Posted on 10/09/2010 10:42:15 AM PDT by mainestategop
Im preparing to write an article about Liberal myths and lies concerning Bush Reagan and Obama and I keep coming back to this claim that liberals have been making on youtube and several other places that in the 1950s taxes on the wealthy were at an all time high and our economy was flurishing. Any old timers from that bygone era care to comment? Has anyone heard this?
When you compare tax rates you also have to include all the hidden tax rates such as on electric service or phone.
That said, there used to be a lot LOT more deductions. Thus, someone at the 60% level might only pay an actual 20%. When Reagan lowered the progressive rates, the vast array of deductions were also trimmed back heavily to a shadow of what they were.
Finally, “The Wealthy” used to be wealthy. However, the jump off point for “high income earners” has dropped enormously as a factor of buying power. In the 50’s someone who made enough to own a large home with a pool in a nice neighborhood was considered middle class. Now they are considered “the wealthy”.
The people who can or will do the essential things that others can't or won't are paid the most. They comprise the top 10%. When you tax that top 10% heavily, then those people, can and will raise their rates of compensation. What you are left with are stupid people voting to sock it to those evil rich people, but who instead effectively increase their own costs of essential items and services.
Think of it this way. Ten people come to my water stand in the middle of the desert, where I have dug a well. They get mad that I have done well selling water for a $1 a glass, so they vote to put a 90% on desert water sales. In turn, I raise the price of my water to $10 a glass, and the morons think they've ripped me a new one. Of course, there is also the possibility that I will just cap my well and they'll die of thirst.
Our economy flourished in the 1950’s, in part, because much of industrial Europe and Japan had been destroyed during WW II. Hence, there was much less competetion than today.
Although I was just a pre-teen then, I remember that our family and those of my friends was wonderful - not lower class. Everyone I knew had someone to do the heavy cleaning for them, we had clothes only for Sunday and going to town and clothes just for school, everyone had one car but we bought a new car every other year, everyone had plenty of good locally grown food. Christmas time was special and we had lots of presents but just a few toys, mostly things like books and clothes-like a year’s supply of underwear and new pajamas. Very little was purchased during the year except a new outfir for Easter and new shoes for school. My mom owned a small women’s clothing store with several employees, most expensive blouse was $5.99, most were $2.99. We lived in a huge two story house. Everybody worked at something. Nobody talked about money or taxes - ever! Major difference between today and then - more stuff to buy so more materialistic society. Not necessarily better, just different.
Credit cards in the '50s? No such thing. We had store charge accounts, but the only major credit card was American Express and you had to pay a fee for that and pass a rigorous exam for credit. And AMEX required the card to be paid in full each month. Generally the only people who had an AMEX card were people who traveled for business -- and that was in the 60s.
Exactly. Not much job outsourcing going on back then either.
Diner’s Club Credit card company was formed in 1950
True, but I think our colleague ed just innocently overlapped two distinct trends; it happens.
During the 1950s and 1960s, when credit cards were rare, interest paid on installment loans and store cards were deductible.
During the 1970s, credit cards became more common, in many individual cases replacing the loans and store cards entirely.
But interest paid to credit card companies was deductible, as their older versions had been. And as people were using credit cards more and more, they got rather used to the idea of being able to have that interest as a deductible.
The Reagan tax cuts of the early 1980s--which we all agree were a very very good thing--then they closed thousands of income-tax loopholes, this was one of them. From then on, one could deduct only interest paid on a home mortgage.
I think there's still some middle-income resentment about this, nearly 30 years later, but one has to remember for each of their loopholes closed up, the "wealthy" had lots and lots of other loopholes closed up.
For the record, I am not, nor have I ever been, "wealthy."
RE: “Credit cards in the ‘50s? No such thing.”
and...
“Diner’s Club Credit card company was formed in 1950”
*********************
Don’t forget Carte Blanche cards!!!
Regardless, all credit card interest was tax deductible, whether a retailer’s card or national card. AND all sales tax was deductible, too, including that on car purchases! Now there’s a motivation to buy a new car!
Some on this thread generalized that overall one cannot compare the 1950's to today. The major basic advances in electronics during the 1950's were already in embryo such as the transistor; today's advances in medicine are largely in diagnostics which flow from electronics. In general, advances today over the 1950's are in application, technique and refinement not fundamental like the transistor.
The 1950's were fun.
Top US Marginal Income Tax Rates, 1913--2003
Mr. Wilson would have paid 91% on $252,156 w/o the myriad loopholes. He probably got a refund. :)
The truly salient point is made by SAJ. For ten years after WW2, the rest of the then-industrialized world was in utter smoking ruin. The rest of the world could absorb any and everything the US could produce.
Even so, I believe there was a significant, though quite normal (especially compared to what our current circustances are) recession circa 1957-1958 that really crunched car sales. The Edsel came out and was not only not-market-friendly, but it came onto the market when Buicks and Chevys weren’t selling as well as they had in the prior 5 years. It was as if the US had tooled up for infinite expansion post-WW2 and overshot in terms of estimating the demand....which is absolutely the most normal thing there is in the business cycle...and the excess capacity had to be “burned off”...an utterly typical inventory correction which productive economies go through every so often.
The wealthy have the advantage over the less affluent in that they can manage their income to avoid taxes.
The income tax is a tax waged on income as defined by law. The wealthy will manage their income to circumvent the highest rates of taxation.
Recently so of the highest earners (corporate officers) have used stock options to do this; diverting their compensation in to the form of stock options to take advantage of the lower tax rates on capital gains (profits from the sale of stock, real estate and other physical assets as defined by law).
The point being that people can be resourceful in tax avoidance and in avoiding taxes they change their behavior. These changes in behavior will cause the financial markets and the economy in general to move in directions that are not necessarily beneficial to the country or the world.
I personally am changing my behavior this year to try to avoid taxes. I am the owner of a rental property. If Obama is successful in allowing the Bush tax cuts to expire the capital gains tax rate will increase from 15 to 20 percent January 1. Also in the Obama Care bill was a new tax on rental income. So I have been pushed by taxes in to trying to sell my rental property by the end of the year.
Changes in taxes change the behavior of people in the real world. The Left has a bad habit of not taking this in to consideration when they contemplate their tax and spend schemes.
Secondly, you didn’t have the size of government that you have today...no war on poverty, no Department of Education, no Department of Housing and Urban devlopment, no depertment of health and human services, no department of veterns...etc...no Clean water act,
The AMT was enacted to “get” the high income individuals who were using loopholes and deductions to pay NO tax. I read somewhere that at the time, it was only going to affect a couple hundred people in the country. Now it’s going to “get” people in the middle class. Yes, the very people the democrats “care” so much about.
No department of energy—just what does that do anyway? You didn’t have a handful of intelligence agencies do the exact same thing...
Yes and deductible sales tax and interest would not have had the distorting effect on the car market of the “Cash for Clunkers” program. Nor would it have cost the government as much money. Nor would it have taken millions of dollars worth of used cars out of the economy.
One thing I have not seen discussed in the media about Cash for Clunkers is how the removal of those cars from the economy reduced the velocity of currency. The used car market in 2006 was making more profits for dealers than was the new car market.
Diner’s Club? What’s that? Seriously, Diner’s Club has never been a player in credit card circles. It never was accepted very many places. I don’t know its rules; I never had one. Probably the ONLY credit card I’ve never had. I think it was used by traveling saelsmen only. Never widely held.
More loopholes.
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