Debunking the Eisenhower "90% income tax" myth.
"The highest tax rate, 90%, only applied to those earning over $3,425,766 (when adjusted for inflation), which was pretty much no one:
'In 1958, out of 45.6 million tax filers, only about 10,000 reported incomes subject to the 81% rate or above. This means only .02% of filers had any income taxed at the 81% rate, let alone the 91% rate!'"
And as marginal rates that only applied to the portion of the income exceeding those levels.
"Also, one would assume with taxes so high, that tax receipts as a percentage of GDP would also be much higher, but they weren’t:"
Indeed as the charts show, federal tax revenue as a percentage of GDP was lower in the 1950s than it mostly has been since.
"This is partly because there were much more generous tax deduction loopholes decades ago, such as being able to deduct significant capital losses from income (instead of just $3000/year). Or the ability to offset income taxes by buying a home and then gradually depreciating the home every year, but while also collecting rental income on the home (to cover the mortgage). Tax reforms of 1964, 1969, and 1986 gradually patched these loopholes."
https://greyenlightenment.com/debunking-the-90-eisenhower-income-tax-myth/
"Today, there are seven tax brackets. In 1989, there were only two. In 1955, there were an utterly ridiculous twenty-four different tax brackets.
Regardless, one should ask how much the rich were actually paying. It should be noteworthy that back in the 1950s, the government wasn’t actually collecting any more in tax revenue as a percentage of GDP."
"But who is paying these taxes a liberal might retort? Has the burden fallen more on the middle and lower classes? Well, no. In fact, the percentage of taxes paid by the highest quintile of income earners has steadily gone up since 1980. In 1980, the top 20 percent paid about 55 percent of all income taxes. Today, it’s just shy of 70 percent. The same goes for the top 1 percent, which went from about 15 percent in 1980 to just shy of 30 percent today."
"A study from the Congressional Research Service concludes that the effective tax rate for the top 0.01 percent of income earners during the period of 91-percent income taxes was actually 45 percent. Given that the top bracket is so much lower today ($3,425,766 in 1955 vs. $413,200 in 2015), the 39.6 percent top marginal rate probably yields something pretty close."
"Another major factor was the myriad of deductions and loop holes that used to be available. Many of these were eliminated by the Tax Reform Act of 1986, which by no coincidence coincided with the biggest rate deductions. For one, interest had previously been deductible on all loans. After the act, it has only been deductible on home mortgages."
"Indeed, one former tax accountant even made the case that there were so many deductions, loop holes and the like in the pre-1986 tax code that “… there was a massive amount of tax fraud at all income levels under the old code. It was so bad and so common that most people took pride in telling others how they cheated on their taxes.”
I’ll leave how true that statement is to the reader, but from what I’ve heard, it sounds about right.
Regardless, the simple fact is that the rich never paid 90 percent of their income in taxes or anything even remotely close to that. Unfortunately though, some memes die hard."
https://mises.org/library/good-ol-days-when-tax-rates-were-90-percent
There is no economic theory, not even leftist ones like Keynesianism and Marxism, that state higher taxes yields stronger economic growth. International empirical research confirms that lower tax rates are associated with stronger economic growth (https://taxfoundation.org/what-evidence-taxes-and-growth). So 1950s prosperity would likely have been even greater with lower tax rates. On top of everything cited above, leftists ignore context. After WW2 most of the world lay in ruin, with the US about the only major country standing intact. The USA received an economic boost from this fact for a decade or two after the war, but that was an aberration. With the return to normalcy the rest of the world became more competitive, with European countries in particular cutting taxes and privatizing industry the past couple of decades.