Because most philosophies that frown on reproduction don't survive.

Friday, January 28, 2011

Rewinding Taxes to the Good Old Days

For decades, progressives tended to accuse conservatives of wanting to bring back the '50s, but in recent years the shoe is on the other foot, with some prominent progressives saying they yearn for the good old days when unions were strong, manufacturing was the core of the economy, and the top marginal tax rate was over 90%. I wanted to see what the real tax situation was for people in a number of different income situations, so I decided to pull the historical tax tables and do the math.

Luckily, the Tax Foundation publishes the income tax tables for every year from 2010 back to 1913. I decided to compare 2010 and 1955. Here are the 2010 tax tables:

I then got the 1955 tax tables and adjusted the income brackets to 2010 dollars using this inflation calculator. (For those interested, the inflation factor from 1955 to 2010 is 713%) The result is as follows:

Next, I wanted to see what this would actually mean for people at various family incomes. Keep in mind, I'm not looking at deductions or tax credits here; I'm just looking at the basic rate calculation. This obviously is not a full real world picture, but I think it at least gives us a view of what the basic message of the tax rates was at these two points in history.
As you can see, everyone paid more in taxes in 1955 than they do now. However, the degree to which they paid more then is interesting. Someone making 40k in 2010 dollars would have paid 1.6 times as much in 1955. Someone who made 80k, only 1.4 times as much. Someone making 120k would have only paid 1.3 times as much. It's not until we get to the astronomically wealthy fellow, earning 1.2 million 2010 dollars per year, that he pays a higher multiple, 1.9 times as much in 1955 as he would in 2010. (Also note that the famed 91% marginal income tax rate doesn't kick in until you're making more than 3.2 million dollars per year in 2010 dollars. You'd have to be well into the richest 0.1% to feel it.)

So while the rich pay less in taxes in 2010 than in 1950, the middle and working classes pay much less as well. And overall, we have a significantly more progressive tax code now than we did then.


Anonymous said...

darwin wrote: "So while the rich pay less in taxes in 2010 than in 1950, the middle and working classes pay much less as well."

The biggest difference, I think, is that in the 1950's everyone agreed that the government should pay its bills.

JMB said...

But the write offs were astronomical during those years (50s-70s). My grandfather bought a goat and then wrote off a 10 acre lake front vacation home in Michigan. All the children were put on the payroll to reduce his income. People just played games with the feds, much like they do now, but it was far more commonplace.