About those 91% income taxes

We hear a lot about the 1950s, and the 91% top income income tax rate at the time. Did anyone actually pay at that rate? Did it generate very much tax revenue?

I often hear or read things that I don't understand, but don't have time to research. One of those mysteries is the 91% maximum tax rate that was once the top rate in the US.

Some insist that raising the current top tax rate from 35% to 39.6% is essential to address our massive federal debt, and defend the 39.6% rate by comparing it to the 91% rate of the 1950s

I know no one who would give up 91 cents of every dollar earned to Uncle Sam without a fight.  If that fight were lost, I know no one who would continue to work if 91% were lost in taxes.

We know that in France, the top tax rate has recently been raised to 75% and this has caused an exodus of high earners, and a variety of other activities to avoid this taxation. We know that one of the facebook founders went so far as to renounce his US citizenship to avoid the tax man.

Were people in the 1950s so patriotic that they paid these taxes cheerfully?  Were there deductions, exclusions and tax avoidance schemes that softened the blow?

I saw an article today that answers my questions, and I recommend it.  The data is from published IRS sources, and it explains how that 91% rate worked and why we didn't see anyone renouncing US citizenship or doing financial cartwheels to keep their earnings to avoid that top rate.  The article suggests that lower tax rates on a larger tax base is not only more effective, but fairer.

Read the story at online.wsj.com

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Donald Lee December 08, 2012 at 01:28 AM
Another link - Millionaires disappear when top tax rate rises to 50%. http://www.telegraph.co.uk/news/politics/9707029/Two-thirds-of-millionaires-left-Britain-to-avoid-50p-tax-rate.html
Ray December 17, 2012 at 01:30 PM
"The article suggests that lower tax rates on a larger tax base is not only more effective, but fairer." - Sure but the vast middle class does not have in their tax returns shell corporations, cayman accounts, millions in 401k.
Smokin' Joe August 20, 2013 at 02:11 PM
Voting with your feet: http://taxfoundation.org/blog/monday-map-migration-personal-income


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