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

  1. #1

    Default Does this chart means the US had a 100% taxrate and can it happen again?



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

    Thanks.

  2. #2

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    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.

  3. #3

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    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.
    When you see that trading is done, not by consent, but by compulsion - when you see that in order to produce, you need to obtain permission from men who produce nothing - when you see that money is flowing to those who deal, not in goods, but in favors - when you see corruption being rewarded and honesty becoming a self-sacrifice - you may know that your society is doomed.- Ayn Rand

  4. #4

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    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
    Those who would fight monsters must take great care that they not become one themselves, and must always remember and never forget that when one looks into the abyss, the abyss also looks into you.

    Friedrich Nietzsche

  5. #5
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    Default

    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.

  6. #6
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    Thumbs down No New Taxes

    Quote Originally Posted by Mats Wheellander View Post


    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.
    "Past performance does not guarantee future results"

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    Default

    Quote Originally Posted by Mryoga View Post
    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.

  8. #8
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    Cool

    Quote Originally Posted by Obediah View Post
    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.
    "Past performance does not guarantee future results"

  9. #9

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    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.
    Last edited by FriedNietz; 12-26-2009 at 12:35 PM.
    Those who would fight monsters must take great care that they not become one themselves, and must always remember and never forget that when one looks into the abyss, the abyss also looks into you.

    Friedrich Nietzsche

  10. #10

    Default Precisely

    Quote Originally Posted by sharpenu View Post
    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.

    Quote Originally Posted by sharpenu View Post
    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.
    -- The golden rule: He who has the gold, rules

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