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View Full Version : Does this chart means the US had a 100% taxrate and can it happen again?



Mats Wheellander
12-26-2009, 05:43 AM
http://1.bp.blogspot.com/_otfwl2zc6Qc/SRb20z4N9DI/AAAAAAAAHqc/L_0Dx7-cob0/s400/tax1.bmp

Sorry, but I'm not smart nor educated enough to really understand the chart.

Thanks.

themadscientist
12-26-2009, 08:18 AM
Well it says 25% down there and 94% up there....

Do you have the document source it's being used in? Just a random graph doesn't do much out of context. :confused:

sharpenu
12-26-2009, 09:07 AM
This likely refers to the tax rate as it was during the days when there were many more tax shelters and holes in the tax code than there is today. Many of the people in the highest tax brackets found ways to hide income from taxation. That was changed when the AMT and tax reform laws were passed. Since more income was subject to taxation, the tax rates were lowered.

Now the shelters are gone, and the rates are again climbing. There is no longer a way to shield your income. IMO, it will cause people to stop working once they hit a certain point.

For example: Let's say that you are a Doctor. You make $200,000 a year, and hit $150,000 in September each year. A new law is passed, making the tax rate 40% for income up to $50,000; 60% for all income from $50,000 to $150,000, and 80% for income over $150,000.

You realize that it is not worth your time to work after you hit the $150,000 point, since you only keep $17,000 of the $50,000 you make in the last quarter (counting SS and medicare) So you have a couple of choices:

1 Stop working in September of each year
2 Work 4 days a week, and leave early one of those 4
3 Work only 6 hours a day instead of 8.
4 Simply see fewer patients. (In other words, be less efficient)

Of course options 1-3 means that your staff (nurses, receptionists, and others) are going to work/make less. This will reduce tax receipts. This is why raising taxes actually hurts the collection of those taxes.

FriedNietz
12-26-2009, 09:16 AM
There was once a 90% tax rate on income in excess of 3 million per year. This was during and before the Eisenhower administration. This was changed to 70% during the Kennedy administration. Then lowered again during the Reagan administration.
http://www.heritage.org/research/taxes/wm327.cfm

It is my view that taxing income above a certain threshold at a high rate prevented the obcenely high pay packages for CEO's and other corporate officers that we see today, and required companies to return more profit to shareholders in the form of dividends to avoid the excessive tax rate. Thereby preventing the stock market from becoming the casino that it has become today. JMHO

Obediah
12-26-2009, 11:14 AM
Have heard FDR had a %90 tax rate which caused the rich to hide income and for one example Hollywood stars to NOT make more than one movie in a year so they didn't pay all their income to Gov.

Mryoga
12-26-2009, 11:37 AM
http://1.bp.blogspot.com/_otfwl2zc6Qc/SRb20z4N9DI/AAAAAAAAHqc/L_0Dx7-cob0/s400/tax1.bmp

Sorry, but I'm not smart nor educated enough to really understand the chart.

Thanks.

Back in the early 60s, I remember my father coming home and ranting about a new tax law that would put him in the 50% bracket. He said if he ever had to give the Goobers half of his paycheck, he'd quit working. Of course he didn't quit, but that started me on a long road of playing the "game". Always figuring the point of diminishing returns.;)

Obediah
12-26-2009, 11:47 AM
Back in the early 60s, I remember my father coming home and ranting about a new tax law that would put him in the 50% bracket. He said if he ever had to give the Goobers half of his paycheck, he'd quit working. Of course he didn't quit, but that started me on a long road of playing the "game". Always figuring the point of diminishing returns.;)

I did that when raising kids in 90's and choose to work part-time (week on week off) as Truck driver netted 18 to 20K plus EIC and all my Income tax paid back put us up around 24 or 5, if had worked full time the taxes would of ate near %50 of next doubled portion of income meaning I'd of took home 29 or 30K a diff of maybe 1.2K month so opted out and to stay home, EIC made my decision easy and we usually got our big check back before April 15th.

Mryoga
12-26-2009, 11:53 AM
I did that when raising kids in 90's and choose to work part-time (week on week off) as Truck driver netted 18 to 20K plus EIC and all my Income tax paid back put us up around 24 or 5, if had worked full time the taxes would of ate near %50 of next doubled portion of income meaning I'd of took home 29 or 30K a diff of maybe 1.2K month so opted out and to stay home, EIC made my decision easy and we usually got our big check back before April 15th.

Playing the Earned Income Credit worked pretty well for me too. I could never figure out how the IRS arrived at the tables. But I didn't complain since my youngest was a student until she was 22.:)

FriedNietz
12-26-2009, 12:17 PM
But isn't it better to tax say the first million or two at a low tax rate then graduate the rate upwards substantially for those who exceed that million or two threshold. It seems to me that the "Robber Barron" tax mentality of today only works to prevent economic upward mobility. I would cite the disappearance of the middle class since the Reagan years as an example of what I mean.

I mean let's face it, taxes on the federal level don't really have much to do with raising money for government anyway. The federal government can produce all the money they want from debt. The federal tax system really only has two reasons for existing. One is to encourage certain behavior and discourage other behaviors. The second reason for taxation on the federal level is to make economic upward mobility more difficult for a specific group of people.

Karlus
12-26-2009, 04:02 PM
You realize that it is not worth your time to work after you hit the $150,000 point

$150K back in Eisenhower's day is some decent coin. Which is exactly why dentists didn't work Fridays...it made no difference income wise and it was better to golf.



means that your staff (nurses, receptionists, and others) are going to work/make less. This will reduce tax receipts. This is why raising taxes actually hurts the collection of those taxes.

Again, very relevant. You now punish the "bad guy" fat cat, and look who gets nailed. Many people had second jobs to cover this problem. But these second jobs typically were underemployment jobs (housecleaning...etc).

God forbid we cut govt spending and do something really silly like a 14% flat tax. That is just horrible.

The headline is "fat cats make too much money" but the reality is putting a complex ruleset in place makes the populace happy and wins elections, but is really a dumb move economically.

jamstigator
12-26-2009, 06:21 PM
There are several reasons to have progressive taxation. Here are some.

1) Without progressive taxation, wealth tends to accumulate with the already-wealthy. You can see that over the last two decades, actually, to a degree. As our taxes have gotten lower and flatter, the rich have gotten MUCH richer, but the middle class has declined.

2) A flat tax, which is highly regressive, would need to be around 30%, not 14%. So the middle-class and the poor would pay substantially more in taxes (the poor a WHOLE LOT more, coming out of food money or car money or lodging money) and the rich would pay less to balance that out. Unless you ARE quite rich, voting for a flat tax means you'd be saying, 'Hey, I want to pay more in taxes, so rich people can pay less!' You really want to pay more in taxes so rich people can have more money? I don't.

3) Rich people pay more in taxes because they use more of the stuff that taxes pay for. They have more cars, more houses, more valuables that need protecting from ciminals. Many poor people don't use roads (no car), don't have a home for fire departments to ever have to put out, don't have anything worth protecting from criminals. It costs money and time to protect the stuff owned by rich people FROM poor people.

4) The French Revolution scenario. When too much wealth gets too concentrated in too few hands, you end up with the non-rich tearing the joint apart, executing the rich, taking (or burning) all of their stuff, and starting over with a more fair system that doesn't concentrate all the wealth into too few hands. We're approaching this now. In the Lost Bush Decade, the wealth disparity in this country has grown to scary levels, even as the common man suffers ever more -- just as was the case prior to the French killing all of their rich people off. In part that's because Bush gave the super-rich a truly massive tax cut (which he put on the national debt, so your kids will be paying that bill). That tax cut was so huge that Warren Buffett had labeled it 'welfare for the rich' and wondered why the country had enough money to give HIM even more (and we actually didn't, which is why Bush charged your kids for that), even as the common man in the middle class was suffering more and more. In other words, the rich pay more in taxes because if they don't, everyone else is gonna burn all their stuff and make life very unpleasant for them. They're paying for a secure and stable social environment in which to store their vast wealth.

So I wouldn't be pushing for any flat tax if I were you...unless you really do want to pay higher taxes so that Warren Buffett can get just a little richer. A flat tax would result in more wealth concentration also, and would ultimately doom us to the French Revolution scenario and anarchy. The rich, at least the educated ones, know this.

Macca38
12-26-2009, 06:41 PM
It doesnt work.....

Australia Introduced a GST and had basic flat tax rates on wages....a few years back...and we were ALL TOLD, this would be It...the Ultimate tax that will save you money, and put more money In the Peoples hands...whilst enabling the Government to continue Its spending projects

What a croc of crap, now that I understand how the system actually does work!!

But over the years, this has degraded, and further taxes have been added, under the guise of other names, and for reasons such as doing supposed good things....

For example...the Bushfires we had here a couple of years back....Introduce a temporary tax...then rename It later, and make it a permanent slush fund, that generates millions, but what happens to all that cash...

When we have another Bushfire...and we will, because the Government In their wisdom does not allow burning off, something The Aborigines practiced for 40,000 years, you will still see the Charities having to do the vast majority, of aid, and calling for donations, and we will probably even have another Telephon, on TV, to raise money.....and not one word will be mentioned, of systems that were supposedly set up previously, and that are now being used to line Politicians pockets, with Wage Increases, and other of their cronified, pet projects, or to maintain their Political Power...

It makes me wonder, what a Bushfire will cost us, If this carbon tax crap, ever gets Introduced...

Its a Joke.....the whole system...

People have short memories.....and the majority, are nothing more, than units.......and continue to fall for all the BS......so I find It pretty hard to have a great deal of sympathy, for most...

Cheers

ConanTheLibertarian
12-26-2009, 07:16 PM
There are several reasons to have progressive taxation. Here are some.

1) Without progressive taxation, wealth tends to accumulate with the already-wealthy. You can see that over the last two decades, actually, to a degree. As our taxes have gotten lower and flatter, the rich have gotten MUCH richer, but the middle class has declined..

Some of the middle class has gotten rich. Like me. I used to be squarely middle class punching a union time card. Since then, in 2005, went into business, and I have become "Obama-rich" by all of his quoted figures.

Net effect - one less middle class earner. One more rich guy.

Can't have THAT, huh?

Top 25% earners pay 86% of income taxes. What's fair - 100%?



2) A flat tax, which is highly regressive, would need to be around 30%, not 14%. So the middle-class and the poor would pay substantially more in taxes (the poor a WHOLE LOT more, coming out of food money or car money or lodging money) and the rich would pay less to balance that out. Unless you ARE quite rich, voting for a flat tax means you'd be saying, 'Hey, I want to pay more in taxes, so rich people can pay less!' You really want to pay more in taxes so rich people can have more money? I don't.

The Fair Tax (written by Boortz / Linder) proposes that a prebate is given to all at or below the poverty level - the 23% tax is given to them up front, so they remain untaxed even while spending all of their money.

The problem is - they currently pay NEGATIVE tax. Zero is a comparably bad deal. It's called Earned Income Tax Credit. Read about it. They get redistributive wealth every tax season.



3) Rich people pay more in taxes because they use more of the stuff that taxes pay for. They have more cars, more houses, more valuables that need protecting from ciminals. Many poor people don't use roads (no car), don't have a home for fire departments to ever have to put out, don't have anything worth protecting from criminals. It costs money and time to protect the stuff owned by rich people FROM poor people..

Rich folks also create jobs with all that consumption. Working folks build all those things. And when you tax us - we buy fewer fancy cars, fewer big houses, and have fewer baubles made by working folks - because government becomes the spender of those dollars. They give it to AIG, GM, Citi, Fannie, and Freddie - and they tell you it's for your own good.


And you must believe it.



4) The French Revolution scenario. When too much wealth gets too concentrated in too few hands, you end up with the non-rich tearing the joint apart, executing the rich, taking (or burning) all of their stuff, and starting over with a more fair system that doesn't concentrate all the wealth into too few hands. We're approaching this now. In the Lost Bush Decade, the wealth disparity in this country has grown to scary levels, even as the common man suffers ever more -- just as was the case prior to the French killing all of their rich people off. In part that's because Bush gave the super-rich a truly massive tax cut (which he put on the national debt, so your kids will be paying that bill). That tax cut was so huge that Warren Buffett had labeled it 'welfare for the rich' and wondered why the country had enough money to give HIM even more (and we actually didn't, which is why Bush charged your kids for that), even as the common man in the middle class was suffering more and more. In other words, the rich pay more in taxes because if they don't, everyone else is gonna burn all their stuff and make life very unpleasant for them. They're paying for a secure and stable social environment in which to store their vast wealth.

Nope - wars fix that. They draft the poor people which reduces unemployment. A few million of them are killed, and the rich get richer.
Northrop Grumman, Boeing, General Dynamics make a ton. Bankers make a ton. Napoleonic Wars killed more French than the French Revolution ever dreamed of. I served eight years - FAIR would be if everyone else did, too. There is no FAIR.



So I wouldn't be pushing for any flat tax if I were you...unless you really do want to pay higher taxes so that Warren Buffett can get just a little richer. A flat tax would result in more wealth concentration also, and would ultimately doom us to the French Revolution scenario and anarchy. The rich, at least the educated ones, know this.

The real protests regarding a Flat Tax are traditional tax evaders. Pimps, Drug Dealers, Illegal Arms Dealers, cash earners who do not report income or paay taxes. These folks get taxed under a Fair tax, which is collected as a Sales Tax on all goods and services.

I say - they will be less inclined to like tax hikes, when they finally have some skin in the game. They need to pay some taxes themselves.

fl57caveman
12-26-2009, 07:17 PM
It doesnt work.....

Australia Introduced a GST and had basic flat tax rates on wages....a few years back...and we were ALL TOLD, this would be It...the Ultimate tax that will save you money, and put more money In the Peoples hands...whilst enabling the Government to continue Its spending projects

What a croc of crap, now that I understand how the system actually does work!!

But over the years, this has degraded, and further taxes have been added, under the guise of other names, and for reasons such as doing supposed good things....

For example...the Bushfires we had here a couple of years back....Introduce a temporary tax...then rename It later, and make it a permanent slush fund, that generates millions, but what happens to all that cash...

When we have another Bushfire...and we will, because the Government In their wisdom does not allow burning off, something The Aborigines practiced for 40,000 years, you will still see the Charities having to do the vast majority, of aid, and calling for donations, and we will probably even have another Telephon, on TV, to raise money.....and not one word will be mentioned, of systems that were supposedly set up previously, and that are now being used to line Politicians pockets, with Wage Increases, and other of their cronified, pet projects, or to maintain their Political Power...

It makes me wonder, what a Bushfire will cost us, If this carbon tax crap, ever gets Introduced...

Its a Joke.....the whole system...

People have short memories.....and the majority, are nothing more, than units.......and continue to fall for all the BS......so I find It pretty hard to have a great deal of sympathy, for most...

Cheers


a government has never met the tax that it could not explain some way to keep it, or re-name it, so it can call it necessary, instead of temporary..

grinningdog
12-26-2009, 09:00 PM
$150K back in Eisenhower's day is some decent coin. Which is exactly why dentists didn't work Fridays...it made no difference income wise and it was better to golf.




Again, very relevant. You now punish the "bad guy" fat cat, and look who gets nailed. Many people had second jobs to cover this problem. But these second jobs typically were underemployment jobs (housecleaning...etc).

God forbid we cut govt spending and do something really silly like a 14% flat tax. That is just horrible.

The headline is "fat cats make too much money" but the reality is putting a complex ruleset in place makes the populace happy and wins elections, but is really a dumb move economically.


The only problem with that is the flat tax would have to be about 35% and only the wealthy would benefit. You cannot simply stop the entitlement programs without a long long term phaseout, probably 40 years or so.

sharpenu
12-26-2009, 09:29 PM
The only problem with that is the flat tax would have to be about 35% and only the wealthy would benefit.

In 2004, there were 130 million income tax returns filed, representing $831.890 billion on $6,875 billion in income. This means that nationwide, a 12.1% flat tax on all income would generate the exact same amount of revenue.

Source: http://www.irs.gov/pub/irs-soi/04in06tr.xls

sharpenu
12-26-2009, 10:22 PM
A flat tax, which is highly regressive, would need to be around 30%, not 14%...Rich people pay more in taxes because they use more of the stuff that taxes pay for. They have more cars, more houses, more valuables that need protecting from ciminals.

I get tired of hearing this tripe. At a flat rate of 12%, a person making $100K will pay 5 times the tax of a person making $20K. What the system is now, is a person making $100K pays an average of 22% in income taxes. A person making $20K pays less than 2%. That means that the person making $100K pays about $22,000 in income tax, and the $20K worker pays $400- he makes 5 times as much, but pays 50 times the taxes.

You call that fair? I don't.

jbaer
12-26-2009, 10:23 PM
After subtracting out the inflation rate (as per shadowstats), was the economy growing faster before or after the Reagan tax cuts?

asusenior
12-28-2009, 01:22 PM
I'm a libertarian and my view is that taxation is wrong in the first place. Taxation is simply confiscation of property by government. There is little difference between government stealing your money versus them taking your cars, jewelry, or any physical possesions.

But if you had to tax, I would definetely support the flat tax because it wouldn't penalize you just because you made a certain income. What is it about the rich that they should pay a far higher percentage than anyone else? The economy would be nothing without entrepreneurs and sucessful businessmens. Government would be nothing without those people either - a good thing. The top 1% already pay 35-40 percent of all taxes. The rich earned their money. They didn't steal it. Government steals your money and distributes it to those who are most likely to vote them back in office (the poor, the "disadvantaged", etc).

Ag gnostic
12-28-2009, 01:43 PM
Look what year that tax rate was & think about what was going on at that time.

it wouldn't penalize you just because you made a certain income.

Unless you made a low income, then a proportionally higher part of your expendible income would go towards taxes.

asusenior
12-28-2009, 01:45 PM
There are several reasons to have progressive taxation. Here are some.

3) Rich people pay more in taxes because they use more of the stuff that taxes pay for. They have more cars, more houses, more valuables that need protecting from ciminals. Many poor people don't use roads (no car), don't have a home for fire departments to ever have to put out, don't have anything worth protecting from criminals. It costs money and time to protect the stuff owned by rich people FROM poor people.


LOL! This is the funniest stuff I've heard all day. Maybe it got too expensive to house each criminal for 30 grand a year (of course with our tax money) so they let them back on the streets. But then again, I would think the rich would have their own security guards.

All those stuff you listed were either funded by local taxes (fire & policing) or gasoline taxes (roads). A lot of those taxes are flat. Quite a few states do not even have a state income tax. Federal taxes fund mostly military, interest on national debt, bailouts, and healthcare. Much of the stuff you don't actually use or see, except for healthcare.

sharpenu
12-29-2009, 03:10 PM
I'm a libertarian and my view is that taxation is wrong in the first place. Taxation is simply confiscation of property by government.

I believed that once as well. I have since come to think of it this way:

Is a deed restricted community that has a dues charging HOA wrong? No, because the HOA dues pay for things that benefit the entire membership- mowing grass in common areas, street lighting, playgrounds, etc.

Similarly, there are functions that government is and should be responsible for- THOSE taxes are not wrong, because I get value for them. At the national level, a limited military to protect the citizens from invasion (NOT to play world police force). At the state level, roads paid for by use taxes on fuel, and at the local level, police and fire services, are all examples of this.

Not included in this is: schools, welfare, medical care, food stamps, policing the world, and foreign aid, to name a few.

The difference between the two is that EVERYONE benefits from certain services, and those services provided to only segments of the population are only paid for by the segment receiving the benefit. Don't want a well policed community or a well equipped, professional fire department? Live outside the city limits. Don't want to drive on the roads? Don't buy fuel. Don't have kids? Then you don't pay the school tuition.

asusenior
12-29-2009, 06:42 PM
I believed that once as well. I have since come to think of it this way:

Is a deed restricted community that has a dues charging HOA wrong? No, because the HOA dues pay for things that benefit the entire membership- mowing grass in common areas, street lighting, playgrounds, etc.

Similarly, there are functions that government is and should be responsible for- THOSE taxes are not wrong, because I get value for them. At the national level, a limited military to protect the citizens from invasion (NOT to play world police force). At the state level, roads paid for by use taxes on fuel, and at the local level, police and fire services, are all examples of this.

Not included in this is: schools, welfare, medical care, food stamps, policing the world, and foreign aid, to name a few.

The difference between the two is that EVERYONE benefits from certain services, and those services provided to only segments of the population are only paid for by the segment receiving the benefit. Don't want a well policed community or a well equipped, professional fire department? Live outside the city limits. Don't want to drive on the roads? Don't buy fuel. Don't have kids? Then you don't pay the school tuition.

Actually most of those things, maybe except the military, can and should be funded privately. Schooling maybe the worst thing ever to be funded by government. The quality is often terrible, teachers get tenured and have little incentive to perform their best afterwards, the "one size fits all" curriculum is unsuitable for many students. Additionally the socialist indoctrination in the classrooms from the economics and history textbooks is government propaganda.

Ever wonder why mass transportation is scarce and inefficient in the US? Because of the overbuilding of roads and highways (often going to nowhere), taking you forever to get from point A to point B. The first highways in this country was built with private money. The first subways (New York) was run privately. Why can't it happen today?

In fact there was no income tax until 1913 and that amendment was considered illegal.

sharpenu
12-29-2009, 08:27 PM
Schooling maybe the worst thing ever to be funded by government. The quality is often terrible, teachers get tenured and have little incentive to perform their best afterwards, the "one size fits all" curriculum is unsuitable for many students. Additionally the socialist indoctrination in the classrooms from the economics and history textbooks is government propaganda.

I concur. In my county, there are 52,000 students. This year's annual budget is $835 million. That works out to $16,000 per student. For that kind of scratch, you could hire a teacher to go to each home and teach the children two at a time.


In fact there was no income tax until 1913 and that amendment was considered illegal.

Does that really matter? Half of the Federal govt's budget is money printed out of thin air.

asusenior
12-29-2009, 08:41 PM
Does that really matter? Half of the Federal govt's budget is money printed out of thin air.

But another question comes up: Why does the Federal government need to even tax in the first place? Or why don't they just drastically reduce the tax? I'd say part of it is to give the illusion that we're paying down the debt. And the other part is the political correctness of wealth redistribution.