Wealth inequality is completely out of control now than compared to when we had those rates, so I don’t buy that argument.

there’s nothing about inequality that should mean that we’re collecting a lower percentage of GDP in taxes. There are lots of reasons outside of tax policy that wealth may accumulate.

Agree, but tactically if you want to reduce wealth inequality that’s the first one given passive investment beats working for income both in tax advantages, lack of estate taxes, and effectiveness.

There’s a giant sucking sound as all the money in the economy accumulates out of towns and cities and into the endless digital coffers of the investment class.

It's commonly claimed that no one paid the 70% rate. But do you have any evidence that that is true? It feels like one of those "facts" that has no sourcing.

Here you go [1]. Most high income earners in the 50s paid about 42%. It’s hard to squeeze income much more than that without the income going somewhere else. Historically speaking.

[1] https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/

That's not what that says. The graph that tops out at 42% is talking about the effective tax rate, not marginal. It's perfectly possible that some people had part of their income taxed at 70%, but their effective tax rate was 42%. That's just how marginal tax brackets work.

It entirely possible but no one was paying the 91% rate. The broader poor was that these rates weren’t effective. Reported income is highly elastic, according to work by Saez et. al.

As that link points out, the majority of the high earners (top 1%), which were averaged to get to 42%, did not even reach the highest tax bracket. The vast majority it turns out. The highest tax bracket applied to less than 2% of the top 1%.

Who likely didn’t pay that as they had plenty of tax avoidance strategies, not unlike the ultra-wealthy today. The apocryphal story I read some years ago was that these rates were cooked up to make it seem like the wealthy were shouldering the burden of WWII rather than profiting from it.

This is a common myth.

If .2% of earners REPORT INCOME greater than $x, they paid tax on that!

We get the percentiles straight from the IRS data.

There's this idea that people report they made $100 MM to the IRS, but are like, "Well, I only want to pay tax on $300k of that." And the IRS is like, "Sure."

You wouldn't be in the top .2% if you only reported incomes of $300k to the IRS. You'd barely be in the top 2%.

That’s not what I’m claiming. It’s pretty clear from public records that no one was really paying those rates. The people it may have hypothetically applied to probably didn’t take all of their earnings as taxable income and found ways to avoid paying the top rate. The real rate collected under the 90% regime in the 50s on the top 0.01% of income earners was 55%, not terribly higher than today.

Taxable income is highly elastic as taxes and income increase. See Emmanuel Saez’s paper here [1]. (Conclusion on page 60) it’s a good overview of the inefficiency of high marginal rates.

It’s nice to believe we could just scoop up the wealth of the wealthiest in society and make good use of the money, but it becomes very hard to collect in a hurry in the real world. Most OECD nations with generous social benefits fund them with VAT and taxes on middle income earners. They’ve all abandoned things like wealth taxes and soaring marginal rates for practical reasons.

[1] https://www.nber.org/system/files/working_papers/w15012/w150...

> The real rate collected under the 90% regime in the 50s on the top 0.01% of income earners was 55%, not terribly higher than today.

Its a time and a half the top marginal nominal rate, which is significantly above the real rate collected on the top 0.01%.

So, yeah, its much higher.

It’s higher but not nearly as high as people expect and didn’t raise a larger percentage of GDP in tax revenue.

> Who likely didn’t pay that as they had plenty of tax avoidance strategies,

Again, like I did 4(?) posts above this one, I'm going to ask for evidence, because I've heard this assertion a lot but never seen any specifics. Surely if they had plenty of tax avoidance strategies, you would be able to point to their version of the Double-Irish. Maybe even be able to estimate the magnitude of dollars avoided in taxes?

> Who likely didn’t pay that as they had plenty of tax avoidance strategies, not unlike the ultra-wealthy today.

You have zero evidence for this.

See the Saez paper from my other comments, it’s a well researched topic. The consensus is that people weren’t paying that rate.

And see my response. It's not as conclusive as you think. https://news.ycombinator.com/item?id=28541687

thanks for the source will need to read this up.

> Literally no one paid that rate in the US.

Literally they did.

In 1944, the top rate peaked at 94 percent on taxable income over $200,000 ($2.5 million in today’s dollars3). That’s a high tax rate.

Over the next three decades, the top federal income tax rate remained high, never dipping below 70 percent.

https://bradfordtaxinstitute.com/Free_Resources/Federal-Inco...

Note the parent said "marginal" tax rate.

> During that period the government captured ~17-18% of GDP in taxes which is the post war average.

Even if the 17~18% of GDP is true (not saying it isn't, just dont have time to verify), it's very likely the highest tax bracket had way fewer people than it does today, so it would be equivalent of taxing earners of $100M/year in today's world. Weighing against GDP total negates increases in spending by the government to provide services that spur economies / provide benefits / etc. Point is - this figure is irrelevant and doesn't normalize the discussion.

No, no one really really did practically[1]. There are ways to capture more revenue, but it usually involves a VAT. Other methods historically cause economic contraction which lowers tax receipts. It’s important to be realistic about what policy can practically accomplish.

[1] https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/

Marginal tax != effective tax[0]

Yes they literally did. Your article says exactly what I said:

The 91 percent bracket of 1950 only applied to households with income over $200,000 (or about $2 million in today’s dollars). Only a small number of taxpayers would have had enough income to fall into the top bracket – fewer than 10,000 households, according to an article in The Wall Street Journal. Many households in the top 1 percent in the 1950s probably did not fall into the 91 percent bracket to begin with.

You need to understand the difference between marginal tax and effective tax. What you're referring to is effective tax. The parent very explicitly said marginal tax.

[0] - https://www.cbpp.org/research/federal-tax/marginal-and-avera...

The Saez paper points out that even among the 0.01% people were avoiding that top rate.

It points it out, but it's not conclusive. From the article you linked:

The data from Piketty, Saez, and Zucman is not divided among federal, state, and local taxes, so it is difficult to tell exactly how much the rich were paying in federal income taxes specifically during this period.

Some of the distributional assumptions in the Piketty, Saez, and Zucman paper are questionable. In particular, the authors assume that the full burden of the corporate income tax falls on owners of capital, which may not be correct. However, the authors note that they “have tested a number of alternative tax incidence assumptions, and found only second-order effects.”

> The Saez paper points out that even among the 0.01% people were avoiding that top rate.

Of course there were - tax avoidance is inevitable, but to say literally none of them were pay the stated rate with no evidence is disingenuous.

Bringing this back the overall point of the discussion - with a marginal tax rate that high (even with avoidance) it raised the effective tax rate nearly ~600 basis points higher. That's significant.