corresponding doctor earning $500,000 can deduct a maximum of $3,000 from his taxable income, no matter how large the loss. Those 1950s gambits lowered tax liabilities but dissuaded individuals from engaging in the more beneficial activities of increasing their incomes and expanding their businesses. As a result, they were a net drag on the economy. When Ronald Reagan finally lowered rates in the 1980s, he did so in exchange for scrapping uneconomical deductions. When business owners stopped trying to figure out how to lose money, the economy boomed. It's hard to determine how much otherwise taxable income disappeared through tax shelters in the 1950s. As a result, direct comparisons between the 1950s and now are difficult. However, it is worth noting that from 1958 to 2010, the taxes paid by the top 3% of earners, as a percentage of total personal income (which can't be reduced by shelters), increased to 3.96% from 2.72%, while the percentage paid by the bottom two-thirds of filers fell to 0.51% in 2010 from 2.7%. This starker division of relative tax burdens can be explained by the inability of upper-income groups to shelter income. It is a testament to the shallow nature of the national economic conversation that higher tax rates can be justified by reference to a fantasy—a 91% marginal rate that hardly any top earners paid. In reality, tax policies that diminish the incentives and capacities of innovators, business owners and investors will not spur economic improvement. Such policies will, however, satisfy the instincts of those who want to "stick it to the rich." Never mind that the rich have already been stuck fairly well. |
| 12/7/12 9:12 AM | |
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micmac
17
Member Since: 4/17/06 Posts: 4758 |
Really good article. To simply quote the top marginal tax rate of the 50's doesn't tell us anything. 
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| 12/7/12 10:19 AM | |
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Team Cup
111
Member Since: 11/18/02 Posts: 20949 |
Ttt
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| 12/7/12 10:22 AM | |
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e. kaye
Member Since: 1/1/01 Posts: 29842 |
Liberals are not good with the numbers. They just make them up, divorced from facts and reality to support whatever position they want to lie about. |
| 12/8/12 8:03 AM | |
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micmac
17
Member Since: 4/17/06 Posts: 4764 |
No one wants to disagree with Schiff?
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| 12/8/12 8:17 AM | |
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in_different
10
Member Since: 1/20/12 Posts: 1089 |
e. kaye - Goddamn you must know a lot of people if you have met every liberal person there is. In fact, you would have to travel around the world to justify a blanket statement such as that. |
| 12/8/12 8:20 AM | |
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jzspanky
Member Since: 11/26/02 Posts: 4425 |
Liberals know the most important number of 4, as in four more years. Enjoy your articles.
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| 12/8/12 8:39 AM | |
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micmac
17
Member Since: 4/17/06 Posts: 4766 |
jzspanky - Liberals know the most important number of 4, as in four more years. Enjoy your articles.I think this is Obama's response anytime someone competent brings him stats proving the validity of 'conservative' economics. We need an Obama "did not read" gif.
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| 12/8/12 8:47 AM | |
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jzspanky
Member Since: 11/26/02 Posts: 4427 |
micmac -Well not really. To argue that the tax rates and the money they brought in from the 1950 was a fallacy is the same thing you can make now. The effective tax rates are all that matter and the fact that the top .5% of earners account for 50% of all capital gains and have effective tax rates of roughly 15% because of it makes me find the error with this opinion piece.jzspanky - Liberals know the most important number of 4, as in four more years. Enjoy your articles.I think this is Obama's response anytime someone competent brings him stats proving the validity of 'conservative' economics. It's true that some taxes and deduction creat economic feedback. It's also true that some don't. This article compares apples and oranges and tries to imply one is better, which is comical.
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| 12/8/12 8:48 AM | |
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jzspanky
Member Since: 11/26/02 Posts: 4428 |
micmac -More like you need a GOP "did not understand" gif for your posters.jzspanky - Liberals know the most important number of 4, as in four more years. Enjoy your articles.I think this is Obama's response anytime someone competent brings him stats proving the validity of 'conservative' economics.
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| 12/8/12 8:57 AM | |
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micmac
17
Member Since: 4/17/06 Posts: 4767 |
jzspanky -I disagree. He isn't 'comparing' anything. He is simply demonstrating that the common argument that in the fifties the 'rich' paid 91% in federal taxes and today the rich doesn't pay their share is nothing more than empty rhetoric. The top rate was hardly paid by anyone at all and to suggest otherwise is disingenuous at best.micmac -Well not really. To argue that the tax rates and the money they brought in from the 1950 was a fallacy is the same thing you can make now. The effective tax rates are all that matter and the fact that the top .5% of earners account for 50% of all capital gains and have effective tax rates of roughly 15% because of it makes me find the error with this opinion piece.jzspanky - Liberals know the most important number of 4, as in four more years. Enjoy your articles.I think this is Obama's response anytime someone competent brings him stats proving the validity of 'conservative' economics.
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| 12/8/12 9:02 AM | |
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jzspanky
Member Since: 11/26/02 Posts: 4429 |
micmac -The top rate today isn't paid by hardly anyone either. No 'rate' actually is. The article by nature implies a comparison of how we judge it based on today's standard since we are people of today.jzspanky -I disagree. He isn't 'comparing' anything. He is simply demonstrating that the common argument that in the fifties the 'rich' paid 91% in federal taxes and today the rich doesn't pay their share is nothing more than empty rhetoric. The top rate was hardly paid by anyone at all and to suggest otherwise is disingenuous at best.micmac -Well not really. To argue that the tax rates and the money they brought in from the 1950 was a fallacy is the same thing you can make now. The effective tax rates are all that matter and the fact that the top .5% of earners account for 50% of all capital gains and have effective tax rates of roughly 15% because of it makes me find the error with this opinion piece.jzspanky - Liberals know the most important number of 4, as in four more years. Enjoy your articles.I think this is Obama's response anytime someone competent brings him stats proving the validity of 'conservative' economics. Comparing the number of people at a specific tax rates and how much they pay compared to when? Comparing the percent of people at a specific tax rate and how much they pay compared to when? The only true comparison is the total amount of wealth at those rates and why even are you trying to make a comparison to today's standards. I think you need to make that "I don't understand economics" gif and be the first one to use it.
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| 12/8/12 9:03 AM | |
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micmac
17
Member Since: 4/17/06 Posts: 4768 |
jzspanky -And the liberal position of you don't agree with Obama and me so you must be stupid emerges.micmac -The top rate today isn't paid by hardly anyone either. No 'rate' actually is. The article by nature implies a comparison of how we judge it based on today's standard since we are people of today.jzspanky -I disagree. He isn't 'comparing' anything. He is simply demonstrating that the common argument that in the fifties the 'rich' paid 91% in federal taxes and today the rich doesn't pay their share is nothing more than empty rhetoric. The top rate was hardly paid by anyone at all and to suggest otherwise is disingenuous at best.micmac -Well not really. To argue that the tax rates and the money they brought in from the 1950 was a fallacy is the same thing you can make now. The effective tax rates are all that matter and the fact that the top .5% of earners account for 50% of all capital gains and have effective tax rates of roughly 15% because of it makes me find the error with this opinion piece.jzspanky - Liberals know the most important number of 4, as in four more years. Enjoy your articles.I think this is Obama's response anytime someone competent brings him stats proving the validity of 'conservative' economics.
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| 12/8/12 9:05 AM | |
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jzspanky
Member Since: 11/26/02 Posts: 4430 |
micmac -No but the "I understand this opinion piece and it must imply the president is wrong" view rears it's ugly head.jzspanky -And the liberal position of you don't agree with Obama and me so you must be stupid emerges.micmac -The top rate today isn't paid by hardly anyone either. No 'rate' actually is. The article by nature implies a comparison of how we judge it based on today's standard since we are people of today.jzspanky -I disagree. He isn't 'comparing' anything. He is simply demonstrating that the common argument that in the fifties the 'rich' paid 91% in federal taxes and today the rich doesn't pay their share is nothing more than empty rhetoric. The top rate was hardly paid by anyone at all and to suggest otherwise is disingenuous at best.micmac -Well not really. To argue that the tax rates and the money they brought in from the 1950 was a fallacy is the same thing you can make now. The effective tax rates are all that matter and the fact that the top .5% of earners account for 50% of all capital gains and have effective tax rates of roughly 15% because of it makes me find the error with this opinion piece.jzspanky - Liberals know the most important number of 4, as in four more years. Enjoy your articles.I think this is Obama's response anytime someone competent brings him stats proving the validity of 'conservative' economics.
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| 12/8/12 9:06 AM | |
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419
25
Member Since: 11/12/00 Posts: 23270 |
My thoughts: 1. Is it fair to say our tax code is more progressive if the middle class is getting hammered? 2. Why does Schiff focus on 1958, and not any other year when the marginal rate was higher? 3. LOL at working wealthy. |
| 12/8/12 9:08 AM | |
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jzspanky
Member Since: 11/26/02 Posts: 4431 |
micmac -The article is based on a premise that the president walks around and implies that when he uses the term fair share it relates to a 91% tax rate which is stupid alone. No offense to Mr. Schiff but it's simply an opinion piece.jzspanky -And the liberal position of you don't agree with Obama and me so you must be stupid emerges.micmac -The top rate today isn't paid by hardly anyone either. No 'rate' actually is. The article by nature implies a comparison of how we judge it based on today's standard since we are people of today.jzspanky -I disagree. He isn't 'comparing' anything. He is simply demonstrating that the common argument that in the fifties the 'rich' paid 91% in federal taxes and today the rich doesn't pay their share is nothing more than empty rhetoric. The top rate was hardly paid by anyone at all and to suggest otherwise is disingenuous at best.micmac -Well not really. To argue that the tax rates and the money they brought in from the 1950 was a fallacy is the same thing you can make now. The effective tax rates are all that matter and the fact that the top .5% of earners account for 50% of all capital gains and have effective tax rates of roughly 15% because of it makes me find the error with this opinion piece.jzspanky - Liberals know the most important number of 4, as in four more years. Enjoy your articles.I think this is Obama's response anytime someone competent brings him stats proving the validity of 'conservative' economics.
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| 12/8/12 9:10 AM | |
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jzspanky
Member Since: 11/26/02 Posts: 4432 |
419 - My thoughts:He's simply selling a false premise that supports his opinion and false assumptions using a narrow scope. It's just an glorified Op-Ed.
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| 12/8/12 9:13 AM | |
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419
25
Member Since: 11/12/00 Posts: 23271 |
I was hoping you'd have a better answer than 'that's just his opinion.' |
| 12/8/12 9:17 AM | |
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micmac
17
Member Since: 4/17/06 Posts: 4769 |
jzspanky -I do understand this 'opinion' piece. Interesting characterization of an article full of facts.micmac -No but the "I understand this opinion piece and it must imply the president is wrong" view rears it's ugly head.jzspanky -And the liberal position of you don't agree with Obama and me so you must be stupid emerges.micmac -The top rate today isn't paid by hardly anyone either. No 'rate' actually is. The article by nature implies a comparison of how we judge it based on today's standard since we are people of today.jzspanky -I disagree. He isn't 'comparing' anything. He is simply demonstrating that the common argument that in the fifties the 'rich' paid 91% in federal taxes and today the rich doesn't pay their share is nothing more than empty rhetoric. The top rate was hardly paid by anyone at all and to suggest otherwise is disingenuous at best.micmac -Well not really. To argue that the tax rates and the money they brought in from the 1950 was a fallacy is the same thing you can make now. The effective tax rates are all that matter and the fact that the top .5% of earners account for 50% of all capital gains and have effective tax rates of roughly 15% because of it makes me find the error with this opinion piece.jzspanky - Liberals know the most important number of 4, as in four more years. Enjoy your articles.I think this is Obama's response anytime someone competent brings him stats proving the validity of 'conservative' economics. The only thing this article 'implies' is that the argument by many democrats and 99%ers that 'the rich aren't paying enough anymore like they used to in the 50s when they paid 91% and life was more socially just' (don't pretend a gazillion people haven't made that argument) is a lie.
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| 12/8/12 9:18 AM | |
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jzspanky
Member Since: 11/26/02 Posts: 4433 |
419 - I was hoping you'd have a better answer than 'that's just his opinion.'But that's all it is. He's comparing apples and oranges of when our work force was different, our pay scale was different, and our tax code was different to try to imply when the president says the generic and vague term of "not fair share", he is naturally harkening back to this. He's "article" isn't much more of someone attacking a strawman. I'm sure everything he says is true to his liking but it's identifying a problem that no one worries about and isn't relevant.
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| 12/8/12 9:24 AM | |
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jzspanky
Member Since: 11/26/02 Posts: 4434 |
micmac -That too is your opinion.jzspanky -I do understand this 'opinion' piece. Interesting characterization of an article full of facts.micmac -No but the "I understand this opinion piece and it must imply the president is wrong" view rears it's ugly head.jzspanky -And the liberal position of you don't agree with Obama and me so you must be stupid emerges.micmac -The top rate today isn't paid by hardly anyone either. No 'rate' actually is. The article by nature implies a comparison of how we judge it based on today's standard since we are people of today.jzspanky -I disagree. He isn't 'comparing' anything. He is simply demonstrating that the common argument that in the fifties the 'rich' paid 91% in federal taxes and today the rich doesn't pay their share is nothing more than empty rhetoric. The top rate was hardly paid by anyone at all and to suggest otherwise is disingenuous at best.micmac -Well not really. To argue that the tax rates and the money they brought in from the 1950 was a fallacy is the same thing you can make now. The effective tax rates are all that matter and the fact that the top .5% of earners account for 50% of all capital gains and have effective tax rates of roughly 15% because of it makes me find the error with this opinion piece.jzspanky - Liberals know the most important number of 4, as in four more years. Enjoy your articles.I think this is Obama's response anytime someone competent brings him stats proving the validity of 'conservative' economics. Truth is no one pays the rate that they qualify at. We live in a tiered tax system that only the money at that tier is taxed at that rate. Everyone's effective rate is lower than their tax tier by nature. Truth is there is no such thing as fair share in general. The term itself is speculative at best. Feel free to write your own article trying to quantify it, I'm sure someone will quote it. The tax rate that is most important and most tangible are the rates of the 1990s. Feel free to argue for 1958 and believe that is what the democrats are referencing. Once again, it would be your opinion.
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| 12/8/12 9:36 AM | |
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Lite
7
Member Since: 12/12/02 Posts: 7602 |
There's a lot left unsaid in the article, understandable. Given the amount of exemptions and loopholes available to the wealthy today--something Romney gave us a good lesson on--it's pretty mind boggling that they had more back then, but it may be true. The crux of the article, though, is the last line, where he repeats the trickle-down mantra and higher rates will disincentivize innovation and job creation. He doesn't support that, and in fact, studies of the kinds of tax increases that we're talking about currently, something like a move from 35 to 39% on portions of income over 250,000, don't back him up at all. Personally, I believe that leveling the playing field by offering more people a competitive start in life would spur innovation and job creation. Of course their should be material rewards for success, and there would be and there always has been. A tax jump to 39% for income over $250,000 certainly isn't going to change that. |
| 12/8/12 9:40 AM | |
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micmac
17
Member Since: 4/17/06 Posts: 4770 |
SPIDERHLUK - and lol @ quoting peter schiff as if he's some intellectual. he's a standard rich far right republican, who couldn't even beat linda mcmahon in primaries. he is a political failure in every sense of the word.You are right about two things, he did lose to McMahon in the primaries. I think that says far more about the average voter in America than about Schiff and he is rich. Your other descriptions of Schiff are all wrong. He is not a typical republican, he is and has been highly critical of republican policy. He is more of an independent who ran as a republican. Also, he is a huge advocate of what is best for everyone - jobs, savings accounts, etc - but these things aren't possible for everyone in the current climate of out of control government spending and uncompetitive corporate tax rates regardless of which party wins. Until a guy like Schiff wins an election, the ONLY people who will win are the independently wealthy.
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| 12/8/12 9:40 AM | |
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Stronghold
7
Member Since: 1/1/01 Posts: 73345 |
Everyone loves spending everyone else's money. |
| 12/8/12 9:47 AM | |
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micmac
17
Member Since: 4/17/06 Posts: 4771 |
Lite - There's a lot left unsaid in the article, understandable. Given the amount of exemptions and loopholes available to the wealthy today--something Romney gave us a good lesson on--it's pretty mind boggling that they had more back then, but it may be true.I agree with you (except that Schiff is not making an argument at all for OR against the expiry of the Bush tax cuts). Ultimately I believe the debate over small tax rate increases to personal income taxes is a distraction from the two real problems. First, government spending/entitlement programs are going to destroy the economy if top personal marginal rates are at 35, 39 or 49. Second, the tax rates that REALLY matter are corporate rates. Bring the jobs back to America, and taxpayers won't really care if they are paying 25 or 30 if it means their income goes from $0.00 to an level that will feed their family.
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