Wednesday, November 25, 2015

The Good Ol' Days: When Tax Rates Were 90 Percent

Bernie Sanders noted that “When radical, socialist Dwight D. Eisenhower was president, I think the highest marginal tax rate was something like 90 percent.” Paul Krugman said the same thing as did Michael Moore in his film Capitalism: A Love Story and you’ll see this factoid repeated on countless memes floating around the Internet.However, what a tax rate is and what is actually paid are two very different things. Indeed, in 1955, the only people paying 90 percent (actually 91 percent) were those making over $3,425,766 when adjusted for inflation. And these are marginal rates, so they only paid that on any earnings above that threshold…….
Regardless, the simple fact is that the rich never paid 90 percent of their income in taxes or anything even remotely close to that. Unfortunately though, some memes die hard.