Richly Undeserved

New York Times ^ | April 10, 2009 | David Leonhardt

[reaganaut1]

[Obama's] agenda is a bold one in many ways. Yet his tax code would still look more kindly on wealth than Nixon’s, Kennedy’s, Eisenhower’s or that of any other president from F.D.R. to Carter. And only part of the reason for this is widely understood.

It’s well known that tax rates on top incomes used to be far higher than they are today. The top marginal rate hovered around 90 percent in the 1940s, ’50s and early ’60s. Reagan ultimately reduced it to 28 percent, and it is now 35 percent. Obama would raise it to 39.6 percent, where it was under Bill Clinton.

What’s much less known is that those old confiscatory rates were not as sweeping as they sound. They applied to only the richest of the rich, because yesterday’s tax code, unlike today’s, had separate marginal tax rates for the truly wealthy and the merely affluent. For a married couple in 1960, for example, the 38 percent tax bracket started at $20,000, which is about $145,000 in today’s terms. The top bracket of 91 percent began at $400,000, which is the equivalent of nearly $3 million now. Some of the old brackets are truly stunning: in 1935, Franklin D. Roosevelt raised the top rate to 79 percent, from 63 percent, and raised the income level that qualified for that rate to $5 million (about $75 million today) from $1 million. As the economist Bruce Bartlett has noted, that 79 percent rate apparently applied to only one person in the entire country, John D. Rockefeller.

Today, by contrast, the very well off and the superwealthy are lumped together. The top bracket last year started at $357,700.

[reaganaut1]

So many really rich people in Hollywood, Wall Street, and elsewhere support the Democrats that confiscatory tax rates on them would have a certain justice. But if conservatives accept the principle that a really rich person, say someone earning more than $1 million a year, can be taxed at a 79% rate, as under Roosevelt, it's just a matter of time before such rates are extended to lower incomes.

The Times and other leftists are admitting that all the spending they support will eventually require much higher taxes than even Obama is currently proposing.

[Tarpon]

You cannot tax and spend your way to prosperity. If that were true the Soviet Union would rule the world.

Not that our liberal naive friends would mind that.

[EQAndyBuzz]

I wonder if there is a correlation between high tax rates and companies not hiring or high tax rates and companies leaving America to do business elsewhere.

Nahh... Probably not. /sarcasm

[C210N]

1. I don't like what my government is spending money on: welfare state, acorn, abortion, un (sic), indoctrination of kids, social insecurity, etc. Therefore, I don't want to pay more in taxes, and I don't even want folks wealthier than me, paying more... even the hollyweird types, as all it does is bloat the federal govt.

2. Big difference between the "lower" tax rate of today and the "higher" one of yesterday as pointed out by the NYT is that today you need to aggregate the net taxes and fees that help to bloat the government. If you add in to the mix of income tax (local, state, federal), excise taxes, sales taxes, gas taxes, user fees, etc, etc, etc, you see that we pay probably much more to the govt as a whole than ever before.

[lakertaker]

Plus this article seems to ignore how the coming inflation will affect people on top of the inevitable higher taxes.

The I remind myself, this is the NYT.

[trek]

You have this one right. Obama knows he cannot impose confiscatory taxes on the middle class right away. So the Obama plan for redistributive socialism involves three parts.

Part 1: Impose confiscatory taxes on the "rich" that are not indexed to inflation.

Part 2: Establish entitlements for the "poor" that are indexed to inflation.

Part 3: Create money with wild abandon and let inflation bring on the promised land of social justice.

So far the Sheeple are just lapping it up.

[Reeses]

David Leonhardt is an economics columnist for The Times and a staff writer for the magazine.

In the real days of journalism, a staff writer would interview an expert. Today we get analysis from a staff writer that insists on getting a vanity byline.

[Oldexpat]

People talk about the tax rate, but it is meaningless without also examining how people avoided paying those rates. Before Reagan tax reform..I had several years at high rates where I paid no taxes. Reason..depreciation and operting losses on rental realestate. Sheltered my income.
After the Reagon tax reform..rates went down, but you couldn’t take the same deductions for realestate against your earned income. The devil is in the details.

[Jim Noble]

All this about tax RATES and "the rich" is nonsense.

The real rich do not rely on income, they rely on assets.

High rates of tax on INCOME punish strivers, not the rich.

Or, to put it another way, it's not your income that makes you rich.

[Jim Noble]

confiscatory tax rates on them would have a certain justice.

Only if you tax their assets.

As long as the rate on mansions and land is zero, they'll be fine with whatever Obama wants to do to their up-and-coming competition.