11/14/2023 0 Comments Has the us ever had a flat taxThis can be understood by realizing that there were over 20 tax brackets in the 1940s and 50s that ranged from about 20% for the lowest bracket and 90% at the top (see how marginal tax brackets work in a “progressive tax system ” essentially a person pays the bracket rate on every dollar within a given bracket and those rates get higher as people earn more). Meanwhile, the average worker would have paid around 20% and many low wage workers paid less in this same time. In terms of the federal income tax, rather than paying the full 90%, the top effective federal income tax rate was closer to 40% – 60% on average in the 1940s and 50s (the effective rate being what the highest earners actually pay in federal income taxes after deductions and with marginal brackets considered). The Federal Income Tax in the 1940s and 1950s For the full story we have to consider the nuances of tax brackets, and state, federal, and local taxes paid after deductions including the capital gains tax, payroll tax, and estate tax, and then we have to look at the effects of this over time regarding spending, tax revenue, and the effects on society (in terms of assistance, equality, and economic growth). The grand result is that Reagan taxed top incomes at lower rates than FDR, and thus the general idea behind the “90% talking point” is correct… However, the full story is much more complex than simply comparing FDR’s 90% top tax bracket to Reagan’s 28% top tax bracket. If we want to understand the difference between FDR’s taxes and Reagan’s taxes, then we really need to consider all of this and more. Meanwhile, the federal income tax is only one of many taxes that comprise the total tax burden a person pays. The bottomline: FDR’s top tax bracket was over 90%, but people didn’t pay the top federal income tax rate in that era, like in any era, people pay an effective rate (which is always less than the top tax bracket rate in a progressive tax system). Meanwhile, the average total effective tax burden (all state, federal, and local taxes paid after deductions) for the top 1% of income in the 1950s was about 42% (compared to about 36% in 2014 and less than 35% under figures Reagan and Bush). The top marginal income tax rate was over 90% under FDR and Eisenhower, but the effective rate in those times ranged from roughly 0% – 60%. Did Taxes Used to be Over 90% Under Presidents like FDR and Eisenhower? Is the 90% Tax Rate a Myth?
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