Now maybe you had already heard something like this, but my reaction was, “Wait, what? no way!” I assumed that this was just some stupid “meme-er” making absurd comments on Facebook as so many do. Then I thought “Hey, I recently started a blog where I can talk about whatever I want! Why not find out where these folks are getting their information!?”
So I went on my quest. In about two seconds I had the tax data from the last 100 years
in the palm of my hand. i was very surprised by what I what I learned. Turns out that in 1944 the tax rate for the highest income bracket was raised to an enormous 94%! As shown here:
This rate lasted until 1946, when it dropped to 91%. there it stayed until it was cut to 77% (that still seems pretty crazy high) in 1964. That makes two whole decades, from 1944-63 where the top income bracket kept less than 10% of their income!
Well there had to be more to it then that. so I kept looking for more information. i found a good explanation how the tax rate worked.
essentially, like today, there were a number of tax loopholes available to the populous. the article explains the the top effective tax rate for most of the upper crust was closer to 50-60%. Again, that’s still pretty darn high compared to today.
The last question for me, at least for tonight, is in relation to today’s debates. Were these higher tax rates a detriment to the economy (as those opposed to raising taxes argue), or was the economy in a state of transient bliss, as the above meme implies? I found one article that gives an interesting viewpoint
. the author uses about a million graphics (Including the one I posted above). What I found most compelling is that he compares tax cuts that occurred in the mid 20’s to the tax cuts that went into effect in the early 2000’s. in a nutshell, in both instances tax rates were cut. significantly. Both periods saw a few years where the economy was boosted, and then in both instances the bottom fell out, Ultimately resulting in the great depression of the 30’s and the current recession from which we still attempt to recover.
Now, I realize that there were probably many factors that contributed to the unfortunate circumstances of today and back in the 20’s, but this is still makes for an interesting point. Consider this. During both eras in question we’ve seen a very high unemployment rate. In the great depression unemployment reached 23% of the U.S.
In 2009 the rate peaked around 10%
. how do these statistics compare with unemployment through the 50’s and early 60’s?
Well in 1944, when the tax rates skyrocketed, the unemployment rate was at an amazing 1.2%,
. This low rate probably had a lot to do with everyone fighting in a terrible war… but I guess we have a tine silver lining? at the end of the war the rate increased to nearly 4%. As you can see in the link, though the rest of this period the economy was’t without it’s hiccups, but the highest unemployment ever reached in the 50’s and early 60’s was 6.8% in 1958. though the economy didn’t enjoy quite the golden age that may have been implied, in general it would appear that the times were much better for folks in those days then they are now.
You can read the above articles and study the links for a more detailed description of all this if you’re interested, or if you feel any part of this wasn’t quite clear.
I realize that the economy isn’t controlled by any one thing, and you can point to a number of factors that lead to periods of economic turbulence. For my part, however, This information has me wondering about the today’s tax debate. It punches a serious hole in the argument that higher taxes on upper crust hurts the economy. For today we have compelling reasons to believe that a healthy economy is fueled in part by a healthier tax rate.
Don’t misunderstand. a 91% tax rate is ridiculous. I still can’t believe that at one point America taxed some Americans at such a high rate, but at least after tonight’s research I find it hard to believe that marginal (and I stress marginal) tax hikes for some income groups wouldn’t be beneficial to the economy on the whole.
Thus, it turns out that there’s quite a bit of truth to the meme that spawned this post after all. At the very least I consider myself a little more informed.