Oh so the welfare hypocrisy started way back then.. always thought it funny when people could 'write off' and get breaks while complaining about people taking handouts.
Of note about the 1950's when the top marginal rate was 91%
- The lowest tax bracket was 20% ($0 - $4K/yr)
- Income of $32K/yr was taxed at 50%
- Income of $44K/yr was taxed at 59%
The problem of tax expenditures was first identified in the 1960s by Harvard law professor Stanley Surrey, who went to work for John F. Kennedy in 1961 as Assistant Secretary of the Treasury for tax policy. At that time the top marginal income tax rate was 91%, meaning that reducing one's taxable income by $1 saved 91 cents in taxes for those in the top bracket, while earning $1 of additional income netted them only 9 cents. For some people it was worth spending 90 cents to reduce their taxable income by $1, which gave rise to many wasteful tax shelters designed to produce nothing except tax deductions.
Obviously, this not only encouraged rich people to mine the Tax Code aggressively for tax loopholes but also to pressure Congress to enact new ones. As a consequence, effective tax rates--those people actually paid in terms of taxes as a share of income--diverged sharply from statutory rates. In effect, the high statutory rates implied that the rich were being soaked, while the reality was that the actual tax rates that they paid were much lower.
There was a widespread perception that many rich people were paying little if any federal income taxes. A popular book during this era was The Great Treasury Raid by Philip M. Stern
Turns out those rich folks you assume were paying 91% were instead paying their Congressmen to set up loopholes and tax shelters.
How do you think that worked out for the $32K/yr 50% taxbracket fellow?
Nitwits like Krugman who want to go back to the 50's taxcode need to take the time and actually examine why we moved away from that code in the first place.
Put another way, at the top end, do you want the money invested in the economy or in wasteful tax shelters?
For middle America, do you want rates of 50% knowing there are tax sheltered rich folks who'll find ways to pay nothing?