90% AIG Tax Rate: Back to the 1950s

Dave Prychitko: The latest move to tax the bonuses at AIG is an attempt to bring about, essentially, a new marginal tax rate of 90%. We haven't seen that since the 1950s and early 1960s in the U.S. (see chart above, data here). The difference here between today's proposal and that of the past is that it is targeted not toward a general class of income earners in general, but to bonus-earners (non-earners?) at a particular corporation.

In the chart above, notice the huge increases in marginal tax rates during the 1930s, from 25% in 1931, to 63% in 1932, to 79% in 1936.

Comments

[THofler:]

Except it is not targeted to bonus earners at a particular corp. As I understand it, the proposed 90% tax applies to all bonuses paid at all corps. that have received Treasury funds (TARP & bailout). I.e. all major banks.

Mar 22 01:59 AM

[y3115y:]

1, We pay Obama salary.
2, AIG donnated more than 200K to Obama.
3, We bail out AIG.
4, We are the loser, Obama is winner from both sides.

Mar 22 08:34 AM

[birder:]

It might be interesting to note that when the marginal rate was above 90%, the growth rate of the economy was at it highest level.

Mar 22 08:44 AM

[Trane250:]

The 90% top tax rate during the 50's paid off the debt incurred during WWII. It also paid for the Marshall Plan for Europe, the Korean war and the cold war. This was before "supply side" economics. Tax cuts had to be earned back then.

Mar 22 02:34 PM

[Paco6945:]

I don't know whether it is ignorance or calculated distortions when drivel such as the previous three comments are posted.

1. When rates were lowered from 91% to 70% by Kennedy in the 60s, tax revenues increased significantly.

2. When rates were further lowered from 70% to 28% by Reagan in the 80s, tax revenues increased significantly.

To compare the 90% rates of the 40s and 50s with the current rates is disingenuous at best. There were huge loopholes that were subsequently reduced with the various tax reform acts.

Finally, the 90% rate in 1951 kicked in at $200,000 income. That is equivalent to $1,700,000 today. Or, if you don't want to adjust for inflation, let's return to the good old days of 1951 where a salary of $32,000 put you in the 66% tax bracket.

Mar 22 04:20 PM

[Trane250:]

What "supply side" fanatics fail to point out is that while tax revenue increased during the Reagan years, treasury debt increased by $1.8 trillion 1980s dollars, that's well over 3 trillion in today's fiat. After all is said and done, the Bush regime will have doubled the national debt. But, of course, debt doesn't matter to a supply sider.

On Mar 22 04:20 PM Paco6945 wrote:

> I don't know whether it is ignorance or calculated distortions when
> drivel such as the previous three comments are posted.
>
> 1. When rates were lowered from 91% to 70% by Kennedy in the 60s,
> tax revenues increased significantly.
>
> 2. When rates were further lowered from 70% to 28% by Reagan in the
> 80s, tax revenues increased significantly.
>
> To compare the 90% rates of the 40s and 50s with the current rates
> is disingenuous at best. There were huge loopholes that were subsequently
> reduced with the various tax reform acts.
>
> Finally, the 90% rate in 1951 kicked in at $200,000 income. That
> is equivalent to $1,700,000 today. Or, if you don't want to adjust
> for inflation, let's return to the good old days of 1951 where a
> salary of $32,000 put you in the 66% tax bracket.
>

Mar 23 11:24 AM

[Paco6945:]

The increase in debt was due to increased SPENDING. The fact is that reducing in tax rates INCREASES revenues. I suppose you are going to claim that the spending would have been lower under the Democrats. Put down the Kool-Aid.

The problem is with both major parties. Republicans are for increasing tax revenues (by lowering tax rates) and for more spending. Democrats are for decreasing tax revenues (by raising tax rates) and for EVEN MORE spending.

I guess you haven't read a newspaper in the last three months. Deficits for the the next 10 years, based on the spending proposed by the current administration and their accomplices in congress, are projected by CBO to be $9 trillion.

Mar 23 01:54 PM

[CLH:]

I can only LOL when the president justifies his outrageous spending on Bush's spending. In 8 weeks Obama has spent more then Bush did in 8 years.

Mar 23 04:50 PM